B-199765.2, AUG 13, 1981

B-199765.2: Aug 13, 1981

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

CED - HENRY ESCHWEGE: THE ATTACHED IS IN PARTIAL RESPONSE TO THE MEMORANDUM OF MARCH 2. IT ADDRESSES THE LEGALITY OF FEMA'S POLICY OF REFUSING TO PROVIDE FUNDS FOR PUBLIC ASSISTANCE COSTS TO STATES WHERE DISASTERS HAVE BEEN DECLARED UNLESS THE STATES AGREE TO PAY 25 PERCENT OF THOSE COSTS. WE CONCLUDE THAT THE POLICY IS LEGALLY PERMISSIBLE UNDER SECTION 301(B) OF THE DISASTER RELIEF ACT OF 1974 AS LONG AS FEMA IS WILLING TO MAKE EXCEPTIONS IN APPROPRIATE CASES. (AN ADDITIONAL MEMORANDUM CONTAINING OUR ANALYSIS OF THE REMAINING QUESTION WILL FOLLOW.). VARIOUS CONGRESSIONAL COMMITTEES ARE REVIEWING THE PROPRIETY OF FEMA'S 75/25 PERCENT COST-SHARING POLICY. I HAVE NO OBJECTION IF YOU WISH YOUR STAFF AND MINE TO DISCUSS THIS MEMORANDUM WITH THE CONGRESSMAN'S STAFF.

B-199765.2, AUG 13, 1981

SUBJECT: REVIEW OF FEDERAL EMERGENCY MANAGEMENT AGENCY'S (FEMA) DISASTER DECLARATIONS (CODE 068109; B-199765.2)

DIRECTOR, CED - HENRY ESCHWEGE:

THE ATTACHED IS IN PARTIAL RESPONSE TO THE MEMORANDUM OF MARCH 2, 1981, FROM RON WOOD, GROUP DIRECTOR, CED. IT ADDRESSES THE LEGALITY OF FEMA'S POLICY OF REFUSING TO PROVIDE FUNDS FOR PUBLIC ASSISTANCE COSTS TO STATES WHERE DISASTERS HAVE BEEN DECLARED UNLESS THE STATES AGREE TO PAY 25 PERCENT OF THOSE COSTS.

WE CONCLUDE THAT THE POLICY IS LEGALLY PERMISSIBLE UNDER SECTION 301(B) OF THE DISASTER RELIEF ACT OF 1974 AS LONG AS FEMA IS WILLING TO MAKE EXCEPTIONS IN APPROPRIATE CASES. (AN ADDITIONAL MEMORANDUM CONTAINING OUR ANALYSIS OF THE REMAINING QUESTION WILL FOLLOW.)

AT THE PRESENT TIME, VARIOUS CONGRESSIONAL COMMITTEES ARE REVIEWING THE PROPRIETY OF FEMA'S 75/25 PERCENT COST-SHARING POLICY. IN ADDITION, CONGRESSMAN GUNDERSON OF WISCONSIN RECENTLY EXPRESSED AN INTEREST IN MY OPINION ON THIS QUESTION. I HAVE NO OBJECTION IF YOU WISH YOUR STAFF AND MINE TO DISCUSS THIS MEMORANDUM WITH THE CONGRESSMAN'S STAFF.

ATTACHMENT

REVIEW OF FEDERAL EMERGENCY MANAGEMENT AGENCY'S DISASTER DECLARATIONS (CODE 068109)

DIGEST

FEDERAL EMERGENCY MANAGEMENT AGENCY'S (FEMA) PRACTICE OF REQUIRING STATES TO AGREE TO PAY 25 PERCENT OF COSTS OF ELIGIBLE PUBLIC ASSISTANCE PROVIDED UNDER DISASTER RELIEF ACT OF 1974 IS NOT IMPROPER AS MATTER OF LAW. STATUTE GIVES FEMA BROAD DISCRETION. FEMA CAN WITHIN THAT DISCRETION DETERMINE THAT 25 PERCENT REPRESENTS REASONABLE LEVEL OF PARTICIPATION IN ALL NORMAL CIRCUMSTANCES. ALSO, FEMA HAS LEFT ITSELF OPTION TO DEVIATE FROM POLICY IN APPROPRIATE CASES.

QUESTION: DOES FEMA HAVE AUTHORITY TO REQUIRE STATES, AS A CONDITION TO RECEIVING FEDERAL DISASTER ASSISTANCE, TO AGREE TO PAY 25 PERCENT OF THE ASSISTANCE COSTS, OR MUST IT MAKE INDIVIDUAL DETERMINATIONS OF THE STATE SHARE APPROPRIATE FOR EACH DISASTER? IF FEMA LACKS SUCH AUTHORITY, MAY STATES RECOVER PORTIONS OF PAST CONTRIBUTIONS?

ANSWER: YOUR QUESTION IS DIRECTED TO THE 75/25 PERCENT COST SHARING POLICY AS APPLIED TO FEDERAL DISASTER ASSISTANCE. AS YOU KNOW, THE COST- SHARING POLICY APPLIES TO EMERGENCY ASSISTANCE ALSO; OUR ANSWER, WHILE EXPRESSED IN TERMS OF DISASTER ASSISTANCE, APPLIES EQUALLY TO EMERGENCY ASSISTANCE. ALSO, ALTHOUGH THIS DISCUSSION IS FRAMED IN TERMS OF "STATE" COMMITMENTS, THE LAW (42 U.S.C. SEC. 5141(B)) AND FEMA'S POLICY INCLUDE LOCAL GOVERNMENT COMMITMENTS IN DETERMINING THE STATE SHARE.

FEMA HAS NOT FORMALIZED ITS POLICY BY PROMULGATING A REGULATION OR BY PUBLISHING NOTICE IN THE FEDERAL REGISTER. HOWEVER, OUR ANALYSIS OF THE ACT AND ITS LEGISLATIVE HISTORY INDICATES THAT IT IS NOT IMPROPER FOR FEMA, BASED ON ITS EXPERIENCE AND IN LIGHT OF THE DIFFICULTY IN INDUCING STATES VOLUNTARILY TO MAKE COMMITMENTS WHICH FEMA CONSIDERS REASONABLE, TO DETERMINE THAT PREVIOUS LEVELS OF STATE SHARING HAVE BEEN UNACCEPTABLY LOW, AND THAT 25 PERCENT REPRESENTS A REASONABLE LEVEL OF STATE PARTICIPATION IN ALL FORESEEABLE CASES. THE POLICY WOULD NOT BE PROPER IF FEMA WERE UNWILLING TO DEVIATE FROM IT NO MATTER WHAT THE CIRCUMSTANCES. HOWEVER, FEMA INFORMS US THAT IT REMAINED WILLING TO MODIFY ITS COST- SHARING RATIO IF THE CIRCUMSTANCES SURROUNDING THESE DISASTERS HAD WARRANTED A DIFFERENT COST-SHARING RATIO. THUS, WE CANNOT SAY THAT FEMA'S POLICY IS AN ABUSE OF DISCRETION.

ANALYSIS: THE DISASTER RELIEF ACT OF 1974, 42 U.S.C. SEC. 5121, ET SEQ. (THE ACT), AUTHORIZES FEDERAL ASSISTANCE TO STATE AND LOCAL GOVERNMENTS IN RESPONSE TO A CATASTROPHE WHICH IS OF SUCH SEVERITY AND MAGNITUDE THAT EFFECTIVE RESPONSE IS BEYOND THE CAPABILITIES OF THE AFFECTED STATE AND LOCAL GOVERNMENTS AND FEDERAL ASSISTANCE IS REQUIRED. WHILE A BROAD RANGE OF FEDERAL PROGRAMS BECOMES AVAILABLE TO STATES WHEN A "MAJOR DISASTER" OR AN "EMERGENCY" DECLARATION IS MADE UNDER THE ACT, CONGRESS DID NOT INTEND THE FEDERAL GOVERNMENT TO ASSUME A UNILATERAL ROLE IN RESPONDING TO SUCH OCCURRENCES. TO THE CONTRARY, CONGRESS STATED SPECIFICALLY ITS INTENT, BY THE ACT, TO PROVIDE "ASSISTANCE *** TO STATE AND LOCAL GOVERNMENTS IN CARRYING OUT THEIR RESPONSIBILITIES TO ALLEVIATE THE SUFFERING AND DAMAGE WHICH RESULT FROM SUCH DISASTERS ***." 42 U.S.C. SEC. 5121(B) (1976 ED.).

WHILE THE PRESIDENT ISSUES MAJOR DISASTER AND EMERGENCY DECLARATIONS, FEMA ADMINISTERS THE ACT, INCLUDING MAKING RECOMMENDATIONS TO THE PRESIDENT. TO INSURE IN PART THAT FEDERAL DISASTER ASSISTANCE IS SUPPLEMENTAL TO STATE AND LOCAL EFFORTS, FEMA REGULATIONS REQUIRE EACH STATE APPLYING FOR FEDERAL DISASTER RELIEF TO EXECUTE A COST-SHARING AGREEMENT AS A PREREQUISITE TO RECEIPT OF FEDERAL DISASTER ASSISTANCE. C.F.R. SEC. 205.44 (1980). UNDER THESE AGREEMENTS, STATES MUST BE WILLING TO ASSUME A PORTION OF THE COSTS ASSOCIATED WITH ELIGIBLE PUBLIC ASSISTANCE IN ORDER TO RECEIVE RELIEF UNDER THE ACT. SINCE MAY OF 1980, FEMA HAS ADVISED ALL STATE APPLICANTS FOR ASSISTANCE THAT IT WOULD PROVIDE FEDERAL DISASTER ASSISTANCE CONTINGENT UPON THE STATES' AGREEMENT TO PAY 25 PERCENT OF THE TOTAL COST OF ELIGIBLE PUBLIC ASSISTANCE.

WITH RESPECT TO THE LAST 15 DISASTER RELIEF REQUESTS, FEMA HAS IN FACT AGREED TO FUND 75 PERCENT OF ELIGIBLE PUBLIC ASSISTANCE COSTS. STATES HAVE BEEN REQUIRED, AS A CONDITION TO RECEIVING FEDERAL AID, TO AGREE TO PAY THE REMAINING 25 PERCENT. WE ARE INFORMED THAT THE FINAL DECISION TO FUND ONLY 75 PERCENT OF THE COSTS OF THIS PROGRAM WAS MADE IN EACH CASE BY THE PRESIDENT. INDEED, THE 75/25 REQUIREMENT HAS BEEN EXPRESSLY INCORPORATED IN THE PRESIDENT'S RECENT DISASTER DECLARATIONS. SEE, FOR EXAMPLE, 45 FED.REG. 82710-11 (1980).

WHILE THIS POLICY HAS NOT BEEN EMBODIED IN A FORMAL RULE, FEMA HAS PROVIDED US WITH A DRAFT OF SUCH A RULE. THE DRAFT RULE JUSTIFIES THIS APPROACH PRIMARILY ON GROUNDS THAT IT IS IN ACCORDANCE WITH CONGRESSIONAL INTENT TO MAKE FEDERAL DISASTER ASSISTANCE UNDER THE ACT SUPPLEMENTAL TO STATE EFFORTS, AND THAT SUCH A POLICY READILY INSURES THAT STATES WILL PAY A "REASONABLE AMOUNT" OF THE COSTS OF DISASTER RELIEF. FEMA ALSO NOTES THAT SUCH A COST-SHARING ARRANGEMENT HAS THE ADVANTAGE OF REDUCING FEDERAL EXPENDITURES FOR THE DISASTER RELIEF PROGRAM, AND THAT IT WILL REDUCE THE TIME PREVIOUSLY REQUIRED TO DELIVER DISASTER RELIEF ASSISTANCE TO AFFECTED STATES BY REDUCING THE TIME IT TAKES TO EVALUATE THE EXTENT OF STATE AND LOCAL CONTRIBUTIONS TO THE DISASTER RELIEF EFFORT.

THE DRAFT OF FEMA'S PROPOSED RULE EXPRESSING ITS 75/25 POLICY INDICATES THAT EXCEPTIONS MIGHT BE MADE WHEN THERE ARE "SUCH EXTRAORDINARY AND COMPELLING CIRCUMSTANCES, UNIQUE TO A PARTICULAR DISASTER-AFFECTED STATE, THAT STATE AND LOCAL CONTRIBUTIONS AT THIS LEVEL OR OF THIS TYPE WOULD BE CLEARLY PRECLUDED. SUCH CIRCUMSTANCES MIGHT INCLUDE THE OCCURRENCE OF AN OVERWHELMINGLY CATASTROPHIC EVENT OR REPEATED DISASTERS AFFECTING THE SAME JURISDICTION."

SECTION 301(B) OF THE ACT (42 U.S.C. SEC. 5141(B)) PROVIDES THAT, BEFORE DISASTER ASSISTANCE IS AVAILABLE, THE GOVERNOR OF AN AFFECTED STATE MUST FIRST DETERMINE THAT THE OCCURRENCE IS OF SUCH SEVERITY AND MAGNITUDE THAT EFFECTIVE RESPONSE IS BEYOND THE CAPABILITY OF THE STATE AND THE AFFECTED LOCAL GOVERNMENTS, AND THEN SUBMIT THIS DETERMINATION WITH THE REQUEST FOR FEDERAL DISASTER ASSISTANCE. IN ADDITION, SECTION 301(B) REQUIRES THE GOVERNOR TO FURNISH INFORMATION ON THE EXTENT AND NATURE OF STATE RESOURCES WHICH HAVE BEEN OR WILL BE USED IN RESPONSE TO THE DISASTER, AND TO CERTIFY THAT A REASONABLE AMOUNT OF STATE AND LOCAL GOVERNMENT FUNDS WILL BE COMMITTED TO ALLEVIATE THE CONDITIONS IN THE STATE. BASED ON THIS INFORMATION, THE PRESIDENT IS AUTHORIZED TO DECLARE EITHER AN EMERGENCY OR A MAJOR DISASTER. UPON SUCH A DECLARATION, FEDERAL ASSISTANCE BECOMES AVAILABLE TO SUPPLEMENT THE EFFORTS OF AFFECTED STATE AND LOCAL GOVERNMENTS.

FEMA'S POLICY OF REQUIRING STATES TO BEAR 25 PERCENT OF THE COST OF PUBLIC ASSISTANCE, IF APPLIED WITHOUT EXCEPTION, COULD RESULT IN STATE AND LOCAL GOVERNMENTS HAVING TO PAY FOR DISASTER RELIEF COSTS WHICH THEY BELIEVE ARE BEYOND THEIR CAPABILITY TO ASSUME, OR WHICH THEY BELIEVE CONSTITUTE MORE THAN A REASONABLE AMOUNT OF STATE AND LOCAL FUNDS. CONVERSELY, STATES WHICH CAN AFFORD TO PAY MORE THAN 25 PERCENT COULD BE ALLOWED TO CONTRIBUTE LESS THAN A REASONABLE AMOUNT.

WE ARE NOT ABLE TO CONCLUDE THAT FEMA IS ACTING IMPROPERLY, HOWEVER, AT LEAST AS LONG AS FEMA DOES NOT REFUSE TO MAKE EXCEPTIONS FROM THE POLICY. IN TERMS OF THE STATUTORY GOAL THAT COSTS BE SHARED BETWEEN FEDERAL AND STATE AUTHORITIES, FEMA CAN LEGITIMATELY SEEK ASSURANCES THAT THE STATE AND LOCAL GOVERNMENTS ARE IN FACT CONTRIBUTING A REASONABLE AMOUNT OF THEIR FUNDS, AS REQUIRED BY SECTION 301(B) OF THE ACT. FEMA ASSERTS THAT STATES HAD IN THE PAST UNIFORMLY UNDERSTATED BY A WIDE MARGIN THEIR ABILITY TO CONTRIBUTE TO DISASTER RELIEF. FEMA FOUND IT "EXCEPTIONALLY DIFFICULT" TO IDENTIFY ANY PRECISE AMOUNTS FOR EACH STATE IN EACH DISASTER THAT WOULD REPRESENT AN ADEQUATE STATE OFFERED COMMITMENT. AS A CONSEQUENCE, BASED ON ITS EXPERIENCE WITH THE PROGRAM, FEMA CONCLUDED THAT 25 PERCENT WAS A REASONABLE PROPORTION FOR ANY STATE IN VIRTUALLY ALL CONDITIONS FEMA COULD CONCEIVE OF.

IN OUR VIEW, FEMA'S APPARENTLY STRICT ADHERENCE TO THE 75/25 RATIO IS BASED ON A DISCRETIONARY ASSESSMENT THAT A 75/25 COST-SHARING APPROACH RESULTS IN A REASONABLE LEVEL OF STATE PARTICIPATION IN DISASTER RELIEF COSTS IN ALL OR ALMOST ALL CASES. IT OBVIATES THE ADMINISTRATIVE PROBLEMS ASSOCIATED WITH ATTEMPTING TO CALCULATE THE APPROPRIATE COST-SHARING FRACTIONS FOR EACH DISASTER, A MATTER NOT SPECIFICALLY ADDRESSED BY THE STATUTE, AND ALSO ASSURES COMPLIANCE WITH THE STATUTORY PURPOSE THAT THE FEDERAL AID BE SUPPLEMENTAL TO THE STATES. MOREOVER, FEMA HAS LEFT ITSELF FREE TO RECOMMEND PROVIDING MORE OR LESS THAN 75 PERCENT OF THE ASSISTANCE, SHOULD IT BE CONVINCED IN A PARTICULAR CASE THAT AN EXCEPTION IS WARRANTED.

WE HAVE NO EVIDENCE WHICH CLEARLY INDICATES THAT THIS COST-SHARING ARRANGEMENT WAS UNREASONABLE AS APPLIED IN A PARTICULAR CASE, OR THAT FEMA WAS UNWILLING TO DEPART FROM THE 75/25 COST-SHARING RATIO IF A PROPER CASE HAD OCCURRED. THE ONE CASE DOCUMENTED IN THE FILE YOU GAVE US - WISCONSIN - DOES NOT RESOLVE THIS ISSUE. WHILE FEMA'S CORRESPONDENCE WITH WISCONSIN APPEARS TO REFLECT AN UNYIELDING ADHERENCE TO THE 75/25 RATIO, FEMA'S REFUSAL TO ACCEPT ANYTHING OTHER THAN A 25 PERCENT STATE SHARE WAS NOT CLEARLY UNJUSTIFIED. THERE IS NO EVIDENCE IN THE RECORD THAT 25 PERCENT WAS UNREASONABLE FOR WISCONSIN TO PAY UNDER THE CIRCUMSTANCES AS THEY EXISTED WHEN THE REQUEST FOR FEDERAL ASSISTANCE WAS MADE.

A FINDING THAT THE FEDERAL SHARE SHOULD HAVE BEEN MORE THAN 75 PERCENT IN A PARTICULAR CASE, WERE WE IN A POSITION TO SO DETERMINE, WOULD PROVE THAT IN THAT INSTANCE FEMA'S JUDGMENT WAS WRONG. IT WOULD NOT PROVE THAT THE POLICY WAS UNLAWFUL. THE LEGAL ISSUE IS WHETHER FEMA MUST MAKE INDIVIDUAL DETERMINATIONS AS TO THE STATE SHARE IN EACH CASE OR WHETHER IT CAN ESTABLISH IN ADVANCE A LEVEL OF REQUIRED STATE PARTICIPATION. TO FIND THAT THE POLICY IS ILLEGAL REQUIRES MORE THAN CONCLUDING THAT 25 PERCENT IS IN ONE OR MORE INSTANCES UNREASONABLE FOR THE STATE TO PAY. REQUIRES RATHER THE CONCLUSION THAT SETTING ANY PERCENTAGE ON OTHER THAN A CASE-BY-CASE BASIS IS INCONSISTENT WITH THE WORKINGS AND INTENTION OF THE STATUTE. WE CANNOT SUPPORT THAT CONCLUSION.

WE ALSO NOTE THAT THE CONFEREES OF THE APPROPRIATIONS COMMITTEES WERE AWARE OF FEMA'S POLICY, APPARENTLY REGARDED ITS CONTINUED APPLICATION AS A DISCRETIONARY COST-SHARING POLICY, AND DESCRIBED IT WITH APPARENT APPROVAL AS "NEGOTIATING" WITH THE STATES (H. R. REP. NO. 96-1476, 12 (1980)).

IF YOU DETERMINE THAT EITHER THE 75/25 COST-SHARING APPROACH WAS UNFAIR IN THAT SOME STATES PAID MORE OR LESS THAN A REASONABLE AMOUNT, OR, WHETHER OR NOT THE RESULTS WERE UNFAIR, THE 75/25 APPROACH IS UNDESIRABLE FROM THE STANDPOINT OF ECONOMY AND EFFICIENCY, IT WOULD BE APPROPRIATE FOR YOUR REPORT TO RECOMMEND CHANGES IN FEMA'S IMPLEMENTATION OF THE ACT.