Topic:
DISASTERS; EMERGENCY ASSISTANCE; APPROPRIATIONS PROCESS; DISASTER RELIEF; STATE FUNDS;
Location:
DISASTERS; EMERGENCIES;

OLR Research Report


November 28, 2007

 

2007-R-0643

STATE DISASTER FUNDING

By: Veronica Rose, Principal Analyst

You asked where other states get funding to pay for disaster relief when the disaster does not qualify for federal funding. We found no current comprehensive source of information on disaster funding. The information in this report is largely based on a 1998 Congressional Budget Office (CBO) report, a 2003 National Emergency Management Association (NEMA) report, and a 2004 Congressional Research Service (CRS) report to Congress.

SUMMARY

A 1998 CBO report concluded that most states have procedures for funding disaster assistance programs that parallel current federal practices. They typically appropriate small sums to emergency response accounts annually and, when a disaster occurs, governors declare a state of emergency and request a supplemental appropriation from the state legislature.

In another approach, according to the report, some governors declare an emergency and “borrow” unobligated funds from other accounts without first getting legislative approval (e.g., Idaho, Florida, and Virginia empower their governors to transfer unobligated resources of state agencies to the emergency account to address a disaster).

The CBO report noted that few states have dedicated accounts or trust funds for emergencies that bypass the legislative appropriation process, and even fewer fund these accounts in advance at a level sufficient to cover large-scale emergencies (see copy of report attached).

A 2003 NEMA survey found that most states (31) appropriate funds for specific incidents after a major disaster occurs. Twenty-two states, according to the report, have separate disaster funds to which money is appropriated as needed (usually annually) to maintain adequate balances. The report found only Arkansas and Florida had established disaster trust funds with revenue from specified sources. Florida, for example, imposes a surcharge on insurance policies (see Table 1 attached).

This report highlights different approaches in Colorado, Florida, Maryland, Nevada, and Washington, D.C.

COLORADO

In 1992, Colorado established the Emergency Reserve Fund as part of a citizen initiative known as the Taxpayer's Bill of Rights (Colo. Rev. Stat. 24-77-104). The initiative requires the state to maintain a balance in the reserve equal to at least 3 percent of annual state spending (excluding debt service). The formula yields amounts potentially large enough to address a large-scale emergency without requiring unbudgeted appropriations.

The state also has a disaster emergency fund that contains appropriations from the legislature (Colo. Rev. Stat. 24-32-2106)

FLORIDA

In 1993, in response to Hurricane Hugo, Florida created an Emergency Management Preparedness and Assistance Trust Fund, financed with an annual surcharge on property insurance policies, totaling about $16 million this year. The surcharge is $2 per policy on every homeowner, mobile home owner, tenant homeowner, and condominium unit owner policy; and a $4 annual surcharge on every commercial fire, commercial multiple peril, and business owner property insurance policy, issued or renewed on or after May 1, 1993 (Fla. Stat. Ann. 252.372). Twenty percent of the money in the fund is for state relief assistance for non-federally declared disasters.

The fund was established to provide appropriations for emergency planning to state, county, local, and certain private concerns. It is not used for responding to state or federally declared emergencies. In those cases, the governor has the authority to borrow unused amounts from other state trust funds.

MARYLAND

In 1990, Maryland established the catastrophic event account to respond quickly to natural disasters or catastrophes that could not be addressed within existing appropriations. The governor may, with proper notification and approval, transfer funds from the account to the appropriate expenditure accounts. The account may be used to help state government units pay costs that result from a disaster (Md. State Finance and Procurement 7-324). The account is a continuing fund (i.e., any money in the account does not revert to the state Revenue Stabilization Fund).

NEVADA

Nevada maintains several disaster relief funds. The following descriptions of the funds are taken largely from a March 23, 2004 CRS report (Nevada Emergency Management and Homeland Security Authorities Summarized, March 23, 2004, RL 32320).

Disaster Relief Account

The disaster relief account is a special account in the state Contingency Fund to stabilize the operation of the state government. It is funded with direct legislative appropriation and grants, gifts, or donations. When a disaster is declared, the state board of examiners estimates the money available in the fund and the anticipated amount of grants and loans needed for the disaster. If the amount needed exceeds what is available, all grants and loans from the fund must be reduced. If a grant or loan reduction would reduce the amount of federal money a state agency or local government receives, the reduction may not be made (Nev. Rev. Stat. 353.2705 to 2735). Interest and income earned on the money in the fund, after deducting any applicable charges, must be credited to the fund, with the first $500,000 deposited in the emergency assistance account, described below (Nev. Rev. Stat. 414.135).

Emergency Assistance Account

The emergency assistance account is a subaccount within the disaster relief account. The state controller must transfer any interest earned during the previous fiscal year on the money in this fund (not exceeding $500,000) to the emergency assistance account. The Division of Emergency Management and the Department of Public Safety administer the account and must approve expenditures. Account funds must be expended solely to (1) provide supplemental emergency assistance to state or local governments severely and adversely affected by any natural, technological, or man-made emergency and for which available resources are inadequate; or (2) pay actual administrative expenses incurred by the division during an emergency or disaster. The division may, with the interim finance committee's approval, allocate up to $250,000 to buy emergency management equipment or supplies, or to provide training (Nev. Rev. Stat. 414.135).

Special Revenue Fund

The Special Revenue Fund was established to stabilize state government operation. Every quarter, the state controller must transfer an amount equal to one-half of the interest earned on money in the fund (up to $500,000 per quarter) to the disaster relief fund “to stabilize the operation of state government during the previous quarter.” Money from the fund may be appropriated only if there is a five-percent revenue shortfall, or if the legislature and the governor declare that a fiscal emergency exists (Nev. Rev. Stat. 353.288).

Emergency Account

Expenditures, up to $50,000, may be made from an emergency account in the state General Fund for invasions, disasters, or epidemics. When the state board of examiners finds that appropriations are not enough to meet an emergency, it may authorize expenditures (Nev. Rev. Stat. 353.263).

Contingency Account

The state has a “contingency fund” as a special revenue fund, with money derived from appropriations for emergency use to cover unforeseen expenses (Nev. Rev. Stat. 353.266).

A local governing body may establish a fund to stabilize the operation of the local government and mitigate the effects of natural disasters. The fund may be used to mitigate the effects of a natural disaster only if a local government declares that a “natural disaster” exists. Funds may be used to repair or replace public roads, buildings, public utilities, and other infrastructure owned by the local government, for emergency measures to save lives, to protect public health and safety or property, to remove debris from publicly or privately owned land and waterways, for the cost share needed to obtain a grant from a federal disaster assistance agency, and other expenses including revenue shortfalls (Nev. Rev. Stat. 354.6115).

WASHINGTON, D.C.

D.C. has an emergency cash reserve fund that must maintain a balance of four percent of the District's operating budget. The fund must be used for unanticipated and nonrecurring extraordinary needs of an emergency nature, including natural disasters, and may be used when the mayor declares a state of emergency (D.C. Code Ann. 1-204.50a).

Table 1: State Disaster Funding Sources

State

Legislative Appropriations

(a)

Separate Fund (b)

Trust Fund

(c)

Multiple Funds

Other

(d)

Alabama

*

N

N

N

N

Alaska

*

*

N

*

N

Arizona

N

*

N

N

N

Arkansas

*

*

*

N

N

California

*

N

N

N

N

Colorado

*

*

N

*

N

Connecticut

*

N

N

N

N

Delaware

*

N

N

N

*

Florida

*

N

*

*

N

Georgia

*

N

N

N

*

Hawaii

*

*

N

N

N

Idaho

*

*

N

N

N

Illinois

N

*

N

N

N

Indiana

N

N

N

N

*

Iowa

N

N

N

*

N

Kansas

*

N

N

N

*

Kentucky

*

N

N

N

N

Louisiana

*

N

N

N

N

Maine

*

N

N

N

N

Maryland

*

N

N

N

N

Massachusetts

*

N

N

N

N

Michigan

*

N

N

N

N

Minnesota

*

N

N

N

N

Mississippi

N

*

N

N

N

Missouri

*

N

N

N

N

Montana

N

*

N

N

N

Nebraska

N

*

N

N

N

Nevada

*

N

N

*

N

New Hampshire

*

*

N

N

*

New Jersey

*

*

N

N

N

New Mexico

N

N

N

N

*

New York

*

N

N

N

N

North Carolina

*

N

N

N

*

North Dakota

*

N

N

*

*

Ohio

N

*

N

N

N

Oklahoma

N

N

N

N

*

Oregon

*

N

N

N

*

Pennsylvania

*

*

N

N

N

Rhode Island

N

N

N

N

*

South Carolina

*

N

N

N

N

South Dakota

N

*

N

N

*

Tennessee

N

*

N

N

N

Texas

N

*

N

*

N

Utah

*

*

N

N

*

Vermont

N

*

N

N

N

Virginia

*

N

N

N

N

Washington

N

*

N

N

N

West Virginia

N

*

N

N

N

Wisconsin

N

N

N

*

N

Wyoming

N

*

N

N

N

Source: NEMA, February 2003

Key

* = Yes

N =No

(a) Legislative appropriation: Funds appropriated by the legislature for specific incidents after each major disaster occurs.

(b) Separate fund: A separate disaster fund exists and funds are appropriated as needed to maintain adequate funding at all times.

(c) Disaster trust fund: A disaster trust fund exists in which revenue from specified sources is deposited and used as needed for a specific purpose. Examples include a tax on insurance policies or a certain percent of tax receipts.

(d) Other: More than one fund exists and money is obligated from each fund depending upon the type of disaster or situation that has occurred.

Attachments:

1. If Disaster Strikes Today Are You Ready to Lead? A Governor's Primer on All-Hazards Emergency Management, published by NEMA

2. CBO testimony on How States Budget and Plan for Emergencies before the Task Force on Budget Process, June 23, 1998

VR:dw