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The Federal Emergency Management Agency (FEMA) is revising its regulations governing the Public Assistance program to update the monetary threshold at or below which FEMA will obligate funding based on an estimate of project costs, and above which FEMA will obligate funding based on actual project costs.  This rule will ensure FEMA and recipients can more efficiently process unobligated Project Worksheets for COVID-19 declarations, which continue to fund important pandemic-related work, while avoiding unnecessary confusion and administrative burden by not affecting previous project size determinations.

Statement of Need:

FEMA’s Public Assistance (PA) program provides grants to State, local, Tribal, and Territorial governments, as well as eligible private nonprofit (PNP) organizations, for debris removal, emergency protective measures, and the repair, replacement, or restoration of disaster-damaged facilities after a Presidentially-declared major disaster.  FEMA categorizes each grant award as either a small or large project, which is determined by a monetary threshold set each year by FEMA pursuant to statute.  (See section 422 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, codified at 42 U.S.C. 5189).  FEMA obligates money for a small project based on an estimate of the project costs, and FEMA obligates money for a large project based on actual project costs as the project progresses and cost documentation is provided to FEMA.  This expedites FEMA’s processing of PA grant funding by eliminating much of the administrative burden that FEMA experiences when awarding projects at or above the threshold (i.e., large projects).  Ultimately, this reduces FEMA’s cost of administering PA funding and allows FEMA to expedite its provision of Federal disaster assistance.

In 2013, the Sandy Recovery Improvement Act amended section 422(b) of the Stafford Act and required FEMA to complete an analysis to determine whether an increase in the large project threshold was appropriate.  Following this analysis, in 2014 FEMA updated the maximum threshold from $68,500 to $120,000 and continued to adjust the threshold annually to reflect changes in the Consumer Price Index, as required under section 422(b)(2).  Section 422(b)(3) requires FEMA to review the threshold every three years.  FEMA conducted an analysis in 2017 and recommended no change to the threshold at that time.  As a result, the maximum threshold for Fiscal Year (FY) 2021 is currently set at $132,800.

Since FEMA’s analysis in 2017, the U.S. has seen increased disaster activity either due to, or amplified or aggravated by, the climate crisis.  For example, in 2017, Hurricanes Harvey, Irma, and Maria caused a combined total of $293.6 billion in damages.  Damages from wildfires in that year and the next totaled approximately $61 billion.  In 2020, FEMA responded to 22 one billion-dollar events the highest in its history which included a record number of tropical storms in the Atlantic and the Nation’s most active wildfire year recorded.  The estimated damages from these 22 events totaled approximately $95 billion.  In addition to increased natural disasters, in 2020 FEMA also issued an unprecedented 57 major disaster declarations in response to COVID-19, including for every State, 5 territories, the Seminole Tribe of Florida, and the District of Columbia.  In FY 2020 declarations, FEMA’s funding under the PA program is over $32 billion.  Although costs for COVID-19 accounted for 94 percent of this funding, FEMA expects climate change to make natural disasters more frequent and more destructive, requiring greater spending on recovery in the future.

As a result, in 2020, FEMA conducted another analysis to ensure that FEMA is maximizing the benefits of simplified procedures in light of its more recent disaster spending.  Based on this analysis, FEMA determined that it should increase the threshold to $1,000,000, with continued annual adjustment for inflation based on the Consumer Price Index.

Anticipated Costs and Benefits:

FEMA estimates that this rulemaking would result in transfers from FEMA to PA recipients and familiarization costs for PA applicants.  Additionally, this rule would reduce the administrative burden and improve program efficiency for PA recipients, subrecipients, and FEMA, resulting in cost savings to FEMA and PA recipients/subrecipients.