Flood waters in the Midwest have not yet receded and the full human and economic consequences of flooding in Iowa, Wisconsin, Nebraska, South Dakota and Missouri are only beginning to emerge. We do know that the areas around seven Superfund sites are being monitored for water contamination. According to Earther, the EPA has flagged two sites: the Nebraska Ordnance Plant in Mead and the Conservation Chemical Corporation in Kansas City, Missouri. Both sites have toxic chemicals and were hard hit by flooding. CNN reports that drinking water in more than one million individual wells in ten states could be contaminated (Illinois, Indiana, Minnesota, Missouri, Nebraska, Missouri, Wisconsin, Kansas, Kentucky, South Dakota). *
The president’s budget, while highly unlikely to make its way through Congress, indicates his thinking on natural disaster mitigation and recovery. It calls for a 31% decline ($2.2 billion) in the Army Corps of Engineers funding; reduces the crop insurance programs by about $25 billion and implements means testing of the National Flood Insurance Program. The proposal would raise premiums for policyholders to “true risk” levels while providing premium support to low-income policyholders. The budget also reduces the FEMA mapping budget by $78 million from $178 million. (There are no claims on our part that reducing budgets necessarily harms efficiency – we already know that many of these programs are inefficient at current funding levels — rather, major a organizational redo is called for.) Nevertheless, up-to-date maps are a critical tool for assessing risk, particularly for mortgage lenders. The current FEMA maps have been found to be significantly out-of-date.
The National Flood Insurance Program has been reauthorized ten times since 2017 and the current authorization expires May 31, 2019. (The program was reauthorized 17 times between 2008 and 2012 with four lapses.) The 115th Congress forgave $16 billion of NFIP borrowing from Treasury but we assume that new disasters, such as recent flooding, may well cause NFIP to borrow from Treasury again if spending exceeds revenues. If the authorization lapses on May 31st, NFIP would revert to a pay-as-you-go approach for disaster recovery. During the 2010 authorization lapse, the Congressional Research Service estimated that 1,400 home sale closings were cancelled or delayed each day due to the inability to access flood insurance.
In addition to FEMA, which oversees the NFIP, the Department of Housing and Urban Development offers grants to communities to rebuild after disasters. A recently issued GAO report is critical of these grants since HUD has been very slow to come up with reporting conditions for each grant which has meaningfully reduced the flow of already authorized funds to grantee communities.
Congress has shown little motivation over the years to resolve federal emergency response and recovery management. At issue are areas of recurring storms along coastal communities, mid-western river valleys, extreme drought and wildfires in the west. Despite copious evidence that these perils are increasing in intensity and frequency, there is little clarity about and what approach should be taken to reduce damage, hardship and meet higher claims. Some experts call for “managed retreat” from disaster prone areas – but a large scale, logical plan to achieve this has yet to emerge. (Further reading can be round here and here. There is a paywall on this second reference, but the article can also be found through library databases. In addition, search author Katherine J. Mach)
One key issue is the concern that flood insurance premiums are not appropriately priced to the risk. This too is controversial since higher premiums would not likely be affordable for many, particularly retirees that have migrated to coastal communities. In this case, one needs to separate the more typically reported “insured losses” vs. “economic losses”, which costs tend to fall on the individuals, their communities, cities and states most affected. (Think Katrina and New Orleans, where few had flood insurance.)
In addition, FEMA’s budget is subject to annual appropriation and the beginning of the federal budget year falls smack in the middle of the hurricane season (October 1st…during a normal year, of course). In recent years, this timing, coupled with Congressional inaction has subjected disaster victims to the vagaries of federal budget approval. Currently, there is a different viewpoint between the president and Senate Democrats over recovery aid. The president has suggested reducing recovery aid to Puerto Rico and congressional Democrats are resisting this approach which would, in turn, delay recovery funds for mid-western flood victims. The political football continues to be tossed back and forth.
If any program cries out for major overhaul, this is one. A national catastrophe insurance program would be a better approach in our view, one that diversifies the many perils we face in the US: earthquake, wildfire, tornado, flood, hurricane, drought. These do not all take place at the same time, in the same geography, allowing insurance premiums to build up for one risk while another may draw upon reserves – similar to catastrophe insurance by global providers. (Here and here are a few resources if you wish to go deeper.) Such a program should employ the best of today’s climate and weather scientists, and those that are developing risk models appropriate to what we know about changing weather. Such a program should also incentivize policyholders’ buy-in with discounts for using the best practices to mitigate risks. A national coalition of governors, treasurers, local cities, counties, school districts, and special authorities would be members of such a program. (See the list of signatories to wearestillin.com – not a bad place to start.) Most of all, this structure must be outside of politics so that citizens suffering disasters don’t get caught in the political football of appropriations or blue and red partisan gaming about who gets relief and when.
*For those wishing to go further on Mississippi River system flooding, we suggest the book: Rising Tide by John M. Barry, which is subtitled: “The Great Mississippi Flood of 1927 and How it Changed America”. In today’s context, the state of Mississippi is suing the federal government for a taking of property as a result of river control efforts by the Army Corps.
