Romina Boccia and Dominik Lett
The California wildfires have been devastating—not only in their human and environmental toll but in their mounting economic costs. In contrast to the typical federal disaster process, some Republicans have floated the idea of conditioning further federal disaster relief on forest and water management changes in California. This idea of explicitly conditioning disaster aid would be somewhat unprecedented for domestic disaster aid policy, but it could encourage more thoughtful state-level decision-making in the future if done correctly.
As Congress weighs a possible federal response, legislators should pursue a disaster policy that not only addresses the immediate crises but also aligns incentives with the underlying risks that drive up disaster severity and costs.
The Problem with the Current Process
The devastation wrought by California’s most recent wildfires and the ongoing federal response is a microcosm of a joint federal-state disaster process that shifts the costs of poor state and local disaster management onto national taxpayers. This inadvertently can increase the severity and cost of disasters, contributing to a vicious cycle of never-ending emergencies.
In the immediate aftermath of a disaster, the Federal Emergency Management Agency (FEMA) and other federal emergency agencies coordinate with state and local authorities to respond to the crisis. Over the following weeks, months, and years, the federal government provides additional funds for disaster recovery. Under the Stafford Act, FEMA is supposed to cover 75 percent of disaster recovery costs for most jurisdictions, with states and localities covering the remaining 25 percent.
In practice, the president usually waives these cost-sharing requirements, shifting the entire cost onto federal taxpayers. Such was the case for the most recent California wildfires, with Biden waiving the 75 percent cost-sharing requirement. On top of this, the federal government routinely passes enormous supplementals after disasters occur to support rebuilding efforts. The costs of these disasters can linger for decades and contribute directly to the long-term budget challenge, with FEMA still doling out money for Hurricane Katrina (2005) this fiscal year.
By shielding states from the financial consequences of poor disaster prevention and mitigation, routine federal bailouts incentivize behaviors that increase disaster costs, such as encouraging development in high-risk disaster-prone areas. California, with the largest state economy in the United States, has significant capacity to enhance its disaster prevention and response efforts. However, well-intentioned state policies—such as keeping insurance costs low to ensure housing affordability and prioritizing forest preservation—can unintentionally reduce insurance coverage and undermine disaster resilience. When federal taxpayers consistently shoulder disaster recovery costs, it also reduces the financial incentives for states to consider tradeoffs and mitigate future risks.
The Case for Conditioning Aid
While conditioning disaster aid is relatively rare in the US domestic context, it is not without precedent. As outlined above, current law requires states to match a portion of disaster costs to receive federal aid. Additionally, flood disaster aid recipients must purchase flood insurance as a condition of receiving federal disaster relief. Internationally, conditions on all types of aid are more commonplace, with varying degrees of effectiveness.
To maximize the effectiveness of conditions on US disaster relief, conditions ought to be in the best interests of the aid recipient (California), germane to the disaster at hand, and not overly burdensome. California will be unlikely or unable to comply with a raft of unachievable conditions. Similarly, tying disaster aid to non-disaster-related conditions, such as changes to immigration policy, opens a pandora’s box of bad faith conditions. Should Texas, for example, be required by some future Democrat administration to raise its minimum wage or change its policy on abortion to receive federal disaster aid? Republicans should be wary about setting a new precedent they will regret in future years.
If lawmakers choose to condition federal aid to California, they should establish clear, outcome-based conditions directly tied to reducing wildfire risks and improving disaster resilience. Two specific reforms stand out as particularly relevant:
- Accurately pricing risk in insurance policies: California’s insurance regulations, which include price controls and restrictions on insurers’ ability to adjust premiums based on risk, distort market signals and encourage irresponsible development. Conditioning federal aid on California aligning premiums with actuarial risk would encourage the state to overhaul its insurance regulations, deterring new developments in high-risk fire zones and mitigating future disaster costs.
- Promoting better land management: There are several regulatory and legal barriers (both state and federal) to prescribed burns and mechanical treatment that have contributed to fuel buildup in its forests, increasing wildfire intensity. Here, the federal government can work with state and local governments to reduce bureaucratic obstacles to responsible land management. Tying federal aid to measurable reductions in fuel loads, for example, would incentivize more proactive forest management.
Balancing Compassion with Accountability
The federal government shouldn’t simply bail out California without considering the long-term implications for fiscal responsibility and disaster resilience. By conditioning aid on targeted reforms, Congress could encourage California to address some systemic mismanagement issues while reducing the need for future federal interventions.