[Federal Register Volume 81, Number 12 (Wednesday, January 20, 2016)]
[Proposed Rules]
[Pages 3082-3085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00997]



Federal Emergency Management Agency

44 CFR Part 206

[Docket ID FEMA-2016-0003]
RIN 1660-AA84

Establishing a Deductible for FEMA's Public Assistance Program

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Advance notice of proposed rulemaking.


SUMMARY: The Federal Emergency Management Agency (FEMA) is considering 
the establishment of a disaster deductible, requiring a predetermined 
level of financial or other commitment from a Recipient (Grantee), 
generally the State, Tribal, or Territorial government, before FEMA 
will provide assistance under the Public Assistance Program when 
authorized by a Presidential major disaster declaration. FEMA believes 
the deductible model would incentivize Recipients to make meaningful 
improvements in disaster planning, fiscal capacity for disaster 
response and recovery, and risk mitigation, while contributing to more 
effective stewardship of taxpayer dollars. For example, Recipients 
could potentially receive credit toward their deductible requirement 
through proactive pre-event actions such as adopting enhanced building 
codes, establishing and maintaining a disaster relief fund or self-
insurance plan, or adoption of other measures that reduce the 
Recipient's risk from disaster events. The deductible model would 
increase stakeholder investment and participation in disaster recovery 
and building for future risk, thereby strengthening our nation's 
resilience to disaster events and reducing the cost of disasters long 
term. FEMA seeks comment on all aspects of the deductible concept.

DATES: Comments must be received by March 21, 2016.

ADDRESSES: Comments must be identified by docket ID FEMA-2016-0003 and 
may be submitted by one of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    Mail/Hand Delivery/Courier: Regulatory Affairs Division, Office of 
Chief Counsel, Federal Emergency Management Agency, 8NE, 500 C Street 
SW., Washington, DC 20472-3100.

FOR FURTHER INFORMATION CONTACT: Jotham Allen, Federal Emergency 
Management Agency, 500 C Street SW., Washington, DC 20472, 202-646-


I. Public Participation

    Instructions: All submissions received must include the agency name 
and docket ID. Regardless of the method used for submitting comments or 
material, all submissions will be posted, without change, to the 
Federal eRulemaking Portal at http://www.regulations.gov, and will 

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any personal information you provide. Therefore, submitting this 
information makes it public. You may wish to read the Privacy Act 
notice, which can be viewed by clicking on the ``Privacy Notice'' link 
in the footer of www.regulations.gov.
    You may submit your comments and material by the methods specified 
in the ADDRESSES section of this Notice. Please submit your comments 
and any supporting material by only one means to avoid the receipt and 
review of duplicate submissions.
    Docket: For access to the docket to read background documents or 
comments received, go to the Federal eRulemaking Portal at http://www.regulations.gov and search for the docket ID. Submitted comments 
may also be inspected at FEMA, Office of Chief Counsel, 8NE, 500 C 
Street SW., Washington, DC 20472.

II. Background

    The Robert T. Stafford Disaster Relief and Emergency Assistance Act 
(Stafford Act), 42 U.S.C. 5121-5207, provides an orderly and continuing 
means of assistance by the Federal Government to State, Tribal, 
Territorial, and local governments in carrying out their 
responsibilities to alleviate the suffering and damage which result 
from disasters. 42 U.S.C. 5121(b). A ``major disaster,'' as defined by 
the Stafford Act, is ``any natural catastrophe (including any 
hurricane, tornado, storm, high water, winddriven water, tidal wave, 
tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, 
or drought), or, regardless of cause, any fire, flood, or explosion, in 
any part of the United States, which in the determination of the 
President causes damage of sufficient severity and magnitude to warrant 
major disaster assistance . . . to supplement the efforts and available 
resources of [State, Tribal, Territorial, and local governments], and 
disaster relief organizations, in alleviating the damage, loss, 
hardship, or suffering caused thereby.'' 42 U.S.C. 5122(2).
    The declaration process is governed by Federal Emergency Management 
Agency (FEMA) regulations at 44 CFR part 206, subpart B. Upon receipt 
of a declaration request, FEMA formulates a recommendation which is 
forwarded to the President along with the request. 44 CFR 206.37(c). In 
developing its recommendation, FEMA considers such factors as the 
amount and type of damages, the impact of damages on affected 
individuals, the State, Tribal, Territorial, and local governments, the 
available resources of the State, Tribal, Territorial, and local 
governments, and other disaster relief organizations, the extent and 
type of insurance in effect to cover losses, assistance available from 
other Federal programs and other sources, imminent threats to public 
health and safety, recent disaster history, hazard mitigation measures 
taken by the State, Tribal, Territorial, or local governments 
(especially implementation of measures required as a result of previous 
major disaster declarations), and other factors pertinent to a given 
incident. 44 CFR 206.37(c)(1).
    A disaster declaration specifies the types of assistance that may 
be awarded under the Stafford Act, such as Public Assistance, 
Individual Assistance, or Hazard Mitigation assistance. Public 
Assistance provides assistance for debris removal, emergency protective 
measures, and permanent restoration of infrastructure to State, Tribal, 
Territorial, and local governments and certain private nonprofit 
organizations. 44 CFR part 206, subparts G and H.
    When evaluating the need for Public Assistance in a major disaster 
request FEMA evaluates the following factors: Estimated cost of 
assistance, localized impacts, insurance coverage in force, hazard 
mitigation, recent multiple disasters, and the availability of other 
Federal assistance programs. 44 CFR 206.48(a). FEMA evaluates the 
estimated cost of assistance on a per capita basis using the State 
population (using the most recent decennial Census population), and has 
established a per capita indicator of $1 (adjusted annually based on 
the Consumer Price Index for all Urban Consumers, the indicator is 
$1.41 for events occurring in Fiscal Year 2015) as a level at which an 
event might warrant Federal assistance. 44 CFR 206.48(a)(1).
    Currently, once Public Assistance is authorized, FEMA documents all 
projects, including debris removal, emergency protective measures, and 
repair and replacement of eligible facilities, on Project Worksheets to 
reimburse the Recipient (formerly known as the Grantee, this is the 
State, Tribal, or Territorial government that received the disaster 
declaration) and Subrecipients (formerly known as Subgrantees, these 
are local and Tribal governments, and certain private nonprofit 
organizations that apply for and receive funding through the Recipient) 
for all of their eligible costs at the level of the Federal cost share 
designated by the President. 44 CFR part 206, subpart G.
    This practice of funding all eligible costs is somewhat at odds 
with the principle underlying the Stafford Act that there is a level of 
disaster activity which the affected State, Tribal, or Territorial 
government can handle on its own. For simplicity, consider a State that 
is subject to the $1 million minimum threshold. 44 CFR 206.48(a)(1). An 
event that causes $999,999 in Public Assistance-eligible damage will 
most likely not warrant a major disaster declaration and the State and 
affected Tribal and local governments will need to fund all $999,999 in 
disaster costs without any supplemental Federal assistance. However, an 
incident that causes exactly $1 million in damage in the same State 
likely will result in a major disaster declaration. Once declared, FEMA 
will reimburse $750,000 under the typical 75% Federal cost share 
arrangement and the State will only need to fund $250,000. FEMA is 
arguably supplanting $750,000 that the State should be fully capable to 
handle itself.

III. Deductible

    Consistent with the principles of the Stafford Act that assistance 
from the Federal Government is supplemental in nature and that every 
recipient of disaster assistance has some measureable capacity to 
independently respond, FEMA is considering the establishment of a 
disaster ``deductible.'' To ensure a Recipient's participation in 
recovery from disaster losses, following receipt of a major disaster 
declaration authorizing the Public Assistance Program, the Recipient(s) 
would be required to demonstrate it has satisfied a predetermined 
deductible amount before FEMA would provide assistance through a 
Project Worksheet for eligible Public Assistance work. FEMA would 
intend for the calculation of the deductible level for each Recipient 
to be published periodically and to be representative of Recipient 
capability. In addition to considering how to calculate a deductible 
amount, FEMA is considering what means by which a Recipient could 
demonstrate it has satisfied a deductible requirement, including 
through completion of FEMA-eligible projects entirely with its own 
funding, or through other Recipient activities for which FEMA would 
calculate an appropriate credit against the deductible. FEMA might 
provide a credit toward the deductible, for example, for a Recipient's 
prior adoption of a building code that reduces risk; for adoption of 
proactive fiscal planning such as establishing a disaster relief fund 
or a self-insurance fund; or investment in programs of assistance 
available when there is not a federal declaration.

[[Page 3084]]

    FEMA anticipates a deductible would be calculated and applied at 
the Recipient (i.e., State, Tribal, or Territorial level), not 
Subrecipient, level. However, the deductible would need to be satisfied 
before any project, at either the Recipient or Subrecipient level, 
would be eligible for assistance.
    FEMA believes that a deductible could result in more effective use 
of taxpayer resources. It could incentivize proactive fiscal planning 
by Recipients for disasters, encouraging them to set aside funding 
specifically reserved for disaster response and recovery. The 
availability of credits toward the deductible could incentivize 
increased planning and adoption of specific mitigation activities which 
will result in risk-informed mitigation strategies on a broad scale. 
States may be encouraged to develop and fund special programs such as 
emergency management programs and individual assistance programs, as 
such plans may be credited toward satisfaction of the deductible. 
Recipients that adopt standardized and enhanced building codes could be 
rewarded with a credit toward their deductible amount. The results of 
these efforts may in turn increase our nation's resiliency to disaster 
events: Increased self-sufficiency on the part of State and local 
governments and their ability to support their citizens during and 
after a disaster, and a decrease in the negative effects of a disaster 
on our citizens.

IV. Public Comment

    FEMA welcomes public comment on all aspects of the deductible 
concept, but would derive particular benefit from commenters addressing 
one or more of the following questions (``Recipient'' in these 
questions refers to any possible entity that might be a Grantee for 
Public Assistance, including States, Tribes, and Territories):
    1. Calculating the Deductible: How should FEMA calculate the 
deductible amount for each Recipient to adequately reflect individual 
Recipient capacity?
    a. Using the Public Assistance per capita indicator established by 
44 CFR 206.48(a)(1)? Why?
    b. Using population estimates? Why?
    i. If so, should FEMA continue to rely upon the decennial census 
population calculations, consider population estimates, or consider 
other population calculation sources and why?
    c. Using the Recipient's fiscal capacity? Why?
    i. If so, how should FEMA measure fiscal capacity? Which metrics 
should be used to assess it and why? Please also identify preferred 
sources for suggested metrics. Potential metrics include, but are not 
limited to:
    1. Actual revenue.
    2. Potential revenue.
    3. Total Taxable Resources.
    4. Gross Domestic Product.
    5. Budget surplus/deficit.
    6. Economic projections.
    7. Bond ratings.
    8. Unemployment rate.
    9. Other.
    d. Using a measurement of disaster risk? Why?
    i. If so, how should FEMA measure disaster risk? Which metrics 
should be used to assess it and why? Potential metrics include, but are 
not limited to:
    1. Past presidential declarations.
    2. Past FEMA disaster relief.
    3. Insurance industry data.
    4. Climatological data, including projected future risk.
    5. Priority placed on mitigation in the State or local budget.
    2. Scope of Deductible: How should FEMA define the applicability of 
the deductible to ensure it incentivizes meaningful improvements in 
planning, fiscal capacity, and risk mitigation?
    a. Should the deductible apply to State governments, Territorial 
governments, Tribal governments, or all of the above?
    b. To which of the following types of FEMA Public Assistance should 
the deductible apply and why?
    i. Direct Federal Assistance (emergency work performed, or 
contracted for, by the Federal government at the request of the 
    ii. Emergency Work (debris removal and emergency protective 
    iii. Permanent Work (infrastructure repair and replacement).
    iv. Management Costs.
    v. Other.
    3. Satisfying the Deductible: How should a Recipient be able to 
satisfy its deductible?
    a. Should only Recipient actions be allowed to satisfy the 
deductible, or should Subrecipient actions be considered as well and 
    i. If Subrecipient actions should be considered, which of the 
following Subrecipients should be included and why?
    1. Local governments.
    2. Indian Tribal governments.
    3. Private nonprofit organizations.
    b. What of the following types of actions should qualify towards 
satisfying the deductible and why?
    i. Work that would be eligible for FEMA assistance but for the 
    ii. Management costs for work that would be eligible for FEMA 
assistance but for the deductible.
    iii. Spending on incidents that do not receive a Presidential 
declaration and supplemental FEMA assistance (for example, emergencies 
declared by the Governor).
    iv. For incidents that do receive a Presidential declaration, 
spending in jurisdictions that were not designated for supplemental 
FEMA assistance.
    v. Cost-share requirements for FEMA programs.
    1. If so, which programs and why?
    vi. Spending on projects beyond the cost-share required amount.
    vii. Investments in emergency management programs using non-Federal 
    viii. Establishment of a disaster relief fund or ``rainy day'' 
    ix. Expenditures from a disaster relief fund or ``rainy day'' fund.
    x. Establishment of an individual assistance program.
    xi. Expenditures from an individual assistance program.
    xii. Planning, preparedness, or mitigation programs supported by 
non-Federal funding.
    xiii. Adoption of standardized or enhanced building codes.
    xiv. Proportion of the jurisdiction which is covered by 
standardized and/or enhanced building codes.
    xv. Other.
    c. How much of an administrative burden would it be for Recipients 
to track, and submit for verification, documentation related to each 
manner of satisfying the deductible?
    i. How would Recipients track the documentation?
    ii. How should FEMA verify the information?
    d. How should these actions be counted or credited toward 
satisfaction the deductible? Why?
    i. Dollar-for-dollar reductions in the deductible. For example, 
each dollar spent through a Recipient's own individual assistance 
program could count as a dollar toward meeting the deductible.
    ii. Percentage credits toward the deductible. For example, a 
Recipient may receive a credit of X percent of the deductible for 
establishing its own individual assistance program.
    iii. Other. If so, please provide details regarding these other 
    4. Incentivizing Change: FEMA believes a deductible could improve 
the United States' disaster management system and increase disaster 
resilience nationally by driving Recipient legislative action, 
budgeting, planning and other measures that further greater resilience. 
FEMA seeks comment on this, as follows:
    a. Will a deductible requirement incentivize potential future 
Recipients of disaster assistance to adopt measures

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that make them more resilient or more capable to respond to future 
disasters? If so, how?
    b. In which of the following areas should FEMA focus the incentives 
of a deductible approach in order to achieve those improvements in 
disaster management and resilience and why?
    i. Increased fiscal capacity to address disasters at the Recipient 
    ii. Better planning by Recipients for the financial costs of 
    iii. Reduced long-term impact of disasters.
    iv. Reduced risk of loss from disaster.
    v. Decreased future disaster costs.
    vi. Better levels of cooperation among neighboring jurisdictions.
    vii. Increased State emergency management staffing and funding.
    viii. Other.
    c. What specific actions should FEMA seek to incentivize and why? 
Potential actions include:
    i. Acceptance of greater financial responsibility for disaster 
costs by non-Federal entities.
    ii. Increased non-Federal investment in emergency management 
programs generally.
    iii. Increased investment in mitigation strategies at Recipient 
    iv. Establishment of Recipient disaster relief funds or ``rainy 
day'' funds.
    1. Increased spending from such funds where they already exist.
    v. Establishment of Recipient individual assistance programs.
    1. Increased spending from such funds where they already exist.
    vi. Increased level of Recipient financial relief provided for 
incidents that do not receive a Presidential declaration pursuant to 
the Stafford Act.
    vii. Other.
    d. How could a deductible incentivize the actions necessary to 
achieve improvements in the selected areas and how should FEMA design 
the deductible to provide that incentive?
    e. Are there alternatives to a deductible that could serve as a 
better incentive to the selected improvements and actions?
    i. If so, what are those alternatives?
    ii. Why would those alternatives be more effective than a 
    5. Implementation Considerations: How could FEMA design deductible 
implementation so as to maximize effectiveness of the deductible as an 
incentive, but also ensure Recipients have sufficient opportunity to 
adjust to it?
    a. What specific actions might Recipients take if a deductible were 
introduced to FEMA's Public Assistance Program? What specific types of 
actions should we seek to incentivize through the establishment of a 
    b. How would Recipients meet the deductible?
    i. Would Recipients seek to pass the costs of the deductible on to 
Subrecipients? How?
    ii. Would the passing on of costs to Subrecipients be appropriate? 
Why or why not?
    iii. Should FEMA seek to prevent Recipients from passing the costs 
on to Subrecipients? Why?
    iv. If so, what methods could FEMA use to prevent the transfer of 
responsibility for costs from Recipients to Subrecipients?
    c. Should the deductible be applied on an annual basis or per 
    i. If annual, how should FEMA define the year? Why?
    ii. If per disaster, should there be a cap on the number of 
deductibles, or total deductible amount, that a Recipient should be 
responsible for in a given year? Why? In what way can FEMA be sensitive 
to problems caused by recurrent disasters through a deductible policy?
    iii. If appropriate, how should FEMA set the cumulative annual 
deductible cap for repetitive disasters?
    d. Should FEMA ever consider waiving all or part of the deductible? 
    i. If so, under what circumstances should FEMA consider waiving all 
or part of the deductible?
    ii. If so, how should FEMA determine what portion of the deductible 
should be waived?
    iii. How frequently should FEMA consider waiving all or a portion 
of the deductible? Why?
    e. If FEMA introduced a deductible concept to the Public Assistance 
Program, what steps would Recipients take to adjust?
    i. How long would it take Recipients, working with relevant 
stakeholders, to appropriately adjust to the introduction of a 
    ii. Should FEMA consider a phased implementation approach through 
which the deductible would be applied over time? Why?
    iii. If so, over how much time should the deductible concept be 
phased in and in what way? Why?
    6. Estimating Impacts: Implementation of a deductible as a 
prerequisite for receiving Public Assistance would have an economic 
impact on future Recipients of disaster assistance.
    a. Do Recipients currently maintain a disaster relief or ``rainy 
day'' fund?
    b. If not, how much would it cost to establish and administer a 
disaster relief or ``rainy day'' fund?
    c. If a Recipient could satisfy its deductible through provision of 
its own individual assistance program, would Recipients establish or 
expand existing individual assistance programs?
    d. What are the costs of establishing and running various 
individual assistance programs?
    e. If a Recipient could satisfy its deductible through an increase 
in planning, preparedness, or mitigation programs, would Recipients 
increase the level of such activities or programs?
    f. If a Recipient could satisfy its deductible through adoption of 
enhanced building codes, would Recipients or Recipient communities 
adopt such codes?
    g. What are the costs associated with adoption of such building 
    h. What are the costs associated with the specific actions 
Recipients might take if a deductible were introduced to FEMA's 
disaster relief programs?
    i. What, if any, disproportionate impacts might be borne by small 
nonprofit entities or small government jurisdictions (populations less 
than 50,000)?

    Authority: 42 U.S.C. 5121 et seq.

    Dated: January 13, 2016.
W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2016-00997 Filed 1-19-16; 8:45 am]