How states can manage the challenges of paying for natural disasters

From wildfires in the West to hurricanes in the Gulf of Mexico and along the Eastern Seaboard, natural hazards are becoming more frequent and more severe throughout the United States. Ensuring that public funding is available to respond to, recover from, mitigate against, and prepare for these events involves a complex relationship across all levels of government: federal, state, and local. The rising cost and frequency of disasters, as well as the fiscal impacts of the COVID-19 pandemic, are putting pressure on budgets at all three levels, fueling debates that could affect the intergovernmental dynamics of the disaster funding system. This changing landscape has brought the critical but understudied role of states to the forefront.

In this context, research by The Pew Charitable Trusts has uncovered three actions that state policymakers can take to improve their understanding of the fiscal impact of natural hazards on state budgets and assess how resources might be better allocated for the long term:

• Comprehensive tracking. States should track their spending on disasters across all of the agencies and disaster phases—response, recovery, mitigation, and preparedness.

• Budgeting mechanism assessments. States should examine the budgeting methods they use to pay for disasters to determine if those approaches are meeting their needs.

• Mitigation integration. States should consider how their spending and budgeting practices incorporate investments in disaster mitigation—efforts undertaken to reduce harm from future disasters; every mitigation dollar spent can save an average of $6 in post-disaster recovery costs.

Although states face uncertainty associated with the rising costs of these events, these steps can help them manage the challenges moving forward.