The Epicenter defines infrastructure as the physical, economic, and social systems central to the functioning of an economy and a society. Resiliency in critical infrastructure is about the ability to withstand extreme climate impacts and recover from them quickly.
If $1 invested in disaster prep saves $13, then it's clear investing in preparedness produces a higher ROI than recovery. But what does that preparation look like? An interview with Nanotech Materials offers an example of resiliency in the category of fortified roofing and building materials.
If each $1 invested in disaster preparation saves $13 in economic costs, damages, and cleanup, then it's clear that investing in the preparation for climate-related catastrophes produces a higher ROI than just focusing on recovery alone. But what, exactly, does that preparation look like?
A smart transition of FEMA toward state and local disaster responsibility would encompass 1) reform to the Stafford Act to rebalance federal and state contributions, 2) a restructuring of state disaster relief funds, and 3) a shift toward regionalization of disaster response.
In its proposed FEMA review, the Trump Administration is pushing states and localities to take greater ownership of resilience and emergency response. If done correctly, this is not a flawed approach. However, if executed in line with current federal budget freezes and staff reductions, it presents high risks and potential for unintended consequences. The federal government’s role in disaster management is deeply embedded in the economic and governance fabric of the United States, and any abrupt dissolution of FEMA would throw disaster recovery efforts into chaos.
To be clear, FEMA and federal disaster support should not go away. The U.S. economic system, the engine that fuels American prosperity, is built upon a federalist framework that balances state and local control with federal oversight and resources. This system is unique in the world and is a major reason the U.S. maintains global leadership in economic strength and disaster response capacity. Stripping FEMA of its resources without adequately strengthening state and local capabilities would break this balance and weaken our ability to respond to increasingly frequent and severe disasters.
Federal funding is the financial backbone of state and local budgets, with roughly 33% of state budgets coming from federal transfers. This dependency is even higher in traditionally Republican states; according to Pew Charitable Trusts, states such as Louisiana, Mississippi, Kentucky, and West Virginia receive 40-50% of their total budgets from federal sources. These figures do not take into account federal capital allocation in the event of a disaster. A wholesale removal of FEMA would not just impact disaster response—it would exacerbate fiscal instability at a time when states are already bracing for federal budget freezes and potential restructuring of how federal funds flow to them.
Historically, natural disasters have been seen as a short-term credit positive because of the rapid influx of FEMA aid and insurance payouts, which injected liquidity into affected communities and helped stabilize local economies. However, the landscape is rapidly changing as the property and casualty insurance industry is in a tailspin, with insurers retreating from high-risk markets due to escalating climate-related losses. Removing FEMA’s backstop at the same time that private insurers are exiting the market would challenge traditional disaster response and post-disaster economic development.
This perfect storm of disaster financing gaps underscores the need for reform to the Stafford Act, the bill that essentially dictates federal disaster relief. The current system does not emphasize or require risk reduction, guaranteeing federal aid without requiring meaningful resilience investments. But dismantling FEMA without first establishing a new resilience-focused financial model would leave states and municipalities dangerously exposed, triggering significant fiscal stress just as disasters are becoming more frequent and severe.
The current federal budget freeze discussion has largely ignored its impact on state budgets, just as the proposed FEMA dissolution ignores the cascading consequences of abruptly shifting financial and operational responsibilities to underfunded and underprepared state agencies. This is subtraction without addition, a general downsizing rather than a strategic reallocation—one that could push both states and municipalities toward financial crisis.
The Federal government’s current disaster policy is reactive in nature—focused on response and recovery rather than proactive risk mitigation. This needs to change. Rather than a blanket federal retreat from disaster response, we should rethink the Stafford Act and other disaster approaches to incentivize resilience investments at the state and local levels.
A smarter transition toward state and local disaster responsibility would encompass 1) reform to the Stafford Act to rebalance federal and state contributions, 2) a restructuring of state disaster relief funds, and 3) a shift toward regionalization of disaster response.
The federal government should create financial incentives for pre-disaster investment. The federal cost-share under the Stafford Act is typically 75% federal, 25% state/local. However, states that invest heavily in resilience (e.g. building to modern flood, fire, and wind codes) could qualify for a higher federal cost-share in post-disaster aid.
This should include expanded pre-disaster mitigation grants. Programs like FEMA’s Building Resilient Infrastructure and Communities (BRIC) fund should be significantly expanded and made more accessible to low-capacity communities.
The federal government should offer structured guidance and seed funding to help states establish independent, well-capitalized disaster relief funds. Instead of replicating Florida’s Hurricane Catastrophe Fund—which relies heavily on municipal bonds and exposes the state to overborrowing without addressing systemic resilience issues—the U.S. needs a more sustainable, market-driven approach to state disaster financing. California appears to be following a similarly flawed path with its wildfire risk financing, further underscoring the need for a national framework for state disaster relief funds.
A principal tenant here is around policies that encourage states and localities to move away from short-term agendas that inevitably increase their climate risk profiles (e.g. zoning rules encouraging development in flood zones or near dry vegetation) and their public debt burdens. This framework should prioritize:
By replacing the current patchwork of underfunded and reactionary state disaster funds with a federally guided but state-administered framework, the U.S. can build a more sustainable, risk-aware system that reduces taxpayer liability, enhances private sector participation, and strengthens resilience at the state and local levels.
FEMA should facilitate regional emergency response compacts where states pool resources, similar to the Emergency Management Assistance Compact (EMAC). State-level Resilience Authorities (akin to Maryland's legislative support for resilience authorities) could be created to manage pooled risk across multiple localities, preventing wealthier areas from simply offloading their risk onto FEMA.
Shifting more responsibility for resilience and disaster response to states and localities is a valid policy objective—but not at the expense of FEMA’s essential functions. The U.S. needs a phased approach that encourages states to invest in resilience, modernizes disaster funding, and enhances state-level capacity—without pulling the rug out from under the existing system.
Dismantling FEMA without building a stronger foundation for disaster response is not federalism—it’s fiscal and policy malpractice. Instead, we must use this moment to modernize the Stafford Act, unlock new state funding models, and ensure that federal support remains a stabilizing force in regionalized disaster management.
By making these shifts, we can strengthen local and state disaster preparedness without sacrificing the federal coordination and economic stability that have made the U.S. a global leader in disaster response.
If each $1 invested in disaster preparation saves $13 in economic costs, damages, and cleanup, then it's clear that investing in the preparation for climate-related catastrophes produces a higher ROI than just focusing on recovery alone. But what, exactly, does that preparation look like?
There are no silver bullet solutions for the private sector to adopt to dramatically reduce the costs of winter storms. The biggest lever to bring costs down exists in modernizing and winterizing the grid—an endeavor that will require substantial technological, mechanical, and financial investments.
Extreme weather events wreak havoc on a grid not designed to endure their frequency and intensity, but there are solutions to build resiliency. 1. Modernize grid infrastructure; 2. Install more microgrids; 3. Roll out more renewable energy to reduce fossil-fuel dependence
The muni bond market presents an opportunity to finance resiliency in a way that aligns policy-makers, community stakeholders, business interests, and investors. By strengthening local infrastructure to render assets less vulnerable to climate shocks, it can reduce disaster costs for communities.