This message was sent to the Justice and Public Safety Committee —

We are writing with information related to FEMA’s recent announcement that the agency is considering a “disaster deductible” concept that would require recipients of federal disaster assistance funds to meet a certain level of spending before receiving federal funds following a disaster – similar in concept to a personal health insurance deductible.

Please find this information below.

The disaster deductible proposal: the “what” and the “why”

On January 20, an advanced notice of proposed rulemaking (ANPRM) announced that FEMA is considering the establishment of a “disaster deductible,” which would require recipients of FEMA Public Assistance (typically states; counties are sub-recipients) to meet a predetermined level of financial or other commitment before receiving federal disaster funds. At this juncture, FEMA is not formally proposing the implementation of a deductible, but the agency is soliciting comments on the deductible concept. These comments are due by March 21. NACo is working with its members and partner organizations to assess the potential impact of a “disaster deductible” on counties, and we plan to submit comments to FEMA.

In the ANPRM, FEMA writes that under a disaster deductible framework, states could meet the deductible requirement not just through their post-disaster spending, but also through investments in certain resilience and mitigation projects, like “prior adoption of a building code that reduces risk; 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.”

The deductible concept is being put forth by FEMA in response to recommendations from the Government Accountability Office (GAO) and the Department of Homeland Security’s Office of Inspector General that the federal disaster declaration threshold – the level of fiscal damage caused by a disaster at which the federal government provides funding to states – be raised to reduce federal spending on disasters. According to FEMA, the deductible proposal would be one way to address the concerns of GAO and the Inspector General without raising the disaster threshold.

Ultimately, FEMA believes that a deductible could result in more effective use of taxpayer resources, incentivize proactive fiscal planning for disasters and encourage the set-aside of funds for disaster response and recovery.

FEMA’s fact sheet on the proposal is attached. You can also read a helpful piece on the proposal from