The State of State Natural Disaster Management

Climate resilience—including better management of increasingly frequent and costly natural disasters—will likely feature in President Joe Biden’s State of the Union address on March 7. While the federal government plays a key role in disaster assistance, state leaders have also been confronting the fiscal impacts of these events in recent years—and taking steps to better manage their spending on them.

In 2023, weather-related disasters causing a billion dollars or more in damage were more frequent than ever in the United States. States are dealing with increased volatility in their own spending on natural disaster response and recovery as the damage caused by extreme weather events becomes more costly.

The increasing cost and risk of natural disasters is playing a major role in shrinking the home insurance market and driving up rates in Gulf Coast and Western states. In response, leaders in these states have taken a range of steps to protect property and state budgets from the myriad threats posed by more frequent and expensive disasters. Forty-six states have a disaster spending account, but most don’t have a consistent strategy for funding it.

Recent years, however, have seen more policymakers pay attention to disaster funding practices in the interest of mitigating states’ fiscal risk. In Massachusetts, one of the four states without such an account, lawmakers are proposing a new disaster relief fund. As noted in previous research, California has appropriated $2.7 billion in state funds for wildfire and forest resilience, while Utah provides incentives to encourage local governments to make their own investments in reducing risk.

States are also taking steps to more comprehensively track how much they spend on disaster assistance and better assess their budgeting practices, which can help states make more strategic decisions, such as devoting more resources to mitigation strategies. When examining the return on mitigation investments in the contiguous 48 states, The Pew Charitable Trusts found that, although the amount varies, every state saves at least three times as much in post-disaster recovery costs as it invests in mitigation.

Natural disasters—such as floods, earthquakes, and wildfires—are inevitable, and policymakers will continue to face the challenges of covering the many costs that come with them. State policymakers can help manage future fiscal impacts by implementing spending tracking, identifying opportunities to improve budgeting practices, and prioritizing mitigation investments that can save money down the road. As budgets continue to be squeezed and disasters increase in frequency and severity, planning and acting now is more important than ever.

Liz Farmer is an officer with The Pew Charitable Trusts’ state fiscal policy project, and Colin Foard is a senior manager with Pew’s managing fiscal risks project.