Disaster recovery burden is growing
The burden of disaster recovery is growing. In the 1950s, disasters in the U.S. caused a combined $53.6 billion in insured losses, according to an assessment by the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania. In the 1990s, losses reached $778 billion.
Driving up the costs are population growth and urbanization. In 2004, Florida alone had $1.9 trillion in insured assets along its high-risk coastal areas, according to the Wharton Risk Management Center’s report.
And the insurance industry is balking. Private insurers, stung by huge costs of doing business over the last decade, have stopped writing policies for some areas or charge such high premiums that people decide to take their chances. Even the National Flood Insurance Program, which will run a $28 billion deficit after Hurricane Sandy, won’t insure against flooding in some areas.
Many assets aren’t insured, which places more of a burden on government recovery programs. Taxpayers paid out about 62 percent of the recovery costs of disasters between 2000 and 2008, the Wharton Risk Management center reported.
“You didn’t see the governor of New Jersey make a big deal about having only 30 to 40 percent market penetration for flood insurance,” after Hurricane Sandy, said Jeffrey Czajkowski, a research fellow at the Wharton center. He noted many people live in areas where they could get flood insurance from the government but do not. “The other 60 percent should have insurance, and if they don’t, why should they get fast aid?” he said.
Main source of recovery funds
The Federal Emergency Management Agency is the main source of disaster recovery funds. It’s also the primary source of money for preparedness, though groups like the Army Corps of Engineers also have budgets for preparedness projects.
In 2012, FEMA spent more than $7 billion on recovery. By comparison, it spent $2 billion on disaster preparedness for various events, including terrorism.
FEMA has drawn fire from Sen. Tom Coburn, R-Okla., for its slowness in paying out those funds; it has billions in unspent preparedness money on hand.
The agency keeps money in reserve for ongoing projects, but a high bar to get FEMA funds may also be part of the reason for the delay. Most of FEMA’s awards are reimbursement grants. In other words, a community or a person pays money for a project and then applies for reimbursement.
In the case of Salisbury, Mass., for example, the application process took “hundreds of hours over three years,” said Jerry Klima, a retired corporate lawyer and town selectman.
Salisbury got a grant to protect a business district and a portion of U.S. Route 1 from flooding that can close the highway for days at a time. The grant means the town can repair a culvert beneath an old rail bed that will drain water away from the commercial area during storms.
Politics can also bog down FEMA’s grants. In New Jersey, for example, some beachfront property owners are resisting community efforts to shore up protective dunes that would blunt the impact of coastal storms such as Sandy. Their lack of support threatens some plans, despite promised money from FEMA.
In a now-famous case, a couple won a judgment against their town for building a protective dune that blocked their ocean view — and eventually protected their property from Sandy’s impact.
FEMA’s preparedness money “has been an issue of confusion over the years,” acknowledged Timothy W. Manning, deputy director for protection and national preparedness. The money is reserved for projects in process, like transit station reinforcements or infrastructure improvements to ports, he said. FEMA has moved to speed its grant process and now has $4.5 billion on hand, versus $9 billion a year ago.
FEMA’s former (and first) undersecretary of preparedness, George W. Foresman, said the agency has become tremendously more efficient since Hurricane Katrina hit the Gulf Coast in August 2005, but also said that “we get so focused on bells and whistles that we fail to remember that behind every successful program is a good accountant and a good accounting infrastructure.”