NCPA - National Center for Policy Analysis

Disaster Insurance For Government?

August 27, 1999

The Federal Emergency Management Agency (FEMA) has floated a plan to have states and municipalities insure public property against earthquakes, hurricanes, floods and fires -- rather than have the federal government ride to the rescue after every disaster. But state and local officials don't like that idea one little bit.

FEMA officials reasoned that if individual owners were responsible for getting flood insurance for their own property, why shouldn't states and cities do the same? But since relying on FEMA is much cheaper, local officials are fighting the notion -- with California, which has received more than one-third of all federal disaster payments since 1989 -- leading the charge.

  • The first such federal aid went to a town in New Hampshire that was ravaged by an 1803 fire.
  • That set a costly precedent, since more than $25 billion in taxpayers' money has been spent on disaster aid in the past decade alone.
  • Grants to repair or rebuild government and nonprofit facilities ate up $13 billion of that -- or more than half of FEMA spending.
  • The FEMA proposal would have required that state and local government insure themselves for up to 80 percent of the replacement costs of their buildings.

Members of the California delegation in Congress argue that insuring the University of California alone would cost nearly $12 million a year, while premiums for public facilities in Los Angeles County would amount to $25 million. They predict such sums would have to come from increased taxes or reductions in services.

Sources: Editorials, "States Shun Disaster Protection, Counting on Generous Uncle Sam," and Reps. Jerry Lewis (R-Calif.) and Sam Farr (D-Calif.),"Shifting Costs Is No Cure," both in USA Today, August 27, 1999.


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