Budgeting for Disasters: Part I. Overview of the Problem: Budgeting Philosophies and Practices Can Be Applied to Different Disaster Response Challenges: Planning, Prevention, Preparedness, Mitigation, Response, Recovery, Remediation, and Reconstruction

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Historically, when disaster strikes, all levels of government do what is necessary and worry about paying for it later. Many, but not all, local and state governments have contingency or rainy day funds for disaster response. Once these emergency funds are exhausted, most governors have to call a special session of the legislature to seek additional appropriations. Local governments have assumed, at least since the New Deal, that if it gets bad enough, Congress will bail them out. Local and state governments share the responsibility for protecting their citizens from disasters and for helping them to recover when a disaster strikes.

Pressure to examine or reform this approach has in recent years been obviated by the complex system of open-handed reimbursements made by the Federal Emergency Management Agency (FEMA), primarily under the provisions of the Stafford Act of 1988. Now, however, a series of unusually destructive disasters and administrative problems have greatly increased public awareness of these issues, which has pressured local and state governments to improve all aspects of emergency response to disasters. This in turn creates an urgent need for local governments to find and implement effective and legal budgeting methods for the various stages of disaster response.

This article is Part I of "Budgeting for Disasters." It looks at budgeting philosophies and practices as they apply to the eight stages of disaster response: planning, prevention, preparedness, mitigation, response, recovery, remediation, and reconstruction. Part II will suggest the budgeting methods that are most appropriate for future disasters. A "disaster" is a disruptive event that is large enough to stress the ordinary coping capabilities of local or state governments and that cannot be prevented by political or economic action. A garbage strike, for example, is not a disaster because it could be prevented by political intervention. Disaster has no upper limit: some have regional, national, supranational, or even global impact, but the basic unit of response is local or state governments.

Episodic versus Routine Events and Budgeting

The greatest challenge in budgeting for disasters is deciding whether to treat them as episodic or routine. Episodic means, in this case, short term and infrequent, and routine is, well, routine. If disaster response is mostly episodic in nature, then its budgeting will resemble capital budgeting. If disaster response is more routine than episodic, its budgeting should be more like operating budgeting. The expenditures recur annually and pay for familiar items. In reality, disaster response is not entirely episodic or entirely routine, but each stage of disaster response can be identified as more episodic or more routine, involving a mixture of budgeting types (Table 1).

Over the course of years, the total expenditure for disasters in an area may cumulatively average out and make the entire picture look like a routine-type, albeit lumpy, operating budget. Even for a single disaster, type of disaster, or group of disaster types, some stages can be spread out, blurring the episodic nature into something that looks more routine. We need to develop the concept of the life-cycle cost of disasters.

Dividing disaster budgeting into routine and episodic flies in the face of regular budget theory. Yet it is the episodic events on which government is judged, on which legitimacy is built, whether storm relief fails, 9/11 strikes, or whatever. Government exists to help in emergencies. That is why the Hurricane Katrina disaster was so important to the public sector: government failed at the one thing people depend on it for, the one thing that holds us together as a society. Such failure undermines the legitimacy of government.

Prevention versus Suppression

Disaster management can borrow profitably from models of health management, starting with the prevention-versus-suppression model. …