U.S. Needs Better Budgeting for Natural Disasters

Blog Post
Monday, April 29, 2019

With growing threats from climate change and natural disasters, some lawmakers in both parties are discussing needed changes in how Washington budgets -- or to be more precise, fails to budget -- for disaster-related costs.

“Planning for emergencies is not a precise science, but I believe Congress can do better,” Senate Budget Committee Chairman Michael Enzi (R-Wyo.) said earlier this month.

Indeed it can. Lawmakers and President Trump, in fact, are currently in the midst of a messy fight over disaster assistance legislation.

Since passage of the Budget Control Act in 2011, Enzi said, Congress had spent $250 billion outside of the act’s spending limits in response to natural disasters and other emergencies.

“While better budgeting for natural disasters won’t fix all of our financial problems, it is a good place to start,” he said.

Sen. Jon Tester (D-Mont.) says natural disasters are “becoming so common that we should be budgeting for them.”

The problem is that elected officials have a tendency to act as if natural disasters are extraordinary surprises. But as Sen. Mitt Romney (R-Utah) noted earlier this year, “frankly, disasters are not so extraordinary.”

The Congressional Budget Office (CBO) this month provided a helpful reminder of this with a report on the anticipated costs of certain types of natural disasters: hurricanes, tropical storms and flooding from storm surges and heavy rain. These categories are responsible for most of the disaster damage in the United States.

The CBO estimates that expected annual losses to the U.S. economy for most of these types of events will average $54 billion, or 0.3 percent of GDP, in the years ahead. That number consists of $34 billion in annual losses to residences, $9 billion to businesses, and the rest to the public sector.

The new report notes two key ways this affects the federal budget.

“If the president declares a disaster in response to a severe storm, that declaration can lead to significant federal spending for repairs and assistance,” CBO says. In addition, “when claims on the federally administered National Flood Insurance Program exceed the program’s receipts from insurance premiums, net federal outlays rise.”

Under current conditions and policies, the budget office says, “the expected annual cost to the federal government -- and thus to taxpayers -- of damage from hurricane winds and storm-related flooding is $17 billion for the major categories of spending that CBO analyzed.” It should be remembered that there are other types of natural disasters as well, such as the growing numbers of wildfires.

The CBO cautions that its storm-related estimates are “inherently uncertain.” However, they give lawmakers some numbers to work with that are far more useful than simply assuming zero future disaster costs until the day the next disaster occurs.

In addition, the CBO report discusses a number of options that could reduce expected storm losses and their effects on the federal budget in the future.

These include “limiting greenhouse gas emissions, increasing federal funding to assess flood risks or to lessen damage if storms occur, expanding purchase requirements for flood insurance, and increasing the share of disaster assistance paid for by state and local governments.”

Without policy changes, CBO warns, “storm-related costs are likely to rise in the future because of climate change and increases in development in risky areas.”

Such increases would likely come at a time when the federal budget will be under increasing pressure as the result of an aging population and -- absent broad reforms -- rising health care costs and an inefficient tax code.

So elected officials should give serious consideration to the options that CBO describes to hold down future costs. In addition, lawmakers should heed those who seek to make budgeting for disaster costs more responsible, timely and credible.