FEMA’s Disaster Fund Is Almost Depleted. What Happens Next?

As communities across the United States continue to be overwhelmed by extreme weather, the Federal Emergency Management Agency’s disaster relief fund — the largest source of federal post-disaster assistance — is likely heading into the red.

“Right now, we anticipate a shortfall towards the mid and end of August,” FEMA Administrator Deanne Criswell said at a congressional hearing earlier this month.

To address the most pressing question right off the bat: No, this doesn’t mean FEMA is going to cease operations any day now or be unavailable to assist places impacted by disasters in the weeks to come. But it is worth understanding how FEMA got here and the sort of difficult calls the agency might need to make if its prediction comes to pass.

Taking it back to the basics, FEMA defines the disaster relief fund as “an appropriation against which FEMA can direct, coordinate, manage, and fund eligible response and recovery efforts” for federally-declared disasters and emergencies. These dollars can be put toward works like removing debris after a disaster and repairing public infrastructure, as well as preparing for future disasters and giving impacted residents financial aid. That means the funding both makes things happen quickly after disaster strikes and is a source of ongoing assistance in the months or even years that follow. When making a request for next year’s budget, Criswell described the disaster relief fund as a “vital function to our nation’s readiness posture.”

The fund is typically filled through congressionally-approved appropriations, including supplemental appropriations in response to specific disasters. In line with other disaster spending, these costs have spiked in recent years in response to increasingly extreme weather events and the Covid-19 pandemic. According to a Congressional Budget Office analysis released last year, disaster relief fund spending was around $5 billion annually between 1992-2004; from 2005-2021, the annual average was more than triple that at $16.5 billion.

Administrator Criswell has been warning Congress about a potential summer deficit since April, and this forecasted dip has also been clear in monthly reports FEMA shares with Congress tracking the fund’s balance. In fact, a group of Florida congress members described the fund as “one of the most-tracked single accounts funded by Congress each year” in a recent letter calling for Congress to take action on the issue. Despite that bipartisan plea and legislation in both the House of Representatives and the Senate to refill the fund, Congress failed to pass any supplemental aid before adjourning for an August recess. When sessions resume in September, refilling the fund will be one of a long list of financial priorities before the end of the month, which is also the end of the fiscal year.

Per FEMA’s July report to Congress, the fund is expected to hit a $4.2 million deficit in September. But in an email yesterday, a FEMA spokesperson told me funding levels are “more than adequate to execute immediate response and recovery efforts to any incidents which may occur” and that FEMA is “working closely with the administration to ensure adequate resources remain available.” The agency declined to offer any specifics about what that work entails or how funds might be moved around to address any areas of need. So far, the Biden administration has not yet requested any supplemental funding from Congress.

When addressing questions about the potential shortfall in the July hearing, Administrator Criswell said FEMA has a number of “tools that we can implement” to ensure the agency continues to offer aid if and when disasters occur in coming weeks. She also clarified that the status of the fund’s balance does not factor into whether aid applications to the agency will be granted or denied.

Jessie Riposo, director of the RAND Corporation’s Disaster Management and Resilience Program, told me that addressing any lack in the disaster relief fund would ultimately come down to the agency needing to make risk calculations and determine where dollars are most necessary until funding as usual resumes.

Craig Fugate, who served as FEMA Administrator during the Obama administration, explained to Marketplace that addressing any new disasters would likely come at the temporary expense of longer-term priorities, such as rebuilding or mitigation programs. (There’s an unfortunate irony in there, as a National Institute of Building Sciences study found each dollar spent on federal mitigation grants saves an average of $6 in post-disaster recovery spending.)

For now, Riposo notes that the disaster relief fund is still operating as usual and whether or not there will be shortfalls are speculation. The difficulty in predicting disaster-related costs is something Criswell has addressed, as well, telling Congress, “The disaster relief fund as we continue to go into the last quarter is always a very dynamic situation and the balances continue to change.”

However, the draw on this resource is showing no signs of easing up: In July alone, there were seven federally-declared disasters added to the agency’s growing list of responsibilities.