[Senate Hearing 112-181]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-181
 
      FEDERAL DISASTER ASSISTANCE BUDGETING: ARE WE WEATHER-READY?

=======================================================================

                                HEARING

                                before a

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            SPECIAL HEARING

                     JULY 28, 2011--WASHINGTON, DC

                               __________

         Printed for the use of the Committee on Appropriations


   Available via the World Wide Web: http://www.gpo.gov/fdsys/browse/
        committee.action?chamber=senate&committee=appropriations

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                      COMMITTEE ON APPROPRIATIONS

                   DANIEL K. INOUYE, Hawaii, Chairman
PATRICK J. LEAHY, Vermont            THAD COCHRAN, Mississippi, Ranking
TOM HARKIN, Iowa                     MITCH McCONNELL, Kentucky
BARBARA A. MIKULSKI, Maryland        RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin                 KAY BAILEY HUTCHISON, Texas
PATTY MURRAY, Washington             LAMAR ALEXANDER, Tennessee
DIANNE FEINSTEIN, California         SUSAN COLLINS, Maine
RICHARD J. DURBIN, Illinois          LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            LINDSEY GRAHAM, South Carolina
MARY L. LANDRIEU, Louisiana          MARK KIRK, Illinois
JACK REED, Rhode Island              DANIEL COATS, Indiana
FRANK R. LAUTENBERG, New Jersey      ROY BLUNT, Missouri
BEN NELSON, Nebraska                 JERRY MORAN, Kansas
MARK PRYOR, Arkansas                 JOHN HOEVEN, North Dakota
JON TESTER, Montana                  RON JOHNSON, Wisconsin
SHERROD BROWN, Ohio

                    Charles J. Houy, Staff Director
                  Bruce Evans, Minority Staff Director
                                 ------                                

       Subcommittee on Financial Services and General Government

                 RICHARD J. DURBIN, Illinois, Chairman
FRANK R. LAUTENBERG, New Jersey      JERRY MORAN, Kansas
BEN NELSON, Nebraska                 MARK KIRK, Illinois
DANIEL K. INOUYE, Hawaii (ex         THAD COCHRAN, Mississippi (ex 
    officio)                             officio)

                           Professional Staff

                             Marianne Upton
                         Diana Gourlay Hamilton
                          Melissa Z. Petersen
                        Dale Cabaniss (Minority)
                        Ellen Beares (Minority)
                       LaShawnda Smith (Minority)

                         Administrative Support

                              Nora Martin


                            C O N T E N T S

                              ----------                              
                                                                   Page

Opening Statement of Senator Richard J. Durbin...................     1
    Prepared Statement of........................................     5
Prepared Statement of Howard Kunreuther and Erwann Michel-Kerjan.     6
Natural Disasters Impose Severe Economic Losses..................     6
Why Are Disaster Losses Increasing?..............................     6
Increasing Role of Federal Disaster Assistance...................     7
Reducing Exposure to Losses From Disasters.......................     7
Why Individuals do not Protect Themselves Against Potential 
  Disasters......................................................     8
The Key Role of Insurance........................................     9
Our Proposal: A Multi-year Insurance-Risk Reduction Loan Program.    10
Lessons From an Energy Efficiency Program........................    10
We Need To Act Now...............................................    11
Catastrophe Modeling and the Exceedance Probability Curve........    11
Usefulness of the EP Curve.......................................    12
About RMS........................................................    13
Insuring Flood Risk..............................................    13
Devastating Losses Require Better Insurance......................    14
Limits of the NFIP as Currently Designed.........................    14
Better Tools for Disaster Financing..............................    15
Letter From the Center for American Progress Action Fund.........    16
Statement of Senator Jerry Moran.................................    19
Statement of David C. Trimble, Director, Natural Resources and 
  Environment, Government Accountability Office..................    20
    Prepared Statement of........................................    21
Climate Change Adaptation........................................    21
Federal, State, and Local Authorities are Beginning To Take Steps 
  To Adapt to Climate Change.....................................    22
Why the GAO Did This Study.......................................    28
What GAO Found...................................................    28
Statement of Kathryn D. Sullivan, Ph.D., Assistant Secretary of 
  Commerce for Environmental Observation and Prediction, National 
  Oceanic and Atmospheric Administration, Department of Commerce.    29
    Prepared Statement of........................................    31
Depiction of Gulf of Mexico Hypoxia Zone Image...................33, 64
What it Means....................................................    33
The Various Roles of NOAA........................................    34
Achieving a Weather- and Water-ready Nation......................    36
Statement of James Rivera, Associate Administrator, Office of 
  Disaster Assistance, Small Business Administration.............    38
    Prepared Statement of........................................    40
The SBA's Role in Responding to a Disaster.......................    41
Budget Formulation Subsidy Estimates.............................    41
Additional Resources.............................................    41
Significant Improvements Since Hurricane Katrina.................    42
Statement of Dr. Donald J. Wuebbles, The Harry E. Preble 
  Professor of Atmospheric Sciences, University of Illinois-
  Urbana, Illinois...............................................    43
    Prepared Statement of........................................    45
Statement of Franklin W. Nutter, President, Reinsurance 
  Association of America.........................................    50
    Prepared Statement of........................................    52
Questions Submitted by Senator Richard J. Durbin.................    68
Questions Submitted to Kathryn D. Sullivan, Ph.D.................    68
Questions Submitted to David C. Trimble..........................    72
Dangers and Drawbacks of Fragmented Management...................    72
Addressing Government Challenges by Adapting Private Sector Tools    73


      FEDERAL DISASTER ASSISTANCE BUDGETING: ARE WE WEATHER-READY?

                              ----------                              


                        THURSDAY, JULY 28, 2011

                           U.S. Senate,    
         Subcommittee on Financial Services
                            and General Government,
                               Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Richard Durbin (chairman), 
presiding.
    Present: Senators Durbin and Moran.


             OPENING STATEMENT OF SENATOR RICHARD J. DURBIN


    Senator Durbin. I'm pleased to convene this hearing to 
investigate the Federal Government's responsibilities in terms 
of dealing with long-term planning to mitigate the economic 
impact of severe weather events. I welcome my distinguished 
ranking member, Senator Jerry Moran of Kansas. Other colleagues 
may join us on the dais today. And they will be invited to send 
in written questions if they're not in attendance personally.
    Joining us today to contribute to the conversation are 
public officials and experts in disaster relief and catastrophe 
modeling from the Government, business, and scientific realm.
    Our first witness is going to be David C. Trimble, Director 
of the Natural Resources and Environmental Group with the 
Government Accountability Office (GAO).
    Our second witness is Kathryn D. Sullivan, Ph.D., Deputy 
Administrator and Assistant Secretary of Commerce for 
Environmental Observation and Prediction at the National 
Oceanographic and Atmospheric Administration (NOAA). 
Incidentally, Dr. Sullivan was the first woman to walk in space 
and previously served as the NOAA's chief scientist.
    Our next witness is James Rivera, associate administrator 
for the Office of Disaster Assistance at the SBA.
    Our fourth witness is Dr. Donald J. Wuebbles. He is an 
endowed professor at the University of Illinois and recipient 
of the 2007 Nobel Prize for his work with the intergovernmental 
panel on climate change. On a prouder note, Dr. Wuebbles is an 
Illinois native, son of a farmer, raised in Clinton County, 
Carlyle, Illinois. Glad that you're here.
    Our final witness is Franklin W. Nutter, president of the 
Reinsurance Association of America.
    A famous political philosopher named Robert Allen 
Zimmerman, a.k.a. Bob Dylan, once said, you don't have to be a 
weatherman to know which way the wind is blowing. And we are 
going to discuss today how the wind is blowing in terms of 
weather events and whether we're prepared for it.
    According to the NOAA's National Climate Data Center 
(NCDC), the United States has already experienced eight natural 
disasters, with damages totaling more than $1 billion this 
year--eight. The previous record for weather-related disasters 
of this magnitude was nine in one year. We're almost at that 
point and it's only July.
    [The information follows:]

                     NATURAL DISATSER LOSSES IN THE UNITED STATES--FIRST SIX MONTHS OF 2011
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                     Number of                       Estimated       Estimated
           Event (As of July 6, 2011)                 events        Fatalities    overall losses  insured losses
----------------------------------------------------------------------------------------------------------------
Severe thunderstorm.............................              43             593         $23,573         $16,350
Winter storm....................................               8              15           1,900           1,425
Flood...........................................               8              15           2,100         ( \1\ )
Earthquake......................................               2               1             105         ( \1\ )
Tropical cyclone................................  ..............  ..............  ..............  ..............
Wildfire........................................              37               7             125              50
----------------------------------------------------------------------------------------------------------------
\1\ In progress.

Source.--MR NatCatSERVICE.




    I fly home to Illinois every weekend. I can tell you that, 
during the last 6 months, I've seen it all. Chicago and 
Illinois have experienced blizzards, tornadoes, blistering 
heat, and severe flooding.
    In February, just a few months back now, Chicago--the 
third-largest city in the United States--was shut down with 2 
feet of snow overnight, 60 mile-per-hour winds that hammered 
the city. That blizzard caused 36 deaths and more than $3.9 
billion in damage. This spring, tornadoes damaged homes and 
businesses throughout our State.
    In May, flooding along the Ohio River was so severe, the 
Army Corps of Engineers was forced to blow a levy in Missouri 
to prevent homes in Cairo, Illinois, from being completely 
destroyed.
    Last Friday night, as I was telling Senator Moran, I was 
awakened by what I thought was a storm. It sure was. It dumped 
almost 7 inches of rain in a little more than an hour, the 
largest single 1-day rainfall in the history of recorded 
weather in the city of Chicago. The Metropolitan Water 
Reclamation District was forced to release untreated sewage 
into Lake Michigan. The system was overwhelmed.
    Last night, several parts of Illinois suffered severe 
rainstorms that caused the evacuation of hundreds of people and 
two fatalities. July is now the wettest month in the 122 years 
of Chicago's recorded history.
    Illinois is not alone in these notable weather events. 
We've seen droughts in Texas, wildfires in Arizona and New 
Mexico, flooding in Tennessee, and according to Senator Moran, 
both drought and flooding in his State.
    Today, there are excessive heat warnings in more than 20 
communities throughout Kansas, Senator Moran's home State, and 
flood warnings along the Missouri River.
    In 2011 alone, almost $28 billion in damages have already 
been caused by catastrophic events, and hurricane season is 
just starting. The economic impact of severe weather events is 
only projected to grow in future years as the frequency and 
intensity of weather events continues to grow.
    As this chart will show you, the weather is getting worse 
and more violent; catastrophic, in fact. The Federal Government 
needs to do more to be ready to protect Federal assets and to 
provide disaster assistance on an increasing frequency.




                       Source.--MR NatCatSERVICE.

    Are we ready? Well, the private insurance industry is. I 
was surprised, Mr. Nutter, in visiting some of the leaders in 
your business, a year or two ago, and realizing how closely 
they follow weather and weather patterns, principally if 
they're in the property and casualty realm. And they make 
business decisions about risk, and whether or not the risks are 
going to increase to the point where premiums have to go up or 
they stop writing insurance. And they make those decisions on a 
regular basis.
    You're thinking ahead. I'm not sure the Federal Government 
is thinking ahead when it comes to our preparedness for 
disasters. Private insurers handled $89 billion in losses, 
sustained by 5.5 million policyholders, in the 2004 and 2005 
hurricane seasons without any significant setbacks.
    Given the industry's success, I want to see if there are 
budgeting practices the Federal Government could adapt from the 
private sector to better forecast how we budget for disaster 
assistance efforts.
    Another chart we can put up here, the SBA's Disaster Loan 
Program provides a good example of the sporadic Federal 
budgeting associated with natural disasters. Historically, loan 
volumes under the program average $1 billion a year. 




    However, the actual amount fluctuates greatly from year to 
year and often differs significantly from the long-term 
average. In years with multiple catastrophic events, we are 
left scrambling to fund relief programs in the short term. In 
the meantime, we're not focusing strategically on the long-term 
Federal budgetary impact of what we know is happening, 
increasingly severe weather events.
    With the potential for more severe disasters occurring with 
greater frequency, I have called this hearing to explore the 
Federal Government's planning for spending on disaster relief. 
I don't know that other committees are considering this, but 
because of our appropriations responsibility, with at least one 
of the agencies affected, I've tried to coordinate other 
Federal agencies in this conversation.

                          PREPARED STATEMENTS

    The cumulative expected exposure of the U.S. Government to 
weather-related disasters over the next 75 years could reach $7 
trillion with inflation. If we hope to put this country on a 
sustainable fiscal path, we need to be prepared to manage this 
increase in natural catastrophe. We can learn from the private 
sector how to better prepare.
    I ask unanimous consent that the submitted testimonies of 
Howard Kunreuther and Erwann Michel-Kerjan, and Risk Management 
Solutions, as well as a copy of an article entitled Redesigning 
Flood Insurance that appeared in Science magazine on July 22 be 
part of the permanent record of this hearing. At this point, 
I'd like to turn it over to my colleague and friend, Senator 
Moran.
    [The statements follow:]

            Prepared Statement of Senator Richard J. Durbin

    Good afternoon. I am pleased to convene this hearing to investigate 
how the Federal Government could improve its long-term planning to 
mitigate the economic impacts of severe weather events.
    I welcome my distinguished ranking member, Senator Jerry Moran, 
other colleagues who have joined me on the dais today, and others who 
may arrive during the course of these proceedings.
    Joining us today to contribute to this conversation are public 
officials and experts in disaster relief and catastrophe modeling from 
the government and scientific realms.
    Our first witness is David C. Trimble, Director of the Natural 
Resources and Environment Group at the Government Accountability 
Office.
    Our second witness is Kathryn D. Sullivan, Ph.D., Deputy 
Administrator and Assistant Secretary of Commerce for Environmental 
Observation and Prediction at the National Oceanic and Atmospheric 
Administration (NOAA).
    Dr. Sullivan was the first woman to walk in space and previously 
served as NOAA's chief scientist.
    Our next witness is James Rivera, Associate Administrator for the 
Office of Disaster Assistance at the Small Business Administration 
(SBA).
    Our fourth witness is Dr. Donald J. Wuebbles. He is an endowed 
professor at the University of Illinois and recipient of the 2007 Nobel 
Peace Prize for his work with the Intergovernmental Panel on Climate 
Change.
    And--I am proud to note--Professor Wuebbles in an Illinois native. 
He is the son of a farmer and was raised in Carlyle, Illinois.
    Our final witness is Franklin W. Nutter, President of the 
Reinsurance Association of America.
    According to the NOAA's National Climate Data Center, the United 
States has already experienced eight natural disasters with damages 
totaling more than $1 billion this year.
    The previous record for weather-related disaster of this magnitude 
was nine in one year. We are almost at that point, and it is only July.
    I fly home to Illinois almost every weekend. I can tell you that 
during the last 6 months, Illinois has experienced blizzards, tornados, 
blistering heat and severe flooding.
    In February, Chicago--the third-largest city in the United States--
was shut down as 2 feet of snow fell overnight and 60 mile per hour 
winds hammered the city.
    The blizzard caused 36 deaths and more than $3.9 billion in damage.
    This spring, tornados damaged homes and businesses throughout 
Illinois.
    In May, flooding along the Ohio River was so severe that the Army 
Corps of Engineers was forced to demolish a levee to prevent homes in 
Cairo, Illinois, from being completely destroyed.
    This past weekend, 7 inches of rain fell on Chicago in 1 day, the 
largest recorded single-day rainfall in history. The Metropolitan Water 
Reclamation District was forced to release untreated sewage into Lake 
Michigan and to close nearby beaches.
    And last night, several parts of Illinois suffered severe 
rainstorms that caused the evacuation of hundreds of people and two 
fatalities.
    July is now the wettest month in the 122 years of Chicago's 
recorded history.
    And Illinois is not alone. We've seen drought in Texas, wildfires 
in Arizona, and flooding in Tennessee.
    Today, there are excessive heat warnings in more than 20 
communities throughout Kansas--Senator Moran's home State--and flood 
warnings along the Missouri River.
    In 2011 alone, almost $28 billion in damages have already been 
caused by catastrophic events--and hurricane season is just beginning.
    And the economic impact of severe weather events is only projected 
to grow in future years as the frequency and intensity of weather 
events continues to grow.
    The weather is getting worse, catastrophic in fact. The Federal 
Government needs to do more to be ready to protect Federal assets and 
provide disaster assistance on an increasing frequency.
    Is the Federal Government prepared for this?
    The private insurance industry is.
    These companies have stayed financially stable despite a dramatic 
increase in property losses in recent years.
    Private insurers handled $89 billion in losses sustained by 5.5 
million policyholders in the 2004 and 2005 hurricane seasons without 
any significant setbacks.
    Given the industry's success, I'd like to see whether there are any 
budgeting practices that the Federal Government could adapt from the 
private sector to better forecast how we budget for disaster assistance 
efforts.
    The SBA's Disaster Loan Program provides a good example of the 
sporadic Federal budgeting associated with natural disasters.
    Historically, loan volumes under the program average $1 billion a 
year. However, the actual amount fluctuates greatly from year-to-year 
and often differs significantly from the long-term average.
    In years with multiple catastrophic events, we are left scrambling 
to fund relief programs in the short term.
    But, in the meantime, we're not focusing strategically on the long-
term budgetary impacts of what we know is happening--increasingly 
severe weather events.
    With the potential for more severe disasters occurring with greater 
frequency in the future, I have called this hearing to explore the 
Federal Government's planning for spending on disaster relief.
    The cumulative expected exposure of the U.S. Government to weather-
related disasters over the next 75 years could reach $7 trillion, with 
inflation.
    If we hope to put this country on a sustainable fiscal path, we 
need to be prepared to manage this increase in natural catastrophes.
    We can learn from the private sector how to better prepare for the 
economic impact of severe weather.
                                 ______
                                 
    Prepared Statement of Howard Kunreuther and Erwann Michel-Kerjan

    Chairman Durbin and Ranking Member Moran: We are very pleased that 
you are holding this hearing to examine the costs to the Federal 
Government associated with natural disasters and steps that could be 
taken to reduce those costs. We agree that this is an increasingly 
important subject to understand and address. We, Howard Kunreuther and 
Erwann Michel-Kerjan, have conducted considerable research in these 
areas at the Center for Risk Management and Decision Processes of The 
Wharton School at the University of Pennsylvania. It is a pleasure to 
share our observations and recommendations with you.

            NATURAL DISASTERS IMPOSE SEVERE ECONOMIC LOSSES

    In recent years we have witnessed a dramatic increase in the 
economic cost and death toll from hurricanes, earthquakes, floods, and 
other natural disasters worldwide. Economic losses from these 
catastrophic events increased from $528 billion (1981-1990) to more 
than $1.2 trillion over the period 2001-2010.\1\
---------------------------------------------------------------------------
    \1\ Data from Munich Re and Swiss Re.
---------------------------------------------------------------------------
    Although we are only halfway through 2011, an exceptional number of 
very severe natural catastrophes, notably the Japanese earthquake and 
tsunami, makes 2011 the highest economic loss year on record. In the 
United States, the Southern and Midwestern States were hit by an 
exceptionally severe series of tornadoes in April and May. Around this 
time, heavy snowmelt, saturated soils, and more than 20 inches of rain 
in a month led to the worst flooding of the lower Mississippi River 
since 1927 with extensive agricultural damage, property, and inland 
marine losses. The U.S. National Hurricane Center at the National 
Oceanic and Atmospheric Administration forecast in May that the 2011 
hurricane season would have above-average activity in the Atlantic 
basin.\2\
---------------------------------------------------------------------------
    \2\ NOAA hurricane outlook indicates an above-normal Atlantic 
season (2011). Available at: http://www.noaanews.noaa.gov/stories2011/
20110519_atlantichurricaneoutlook.html. May 19, 2011.
---------------------------------------------------------------------------
    Given the increasing losses from natural disasters in recent years, 
it is surprising how few property owners in hazard-prone areas have 
invested in loss reduction measures. We propose a program that will 
address this issue directly and hence reduce the need for Federal 
disaster assistance in the future.

                  WHY ARE DISASTER LOSSES INCREASING?

    There are at least two principal socio-economic factors that 
directly influence the level of economic losses due to catastrophe 
events: exposed population and value at risk. The economic development 
of Florida highlights this point. According to the U.S. Bureau of the 
Census, the population of that State has increased significantly over 
the past 50 years: 2.8 million inhabitants in 1950, 6.8 million in 
1970, 13 million in 1990, and 18.8 million population in 2010 (almost a 
570 percent increase since 1950). A significant portion of that 
population increase lives in high hazard areas of the coast. There is 
thus an increased likelihood of severe economic and insured losses in 
Florida unless cost-effective mitigation measures are implemented. 
Recent climate studies indicate we should also expect more extreme 
weather-related events in the future.\3\ The questions that need to be 
addressed directly by the Congress and other interested parties are:
---------------------------------------------------------------------------
    \3\ P.C.D. Milly, Julio Betancourt, Malin Falkenmark, Robert M. 
Hirsch, Zbigniew W. Kundzewicz, Dennis P. Lettenmaier, and Ronald J. 
Stouffer, Science 319, 573 (2008); Knutson, T., J. McBride, J. Chan, K. 
Emanuel, G. Holland, C. Landsea, I. Held, J. Kossin, A.K. Srivastava 
and M. Sugi. Tropical Cyclones and Climate Change. Nature Geoscience 3, 
157-163. (2010).
---------------------------------------------------------------------------
  --Who will pay for these massive losses?
  --What actions need to be taken now so our country is more resilient 

        WHEN THESE DISASTERS OCCUR (AS THEY WILL) IN THE FUTURE?
             INCREASING ROLE OF FEDERAL DISASTER ASSISTANCE

    Not surprisingly, the disasters that occurred in now much more 
populated areas of the United States have led to historical levels of 
insurance claim payments \4\ as well as a surge in the number of 
Presidential disaster declarations. In an article published last week 
in Science about reforming the federally run National Flood Insurance 
Program (NFIP), we showed that the number of major disaster 
declarations increased from 252 during the period 1981-1990, to 476 
(1991-2000) and 597 during the period 2001-2010. In 2010 alone, there 
were 81 such major disaster declarations.\5\
---------------------------------------------------------------------------
    \4\ See H. Kunreuther and E. Michel-Kerjan (2009), At War with the 
Weather MIT Press, for a detailed analysis.
    \5\ E. Michel-Kerjan and H. Kunreuther (2011). Reforming Flood 
Insurance. Science 333, 408-409, July 22.
---------------------------------------------------------------------------
    American taxpayers paid $89 billion in relief in the aftermath of 
the 2005 hurricane season (2010 prices). This figure was actually 
greater than the combined amount that private insurers and reinsurers 
paid for wind-related insured losses due to Hurricanes Katrina, Rita, 
and Wilma.\6\ This more pronounced role of the Federal Government in 
assisting disaster victims can also be seen by examining several major 
disasters that occurred in the past 50 years as shown in the table 
below.\7\
---------------------------------------------------------------------------
    \6\ The figure does not include the $17 billion paid by the NFIP 
for flood insurance claims for Hurricane Katrina, most of which had to 
be borrowed from the U.S. Treasury.
    \7\ E. Michel-Kerjan and J. Volkman-Wise (2011). The Risk of Ever-
Growing Disaster Relief Expectations. Wharton Risk Center Working Paper 
#2011-09. Available at http://opim.wharton.upenn.edu/risk/papers.php


------------------------------------------------------------------------
                                                     Federal aid as a
                    Disaster                       percentage of total
                                                          damage
------------------------------------------------------------------------
Hurricane Ike (2008)...........................                       69
Hurricane Katrina (2005).......................                       50
Hurricane Hugo (1989)..........................                       23
Hurricane Diane (1955).........................                        6
------------------------------------------------------------------------

    Each new massive Government disaster relief program creates a 
precedent. As a result, not only are there expectations when a disaster 
strikes that governmental assistance is on the way, but in order to 
gain politically from their actions, Members of Congress are likely to 
support bills that authorize more aid than for past disasters. If 
residents of hazard-prone areas expect more Federal relief following 
future disasters, they then have less economic incentive to reduce 
their own exposure and/or purchase insurance.

               REDUCING EXPOSURE TO LOSSES FROM DISASTERS

    Today, we can more accurately estimate the risks that different 
communities and regions face from natural hazards. We are able to 
reduce potential disaster losses through mitigation measures and know 
that insurance can provide financial protection to those in harm's way, 
thus lowering the financial burden on taxpayers and increasing personal 
responsibility. Yet many residents in hazard-prone areas are still 
unprotected against earthquakes, floods, hurricanes, and tornados.
    We address the following question: How do we reduce the exposure of 
property to losses from natural disasters and hence reduce the need for 
disaster assistance following future catastrophes?
    We first focus on why many residents in hazard-prone areas do not 
protect themselves against disasters (which often starts with their 
moving to high-risk areas--a behavioral perspective). We then propose a 
course of action that overcomes these challenges (a policy 
perspective). Specifically, we believe that multi-year disaster 
insurance contracts tied to the property and combined with risk 
reduction loans will lead many more individuals to invest in protection 
and thus be in a much better financial position to recover on their own 
following the next disaster. The proposed program should thus reduce 
the need for disaster assistance and be a win-win situation for all the 
relevant stakeholders compared to the status quo. Current energy 
efficiency programs can serve as a model for our proposal.

 WHY INDIVIDUALS DO NOT PROTECT THEMSELVES AGAINST POTENTIAL DISASTERS 
                                  \8\
---------------------------------------------------------------------------
    \8\ The material in this section is based on Kunreuther and Michel-
Kerjan (2010) ``Overcoming Myopia'' Milken Review, Fourth Quarter, pp. 
48-57. More detail on these behavioral biases appears in Kunreuther, 
Meyer and Michel-Kerjan (in press). ``Overcoming Decision Biases to 
Reduce Losses from Natural Catastrophes''. In E. Shafir (ed.) 
Behavioral Foundations of Policy. Princeton, NJ: Princeton University 
Press.
---------------------------------------------------------------------------
    There is growing empirical evidence from psychology and behavioral 
economics that many decisionmakers ignore the potential consequences of 
large-scale disasters for the following reasons:
      Misperceptions of the Risk.--We often underestimate the 
        likelihood of natural disasters by treating them as below our 
        threshold level of concern. By failing to create scenarios in 
        which a flood or earthquake may plausibly occur, there is no 
        interest in undertaking protective actions such as purchasing 
        insurance or investing in loss reduction measures.
      Ambiguity of Experts.--There are sometimes differences in 
        experts' estimates of the likelihood and consequences of low-
        probability events caused by limited historical data, 
        scientific uncertainty, changing environmental conditions due 
        to increased development and/or the use of different risk 
        models. The variance in risk estimates creates confusion by the 
        general public, Government entities, and businesses as to 
        whether one needs to pay attention to this risk. In fact, 
        decisionmakers often utilize estimates from their favorite 
        experts that provide justifications for their proposed actions.
      Short Horizons for Valuing Protective Measures.--Many businesses 
        and households project only a few years ahead (if not just 
        months) when deciding whether to spend money on loss-reduction 
        measures such as anchoring their roofs to reduce hurricane 
        damage. By focusing on the short-term returns, they fail to 
        invest in risk-reducing measures that could be justified 
        financially when comparing costs and expected returns over the 
        expected life of the property. In other words, cost-effective 
        mitigation measures are often disregarded due to myopic 
        behavior.
      Procrastination.--If given an option to postpone an investment 
        for 1 month or 1 year, there will be a tendency to delay the 
        outlay of funds. When viewed from a temporal distance the 
        investment will always seem worthwhile, but when it comes time 
        to undertaking the work, the prospect of a slight delay always 
        seems more attractive. Moreover, the less certain one is about 
        a correct course of positive action, the more likely one is to 
        choose inaction. There is a tendency to favor the status quo--
        to not change whatever one is doing now.
      Mistakenly Treating Insurance as an Investment.--Individuals 
        often do not buy insurance until after a disaster occurs and 
        then cancel their policies several years later because they 
        have not collected on their policy. They perceive insurance to 
        be a bad investment by not appreciating the adage that the 
        ``best return on an insurance policy is no return at all.''
      Failure To Learn From Past Disasters.--There is a tendency to 
        discount past unpleasant experiences. Emotions run high after 
        experiencing a catastrophic event or even viewing it on TV or 
        the Internet. But those feelings fade rapidly, making it 
        difficult to recapture these concerns about the event as time 
        passes.
      Mimetic Blindness.--Decisionmakers often imitate the behavior of 
        others without analyzing whether the action is appropriate for 
        them. By looking at what other firms do in their industry, or 
        pursuing the actions of their friends and neighbors, 
        decisionmakers can avoid having to think independently.
    In addition to these behavioral biases, there are economically 
rational reasons as to why firms and individuals in hazard-prone areas 
do not undertake risk-reduction measures voluntarily. Consider the 
hypothetical Safelee firm in an industry in which its competitors do 
not invest in loss prevention measures. Safelee might understand the 
investment can be justified when considering how it reduces the risks 
and consequences of a future disaster. However, during normal times, 
the firm might be at a competitive disadvantage because it cannot match 
the cost structure of its competitors. The behavior of many banks in 
the years preceding the financial crisis of 2008-2009 is illustrative 
of such a dynamic.
    Families considering whether to invest in disaster prevention may 
also find the investment to be unattractive financially if they plan on 
moving in a few years and if they believe that potential buyers will 
not take into account the lower risk of a disaster loss when deciding 
how much they are willing to pay for the property. More generally, 
families might have other rational reasons for not purchasing disaster 
coverage or investing in risk-reduction measures when this expense 
competes with other needs that have to be satisfied with a limited 
budget (living expenses, education, taxes, other insurance coverage, 
etc.). This aspect has more significance today given the current 
economic situation the country faces and the high level of 
unemployment.

                       THE KEY ROLE OF INSURANCE

    Our proposed program for reducing disaster losses and the need for 
the Government to provide assistance to the affected communities 
directly addresses these behavioral concerns by providing incentives 
for people and firms to become more resilient. Insurance can play a 
central role by doing three things. First, if priced appropriately, 
insurance provides a signal of the risk an individual or a firm faces 
in their current location. Second, insurance can encourage property 
owners in hazard-prone areas to invest in mitigation measures by 
providing them with premium reductions to reflect the expected 
reduction in losses from future disasters. Third, insurance supports 
economic resiliency: following a disaster an insured individual or firm 
can make a claim to obtain funds to help pay for the loss caused by the 
catastrophe and get back on their feet much more quickly than if they 
were forced to rely on Federal disaster assistance.
    For insurance to play this role, in combination with other programs 
involving the public and private sectors, we feel it is important that 
the following two guiding principles \9\ be adhered to:
---------------------------------------------------------------------------
    \9\ More details on these principles appear in H. Kunreuther and E. 
Michel-Kerjan, At War with the Weather (MIT Press), (2009).
---------------------------------------------------------------------------
      Principle 1.--Premiums should reflect risk. Insurance premiums 
        should be based on risk in order to provide signals to 
        individuals about the hazards they face and to encourage them 
        to engage in cost-effective mitigation measures that reduce 
        their vulnerability to catastrophes. Risk-based premiums should 
        also reflect the cost of capital that insurers must integrate 
        into their pricing in order to meet solvency requirement from 
        rating agencies and insurance regulators, and to also assure 
        adequate return to their investors.

      Risk-based premiums will provide a clear signal of likely damage 
        to those currently residing in hazard-prone areas as well as 
        those considering locating there. Risk-based premiums also 
        enable insurers to provide discounts to homeowners and 
        businesses that invest in cost-effective mitigation measures. 
        If insurance premiums are not risk-based, insurers are unlikely 
        to offer any premium discounts for those who adopt mitigation 
        measures. In fact, they often prefer not to offer coverage to 
        these property owners because it will be a losing proposition 
        in the long run.

      Principle 2.--Equity and affordability issues should be 
        addressed. This principle reflects a concern for some residents 
        in high-hazard areas who will be faced with large premium 
        increases based on Principle 1. However, any special treatment 
        given to homeowners currently residing in hazard-prone areas 
        (e.g., low-income uninsured or inadequately insured homeowners) 
        should be funded through an insurance voucher not through 
        premium subsidies (as is often done today).

      The offer of insurance vouchers applies only to needy individuals 
        who currently reside in a hazard-prone area. Those deciding to 
        move into the area in the future should be charged premiums 
        that reflect the risk. If they were provided with financial 
        assistance to purchase insurance, this would encourage 
        development in hazard-prone areas and exacerbate the potential 
        for catastrophic losses from future disasters.

    our proposal: a multi-year insurance-risk reduction loan program
    Given the behavioral biases and budget constraints individuals 
face, we propose that insurance and other protective measures be tied 
to the property rather than the property owner. We recommend the 
following five features of such a program using the two guiding 
principles for insurance as a basis for its design:

      Multi-year Insurance Tied to Property.--When an individual or 
        businesses purchases a piece of property, they should have an 
        opportunity to purchase a multi-year insurance contract (for 
        example, 5 years) at a fixed annual premium that reflects the 
        risk. At the end of the multi-year contract, the premium could 
        be revised to reflect changes in the risk (higher or lower).

      Vouchers for Those Needing Special Treatment.--We recommend a new 
        disaster insurance voucher program to address issues of equity 
        and affordability to complement the strategy of risk-based 
        premiums for all. Property owners currently residing in a risky 
        area who require special treatment would receive a voucher by 
        the Federal Emergency Management Agency or the U.S. Department 
        of Housing and Urban Development (HUD) as part of its budget or 
        through special appropriation. This program would be similar to 
        the Supplemental Nutrition Assistance Program (``food stamps'') 
        and the Low Income Home Energy Assistance Program, which in the 
        United States enables millions of low-income households to meet 
        their food and energy needs every year. The size of the voucher 
        will be determined through a means-test in much the way that 
        distribution of food stamps is determined today.

      Required Insurance.--Since individuals tend to treat insurance as 
        an investment rather than a protective mechanism, it may have 
        to be a requirement for property located in hazard-prone areas, 
        given the large number of individuals who do not have coverage 
        today.

      There is empirical evidence supporting the third feature of the 
        proposed program. Data from HUD reveal that 41 percent of 
        damaged homes from the 2005 hurricanes were uninsured or 
        underinsured. Of the 60,196 owner-occupied homes with severe 
        wind damage from these hurricanes, 23,000 did not have 
        insurance against wind loss.\10\ We recently undertook an 
        analysis of all new flood insurance policies issued by the NFIP 
        during the period January 1, 2001 to December 31, 2009 and 
        found that the median length of time before these new policies 
        lapsed is 3 to 4 years. On average, only 74 percent of new 
        policies were still in force 1 year after they were purchased; 
        after 5 years, only 36 percent were still in place. The lapse 
        rate is still high after correcting for migration and does not 
        vary much across flood zones.\11\
---------------------------------------------------------------------------
    \10\ U.S. Government Accountability Office (GAO) (2007), Natural 
Disasters: Public Policy Options for Changing the Federal Role in 
Natural Catastrophe Insurance, Washington, DC: GAO, November. GAO-08-7.
    \11\ E. Michel-Kerjan, S. Lemoyne and H. Kunreuther (in press). 
Policy Tenure under the National Flood Insurance Program. Risk 
Analysis: An International Journal.
---------------------------------------------------------------------------
      Multi-year Loans for Mitigation.--To encourage adoption of loss 
        reduction measures, State, Federal Government, or commercial 
        banks could issue property improvement loans so as to spread 
        the costs over time. For instance, a property owner may be 
        reluctant to incur an upfront cost of $1,500 for making his 
        home more disaster resistant but would be willing to pay the 
        $145 annual cost of a 20-year loan (calculated here at a high 
        10 percent annual interest rate). In many cases the reduction 
        in the insurance premium due to lower losses from disasters 
        will be greater than the loan cost making this investment 
        financially attractive.

      Well-enforced Building Codes.--Given the reluctance of property 
        owners to invest in mitigation measures voluntarily, building 
        codes should be designed to reduce future disaster losses and 
        be well-enforced through third-party inspections or audits.

               LESSONS FROM AN ENERGY EFFICIENCY PROGRAM

    As we think about developing incentives for disaster reduction, the 
Property Assessed Clean Energy (PACE) program that has been adopted by 
27 States for promoting energy efficiency has features that can provide 
insights into designing the above program.
    PACE provides long-term funding from private capital markets at low 
cost and needs no Government subsidies or taxes. It raises property 
values by making heating and cooling less expensive, and it enjoys 
broad bipartisan support nationwide at State and local levels. Here are 
the features of the program that encourage property owners to take 
measures today to make their home more energy efficient in ways that 
mirrors how property owners would want to make their homes more 
disaster resistant:

      Multi-year Financing.--Interested property owners opt-in to 
        receive financing for improvements that is repaid through an 
        assessment on their property taxes for up to 20 years. PACE 
        financing spreads the cost of energy improvements such as 
        weather sealing, insulation, energy efficient boilers and 
        cooling systems, new windows, and solar installations over the 
        expected life of these measures and allows for the repayment 
        obligation to transfer automatically to the next property owner 
        if the property is sold. PACE solves two key barriers to 
        increased adoption of energy efficiency and small-scale 
        renewable energy: high upfront costs and fear that project 
        costs won't be recovered prior to a future sale of the 
        property.

      Annual Savings.--Because basic energy efficiency measures can cut 
        energy costs by up to 35 percent, annual energy savings will 
        typically exceed the cost of PACE assessments. The upfront cost 
        barrier actually turns into improved cash flow for owners in 
        much the same way that the reduction of annual insurance 
        premiums could exceed the annual loan costs.

      Transfer to new Property Owner.--Like all property-based 
        assessments, PACE assessments stay with a property upon sale, 
        until they are fully repaid by future owners who continue to 
        benefit from the improvement measures.

                           WE NEED TO ACT NOW

    Our country has entered a new era of catastrophes.\12\ Our exposure 
is growing and the damage from disasters over the next few years is 
likely to be more devastating than what we have experienced during this 
past decade. When the next catastrophe occurs, the Federal Government 
will very likely come to the rescue, again. If the public sector's 
response to recent disasters is an indicator of their future behavior, 
new records will be set with respect to Federal assistance.
---------------------------------------------------------------------------
    \12\ The White House (2007). Economic Report of the President. 
Washington, DC.
---------------------------------------------------------------------------
    In order to avoid this outcome we recommend that the appropriate 
government bodies undertake an economic analysis of the benefits and 
costs of the proposed multi-year insurance-risk reduction loan program 
in relation to the current system of private and public insurance and 
Federal disaster assistance.
    We have recently proposed a program along the above lines in the 
context of the reform of the NFIP which is set to expire by September 
30, 2011.\13\
---------------------------------------------------------------------------
    \13\ E. Michel-Kerjan and H. Kunreuther (2011). Reforming Flood 
Insurance. Science 333, 408-409, July 22.
---------------------------------------------------------------------------
    We applaud the U.S. Senate for conducting this hearing on long-term 
exposure of the Federal Government to weather-related risks. We look 
forward to continuing to work with key stakeholders on these critical 
issues.
                                 ______
                                 
                    Risk Management Solutions (RMS)

     CATASTROPHE MODELING AND THE EXCEEDANCE PROBABILITY CURVE \1\

    A catastrophe model is employed to assess catastrophe risk (e.g., 
the risk to property from natural hazards, such as earthquakes, floods, 
hurricanes, and tornado outbreaks) and make corresponding risk 
management decisions. The model output on quantified losses is 
presented in a way that is useful to a particular stakeholder (where 
stakeholders include property owners, insurers, reinsurers, capital 
markets, government officials). Once these metrics are in hand, 
appropriate risk management strategies (e.g. mitigation, the use of 
risk transfer instruments, the accumulation of reserves) can be 
assessed.
    Currently insurers and reinsurers are the stakeholders with the 
most widespread and integrated use of catastrophe models. The capital 
markets have also been eager adopters of this technology to accurately 
price catastrophe bonds. Property owners are less likely to use 
catastrophe models themselves, but their decision processes are 
directly or indirectly influenced by the outcomes. At the governmental 
level, catastrophe modeling can present the means whereby regulators, 
emergency management agencies, and those in charge of government 
catastrophe budgets, can gain an appropriate perspective on risk.

                       USEFULNESS OF THE EP CURVE

    The main output from a catastrophe model is the exceedance 
probability (EP) curve, plotting loss against annual probability. An 
annual probability of 0.1 reflects an event that is expected to happen 
on average once every 10 years. The EP curve is a graphical 
representation of the probability that a certain level of loss will be 
surpassed in a given time period. The loss could be that experience by 
a specific insurance portfolio, or the whole of a nation's economy. The 
EP curve is strongly skewed--with a long tail extending out to the 
right displaying the potential for very large losses but at very low 
probabilities. Figure 1 depicts an EP curve for an insurer with a 
portfolio of residential earthquake policies in Long Beach, California.




     Figure 1. An exceedance probability curve for a portfolio of 
              residential risks in Long Beach, California.

    An EP curve is particularly valuable for insurers and reinsurers to 
determine the size and distribution of their potential losses. They 
will use the EP curve to determine how to develop their portfolio of 
insured properties, so as to keep the probability of insolvency at an 
acceptable level. They will also use their loss EP curve to determine 
what proportion of their risk needs to be transferred to either a 
reinsurer and/or the capital markets.
    However, a loss EP curve could also be employed by a government 
agency to determine an appropriate perspective on its expected 
liabilities in the face of a range of potential catastrophe events. The 
curve can provide planners with the average annualized loss--the amount 
that would need to be set aside each year to pay for the losses that 
would accumulate over time. At the same time a government also needs to 
be aware of what it can infrequently be expected to have to pay out--
recognizing that, for example, payments with a 1 percent annual 
probability (sometimes termed the ``one in one hundred year loss'') may 
be many times the payment at a 10 percent annual probability (i.e. the 
``one in 10 year'' payment). For insurers, as for governments, it is 
tempting to believe that a few years of low level losses, implies that 
losses will remain low, but the EP curve of expected catastrophe losses 
illustrates the potential for very large levels at low probabilities, 
and governments should be planning for the contingency of having to 
handle very significant catastrophe loss events.
---------------------------------------------------------------------------
    \1\ Main excerpts from Chapter 2 of Catastrophe Modeling: A New 
Approach to Managing Risk (Grossi and Kunreuther, eds., 2005).
---------------------------------------------------------------------------
    The loss EP curve relevant for a particular problem has to be 
generated through the application of a catastrophe loss model. These 
models apply a particular hazard, such as earthquake, hurricane, or 
tornado, to the particular exposures: buildings, infrastructure, goods, 
and even people. The models use appropriately tuned vulnerability 
functions to reflect the way that loss is generated, e.g. determining 
how much damage would occur to a specific building type at a specific 
wind speed. For a government concerned with evaluating the EP curve of 
potential payments anticipated after catastrophes, the vulnerability 
functions need to be tuned and calibrated using the actual experience 
of how payments have had to be made after previous catastrophes.

                               ABOUT RMS

    RMS is the world's leading provider of products, services, and 
expertise for the quantification and management of catastrophe risk. 
More than 400 leading insurers, reinsurers, trading companies, and 
other financial institutions rely on RMS models to quantify, manage, 
and transfer risk. As an established provider of risk modeling to 
companies across all market segments, RMS provides solutions that can 
be trusted as reliable benchmarks for strategic pricing, risk 
management, and risk transfer decisions.
                                 ______
                                 

                             [From Science]

          Disaster Management: Redesigning Flood Insurance \1\
---------------------------------------------------------------------------
    \1\ Improved knowledge from a range of disciplines≪ be needed to 
price the much-needed financial products appropriately.
---------------------------------------------------------------------------
        (By Erwann Michel-Kerjan \2\ and Howard Kunreuther \3\)
---------------------------------------------------------------------------
    \2\ Author for correspondence. E-mail: [email protected].
    \3\ We acknowledge support from the NSF, U.S. Department of 
Homeland Security, and the Wharton School's Risk Management and 
Decision Processes Center.
---------------------------------------------------------------------------
    Insurance and government assistance play central roles in ensuring 
economic and social resilience in the aftermath ofcatastrophes in 
developed countries. Around the globe in the past decade, disasters 
have led to unprecedented claims payments to insured victims, and 
government relief to aid the uninsured and the affected communities has 
risen to historic levels.\4\ \5\ \6\ Increases in population, property 
values, and concentration of assets in hazard-prone areas are primary 
causes.\5\ Recent climate studies indicate we should also expect more 
extreme weather-related events in the future.\7\ \8\ \9\
---------------------------------------------------------------------------
    \4\ K. Froot, Ed., The Financing of Catastrophe Risk (Chicago Univ. 
Press, Chicago, 1999).
    \5\ H. Kunreuther, E. Michel-Kerjan, At War with the Weather (MIT 
Press, Cambridge, MA, 2009).
    \6\ D. Cummins, O. Mahul, Catastrophe Risk Financing in Developing 
Countries (World Bank, Washington, DC, 2009).
    \7\ D.A. King, Science 303, 176 (2004).
    \8\ P.C.D. Milly, et al., Science 319, 573 (2008).
    \9\ T. Knutson et al., Nat. Geosci. 3, 157 (2010).
---------------------------------------------------------------------------
    The cumulative expected exposure of the U.S. government to 
catastrophes over the next 75 years could reach $7 trillion.\10\
---------------------------------------------------------------------------
    \10\ D. Cummins, M. Suher, G. Zanjani, in Measuring and Managing 
Federal Financial Risk, D. Lucas, Ed. (National Bureau of Economic 
Research, Univ. of Chicago Press, Chicago 2010), pp. 61-96.
---------------------------------------------------------------------------
    We propose routes to improve flood insurance coverage through the 
U.S. National Flood Insurance Program (NFIP), one of the largest 
government disaster-insurance programs in the world. The U.S. Congress 
is discussing options for continuing the NFIP, which now operates under 
a 1-year extension, set to expire on 30 September 2011. The Federal 
Emergency Management Agency (FEMA), which is responsible for the NFIP, 
is reanalyzing the program. We argue that a new strategy for managing 
floods can increase personal responsibility, decrease risk, and lower 
government exposure. Improved scientific knowledge from a range of 
disciplines will be needed to price the proposed financial products 
appropriately. If successful in the United States, the approach could 
be explored by other countries.

                          INSURING FLOOD RISK

    Floods are one of the most destructive hazards.\11\ In the United 
States, floods account for nearly two-thirds of all presidential 
disaster declarations over the period 1953-2010 (see supporting online 
material). Hurricanes Katrina, Rita, and Wilma and their resulting 
storm surge in 2005 cost over $180 billion (2011 prices).\12\ In the 
summer of 2010, one of the worst floodings in Pakistan's history 
affected more than 20 million people and inflicted $8 billion to $10 
billion in recovery and reconstruction costs.\13\ China also 
experienced the worst floods in a decade, which cost $50 billion.\14\ 
In December 2010, Australia suffered historical flooding.
---------------------------------------------------------------------------
    \11\ N. Pinter, Science 308, 207 (2005).
    \12\ The White House, Economic Report of the President (White 
House, Washington, DC, 2007).
    \13\ The World Bank, Pakistan Floods 2010: Preliminary Damage and 
Needs Assessment (World Bank, Washington, DC, 2010).--
    \14\ Guy Carpenter and Co., China Floods Report (Guy Carpenter and 
Co., New York, 2010); www.gccapitalideas.com/2010/12/20/
china%E2%80%99s-costly-floods-in-2010-likely-to-have-limited-impact/.
---------------------------------------------------------------------------
              DEVASTATING LOSSES REQUIRE BETTER INSURANCE




    Low-income countries typically rely on government and international 
aid to cope with major floods. As countries reach a higher level of 
economic development, insurance mechanisms are used more broadly. Flood 
insurance can be private, as in Germany and the United Kingdom. In the 
United States, residents purchase flood insurance mostly through the 
federally run NFIP, established in 1968 as a result of increased 
federal relief triggered by disasters in the 1960s and the insurance 
industry's refusal to cover this hazard because of their inability to 
accurately assess the risk.\15\ The NFIP covers $1.2 trillion of 
property today (mainly in coastal states), over three times what was 
covered 20 years ago.\16\ \17\
---------------------------------------------------------------------------
    \15\ H. Kunreuther et al., Disaster Insurance Protection: Public 
Policy Lessons (Wiley, New York, 1978).
    \16\ E. Michel-Kerjan, J. Econ. Perspect. 24, 165 (2010).
    \17\ E. Michel-Kerjan, C. Kousky, J. Risk Insur. 77, 369 (2010).
---------------------------------------------------------------------------
    NFIP premiums are established by the federal government. A 
homeowner can purchase building and contents coverage up to $250,000 
and $100,000, respectively, but only if the community that he or she 
lives in participates in the program. This requires that a flood-risk 
map has been completed and that the appropriate public body has adopted 
adequate floodplain management regulations. Homeowners in high-risk 
areas (defined as ``100-year'' or ``base'' levels, expected to be 
flooded at least once every 100 years) are required to purchase 
coverage if they hold a federally backed mortgage.

                LIMITS OF THE NFIP AS CURRENTLY DESIGNED

    The absence of a large reserve has forced the NFIP into debt, as it 
has borrowed over $19 billion from the U.S. Treasury to cover losses 
caused by the 2005 and 2008 hurricanes and floods.\16\ Subsidized 
insurance is part of the problem: Buildings that are near or below base 
flood elevation but that were in place before community flood-risk maps 
were completed are still charged rates that are considerably below the 
actuarial risk. This was done originally to maintain property values. 
About one-fourth of insured properties are still subsidized that 
way.\18\ \19\ And even properties constructed after flood mapping are 
charged premiums based only on an average historical loss year.\20\
---------------------------------------------------------------------------
    \18\ F. Wetmore et al., An Evaluation of the National Flood 
Insurance Program: Final Report (American Institutes for Research, 
Washington, DC, 2006).
    \19\ Congressional Budget Office (CBO), Value of Properties in the 
National Flood Insurance Program (CBO, Washington, DC, 2007).
    \20\ Government Accountability Office (GAO), Flood Insurance: 
Public Policy Goals Provide a Framework for Reform (GAO-11-670T, GAO, 
Washington, DC, 2011).
---------------------------------------------------------------------------
    The NFIP has not been able to enroll and retain many homeowners 
exposed to flood risk. Recent studies show that insurance penetration 
in flood-prone areas remains only at about 50 percent.\21\ \22\ This 
lack of coverage is likely to increase the need for disaster relief 
after major floods. This situation is not specific to the United 
States. In Germany, flood insurance penetration is only 10 percent for 
single-family homes.\23\ After the major 2002 Elbe floods, the German 
government provided the largest amount of public funds ever paid in the 
country's history to compensate uninsured flood victims. In China, only 
1 percent to 2 percent of the $50 billion losses of last year's floods 
were insured.\14\
---------------------------------------------------------------------------
    \21\ W. Kriesel, C. Landry, J. Risk Insur. 71, 405 (2004).
    \22\ L. Dixon, N. Clancy, S. A. Seabury, A. Overton, The National 
Flood Insurance Program's Market Penetration Rate: Estimates and Policy 
Implications (RAND Corp., Santa Monica, CA, 2006).
    \23\ A. H. Thieken et al., Risk Anal. 26, 383 (2006).
---------------------------------------------------------------------------
    Do a large proportion of homeowners never buy coverage, or do many 
who once purchased insurance let their policies lapse? To answer this 
question, we analyzed all new policies issued by the NFIP over the 
period 1 January 2001 to 31 December 2009 (n= 8.9 million).\24\ The 
median length of time before these new policies lapsed is 3 to 4 years. 
On average, only 74 percent of new policies were still in force 1 year 
after they were purchased; after 5 years, only 36 percent were still in 
place. The lapse rate is high even after correcting for migration and 
does not vary much across flood zones.\25\
---------------------------------------------------------------------------
    \24\ E. Michel-Kerjan, S. Lemoyne de Forges, H. Kunreuther, Risk 
Anal. (doi 10.1111/j539-6924.2011.01671.x; http://
opim.wharton.upenn.edu/risk/library/2011-06.pdf.
---------------------------------------------------------------------------
    Behavioral research can shed light on the underinsurance problem. 
As the probability of flood in a given year is low, individuals often 
treat these potential disasters as below their threshold level of 
concern. Studies on risk perception show that individuals do not 
understand low probabilities well and often simply ignore likelihood 
information when making decisions.\25\ \26\ The language used to 
communicate risks is also a problem. Scientists often talk about a 
``100-year return flood,'' but many individuals do not understand what 
that means. Some who have suffered a flood believe that they will not 
have another flood for 100 years. Homeowners are often myopic: If they 
paid insurance premiums for a few years but have not collected on their 
policy, they often view insurance as a bad investment and cancel their 
policy.\15\ Finally, there might be rational reasons for not purchasing 
coverage when this expense competes with other needs that have to be 
satisfied with a limited budget.
---------------------------------------------------------------------------
    \25\ C. Sunstein, Yale Law J. 112, 61 (2002).
    \26\ H. Kunreuther, R. Meyer, E. Michel-Kerjan, in The Behavioral 
Foundations of Policy, E. Shaffir, Ed. (Princeton Univ. Press, 
Princeton, NJ, in press); http://opim.wharton.upenn.edu/risk/library/
2009-08.pdf.
---------------------------------------------------------------------------
                  BETTER TOOLS FOR DISASTER FINANCING

    Our proposal for redesigning flood insurance has five prongs, to be 
implemented simultaneously because they complement each other. First, 
to account for myopic behavior, we recommend that flood insurance be 
sold not as 1-year contracts but as multiyear contracts (e.g., 5 or 10 
years) that would be attached directly to the property at risk rather 
than to the homeowner (as is currently done). We propose that this be 
made mandatory for all homeowners in high-risk areas. To ensure that 
the requirement is enforced, FEMA could be empowered by Congress to 
monitor both existing and new construction in those areas. This reform 
will generate several benefits. It would avoid cancellation of 
insurance after just a few years. If a homeowner were to move to 
another location, the contract would be transferred to the new owner. 
As a result, many more properties will be covered and remain so over 
time. This should also increase the diversification of the NFIP's 
portfolio.
    Second, premiums must be risk-based for all, so that homeowners 
will be informed of the true exposure of their residence to potential 
flood damage.
    Third, such insurance contracts could be complemented with 
multiyear home-improvement loans provided by the government or 
commercial banks to encourage investment in cost-effective risk-
reduction measures, such as flood-proofing one's house; the reduction 
in insurance premiums could offset the annual cost of the loan. The 
benefits of mitigation may also become more apparent over a 5- or 10-
year period.
    Fourth, we recommend a new flood insurance voucher program to 
address issues of equity and affordability to complement the strategy 
of risk-based premiums for all. Property owners currently residing in a 
high-risk zone who require special treatment would receive a voucher by 
the NFIP as part of its budget or through special appropriations. This 
program would be similar to the Supplemental Nutrition Assistance 
Program (``food stamps'') and the Low Income Home Energy Assistance 
Program, which in the United States assist millions of low-income 
households meet food and energy needs every year.
    This proposal will require that building vulnerability be updated 
at policy renewal (every 5 or 10 years) and be reflected in the new 
premiums. Reevaluation of the flood hazard across the country will be 
needed over time to reflect hydrological changes due to factors such as 
additional runoffs caused by new construction, loss of wetlands, and 
possible effects of a changing climate.\27\
---------------------------------------------------------------------------
    \27\ R. J. Burby, Global Environ. Change B Environ. Hazards 3, 111 
(2001).
---------------------------------------------------------------------------
    Fifth, given the current level of U.S. public debt and the desire 
to lower taxpayers' financial liability, we propose that the NFIP 
reduce its catastrophe exposure by purchasing private reinsurance and 
catastrophe bonds.\16\ \28\ We recommend a four-layer approach. After 
the NFIP determines how much risk to retain, private reinsurers would 
provide coverage for a second layer of losses. Investors would then 
provide capital through catastrophe bonds to cover a third layer of 
losses. For truly exceptional events, the NFIP would utilize its 
borrowing capacity from the U.S. Treasury (fourth layer). Determination 
of these layers will be based on their price and how much exposure the 
program opts to retain or transfer.
---------------------------------------------------------------------------
    \28\ Reinsurance is coverage purchased by one insurer from another. 
Catastrophe bonds would transfer part of the NFIP exposure directly to 
institutional investors. If no catastrophe occurs (as defined in the 
contract), investors would receive their capital back plus a return on 
their investment and a premium from NFIP. If a predefined catastrophe 
occurs, the NFIP would use investor payments to cover a portion of the 
claims. As of December 2010, there were about $13 billion invested in 
such bonds to cover losses from future disasters in the Americas, Asia, 
and Europe.
---------------------------------------------------------------------------
    Transparent measurement of risk exposure is critical. Sophisticated 
catastrophe-modeling techniques must be used to determine average 
annual loss, standard deviation, probable maximum loss, and other 
features that enter into the pricing of disaster risk-financing 
instruments. Catastrophe models developed by the scientific community 
can be used to update U.S. flood maps, as about half of the NFIP's 
roughly 106,000 maps were more than 15 years old in April 2008.\29\ 
Some steps have already been taken to address this problem. FEMA has 
begun to digitize flood maps using geographic information systems so 
that they are easier to update. After the failure of the New Orleans' 
levee system in 2005, the U.S. Army Corps of Engineers began 
reevaluating levees throughout the United States using data from 
hydrology, climatology, soil science, and engineering. These studies 
have helped determine which levees no longer meet the standards for 
which they had been designed. These developments in assessing risk more 
accurately could be useful in determining costs and benefits of the 
proposed redesign of flood insurance.
---------------------------------------------------------------------------
    \29\ R. King, Mandatory Flood Insurance Purchase in Remapped 
Residual Risk Areas Behind Levees (Report 7-5700, Congressional 
Research Service, Washington, DC, 2010).
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                                 ______
                                 
    For additional reading, please see: http://www.sciencemag.org/
content/327/5964/454.abstract.
                                 ______
                                 
        Letter From the Center for American Progress Action Fund
                                                    August 4, 2011.
Hon. Richard J. Durbin,
Chair, Subcommittee on Financial Services and General Government,
Washington, DC.
    Dear Chairman Durbin: We would like to submit the attached Center 
for American Progress report, ``The Year of Living Dangerously: 2010 
Extreme Weather Cost Lives, Health, Economy'' for the record of the 
July 28, 2011 hearing on ``Federal Disaster Assistance Budgeting.'' \1\
---------------------------------------------------------------------------
    \1\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year 
of living dangerously'' (Washington: Center for American Progress, 
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
---------------------------------------------------------------------------
    This analysis by the Center for American Progress documents the 
human and economic impact of the extreme weather events in the United 
States in 2010. Last year, unprecedented extreme weather led to a 
record number of disaster declarations by the Federal Emergency 
Management Agency. The United States and the world were swept by 
flooding, severe winter storms, heat waves, droughts, hurricanes, and 
heavy rain storms. These are the types of events that scientists 
predict will occur with more frequency and/or severity as the planet 
warms due to unchecked emissions of carbon dioxide and other climate 
pollutants.
    The extreme weather of 2010 exacted a huge human and economic toll 
as well. The CAP analysis found that more than 380 people died and 
1,700 were injured due to weather events in the United States 
throughout the year. And the magnitude of these events forced the 
Federal Emergency Management Agency,\2\ or FEMA, to declare 81 
disasters last year. For nearly 60 years, the annual average has been 
33.\3\ In 2010, total damages exceeded a whopping $6.7 billion. As of 
April 2011, FEMA had dedicated more than $2.2 billion in financial 
assistance to those harmed by extreme weather in 2010.
---------------------------------------------------------------------------
    \2\ ``Federal Emergency Management Agency'', available at http://
www.fema.gov/.
    \3\ ``FEMA: Declared disasters by year or state'' available at 
http://www.fema.gov/news/disaster_totals_annual.fema.
---------------------------------------------------------------------------
    It is difficult, of course, to link or ``attribute'' individual 
extreme weather events in a single year to global warming. Climate 
factors-including human influences-shape weather patterns.
    According to Munich Re, one of the world's largest reinsurers, 
``the only plausible explanation for the rise in weather-related 
catastrophes is climate change.'' \4\
---------------------------------------------------------------------------
    \4\ Munich RE, ``Two months to Cancun climate summit/large number 
of weather extremes as strong indication of climate change'', Press 
release September 27, 2010, available at http://www.munichre.com/en/
media_relations/press_releases/2010/2010_09_27_press_release. aspx.
---------------------------------------------------------------------------
    Kevin Trenberth, Sc.D., head of the Climate Analysis Section at the 
National Center for Atmospheric Research,\5\ explained at the American 
Meteorological Society's January 2011 meeting, ``Given that global 
warming is unequivocal, the null hypothesis should be that all weather 
events are affected by global warming rather than the inane statements 
along the lines of `of course we cannot attribute any particular 
weather event to global warming.'' \6\
---------------------------------------------------------------------------
    \5\ ``National Center for Atmospheric Research'' available at 
http://ncar.ucar.edu/about-ncar.
    \6\ ``Promoting climate information and communication of climate 
change'' available at http://ams.confex.com/ams/91Annual/webprogram/
Paper180230.html.
---------------------------------------------------------------------------
    In other words, says Trenberth, ``it's not the right question to 
ask if this storm or that storm is due to global warming, or is it 
natural variability. Nowadays, there's always an element of both.'' \7\
---------------------------------------------------------------------------
    \7\ Justin Gillis, ``In weather chaos, a case for global warming'', 
The New York Times, August 14, 2010, available at http://
www.nytimes.com/2010/08/15/science/earth/15climate.html? 
pagewanted=print.
---------------------------------------------------------------------------
    Atmospheric concentrations of carbon dioxide and other greenhouse 
gas pollutants are turning up the heat on our planet. Scientists agree 
that the string of disastrous weather extremes this past year are the 
types of severe weather that will become more frequent or ferocious as 
the planet continues to warm. For instance, in the ``first major paper 
of its kind'' tracking global climatic trends from 1951 to 1999, 
Scottish and Canadian researchers used sophisticated computer models to 
confirm a human contribution to more intense precipitation extremes 
with very high confidence.\8\
---------------------------------------------------------------------------
    \8\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year 
of living dangerously'' (Washington: Center for American Progress, 
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
---------------------------------------------------------------------------
    This analysis is supported by a 2010 Duke University-led study \9\ 
that found, ``Global warming is driving increased frequency of extreme 
wet or dry summer weather in southeast, so droughts and deluges are 
likely to get worse.'' \10\
---------------------------------------------------------------------------
    \9\ Ibid.
    \10\ Ibid.
---------------------------------------------------------------------------
    A study published in the 2011 Journal of Climate presents 
``evidence of a significant human influence on the increasing severity 
of extremely warm nights and decreasing severity of extremely cold days 
and nights.'' \11\
---------------------------------------------------------------------------
    \11\ Christidis, Nikolaos, Peter A. Stott, Simon J. Brown, 2011: 
The Role of Human Activity in the Recent Warming of Extremely Warm 
Daytime Temperatures. J. Climate, 24, 1922-1930.
---------------------------------------------------------------------------
    Likewise, a report by the National Center for Atmospheric 
Research,\12\ Climate Central, The Weather Channel, and the National 
Oceanic and Atmospheric Administration shows that ``if temperatures 
were not warming, the number of record daily highs and lows being set 
each year would be approximately even. Instead . . . record high 
temperatures far outpace record lows across the U.S.''
---------------------------------------------------------------------------
    \12\ ``Record high temperatures far outpace record lows across 
U.S.'', available at http://www2.ucar.edu/news/1036/record-high-
temperatures-far-outpace-record-lows-across-us.
---------------------------------------------------------------------------
    The recent extreme weather should not be a surprise. In 1999, 
Trenberth projected that global warming would lead to severe 
precipitation.

    ``An increase in heavy precipitation events should be a primary 
manifestation of the climate change that accompanies increases in 
greenhouse gases in the atmosphere.''

    Nine years later, the U.S. Climate Change Program under President 
George W. Bush came to a very similar conclusion. ``Heavy downpours 
have become more frequent and intense. Droughts are becoming more 
severe in some regions.'' \13\ These are some of the extreme weather 
events we experienced this April, and in 2010.
---------------------------------------------------------------------------
    \13\ US Climate Change Science Program, ``Weather and Climate 
Extremes in a Changing Climate'' (2008).
---------------------------------------------------------------------------
    Because we have not brought carbon pollution under control, the 
weather events of 2010 will continue to revisit us--with a vengeance as 
they have in 2011. We must act quickly and unequivocally to address 
climate change before the threat becomes insurmountable. This includes 
recognizing that global warming is already affecting us both 
domestically and internationally. There are indications that human and 
economic losses from extreme weather will continue to grow as the 
oceans and planet warms.
    In April 2011, for instance, the United States was struck by 
various extreme weather events. The Weather Channel observed that:

    ``It's been a truly awful, record-setting, tornadic April. We've 
had 11 major severe weather events, some lasting multiple days.'' \14\
---------------------------------------------------------------------------
    \14\ ``The Weather Channel'' available at http://www.weather.com/
outlook/weather-news/news/articles/april-severe-scorecard_2011-04-18.

    These April 2011 extreme events included ``supercell 
thunderstorms'' \15\ in Iowa, severe drought and record wildfires in 
Texas,\16\ and heavy rains \17\ across the United States. The April 
southeastern storms and tornados took at least 297 lives across eight 
States.\18\ And heavy rains in the Mississippi River Valley during 
April and May caused some of the most severe, damaging floods there 
this century.\19\
---------------------------------------------------------------------------
    \15\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year 
of living dangerously'' (Washington: Center for American Progress, 
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
    \16\ ``Record April: Severe weather scorecard'' available at http:/
/www.weather.com/outlook/weather-news/news/articles/a pril-severe-
scorecard_2011-04-18?page=11.
    \17\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year 
of living dangerously'' (Washington: Center for American Progress, 
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
    \18\ Ibid.
    \19\ Louis BURDEAU, ``Mississippi River Floods 2011: Deep South 
Braces For Surge Of Water Not Seen Since 1927'', The Huff Post Green, 
April 28, 2011, available at http://www.huffingtonpost.com/2011/04/28/
mississippi-river-flood-2011_n_855242.html.
---------------------------------------------------------------------------
    Many States continue to be plagued by extreme weather, including 
droughts in Texas and Oklahoma, record heat waves in the Midwest, mid-
Atlantic and the northeast, and the hottest July on record.
    The July 27 hearing was very timely. We share your concern that:

    ``We are not prepared. Our weather events are getting worse, 
catastrophic in fact . . . The Federal government is ignoring the 
obvious. We need to do more to protect Federal assets and respond to 
growing demands for disaster assistance on an increasing frequency.'' 
\20\
---------------------------------------------------------------------------
    \20\ ``Durbin: Federal Government Unprepared for growing number of 
extreme weather events'', available at http://durbin.senate.gov/public/
index.cfm/pressreleases?ID=fd009756-5e33-48d7-be3e-9ee0160f1789.

    We agree with you that the Federal Government must better prepare 
to provide damaged communities with the resources they need to recover 
after extreme weather events.
    The old saying that ``an ounce of prevention is worth a pound of 
cure'' certainly applies to extreme weather. The cure--ensuring that 
future budgets include adequate funds to help communities, businesses 
and families recover--is necessary but not sufficient. It will require 
budgeting billions of dollars annually to assist areas assaulted by 
extreme weather events. This will be a challenge at a time when some in 
the Congress seek deep and lasting reductions in discretionary 
spending.
    In addition, we must also attempt to prevent the rise in extreme 
weather events and the associated loss of life, injuries, and damages. 
The most cost effective step would be the reduction of the carbon 
dioxide pollution responsible for climate change and linked to the 
growth in deadly and expensive extreme weather events.
    Thank you for your leadership in this area, and the opportunity to 
submit these remarks and the Center for American Progress' report, 
``The Year of Living Dangerously,'' for the record of this hearing.
            Sincerely,
                                   Daniel J. Weiss,
                                           Senior Fellow and Director 
                                               of Climate Strategy.
                                   Valeri Vasquez,
                                           Special Assistant, Energy 
                                               Program.
                                 ______
                                 
    For further information, please see: http://
www.americanprogress.org/issues/2011/04/extreme_weather.html

                    STATEMENT OF SENATOR JERRY MORAN

    Senator Moran. Mr. Chairman, this hearing today will 
examine the role of the Federal Government in addressing the 
economic impact of severe weather events through long-term 
budgetary planning, something that this Congress ought to spend 
more time on, the budget as well as budgetary planning.
    Numerous agencies have significant roles to play in regards 
to responding to natural disasters. As a member of the Senate 
Small Business Committee, as well as the ranking member of this 
subcommittee, I'm very familiar with the assistance that the 
Small Business Administration (SBA) provides in regard to the 
disaster loan programs to businesses and families impacted by 
disasters. I've experienced that and their services in my own 
home State on many occasions.
    Given our Federal Government's fiscal constraints, I 
believe we must carefully review all Federal funding to ensure 
that we are budgeting for critical needs appropriately. 
Reviewing how the Government plans for disasters is an 
important part of that process and can help ensure that we 
assist families and businesses in need in a fiscally 
responsible way.
    This critical issue is one that I look forward to hearing 
witnesses' testimony concerning, and I want to make certain 
that we have the ability to pursue the opportunity to improve 
our Government's ability to respond to these matters, and I 
look forward to hearing from the witnesses.
    Senator Durbin [presiding]. Thank you, Senator Moran. We 
will start with each witness. You each have 5 minutes. Your 
written testimony will be part of the permanent and total 
record of the hearing. And then Senator Moran and others who 
might show up will ask a few questions. Mr. Trimble, please 
lead off.

STATEMENT OF DAVID C. TRIMBLE, DIRECTOR, NATURAL 
            RESOURCES AND ENVIRONMENT, GOVERNMENT 
            ACCOUNTABILITY OFFICE
    Mr. Trimble. Chairman Durbin, Ranking Member Moran, I'm 
pleased to be here today to discuss the extent to which Federal 
long-term budget planning contemplates changes in the frequency 
and severity of weather events that may occur as a result of 
changes in the climate.
    Recent assessments of the potential impacts of climate 
change in the United States have found, among other things, 
that many types of extreme weather events, such as heat waves 
and regional droughts, have become more frequent and intense 
during the past 40 to 50 years.
    Further increases in the frequency and severity of such 
damaging weather events are projected to affect water 
resources, agriculture, coastal areas, and infrastructure. The 
Department of Defense recently noted that climate change may 
also act as an accelerant of instability or conflict around the 
world.
    Policymakers are increasingly viewing adaptation, defined 
as adjustments to natural and human systems in response to 
actual or expected climate change, as a risk management 
strategy to protect vulnerable sectors and communities that 
might be affected by changes in the climate. It may be costly 
to raise river or coastal dikes to protect communities and 
resources from sea level rise, build higher bridges, or improve 
stormwater systems, but there's a growing recognition that the 
cost of inaction could be greater.
    Over the years, the GAO has reported on many climate 
change-related issues, including recent reports on adaptation 
and Federal funding for climate change programs and activities. 
Four key points stand out from these reports.
    First, climate change adaptation has begun to receive more 
attention and resources because the greenhouse gases (GHG) 
already in the atmosphere are expected to continue altering the 
climate system into the future, regardless of efforts to 
control emissions.
    Further, there is a growing recognition that past practices 
for making decisions may no longer be reliable. According to 
the National Research Council (NRC), many decision rules for 
such things as building bridges or establishing zoning rules 
assume a continuation of past climate conditions, with similar 
patterns of variation and the same probabilities of extreme 
events.
    According to the NRC, that assumption, fundamental to the 
way people and organizations make their choices, is no longer 
valid. A 2007 GAO report on Federal insurance programs 
highlights this point. We found, at that time, unlike the 
private sector, neither the National Flood Insurance Program 
(NFIP) nor the Federal Crop Insurance Corporation had analyzed 
the potential impacts of an increase in the frequency or 
severity of weather events.
    Second, Federal, State, and local authorities on the front 
line of early adaptation efforts face numerous challenges, 
including insufficient site-specific data such as local 
projections of expected climate changes. The lack of such data 
makes it hard for these officials to understand or quantify the 
potential impacts of climate change, and difficult to justify 
the cost of adaptation efforts, since projections of future 
benefits are less certain than current costs.
    Third, to be effective, Federal efforts to address these 
challenges must be coordinated and directed toward a common 
goal. In 2009, we recommended the development of a national 
strategic plan for adaptation. The recent Interagency Climate 
Change Adaptation Task Force is a positive step and responsive 
to our recommendation, but much work remains.
    Fourth and finally, adaptation will require making policy 
and management decisions that cut across traditional sectors, 
issues, and jurisdictional boundaries. Many Federal entities, 
executive offices, and organizations manage programs and 
activities related to climate change. However, getting these 
entities to work toward a common goal is complicated.

                           PREPARED STATEMENT

    According to our May 2011 report, Federal funding for 
climate change programs and activities totaled nearly $9 
billion in 2010, with another $7 billion in related tax 
expenditures. This report found that agencies did not 
consistently interpret methods for defining and reporting the 
funding of climate change activities and that there is no 
consolidated set of strategic priorities that integrates 
climate change programs and activities across the Federal 
Government. As more Federal, State, and local agencies focus 
attention on incorporating climate change into their planning 
and decisionmaking, the challenges facing these decisionmakers 
will become increasingly prominent.
    Improved accounting over the billions currently spent on 
climate change-related activities, establishing clear strategic 
priorities, and aligning funding with priorities will help the 
Congress address these challenges, and hopefully minimize the 
economic toll of future severe weather events. That concludes 
my statement. I'll, of course, be happy to answer any 
questions.
    [The statement follows:]

                 Prepared Statement of David C. Trimble

                       CLIMATE CHANGE ADAPTATION

Aligning Funding With Strategic Priorities
    Chairman Durbin, Ranking Member Moran, and members of the 
subcommittee: I am pleased to be here today to discuss the extent to 
which Federal long-term budget planning contemplates changes in the 
frequency and severity of weather events that may occur as a result of 
changes in the climate. A 2009 assessment by the United States Global 
Change Research Program (USGCRP) found that many types of extreme 
weather events, such as heat waves and regional droughts, have become 
more frequent and intense during the past 40 to 50 years and that 
changes in these kinds of extreme weather and climate events are among 
the most serious challenges to our Nation in coping with a changing 
climate.\1\ According to the assessment, changes in extreme weather and 
climate events will affect human health, water supply, agriculture, 
coastal areas, and many other aspects of society and the natural 
environment.
---------------------------------------------------------------------------
    \1\ USGCRP coordinates and integrates Federal research on changes 
in the global environment--including climate change--and their 
implications for society. According to a simplified National 
Aeronautics and Space Administration description, ``Weather is what 
conditions of the atmosphere are over a short period of time, and 
climate is how the atmosphere `behaves' over relatively long periods of 
time. When we talk about climate change, we talk about changes in long-
term averages of daily weather.''
---------------------------------------------------------------------------
    Federal, State, and local agencies are tasked with a wide array of 
responsibilities, such as managing natural resources, that will be 
affected by a changing climate. Climate change also has implications 
for the fiscal health of the Federal Government, affecting Federal crop 
and flood insurance programs, and placing new stresses on 
infrastructure. Further, in February 2010 the Department of Defense 
(DOD) issued its Quadrennial Defense Review report.\2\ That report 
noted that:
---------------------------------------------------------------------------
    \2\ According to the DOD, the Quadrennial Defense Review (QDR) is 
to set a long-term course for DOD as it assesses the threats and 
challenges that the Nation faces and re-balances DOD's strategies, 
capabilities, and forces to address today's conflicts and tomorrow's 
threats. As required by law, the most recent QDR examined the 
capabilities of the armed forces to respond to the consequences of 
climate change, in particular, preparedness for natural disasters from 
extreme weather events and other missions the armed forces may be asked 
to support inside the United States and overseas.

    ``. . . while climate change alone does not cause conflict, it may 
act as an accelerant of instability or conflict, placing a burden to 
respond on civilian institutions and militaries around the world. In 
addition, extreme weather events may lead to increased demands for 
defense support to civil authorities for humanitarian assistance or 
---------------------------------------------------------------------------
disaster response both within the United States and overseas.''

    In recent years, climate change adaptation--defined as adjustments 
to natural or human systems in response to actual or expected climate 
change--has begun to receive more attention because the greenhouse 
gases already in the atmosphere are expected to continue altering the 
climate system into the future, regardless of efforts to control 
emissions. According to the National Research Council, however, 
individuals and institutions whose futures will be affected by climate 
change are unprepared both conceptually and practically for meeting the 
challenges and opportunities it presents. In this context, adapting to 
climate change requires making policy and management decisions that cut 
across traditional economic sectors, jurisdictional boundaries, and 
levels of government. We have previously reported that when agencies do 
not collaborate well when addressing a complicated, interdisciplinary 
issue like climate change, they may carry out programs in a fragmented, 
uncoordinated way, resulting in a patchwork of programs that can limit 
the overall effectiveness of the Federal effort.\3\
---------------------------------------------------------------------------
    \3\ GAO, Results-Oriented Government: Practices That Can Help 
Enhance and Sustain Collaboration among Federal Agencies, GAO-06-15 
(Washington, D.C.: October 21, 2005), and Managing for Results: 
Barriers to Interagency Coordination, GAO/GGD-00-106 (Washington, D.C.: 
March 29, 2000).
---------------------------------------------------------------------------
    My testimony today addresses:
  --the actions Federal, State, and local authorities are taking to 
        adapt to climate change;
  --the challenges that Federal, State, and local officials face in 
        their efforts to adapt and actions Federal agencies could take 
        to help address these challenges; and
  --the extent to which Federal funding for adaptation and other 
        climate change activities is consistently tracked and reported 
        and aligned with strategic priorities.
    The information in this testimony is based on prior work, largely 
on our recent reports on climate change adaptation and Federal climate 
change funding.\4\ Additional information on our scope and methodology 
is available in each issued product. All of the work on which this 
statement is based was performed in accordance with generally accepted 
government auditing standards.
---------------------------------------------------------------------------
    \4\ GAO, Climate Change Adaptation: Strategic Federal Planning 
Could Help Government Officials Make More Informed Decisions, GAO-10-
113, (Washington, D.C.: October 7, 2009), and Climate Change: 
Improvements Needed to Clarify National Priorities and Better Align 
Them with Federal Funding Decisions, GAO-11-317, (Washington, D.C.: May 
20, 2011).
---------------------------------------------------------------------------
 FEDERAL, STATE, AND LOCAL AUTHORITIES ARE BEGINNING TO TAKE STEPS TO 
                        ADAPT TO CLIMATE CHANGE

    Our October 2009 report on climate change adaptation found no 
coordinated national approach to adaptation, but our May 2011 report on 
climate change funding cited indications that Federal agencies were 
beginning to respond to climate change more systematically.\5\ About 
the same time as the issuance of our October 2009 report, Executive 
Order 13514 on Federal Leadership in Environmental, Energy, and 
Economic Performance called for Federal agencies to participate 
actively in the Interagency Climate Change Adaptation Task Force.\6\ 
The task force, which began meeting in spring 2009, is co-chaired by 
the Council on Environmental Quality (CEQ), the National Oceanic and 
Atmospheric Administration (NOAA), and the Office of Science and 
Technology Policy (OSTP), and includes representatives from more than 
20 Federal agencies and executive branch offices. The task force was 
formed to develop Federal recommendations for adapting to climate 
change impacts both domestically and internationally and to recommend 
key components to include in a national strategy.
---------------------------------------------------------------------------
    \5\ See GAO-10-113 and GAO-1 109317. For a list of Federal 
adaptation efforts by agency as of 2009, see Climate Change Adaptation: 
Information on Selected Federal Efforts to Adapt To a Changing Climate 
(GAO-10-11 4SP, October 7, 2009), an E-supplement to GAO-10-113, GAO-
10-114SP, (Washington, D.C.: October 2009).
    \6\ For more information about the Interagency Climate Change 
Adaptation Task Force, see http://www.whitehouse.gov/administration/
eop/ceq/initiatives/adaptation.
---------------------------------------------------------------------------
    On October 14, 2010, the task force released its interagency report 
outlining recommendations to the President for how Federal policies and 
programs can better prepare the United States to respond to the impacts 
of climate change. The report recommends that the Federal Government 
implement actions to expand and strengthen the Nation's capacity to 
better understand, prepare for, and respond to climate change. These 
recommended actions include making adaptation a standard part of agency 
planning to ensure that resources are invested wisely and services and 
operations remain effective in a changing climate. According to CEQ 
officials, the task force will continue to meet as an interagency forum 
for discussing the Federal Government's adaptation approach and to 
support and monitor the implementation of recommended actions in the 
progress report. The task force is due to release another report in 
October 2011 that documents progress toward implementing its 
recommendations and provides additional recommendations for refining 
the Federal approach to adaptation, as appropriate, according to CEQ 
officials.\7\
---------------------------------------------------------------------------
    \7\ The White House Council on Environmental Quality, Progress 
Report of the Interagency Climate Change Adaptation Task Force: 
Recommended Actions in Support of a National Climate Change Adaptation 
Strategy (October 5, 2010). This report is available at http://
www.whitehouse.gov/sites/default/files/microsites/ceq/Interagency-
Climate-ChangeAdaptation-Progress-Report.pdf.
---------------------------------------------------------------------------
    Individual agencies are also beginning to consider adaptation 
actions. For example, in May 2009, the Chief of Naval Operations 
created Task Force Climate Change to address the naval implications of 
a changing Arctic and global environment. The Task Force was created to 
make recommendations to Navy leadership regarding policy, investment, 
and action, and to lead public discussion. In addition, the Department 
of the Interior issued an order in September 2009 designed to address 
the impacts of climate change on the Nation's water, land, and other 
natural and cultural resources.\8\ Among other things, the order 
requires each bureau and office in the Department to consider and 
analyze potential climate change impacts when undertaking long-range 
planning exercises, setting priorities for scientific research and 
investigations, developing multi-year management plans, and making 
major decisions regarding potential use of resources. In another 
example, according to the NOAA, its Regional Integrated Sciences and 
Assessments (RISA) program supports climate change research to meet the 
needs of decisionmakers and policy planners at the national, regional, 
and local levels.
---------------------------------------------------------------------------
    \8\ Secretarial Order No. 3289 (September 14, 2009), as amended by 
Secretarial Order No. 3289, Amendment No. 1 (February 22, 2010). As 
originally enacted, the order also designated eight regional Climate 
Change Response Centers, which were subsequently renamed Climate 
Science Centers. According to the Department of the Interior, these 
centers will synthesize existing climate change impact data and 
management strategies, help resource managers put them into action on 
the ground, and engage the public through education initiatives. 
Interior has also identified specific adaptation strategies and tools 
for natural resource managers. For example, Interior provided a number 
of adaptation-related policy options for land managers in reports 
produced for its Climate Change Task Force, a past effort that has 
since been expanded upon to reflect new priorities.
---------------------------------------------------------------------------
    In October 2009, we reported that some State and local authorities 
were beginning to plan for and respond to climate change impacts.\9\ We 
visited three U.S. sites in doing the work for that report--New York 
City; King County, Washington; and the State of Maryland--where State 
and local officials were taking such steps. We have not evaluated the 
progress of these initiatives since the issuance our 2009 report.
---------------------------------------------------------------------------
    \9\ GAO-10-113.
---------------------------------------------------------------------------
    New York City.--New York City's adaptation efforts stemmed from a 
growing recognition of the vulnerability of the city's infrastructure 
to natural disasters, such as the severe flooding in 2007 that led to 
widespread subway closures. At the time of our October 2009 report, New 
York City's adaptation efforts typically had been implemented as 
facilities were upgraded or as funding became available. For example, 
the city's Department of Environmental Protection (DEP), which manages 
water and wastewater infrastructure, had begun to address flood risks 
to its wastewater treatment facilities. These and other efforts are 
described in DEP's 2008 Climate Change Program Assessment and Action 
Plan.\10\ Many of New York City's wastewater treatment plants, such as 
Tallman Island, are vulnerable to sea level rise and flooding from 
storm surges because they are located in the floodplain next to the 
bodies of water into which they discharge. In response to this threat, 
DEP planned to, in the course of scheduled renovations, raise sensitive 
electrical equipment, such as pumps and motors, to higher levels to 
protect them from flood damage.
---------------------------------------------------------------------------
    \10\ New York City Department of Environmental Protection Climate 
Change Program, with contributions by Columbia University's Center for 
Climate Systems Research and HydroQual Environmental Engineers & 
Scientists, P.C., Report 1: Assessment and Action Plan--A Report Based 
on the Ongoing Work of the DEP Climate Change Task Force (New York 
City, N.Y., 2008).
---------------------------------------------------------------------------
    King County, Washington.--According to officials from the King 
County Department of Natural Resources and Parks, the county took steps 
to adapt to climate change because its leadership was highly aware of 
climate impacts on the county. For example, in November 2006, the 
county experienced severe winter storms that caused a series of levees 
to crack. The levees had long needed repair, but the storm damage 
helped increase support for the establishment of a countywide flood 
control zone district, funded by a dedicated property tax.\11\ The 
flood control zone district planned to use the funds, in part, to 
upgrade flood protection facilities to increase the county's resilience 
to future flooding. In addition to more severe winter storms, the 
county expected that climate change would lead to sea level rise; 
reduced snowpack; and summertime extreme weather such as heat waves and 
drought, which can lead to power shortages because hydropower is an 
important source of power in the region. The University of Washington 
Climate Impacts Group, funded by NOAA's RISA program, has had a long-
standing relationship with county officials and worked closely with 
them to provide regionally specific climate change data and modeling, 
such as a 2009 assessment of climate impacts in Washington, as well as 
decisionmaking tools.\12\
---------------------------------------------------------------------------
    \11\ King County Ordinance 15728 (April 25, 2007). The district is 
funded by a countywide ad valorem property tax levy of 10 cents per 
$1,000 assessed value.
    \12\ University of Washington Climate Impacts Group, The Washington 
Climate Change Impacts Assessment: Evaluating Washington's Future in a 
Changing Climate (Seattle, Wash., 2009).
---------------------------------------------------------------------------
    Maryland.--Maryland officials took a number of steps to formalize 
their response to climate change effects. An executive order in 2007 
established the Maryland Commission on Climate Change, which released 
the Maryland Climate Action Plan in 2008.\13\ As part of this effort, 
the Maryland Department of Natural Resources (DNR) chaired an 
Adaptation and Response Working Group, which issued a report on sea 
level rise and coastal storms.\14\ The 2008 Maryland Climate Action 
Plan calls for future adaptation strategy development to cover other 
sectors, such as agriculture and human health. Additionally, Maryland 
provided guidance to coastal counties to assist them with incorporating 
the effects of climate change into their planning documents. For 
example, DNR funded guidance documents to three coastal counties--
Dorchester, Somerset, and Worcester--on how to address sea level rise 
and other coastal hazards in their local ordinances and planning 
efforts.\15\
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    \13\ Maryland Commission on Climate Change, Climate Action Plan 
(Annapolis, Maryland, 2008).
    \14\ Maryland Commission on Climate Change Adaptation and Response 
Working Group, Comprehensive Strategy for Reducing Maryland's 
Vulnerability to Climate Change Phase I: Sea Level Rise and Coastal 
Storms.
    \15\ Wanda Diane Cole, Maryland Eastern Shore Resource Conservation 
& Development Council, Sea Level Rise: Technical Guidance for 
Dorchester County, a special report prepared at the request of the 
Maryland Department of Natural Resources, March 2008; URS and RCQuinn 
Consulting, Inc., Somerset County Maryland Rising Sea Level Guidance, a 
special report prepared at the request of Somerset County, Maryland, 
Annapolis, Md., 2008; and CSA International Inc., Sea Level Rise 
Response Strategy Worcester County, Maryland, a special report prepared 
at the request of Worcester County, Maryland Department of 
Comprehensive Planning, September 2008.
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    GOVERNMENT OFFICIALS FACE NUMEROUS CHALLENGES WHEN CONSIDERING 
  ADAPTATION EFFORTS, AND FURTHER FEDERAL ACTION COULD HELP THEM MAKE 
                        MORE INFORMED DECISIONS

    In our prior work, we found that the challenges faced by Federal, 
State, and local officials in their efforts to adapt to climate change 
fell into several categories:
      Focusing on Immediate Needs.--Available attention and resources 
        were focused on more immediate needs, making it difficult for 
        adaptation efforts to compete for limited funds. For example, 
        several Federal, State, and local officials who responded to a 
        questionnaire we prepared for our October 2009 report on 
        adaptation noted how difficult it is to convince managers of 
        the need to plan for long-term adaptation when they are 
        responsible for more urgent concerns that have short 
        decisionmaking timeframes. One Federal official explained that 
        ``it all comes down to resource prioritization. Election and 
        budget cycles complicate long-term planning such as adaptation 
        will require. Without clear top-down leadership setting this as 
        a priority, projects with benefits beyond the budget cycle tend 
        to get raided to pay current-year bills to deliver results in 
        this political cycle.''

      Insufficient Site-specific Data.--Without sufficient site-
        specific data, such as local projections of expected changes, 
        it is hard to predict the impacts of climate change and thus 
        hard for officials to justify the current costs of adaptation 
        efforts for potentially less certain future benefits. This is 
        similar to what we found in past work on climate change on 
        Federal lands. Specifically, our August 2007 report 
        demonstrated that land managers did not have sufficient site-
        specific information to plan for and manage the effects of 
        climate change on the Federal resources they oversee.\16\ In 
        particular, the managers lacked computational models for local 
        projections of expected changes. For example, at the time of 
        our review, officials at the Florida Keys National Marine 
        Sanctuary said that they did not have adequate modeling and 
        scientific information to enable managers to predict the 
        effects of climate change on a small scale, such as that 
        occurring within the sanctuary.\17\ Without such modeling and 
        information, most of the managers' options for dealing with 
        climate change were limited to reacting to already-observed 
        effects on their units, making it difficult to plan for future 
        changes. Furthermore, these resource managers said that they 
        generally lacked detailed inventories and monitoring systems to 
        provide them with an adequate baseline understanding of the 
        plant and animal species that existed on the resources they 
        manage. Without such information, it is difficult to determine 
        whether observed changes are within the normal range of 
        variability.
---------------------------------------------------------------------------
    \16\ GAO, Climate Change: Agencies Should Develop Guidance for 
Addressing the Effects on Federal Land and Water Resources, GAO-07-863, 
(Washington, D.C.: August 7, 2007).
    \17\ We conducted our work for GAO-07-863 between May 2006 and July 
2007. The agencies involved with this work are now beginning to 
consider climate change adaptation in planning decisions.
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      Lack of Clear Roles and Responsibilities.--Adaptation efforts are 
        constrained by a lack of clear roles and responsibilities among 
        Federal, State, and local agencies. Of particular note, about 
        70 percent (124 of 178) of the Federal, State, and local 
        officials who responded to a questionnaire we prepared for our 
        October 2009 report on adaptation rated the ``lack of clear 
        roles and responsibilities for addressing adaptation across all 
        levels of government'' as very or extremely challenging. For 
        example, according to one respondent, ``there is a power 
        struggle between agencies and levels of government . . .  
        Everyone wants to take the lead rather than working together in 
        a collaborative and cohesive way.''
    These challenges make it harder for officials to justify the 
current costs of adaptation efforts for potentially less certain future 
benefits. A 2009 report by the National Research Council discusses how 
officials are struggling to make decisions based on future climate 
scenarios instead of past climate conditions.\18\ According to the 
report, requested by the Environmental Protection Agency and NOAA, 
usual practices and decision rules (for building bridges, implementing 
zoning rules, using private motor vehicles, and so on) assume a 
stationary climate--a continuation of past climate conditions, 
including similar patterns of variation and the same probabilities of 
extreme events. According to the National Research Council report, that 
assumption, which is fundamental to the ways people and organizations 
make their choices, is no longer valid; Climate change will create a 
novel and dynamic decision environment.
---------------------------------------------------------------------------
    \18\ National Research Council (2009), Informing Decision in a 
Changing Climate. Panel on Strategies and Methods for Climate-Related 
Decision Support, Committee on the Human Dimensions of Global Change, 
Division of Behavioral and Social Sciences and Education. Washington, 
DC: The National Academies Press.
---------------------------------------------------------------------------
    We reached similar conclusions in a March 2007 report that 
highlighted how historical information may no longer be a reliable 
guide for decisionmaking.\19\ We reported on the Federal Emergency 
Management Agency's (FEMA) National Flood Insurance Program (NFIP), 
which insures properties against flooding, and the U.S. Department of 
Agriculture's (USDA) Federal Crop Insurance Corporation, which insures 
crops against drought or other weather disasters. Among other things, 
the report contrasted the experience of private and public insurers. We 
found that many major private insurers were proactively incorporating 
some near-term elements of climate change into their risk management 
practices. In addition, other private insurers were approaching climate 
change at a strategic level by publishing reports outlining the 
potential industry-wide impacts and strategies to proactively address 
the issue.
---------------------------------------------------------------------------
    \19\ GAO, Climate Change: Financial Risks to Federal and Private 
Insurers in Coming Decades Are Potentially Significant, GAO-07-285, 
(Washington, D.C.: March 16, 2007).
---------------------------------------------------------------------------
    In contrast, we noted that the agencies responsible for the 
Nation's two key Federal insurance programs had done little to develop 
the kind of information needed to understand their programs' long-term 
exposure to climate change for a variety of reasons. As a FEMA official 
explained, the NFIP is designed to assess and insure against current--
not future--risks. Unlike the private sector, neither this program nor 
the Federal Crop Insurance Corporation had analyzed the potential 
impacts of an increase in the frequency or severity of weather-related 
events on their operations over the near- or long-term. The proactive 
view of private insurers in our 2007 report was echoed on March 17, 
2009, by the National Association of Insurance Commissioners, which 
adopted a mandatory requirement that insurance companies disclose to 
regulators the financial risks they face from climate change, as well 
as actions the companies are taking to respond to those risks. We have 
not studied the progress of these specific programs in managing the 
Nation's long-term exposure to climate change since the issuance of our 
2007 report.
    Based on information obtained from studies, visits to sites 
pursuing adaptation efforts, and responses to a Web-based questionnaire 
sent to Federal, State, and local officials knowledgeable about 
adaptation, our October 2009 report identified three categories of 
potential Federal actions for addressing challenges to adaptation 
efforts:
  --First, training and education efforts could increase awareness 
        among Government officials and the public about the impacts of 
        climate change and available adaptation strategies. A variety 
        of programs are trying to accomplish this goal, such as the 
        Chesapeake Bay National Estuarine Research Reserve (partially 
        funded by NOAA), which provides education and training on 
        climate change to the public and local officials in Maryland.
  --Second, actions to provide and interpret site-specific information 
        could help officials understand the impacts of climate change 
        at a scale that would enable them to respond. About 80 percent 
        of the respondents to our Web-based questionnaire rated the 
        ``development of State and local climate change impact and 
        vulnerability assessments'' as very or extremely useful.

  --Third, the Congress and Federal agencies could encourage adaptation 
        by clarifying roles and responsibilities. About 71 percent of 
        the respondents to our Web-based questionnaire rated the 
        development of a national adaptation strategy as very or 
        extremely useful. Furthermore, officials we spoke with and 
        officials who responded to our questionnaire said that a 
        coordinated Federal response would also demonstrate a Federal 
        commitment to adaptation. Importantly, our October 2009 report 
        recommended that within the Executive Office of the President 
        (EOP) the appropriate entities, such as CEQ, develop a national 
        adaptation plan that includes setting priorities for Federal, 
        State, and local agencies. CEQ generally agreed with our 
        recommendation.
    Some of our other recent climate change-related reports offer 
additional examples of the types of actions Federal agencies and the 
Congress could take to assist States and communities in their efforts 
to adapt. Our August 2007 report, for example, recommended that certain 
agencies develop guidance advising managers on how to address the 
effects of climate change on the resources they manage.\20\ 
Furthermore, our May 2008 report on the economics of policy options to 
address climate change identified actions the Congress and Federal 
agencies could take, such as reforming insurance subsidy programs in 
areas vulnerable to hurricanes or flooding.\21\
---------------------------------------------------------------------------
    \20\ GAO-07-863.
    \21\ Climate Change: Expert Opinion on the Economics of Policy 
Options to Address Climate Change, GAO-08-605, (Washington, D.C.: May 
9, 2008).
---------------------------------------------------------------------------
  funding for adaptation and other federal climate change activities 
     could be better tracked, reported, and aligned with strategic 
                               priorities
    Our May 2011 report on Federal climate change funding found that:
  --agencies do not consistently interpret methods for defining and 
        reporting the funding of climate change activities;
  --key factors complicate efforts to align such funding with strategic 
        priorities; and
  --options are available to better align Federal funding with 
        strategic priorities, including governmentwide strategic 
        planning.\22\
---------------------------------------------------------------------------
    \22\ GAO-11-317.
---------------------------------------------------------------------------
    Any effective Federal climate change adaptation strategy will need 
to ensure that Federal funds are properly tracked and that funding 
decisions are aligned with strategic priorities. Given the 
interdisciplinary nature of the issue, such alignment is a challenge as 
formidable as it is necessary to address.
    In our report, we identified three methods for defining and 
reporting climate change funding, foremost of which is guidance 
contained in OMB's Circular A-11.\23\ The circular directs agencies to 
report funding that meet certain criteria in three broad categories--
research, technology, and international assistance. According to OMB 
staff, Circular A-11 is the primary method for defining and reporting 
long-standing ``cross-cuts'' of funding for climate change activities. 
Interagency groups, such as USGCRP have collaborated in the past with 
OMB to clarify the definitions in Circular A-11, according to comments 
from CEQ, OMB, and OSTP.\24\
---------------------------------------------------------------------------
    \23\ The other methods identified by respondents were guidance from 
interagency programs and periodic ``data calls'' to collect information 
for unique reporting needs.
    \24\ CEQ, OMB, and OSTP submitted consolidated technical comments 
on our May 2011 report. These comments are reflected in this statement 
as appropriate.
---------------------------------------------------------------------------
    Our work suggests that existing methods for defining and reporting 
climate change funding are not consistently interpreted and applied 
across the Federal Government.\25\ Specifically, for our May 2011 
report, we sent a Web-based questionnaire to key Federal officials 
involved in defining and reporting climate change funding, developing 
strategic priorities, or aligning funding with strategic priorities. 
Most of these respondents indicated that their agencies consistently 
applied methods for defining and reporting climate change funding. Far 
fewer respondents indicated that methods for defining and reporting 
climate change funding were applied consistently across the Federal 
Government. Some respondents, for example, noted that other agencies 
use their own interpretation of definitions, resulting in inconsistent 
accounting across the Government. Respondents generally identified key 
reasons agencies may interpret and apply existing methods differently, 
including difficulty determining which programs are related to climate 
change.\26\ In comments to our May 2011 report, CEQ, OMB, and OSTP 
noted that consistency likely varies by method of reporting, with 
Circular A-11 being the most consistent and other methods being less 
so.
---------------------------------------------------------------------------
    \25\ In GAO-11-317 we analyzed OMB funding reports and responses to 
a Web-based questionnaire sent to key Federal officials with the 
assistance of the EOP and interagency coordinating bodies.
    \26\ These key reasons are discussed in detail in our May 2011 
report: GAO-11-317.
---------------------------------------------------------------------------
    In addition, our work identified two key factors that complicate 
efforts to align Federal climate change funding with strategic 
priorities across the Federal Government. First, Federal officials lack 
a shared understanding of priorities, partly due to the multiple, often 
inconsistent messages articulated in different sources, such as 
strategic plans.\27\ Our review of these sources found that there is 
not currently a consolidated set of strategic priorities that 
integrates climate change programs and activities across the Federal 
Government. As we stated in our May 2011 report, in the absence of 
clear, overarching priorities, Federal officials are left with many 
different sources that present climate change priorities in a more 
fragmented way. The multiple sources for communicating priorities 
across the climate change enterprise may result in conflicting messages 
and confusion.
---------------------------------------------------------------------------
    \27\ These sources include:
      -- strategic plans for interagency programs and agencies;
      -- executive-level guidance memoranda;
      -- the development of new interagency initiatives;
      -- regulations and guidance memoranda;
      -- international commitments; and
      -- testimony of Federal executives before the Congress.
---------------------------------------------------------------------------
    The second key factor that complicates efforts to align Federal 
funding with priorities is that existing mechanisms intended to do so 
are nonbinding, according to respondents, available literature, and 
stakeholders. For example, some respondents noted that the interagency 
policy process does not control agency budgets and that agencies with 
their own budget authority may pay little attention to Federal 
strategic priorities. In other words, Federal strategic priorities set 
through an interagency process may not be reflected in budget decisions 
for individual agencies.
    As OSTP officials acknowledged to us, ``The major challenge is the 
need to connect climate science programs with broader inter- and intra-
agency climate efforts.'' In comments to our report, OSTP stated that 
while significant progress is being made in linking the climate 
science-related efforts, individual agencies still want to advance 
initiatives that promote or serve their agency missions. This, 
according to OSTP, yields a broader challenge of tying climate-related 
efforts (science, mitigation, and adaptation) together into a coherent 
governmentwide strategy.
    Our May 2011 report identified several ways to better align Federal 
climate change funding with strategic priorities, including:
  --options to improve the tracking and reporting of climate change 
        funding;
  --options to enhance how strategic climate change priorities are set;
  --the establishment of formal coordination mechanisms; and
  --continuing efforts to link related climate change activities across 
        the Federal Government.\28\ Specific options are discussed in 
        detail in our May 2011 report and include a governmentwide 
        strategic planning process that promotes a shared understanding 
        among agencies of strategic priorities by articulating what 
        they are expected to do within the overall Federal response to 
        climate change. Also discussed in detail is an integrated 
        budget review process that better aligns these priorities with 
        funding decisions through a more consistent method of reporting 
        and reviewing climate change funding.
---------------------------------------------------------------------------
    \28\ These were identified by respondents, available literature, 
and stakeholders.
---------------------------------------------------------------------------
    Federal entities are beginning to implement some of these options. 
For example, there has been some recent progress on linking related 
Federal climate change programs, according to OSTP. Specifically, OSTP 
stated that the science portion of the CEQ, NOAA, and OSTP-led Climate 
Change Adaptation Task Force is being integrated within USGCRP. OSTP 
also stated that it is working to create an interagency body that will 
bring together agencies that provide climate services to allow for 
better links between climate services and other Federal climate-related 
activities.
    To further improve the coordination and effectiveness of Federal 
climate change programs and activities, we recommended in our May 2011 
report that the appropriate entities within the EOP, in consultation 
with the Congress, clearly establish Federal strategic climate change 
priorities and assess the effectiveness of current practices for 
defining and reporting related funding.
    Chairman Durbin, Ranking Member Moran, and members of the 
subcommittee, this concludes my prepared statement. I would be happy to 
respond to any questions that you or other Members of the subcommittee 
may have.

                                Appendix

                       WHY THE GAO DID THIS STUDY

    A 2009 assessment by the USGCRP found that many types of extreme 
weather events, such as heat waves and regional droughts, have become 
more frequent and intense during the past 40 to 50 years. According to 
the assessment, changes in extreme weather and climate events will 
affect many aspects of society and the natural environment, such as 
infrastructure. In addition, the Department of Defense found that 
climate change may act as an accelerant of instability or conflict, 
placing a burden to respond on militaries around the world.
    According to the National Academies, USGCRP, and others, greenhouse 
gases already in the atmosphere will continue altering the climate 
system into the future regardless of emissions control efforts. 
Therefore, adaptation-defined as adjustments to natural or human 
systems in response to actual or expected climate change--is an 
important part of the response to climate change.This testimony 
addresses:
  --the actions Federal, State, and local authorities are taking to 
        adapt to climate change;
  --the challenges that Federal, State, and local officials face in 
        their efforts to adapt and actions Federal agencies could take 
        to help address these challenges; and
  --the extent to which Federal funding for adaptation and other 
        climate change activities is consistently tracked and reported 
        and aligned with strategic priorities. The information in this 
        testimony is based on prior work, largely on the GAO's recent 
        reports on climate change adaptation and federal climate change 
        funding.

                             WHAT GAO FOUND

    Federal, State, and local authorities are beginning to take steps 
to adapt to climate change. Federal agencies are beginning to respond 
to climate change systematically through an Interagency Climate Change 
Adaptation Task Force formed to recommend key components for inclusion 
in a national adaptation strategy. Individual agencies are also 
beginning to consider adaptation actions. For example, in May 2009, the 
Chief of Naval Operations created Task Force Climate Change to address 
the naval implications of a changing Arctic and global environment. 
Some State and local government authorities were beginning to plan for 
and respond to climate change impacts, the GAO reported in 2009. For 
example, the State of Maryland had a strategy for reducing 
vulnerability to climate change, which focused on protecting habitat 
and infrastructure from future risks associated with sea level rise and 
coastal storms. In another example, King County, Washington, 
established a countywide flood control zone district to upgrade flood 
protection facilities and increase the county's resilience to future 
flooding, among other things.
    Federal, State, and local officials face numerous challenges in 
their efforts to adapt to climate change, and further Federal action 
could help them make more informed decisions. These challenges include 
a focus of available attention and resources on more immediate needs 
and insufficient site-specific data--such as local projections of 
expected climate changes. The lack of such data makes it hard to 
understand the impacts of climate change and thus hard for officials to 
justify the cost of adaptation efforts, since future benefits are 
potentially less certain than current costs. The GAO's October 2009 
report identified potential Federal actions for improving adaptation 
efforts, including actions to provide and interpret site-specific 
information, which could help officials understand the impacts of 
climate change at a scale that would enable them to respond. In a May 
2008 report on the economics of policy options to address climate 
change, the GAO identified actions Congress and Federal agencies could 
take, such as reforming insurance subsidy programs in areas vulnerable 
to hurricanes or flooding.
    Funding for adaptation and other Federal climate change activities 
could be better tracked, reported, and aligned with strategic 
priorities. The GAO's report on Federal climate change funding suggests 
that methods for defining and reporting such funding are not 
consistently interpreted and applied across the Federal Government. The 
GAO also identified two key factors that complicate efforts to align 
funding with priorities. First, officials across a broad range of 
Federal agencies lack a shared understanding of priorities, partly due 
to the multiple, often inconsistent messages articulated in different 
policy documents, such as strategic plans. Second, existing mechanisms 
intended to align funding with government-wide priorities are 
nonbinding and limited when in conflict with agencies' own priorities. 
Federal officials who responded to a Web-based questionnaire, available 
literature, and stakeholders involved in climate change funding 
identified several ways to better align Federal climate change funding 
with strategic priorities. These include a governmentwide strategic 
planning process that promotes a shared understanding among agencies of 
strategic priorities by articulating what they are expected to do 
within the overall Federal response to climate change.

    Senator Durbin. Thank you very much. I mentioned earlier, 
Mr. Trimble is with the GAO and has published, at least, his 
climate change adaptation publication, that I believe was 
issued on July 28. Is that correct?
    Mr. Trimble. Yes, we have a written statement for today's 
hearing----
    Senator Durbin. Good.
    Mr. Trimble [continuing]. A longer statement.
    Senator Durbin. Thank you very much. Kathryn Sullivan, as I 
mentioned earlier, is with the NOAA and is our next witness. 
Please proceed.

STATEMENT OF KATHRYN D. SULLIVAN, Ph.D., ASSISTANT 
            SECRETARY OF COMMERCE FOR ENVIRONMENTAL 
            OBSERVATION AND PREDICTION, NATIONAL 
            OCEANIC AND ATMOSPHERIC ADMINISTRATION, 
            DEPARTMENT OF COMMERCE
    Dr. Sullivan. Thank you, Chairman Durbin and Ranking Member 
Moran, for this opportunity to testify on Federal disaster 
budgeting and whether our Nation is weather ready. As you 
mentioned, I am from the NOAA and am the deputy administrator 
there. The chairman just gave a very cogent and remarkable 
account of the sequence of events that we've seen so far this 
year in severe weather and the great toll that they've taken on 
our country to date.
    I won't repeat that long string of events, but it is 
compelling, indeed, and in fact, the trends are moving in a 
direction that suggest we will have more such events. The 
NOAA's role in supporting Federal disaster budgeting for these 
events is to predict them ahead of time, to observe them in 
real time, and to help people prepare in advance for the 
impacts they're likely to have.
    This advance awareness is, in fact, the very foundation of 
a weather-ready Nation. Businesses, State and local 
governments, and our citizens rely on the NOAA for reliable 
weather and water forecasts to underpin their responses and 
their long-range planning. We've made tremendous strides in our 
forecast and warning capability over the past few decades.
    Our lead time for tornadoes has doubled since we modernized 
our technology and infrastructure in the 1980s and early 1990s. 
We've made significant leaps in our seasonal predictive 
capability, due mainly to researching the weather patterns 
associated with El Nino and La Nina, and also improvements in 
numerical modeling methods.
    Advances in understanding these, and other larger-scale 
phenomena, and their relationship to high-impact weather events 
has been the key to giving us the ability to help the Nation to 
give the Nation advance notice and time to prepare.
    For example, we were able, this year, to provide the 
Midwest with spring flood outlooks as early as January, and to 
foresee the continued severity of Texas' historical drought. 
Even as our predictions improve, however, factors such as 
demographic trends and population growth make society more 
vulnerable than ever to high-impact events. Nearly 90 percent 
of all Presidentially declared disasters are weather- and 
water-related. And as the chairman noted, studies show that 
frequency of these events is increasing.
    As a result, many concerns from agriculture to city 
planners, business, and the military, are looking for ways to 
increase their resilience now.
    The city of Chicago, heeding recent NOAA data on trends, 
and our analytical climate support, is preparing for the 
likelihood of more intense storms and rainfall, along with 
warmer temperatures. Similar adaptation planning is underway in 
New York City, with particular focus on the risk of flooding 
from rising sea level.
    The Navy's Task Force on Climate Change has advised that 
service to prepare to police the equivalent of an extra sea, as 
Arctic ice melts. These decisionmakers and many others, are 
using NOAA science and support to take mitigating steps now in 
order to increase their resilience to these events and reduce 
the potential of severe societal and economic impacts. They 
realize that the past is, indeed, no longer prologue.
    In my written testimony, I describe the four pillars that 
support the NOAA's, i.e., the Nation's, predictive 
capabilities: environmental observations; including weather 
satellites; computer modeling; scientific research; and of 
course, our people, the technical experts who provide the 
forecasts, warnings, and decision assistance. To improve both 
our short-term, local-impact forecasts, and the long-range 
outlooks that enable advance planning, we need to invest in 
each of these pillars. As President Obama said in his address 
to the Nation on Monday, while we all want and need a 
Government that lives within its means, there are still things 
we need to pay for as a country, such as weather satellites.
    I need hardly note to this body that the funding for that 
critical infrastructure is in jeopardy this year. The NOAA's 
Federal, academic, and private sector partners play critical 
roles in mitigating the impacts of weather and water events. We 
work hand-in-hand with our Federal partners, such as the U.S. 
Geological Survey (USGS), the Army Corps of Engineers, and the 
Federal Emergency Management Agency (FEMA).
    This quartet of core partners often acts as conveners and 
integrators of necessary information and people, including 
State and local emergency officials and managers.
    This is just one key part of our efforts to prepare for and 
mitigate impacts. We work very closely together to minimize 
redundancies and enhance the sum of our parts. Our combined 
efforts, before and during this year's historical floods, 
provide an excellent example of the efficacy of these 
partnerships.
    The spring flood outlooks the NOAA issued in January along 
with local decision support, allowed many communities to take 
actions that limited flood impacts, including massive levee 
reinforcements to, eventually, precautionary evacuations. FEMA 
and the Red Cross prepositioned assets. The USGS ensured the 
river gauges were operational.
    We can do better. The NOAA, the USGS, and the Corps of 
Engineers recently signed a memorandum of understanding to 
begin significant advancement of our joint efforts in water 
resource observations, prediction, and management. We've 
committed to a framework that will provide an integrated, 
common operating picture for water resources and management 
nationwide.
    This is known as the Integrated Water Resource Science and 
Service Initiative (IWRSSI). This is just one of many ways in 
which the NOAA is working to improve our ability to provide 
climate information and services effectively to public and 
private sector partners.
    In closing, I'd like to emphasize that the Nation's 
investments in the NOAA's weather prediction and warning 
capabilities have directly saved lives this year.

                           PREPARED STATEMENT

    We are clearly experiencing a trend toward more high-impact 
weather and water events. Thanks to the Congress' support, the 
NOAA, today, is able to help the Nation anticipate their 
development and prepare for their impacts.
    The NOAA is committed to continual improvement of our 
predictive capabilities, and working with our Federal and 
private sector partners, to providing the highest level of 
preparedness and promoting our Nation's resilience to these 
events. Thank you, Mr. Chairman, Mr. Moran, and I look forward 
to any questions you may have.
    [The statement follows:]

            Prepared Statement of Kathryn D. Sullivan, Ph.D.

    Good morning Chairman Durbin, Ranking Member Moran, and members of 
the subcommittee. My name is Dr. Kathryn D. Sullivan, and I am the 
Assistant Secretary of Commerce for Environmental Observation and 
Prediction for the National Oceanic and Atmospheric Administration 
(NOAA). Thank you for the opportunity to testify today at this hearing 
about the Federal Government's role in mitigating the economic impact 
of severe weather events. High-impact weather sometimes takes the form 
of relatively short-lived, but extreme events such as tornados, flash 
floods, hurricanes, wildfires, tsunamis, dust storms, or heat waves--
but also of longer-term events such as floods and drought, which have 
broader impacts across many economic sectors. The NOAA's short-term 
weather forecasts of conditions out to about 2 weeks have been critical 
to saving lives and property in the days leading up to and during the 
extreme events we've been seeing this spring and summer. The NOAA's 
long-range weather and seasonal forecasts, also known as ``climate 
forecasts,'' have been critical to making the advance planning 
decisions, from weeks to months ahead of time, that allow rapid 
response to the onset of these weather events.

An Historic Year in the Making
    The year 2011 has already established itself in the record books as 
an historic year for weather-related disasters and it is not over--in 
fact hurricane season is just getting underway. Just past the year's 
midpoint, we have already seen eight $1-billion-plus disasters. Total 
damages from weather- and water-related events since January for the 
United States are well more than $32 billion and climbing (Lott, et al. 
2011). Tied for fifth, 2011 is as the deadliest tornado year for the 
United States since modern recordkeeping began in 1950, with 537 people 
killed so far. April 2011 ranks as the most active tornado month on 
record with 875 tornadoes, breaking the previous record of 542 set in 
2003. More tornadoes occurred on April 27 of this year than any other 
day in the past 61 years. On May 22, a large portion of Joplin, 
Missouri was devastated by an EF-5 (winds greater than 200 mph) 
tornado, resulting in more than 150 fatalities and more than 1,000 
persons injured. The Joplin tornado was the deadliest this year and is 
ranked seventh among the deadliest tornadoes in U.S. history.
    Prime wildfire conditions prevailed across portions of the Southern 
Plains and Southwestern States, with a record breaking 1.79 million 
acres burned across the country in April alone, with Texas, New Mexico, 
and Arizona bearing the brunt of the wildfire activity. Nearly 6 
million acres have burned nationwide--double the 10-year average by 
this time of year.
    Fueled by record-setting precipitation totals, historic flooding 
has hit the Midwest and Ohio Valley, from the smallest streams to the 
largest rivers. The Ohio Valley region had its wettest April on record, 
and the record goes back to 1895 for some States. Record breaking heavy 
rains across Montana and the Dakotas, combined with runoff from record 
winter snowpack, caused tremendous flooding across those States, with 
Minot, North Dakota, being among the hardest hit. Forecasts now 
indicate this season could rival the Great Flood of 1993. In that year, 
the Upper Midwest endured persistent, record-breaking floods from April 
through August, impacting nine States and causing more than $25 billion 
in damages (adjusted for inflation)(Lott, et al. 2010). The effects of 
floods are felt far downstream as well. Following the 1993 flood, the 
spatial extent of the hypoxic zone, or ``dead zone'' in the Gulf of 
Mexico more than doubled its size, to more than 18,000 km\2\, and 
persisted at that size through midsummer 1997. The tremendous amount of 
water flowing into the Gulf of Mexico from this year's record spring 
flooding is expected to cause the largest ever ``dead zone'', 
surpassing that of 1993 (Rabelais, et al 2011). Dead zones--areas 
lacking the necessary oxygen and salinity to fuel marine life--are 
primarily caused by the effects of runoff from floods, which carry not 
only the upstream sediments such as agricultural nutrients, but also 
the tremendous freshwater influx to the gulf waters. This stimulates an 
overgrowth of algae that sinks, decomposes, and consumes most of the 
life-giving oxygen supply in the water. The Gulf of Mexico dead zone is 
of particular concern because it threatens valuable commercial and 
recreational gulf fisheries that generate about $2.8 billion annually.

            DEPICTION OF GULF OF MEXICO HYPOXIA ZONE IMAGE 




                             Source.--NOAA.

                             WHAT IT MEANS

    Nearly 90 percent of all Presidentially declared disasters are 
weather and water-related, and our vulnerability to the impacts is 
increasing as our population grows. As shown in the chart below, the, 
the number of these events is trending upward, with 2011's numbers on 
track to surpass last year's record.




                   Source.--Munich Re NatCatSERVICE.

    Over the past 30-plus years, the United States has seen a total of 
107 weather-related disasters each totaling more than $1 billion in 
damage. Total standardized losses since 1980 exceed $750 billion.
    Demographic trends and population growth and an increased reliance 
on technology, coupled with this trend in extreme weather events, have 
made our society more vulnerable to high-impact events. As a result, 
many agricultural, business, and urban planners are looking for ways to 
increase community resilience now. For example, the city of Chicago is 
taking steps to prepare for the likelihood of intense storms striking 
more often, of rainfall events causing more flooding, and of warmer 
temperatures. Local climate studies, along with recent trends such as 
an increase in the frequency of heavy rainfall events, have led them to 
conclude that this is the soundest action to take in order to mitigate 
the cost and impact of these events. New York City is also engaged in 
adaptation planning, with particular focus on the risk of flooding from 
rising sea level. The Navy's Task Force on Climate Change has advised 
that the Navy should prepare to police the equivalent of an extra sea 
as the Arctic ice melts. These cities and organizations, among many 
others, recognize the need to understand changes and trends in weather 
patterns, and to apply this to planning that may reduce vulnerability 
to high-impact weather and water events. Their recognition for the need 
to reduce their vulnerability to weather and water extremes is an 
important first step. However, there is much more that needs to be done 
in other sectors of our economy and with the general public to increase 
our resiliency to the impacts of these events.
    There is more that can be done, and that communities and businesses 
are mobilizing to do. This is why the NOAA's mission to understand and 
predict changes in climate, weather, oceans, and coasts, to share that 
knowledge and information with others, and to conserve and manage 
coastal and marine resources is so vital. Our vision for healthy 
ecosystems, communities, and economies, that are resilient in the face 
of change, can lead to improved economic viability of weather-dependent 
sectors like agriculture and other businesses, as well as more lives 
saved.

                       THE VARIOUS ROLES OF NOAA

    Many Federal agencies have a critical role in preparing for weather 
and water disasters, including the United States Geological Survey 
(USGS), the United States Army Corps of Engineers (USACE), and the 
Federal Emergency Management Agency (FEMA). The NOAA works 
collaboratively with these Federal agencies to ensure preparedness and 
a coordinated approach to preparedness.

Research, Observations, and Prediction
    NOAA scientists have been at the forefront of weather and climate 
science, forecasting and public preparedness for decades--our science 
helps save lives and livelihoods. The NOAA has a leading role in 
understanding changes in weather and climate extremes, such as trends 
in severe local storms and extremes in precipitation--too little or too 
much, too often or too infrequent.
    Longer lead-time forecasts for droughts, seasonal flooding, heavy 
rainfall events, heat waves, and cold spells provide tremendous 
economic value for the Nation. The NOAA provides a spectrum of critical 
information across a range of time and space scales, which is used by 
government, business, emergency managers, planners, and the public. 
That information's value increased when businesses, farmers, energy 
producers and utilities, as well as the general public, are prepared 
and have effective plans of action to mitigate impacts.
    Our Nation's environmental predictive capabilities are supported by 
four foundational pillars: observations, computer models, research, and 
our people, who provide forecasts, warnings, and decision assistance to 
key decisionmakers. By strengthening the pillars--through improved 
satellite and in-situ observations, computational capacity, and coupled 
atmosphere, ocean, land models, and necessary research--we can 
revolutionize the forecast process across the entire spectrum, from 
relatively small-scale, short-range applications to long-range weather 
and climate predictions. For example, on the larger scale, coupled 
models provide improved simulations of the interaction between the 
ocean and atmosphere, resulting in more accurate predictions of 
tropical cyclone behavior. On smaller scales, higher-resolution 
observations and models can provide the type of short-term severe 
weather predictions that will one day allow us to ``warn on forecast,'' 
or know up to 60 minutes ahead of time where a tornado will touch down.
    We know that shifts in weather patterns are often regional in 
nature, and have variable time spans. For example, El Nino and La Nina, 
which have become household words, are generally predictable over 
fairly definable areas and time spans. During the 1997-1998 El Nino and 
1998-1999 La Nina, the U.S. agricultural sector experienced damages of 
$2.4 billion-$2.8 billion and $3.6 billion-$10.7 billion (in 2010 
dollars), respectively (Adams, et al. 1999). We are coming to 
understand many of these larger-scale phenomena, such as the North 
Atlantic Oscillation, which is a change in the water temperature in the 
North Atlantic that is strongly correlated with heavy snowfall events 
in the Mid-Atlantic and Northeast States. However, we still do not 
always fully understand how these pattern shifts relate to or affect 
one another, and there are likely many other phenomena we have yet to 
discover. For example, while there are some known correlations between 
the La Nina phase and tornadic activity across the United States, 
significant research is required to improve our scientific 
understanding of links between climate patterns and local weather 
extremes.
    Our tornado warnings have improved significantly over the past two 
decades primarily because of past research efforts. More research would 
help us better understand the rapid evolution of severe thunderstorms 
and why some produce tornadoes and others do not. We face a similar 
challenge with our understanding of hurricanes. While our track 
forecasts have improved greatly--our forecast location for 5 days out 
is now as accurate as the forecast location for 3 days out was 15 years 
ago--we still do not understand what causes some tropical systems to 
jump two intensity categories in less than 24 hours, while others do 
not. Understanding these atmospheric evolutions will help us increase 
forecast lead time and accuracy for these damaging and deadly storms.

Getting the Word Out
    As the Federal Government's sole official voice for issuing 
warnings during life-threatening weather events, and as an established 
reliable and trusted source, the NOAA provides the Nation's first line 
of defense against severe weather. NOAA operates the Nation's 
geostationary and polar orbiting satellites, a nationwide network of 
Doppler weather radars and surface observing stations. Scientists 
develop computational models that combine these observations with 
equations describing the physics of our atmosphere and ocean, and our 
forecasters interpret and deliver critical information. Alerts and 
warnings for severe weather and other near-term hazards (tornados, 
hurricanes, severe thunderstorms, winter storms, most floods, chemical 
spills, volcanic ash, tsunami, space weather, etc.,) are delivered 
through multiple redundant mechanisms, including: NOAA Weather Radio, 
which triggers the Emergency Alert System; NWSChat, which focuses on 
real-time coordination with local core customers in the broadcast media 
and emergency management; the Internet; and, through our private sector 
partners--commercial television and radio, which communicate critical 
information to much larger audiences and effectively inform those in 
harm's way to take appropriate action.

Preparedness
    Our prospects for success in this role, and of achieving our vision 
of resilient communities, lie in our unique enterprise capabilities. 
The goal of disaster resilience is to enhance the capacity of a 
community exposed to hazards to adapt, by resisting or changing, in 
order to reach and maintain an acceptable level of functioning and 
structure. The preparedness challenge remains essentially the same 
across both short-term and long-term weather and water events: public 
awareness, education, and plans of action to mitigate impacts on the 
personal, community and regional scales provide the best protection 
against potential disasters. The NOAA has long-held and strongly 
established ties to the emergency management community, through State, 
local and tribal officials, which help ensure appropriate action is 
taken to prepare communities for weather and water events. The NOAA and 
its partners, such as the National Sea Grant network, use integrated 
research, training, and technical assistance to enhance the ability of 
communities to prepare for, respond to, and rebuild after disasters 
strike. For example, we are developing a Coastal Resilience Index that 
provides a tangible way for communities to identify gaps and examine 
how prepared they are for storms and storm recovery, and provide 
guidance on how to increase resilience through measures including 
strengthening infrastructure or adopting stricter building codes.
    The historic floods currently spanning from Montana across the 
Dakotas, into the northern and central plains and southern Mississippi 
Valley are an excellent example of why we need to prepare for 
catastrophic events. The NOAA/National Weather Service (NWS) spring 
flood outlook highlighted those particular areas as having the 
likelihood of major flooding. Our River Forecast Centers and local 
Weather Forecast Offices worked with Federal, State, and local 
emergency managers and planners to help prepare for and plan to 
mitigate the impact of the flooding. Based on our forecasts, 
communities took extensive actions to limit the impact of the flooding, 
including massive levee reinforcements and eventual evacuations to 
prevent loss of life. FEMA prepositioned relief assets, and the USGS 
ensured their river gauges were operational--all of the agencies worked 
together to help mitigate the potential impact.
    The NOAA often plays a key Federal role throughout these events as 
an integrator of the many Federal capacities applied to alert 
communities and regions to an event and its likely impacts, and to help 
mitigate those impacts as they're occurring and afterward. For example, 
due to the large extent of the Midwest floods this year, we are 
predicting a very extensive ``dead zone'' in the Gulf of Mexico, due to 
the excessive fresh water flowing into the gulf. This will have a 
significant impact on the lives and livelihoods of those in the gulf 
region. The NOAA is working to ensure the gulf region, its communities, 
and the commercial interests are aware of the impacts and timing of 
this event, and supporting mitigation efforts.
    Unfortunately, in spite of our best efforts, severe weather events 
still cause loss of life and significant damage. More of this could be 
mitigated with more timely, accurate and focused warnings. The impacts 
and lives lost from the disasters mentioned above would have been far 
worse without critical data input of observations from satellites and 
in-situ observations, and the extensive work of the NOAA and our 
Federal, non-Federal, State, and local partners to improve the Nation's 
preparedness for these events through education and outreach. However, 
as evidenced by the tragic loss of life in a number of these events, 
there is a long way to go to truly achieve a weather-ready Nation.

              ACHIEVING A WEATHER- AND WATER-READY NATION

    We have made tremendous strides thanks to the modernization of the 
NWS two decades ago. Because of advances in data assimilation and 
modeling, and critical sampling of the atmosphere from our polar 
orbiting satellites and geostationary satellites, model forecasts for 3 
days and beyond have improved substantially. For example, our forecasts 
for 3 days away are now as accurate as they were for 2 days away only 
10 years ago. These improvements have allowed for advance lead times 
between first alert and the actual event.
    For example, leading up to the ``Snowmageddon'' event of February 
2010, the NOAA was able to detect the storm threat 7-plus days in 
advance and begin alerting the east coast up to 5 days in advance of 
the storm. This allowed States to implement contingency and continuity 
of operations plans, airlines to rearrange flights, and the retail 
industry to pre-stock their shelves. As a result, there was minimal 
impact to national and local airline and highway transportation. This 
long lead time was made possible in large part by observations obtained 
by NOAA's polar-orbiting satellite and numerical weather prediction 
models. Polar-orbiting satellites are the backbone of all model 
forecasts at 3 days and beyond; however, the launch of the next 
generation of the NOAA's polar-orbiting satellites, the Joint Polar 
Satellite System (JPSS), has been delayed by the fiscal year 2011 
appropriations process. As a result, the NOAA is faced with a nearly 
100 percent chance of a data gap in the U.S. civilian polar orbit, on 
which both civilian and military users rely, by late 2016 to early 2017 
when the current polar satellites reach the end of their life 
expectancy. The JPSS is a critical part of NOAA's future infrastructure 
needed to continue our path of forecast improvement--and to maintain 
what we have built during the last 30 years.
    The NOAA was also able to highlight the likelihood for severe 
weather in southwest Missouri several days in advance of the May 22 
Joplin tornado. Even our lead times for imminent hazards have 
increased: the tornado warning for the Joplin area was issued 24 
minutes before the tornado struck, a substantial improvement over the 
5-minute advance warnings that were typical just two decades ago. We 
have achieved similar forecast improvements for hurricanes. The NOAA's 
hurricane forecast track error has decreased 60 percent since 1990. All 
these advances have come about through the close coupling of research 
and operations in NOAA's weather enterprise. All of these advances have 
helped save lives and reduce the economic impacts of severe weather.
    With the high death toll and impacts we've seen this year, we take 
little solace in knowing that outcomes could have been worse without 
the extensive work of NOAA and our Federal, non-Federal, State, and 
local partners. There is much more that needs to be done to improve the 
Nation's resilience for these events. Research, education, and outreach 
are the essential ingredients to improving preparedness and via 
improved forecast and warning accuracy and lead times. Realizing a 
weather-ready Nation, where society is prepared for and responds to 
weather-dependent events, is vital.
    Weather-related catastrophes with high economic and social costs 
are not just acute events like tornado outbreaks or hurricanes, but 
also longer-term events such as seasonal or prolonged flooding, 
droughts, wildfire outbreaks, and other phenomenon brought on or 
enhanced by environmental change. These forces of nature can sometimes 
exact an even higher cost, since they occur over longer periods of 
time, impact greater areas, and require longer-term planning to 
mitigate. The NOAA has significant expertise in this area, and our 
products, services, information, and planning are being used more 
broadly and sought out more fervently than ever before. One example is 
the NOAA's work with our partners as part of the Devils Lake Task 
Force. Devils Lake is an enclosed basin in north-central North Dakota 
with no natural outlet. The water level in the lake has risen more than 
50 feet in the last 50 years. Flood damages in the Devils Lake Basin 
have exceeded $300 million and inundated more than 138,000 acres since 
1993 (Wiche, et al. 2010), and increased in volume by six times. The 
community's concerns continue to grow regarding how much more of their 
land and homes, their businesses and infrastructure, the lake will 
consume, and how much more damage it may cause. The NOAA is using our 
weather and climate information--spanning from daily weather forecasts 
to seasonal outlooks and local and regional climate trends and 
analysis--to provide decision-support services to the local community, 
as well as resource management and disaster-response partners at FEMA, 
USGS, USACE, USDA, and others. It is this type of science-based support 
that these decisionmakers demand and need as they plan current and 
future actions to better prepare for both the continued flooding, and 
the potential impacts of a spill catastrophe should the lake reach 
critical spill elevation.
    As noted earlier, demographic trends and population growth, plus 
our increased reliance on technology, have made our society more 
vulnerable to extreme weather. The NOAA has started a national dialog 
with the Nation's top experts in broadcast meteorology, emergency 
management, and the weather industry to examine what is happening with 
severe weather and what can be done in the short- and long-term to 
improve the Nation's severe weather forecasts and warnings, and 
community preparedness. Included in this effort are social sciences, 
innovative technologies, and social media to improve our effectiveness 
in reaching those in harm's way and provoking appropriate response, 
whether to the urgency of a tornado or tsunami warning, or to the 
longer-term likelihoods of flooding or drought. For example, most NWS 
offices have established Facebook pages, providing an additional medium 
for conducting outreach and education, as well as highlighting 
information about ongoing or upcoming weather events. Additionally, the 
NOAA uses NWSChat to give private sector partners an invaluable 
opportunity to interact with NWS experts, and to refine and enrich 
their communications to the public. Moreover, more private companies 
are carrying weather warnings on wireless networks, providing real-time 
alerts to your cell phone or email.
    Sea level rise, the increased number and intensity of heavy 
rainfall events and strong coastal storms, and other natural and human 
hazards are putting more people and property at risk, with major 
implications for human safety, economic vitality, and environmental 
health, especially in coastal areas. A new study by the NOAA indicates 
that coastal communities along the U.S. east coast may now be at 
greater risk of inundation during El Nino years due to higher sea 
levels, accompanied by more destructive storm surges. To achieve a 
weather-ready Nation, it is essential that residents of communities 
understand these risks and learn what they can do to reduce their 
vulnerability and respond quickly and effectively when events occur.
    The NOAA is working on a number of efforts to increase the 
resilience of coastal communities. The NOAA's multi-mission National 
Water Level Observation Network provides water level data that supports 
near-term warnings conducted by the NWS for storm surge and tsunamis, 
and provides long-term climatic records for sea level trends. The NOAA 
has worked with many entities to help them incorporate sea level trend 
guidance into their policy and planning documents. The NOAA also 
maintains the National Spatial Reference System (NSRS), which is the 
national coordinate system that defines position (latitude, longitude, 
and elevation), distances and directions between points, strength of 
gravitational pull, and how these change over time. The NSRS is a 
network of precisely located, permanently marked, in-ground geodetic 
reference points critical for accurate GPS use, and is critical to 
determine an accurate depiction of the shoreline. Both systems are 
needed to accurately model coastal inundation ranging from short-term 
extreme events to long-term sea level changes.
    A key component of achieving a weather-ready Nation is community 
preparedness. NOAA's StormReady program works at the local level to 
ensure communities, both inland and coastal, have the warning 
capabilities and plans in place to help safeguard them against all 
types of disasters. This effort is complemented by NOAA's Coastal 
Storms Program (CSP), which is a nationwide effort to reduce loss of 
life and mitigate impacts of storms on coastal communities and the 
environment. CSP provides dedicated resources and expertise from across 
NOAA to deliver capacity-building tools, training, data, and other 
products and services to enhance hazard resilience in coastal 
communities in particular. For example, NOAA is working with 
communities along the Gulf of Mexico to provide a simple, inexpensive 
method for leaders to perform a self-assessment of their community's 
resilience to coastal hazards. The results help communities prioritize 
what needs to be addressed before the next extreme event. Through these 
various community resilience efforts, NOAA is placing an increased 
focus on social science to better understand how and why decisions are 
made at the State and local levels and how NOAA can improve its efforts 
to communicate risk and uncertainty to the public at large.
    Sustaining our commitment to existing services, while continuing to 
improve our capacity to meet the Nation's weather and water needs, 
requires targeted investments to shore up aging infrastructure, improve 
scientific understanding, and implement enhanced services to reduce 
risk to the Nation caused by weather and water. Today's services are 
built upon earlier investments in innovative science and technology as 
well as our highly skilled workforce. Our capacity to collect and 
assimilate increasing amounts of data to improve model performance must 
increase to realize their potential. This is achieved through making 
critical improvements to science and technology. Future technology 
improvements include continued polar and geostationary satellites, more 
sophisticated radar coverage, observing systems, and improved computing 
capabilities. These technology assets are crucial pieces of our 
national infrastructure. The gap in data from the NOAA's JPSS will 
significantly impact our ability to achieve a weather-ready Nation, 
because it will degrade our ability to accurately forecast severe 
weather events 3 days and beyond.
    Water management decisionmakers also require a new generation of 
water information, forecasts, and decision support. The NOAA is working 
with its Federal partners USGS, USACE, and others to implement 
Integrated Water Resources Science and Services, creating an 
integrated, high-resolution common operating picture for water 
information, supporting timely and critical water management decision 
in full coordination and collaboration with forecasting and decision 
support services.
    We know that the NOAA forecasts, warnings, and community-based 
preparedness programs are vital in enhancing the economy and saving 
lives. It all starts with a commitment on improved forecasting and ends 
with a weather-ready Nation in which businesses, governments, and 
people are prepared to use those forecasts to mitigate impacts.

                                SUMMARY

    To achieve an increase in community resilience and reduce the 
Nation's vulnerability to weather- and water-related extreme events, we 
must continue to improve predictions. Again, our Nation's environmental 
predictive capabilities are supported by four foundational pillars: 
observations, computer models, research, and our people. By 
strengthening the pillars--through improved satellite and in-situ 
observations, computing capacity, coupled atmosphere, ocean, land 
models, and necessary research and science improvement--we can 
revolutionize the forecast process across the entire spectrum from 
relatively small-scale, short-range applications to long-range weather 
and climate predictions.
    The dual goals of preparing for and mitigating natural hazards 
require the continuous commitment and partnership of many individuals 
and sectors--from Federal, State, tribal, and local to public, private, 
and academic. The investments made by the Congress and the 
administration in NOAA's weather prediction and warning capabilities 
directly save lives in the United States during these weather 
disasters. NOAA remains committed to leading U.S. efforts to save lives 
and property through preparedness, detection, modeling, and forecasting 
efforts necessary for improved decisionmaking. Although nothing can 
eliminate the physical threat that severe weather and natural hazards 
pose, NOAA has demonstrated success in better predicting them, reducing 
their impact, and helping vulnerable communities become more resilient 
to their devastating effects--and will work to continuously improve its 
natural hazards products and services to the Nation.

    Senator Durbin. Thanks, Dr. Sullivan. James Rivera is here, 
Associate Administrator, Office of Disaster Assistance, Small 
Business Administration. Please proceed.

STATEMENT OF JAMES RIVERA, ASSOCIATE ADMINISTRATOR, 
            OFFICE OF DISASTER ASSISTANCE, SMALL 
            BUSINESS ADMINISTRATION
    Mr. Rivera. Good afternoon, Chairman Durbin, and Ranking 
Member Moran, and distinguished members of the subcommittee. My 
name is James Rivera and I'm the associate administrator for 
the Office of Disaster Assistance at the SBA.
    Thank you for inviting me to testify on my experience in 
administering the Disaster Loan Program and how the SBA budgets 
for its response in disasters.
    The SBA is responsible for providing affordable, timely, 
and accessible financial assistance, following a disaster to 
businesses, homeowners, and renters. This financial assistance 
comes in the form of low-interest loans to affected homeowners, 
renters, businesses, and nonprofit organizations.
    Since the SBA was created in 1953, we have provided more 
than 1.9 million loans amounting in more than $49 billion. In 
terms of recent activity, as a result of the recent spring 
floods, tornadoes, and disaster events, the SBA has responded 
in 13 States and has provided more than $220 million in loans 
to homeowners and businesses. This is for uninsured losses.
    With regards to budgeting, the Federal Credit Reform Act of 
1990 requires the President's annual budget reflect the 
estimated long-term costs of Federal credit programs on a net 
present value basis. Accordingly, we estimate subsidy cost of 
our credit program.
    Subsidy models are based on the available, historical data, 
so that the estimates can be performed, and therefore, the 
budget formulation subsidy is broadly based on loans made in 
response to historical disasters.
    The Disaster Loan Model produces cash flow projections for 
budget formulations, subsidy estimates, and re-estimates. The 
model uses the historical performance of more than 650,000 
loans since 1992 to project future cash flows. The model also 
predicts individual loan performance based on current 
performance, and the historical experience of loans with 
similar characteristics.
    Loan characteristics found predictive for disaster loan 
behavior include whether the loan was made to a home, or a 
business, the size of the loan, deferral period, type of 
injury, and the age of the loan.
    The SBA recognizes the added value of external modeling, 
and uses this approach to gather information from these models 
to provide additional event-specific information that will 
refine and improve the SBA's ongoing response. The Department 
of Homeland Security and FEMA have a tool called Hazards United 
States (HAZUS) that is a loss-estimation methodology for 
natural disasters in the United States.
    HAZUS is a powerful program for analyzing potential losses 
from floods, hurricanes, and earthquakes. The program couples 
the latest scientific and engineering knowledge with advanced 
geographic information systems technology to produce estimates 
of hazard-related damage before, during, or after disaster.
    The use of the HAZUS Program, allows the SBA to produce 
more accurate, actionable, and timely information when 
responding to natural disasters. We also incorporate this 
information for our Scalability Model. The model is designed to 
further refine and analyze disaster loan estimates for the 
purpose of accurately correlating damage estimates into 
actionable, and immediately staffing, budgetary projections.
    This year, as in past years, Dr. Gerry Bell, a climate 
specialist and research meteorologist at the NOAA's Climate 
Prediction Center, will brief the SBA's senior management on 
the NOAA's updated hurricane prediction.
    Dr. Bell specializes in monitoring global climate 
variability, especially patterns related to El Nino, and La 
Nina, and other atmospheric processes. This briefing will aid 
the SBA in our strategic planning efforts in this hurricane 
season.
    I would also like to quickly highlight some recent 
improvements to our disaster operation. The SBA is partnering 
with Agility Resource Solutions and we provide monthly webinars 
on preparedness. We also partner with the Red Cross and 
leverage the Ready Rating Program for homeowners and 
businesses.
    We've invested in our infrastructure and have increased the 
number of workstations for disaster staff employees from 300 to 
more than 2,100 work stations, which include 350 surge 
workstations at another location. We've increased the capacity 
of our computer system, the Disaster Credit Management System, 
from 800 concurrent users up to 10,000 concurrent users.

                           PREPARED STATEMENT

    Since Hurricane Katrina, the SBA has processed applications 
within 10 days, with an average goal of 14 days for homes and 
18 days for businesses. To put this in perspective, the average 
processing during the 2005 gulf coast hurricanes was 74 days 
for homeowners and 66 days for business loans.
    I appreciate the opportunity to share with the subcommittee 
the role the SBA plays in disaster recovery. We believe that 
we're prepared to be effectively and efficiently respond to the 
needs of disaster victims. I look forward to your questions and 
thank you.
    [The statement follows:]

                   Prepared Statement of James Rivera

    Good afternoon Chairman Durbin, Ranking Member Moran, and 
distinguished members of the subcommittee. Thank you for inviting me to 
testify on my experiences administering the Small Business 
Administration (SBA) Disaster Loan Program and how the SBA budgets for 
its response to disasters.
    Disaster assistance has been part of the SBA's mission since 1953. 
Through the SBA's Office of Disaster Assistance (ODA), the SBA provides 
affordable and timely financial assistance to disaster victims. This 
financial assistance comes in the form of low-interest loans to 
affected homeowners, renters, businesses, and nonprofit organizations.
    Many disaster victims have insurance, which covers part or all of 
the physical property losses due to a natural disaster. But for 
disaster losses not covered by insurance, an the SBA loan is the 
primary form of Federal financial assistance. Since the SBA's inception 
in 1953, we have provided more than 1.9 million loans totaling more 
than $49 billion to help disaster victims in the wake of natural--as 
well as manmade--disasters. These loans are the only form of SBA 
assistance not limited to small businesses. The majority of the SBA 
disaster loans approved--about 80 percent--go to homeowners and 
renters.
    In terms of recent disaster events, in response to the severe 
storms and flooding this spring, the SBA has approved more than 3,700 
loans totaling more than $207 million. And last year, as a result of 
the Deepwater BP oil spill, small businesses in the gulf region that 
earn their living fishing in these waters, as well as seafood 
retailers, boat yards, shipping companies, processing plants, and other 
coastal small businesses faced the potential of tremendous financial 
losses from having to shut down operations because of the oil spill. 
The SBA assisted these small businesses by making Economic Injury 
Disaster Loans (EIDL) available for small businesses in Louisiana, 
Mississippi, Alabama and Florida, and approved $41 million to affected 
small businesses.

               THE SBA'S ROLE IN RESPONDING TO A DISASTER

    The SBA is not a ``first responder agency'' following a disaster. 
Rather, the SBA's role focuses on providing loans as part of the 
recovery effort. The SBA carries out this role in coordination with 
other government partners at the Federal, State, and local levels.
    When the President makes a disaster declaration, various forms of 
Federal assistance, including SBA's Disaster Loan Program, become 
available. If the Federal Emergency Management Agency (FEMA) declines a 
request for a declaration or if the State determines the damage is not 
extensive enough to request FEMA assistance, the State can request an 
``Administrative/Agency Declaration'' from the SBA's Administrator. And 
if that request meets the SBA's damage requirements, area residents and 
business owners may apply for SBA disaster assistance.
    Disaster loans are a vital source of economic support in the 
affected areas. As part of an overall effort to get victims back on 
their feet, the SBA's disaster home loans of up to $200,000 help local 
community members return and rebuild their homes. Moreover, businesses 
and nonprofits of all sizes are eligible for loans of up to $2 million 
to assist with any uninsured and otherwise uncompensated physical 
losses sustained during a disaster. These funds are used to repair or 
replace damaged physical property.
    Additionally, the SBA offers EIDLs to small businesses, small 
agricultural cooperatives, aqua culture businesses and most private 
nonprofit organizations that have suffered economic injury caused by a 
disaster. If a small business or organization is unable to meet 
obligations and pay its ordinary and necessary operating expenses, an 
EIDL loan can help. These loans provide working capital to businesses 
or organizations. The maximum loan amount is $2 million combined for 
both physical and economic injury.
    In processing applications under longstanding program criteria, the 
SBA does not price loans based on the types of disasters that occur--
interest rates for disaster victims are not based on the types of 
exposure that have the potential of higher losses. Funds are available 
and based on needs of each particular disaster and more specifically 
the disaster victim and their damages. Unlike other financial 
institutions, we do not use a progressive scale in determining interest 
rates based on potentially higher loss rates. However, the SBA has a 
responsibility to taxpayers to be a prudent lender and to not only 
require a reasonable assurance of repayment ability, but also to impose 
requirements upon disaster borrowers that will help minimize the 
potential need for future disaster loans (e.g., through insurance 
requirements mandated by regulations and SBA policy).

                  BUDGET FORMULATION SUBSIDY ESTIMATES

    The Federal Credit Reform Act of 1990 requires that the President's 
budget reflect the estimated long-term cost of Federal credit programs 
on a net present value basis. Accordingly, credit agencies estimate the 
subsidy costs of Federal credit programs prior to submission of the 
President's annual congressional budget submission. Subsidy models are 
oriented primarily toward preparing budget formulation subsidy 
estimates based on the available historical data so that estimates can 
be performed long before the fiscal year begins. For disaster 
assistance loans, we cannot know what kinds of disasters will occur in 
advance or how they will interact with other events. Therefore, the 
budget formulation subsidy estimate is broadly based on loans made in 
response to historical disasters.
    The disaster loan model produces cash flow projections for budget 
formulation subsidy estimates and re-estimates. The model uses the 
historical performance of more than 650,000 loans disbursed since 1992 
to project future cash flows. The model predicts individual loan 
performance based on current performance and the historical experience 
of loans with similar characteristics. Loan characteristics found 
predictive for disaster loan behavior include whether the loan was made 
to a home or a business, the size of the loan, grace period length, 
type of injury (economic or physical), and age of the loan.

                          ADDITIONAL RESOURCES

    The SBA recognizes the added value of external modeling approaches 
and uses information gathered from these modeling approaches to provide 
additional, event-specific information that will refine and improve the 
SBA's ongoing response.

HAZUS-MH
    Hazards-US/Multi-Hazard (HAZUS-MH) is the Department of Homeland 
Security's loss-estimation methodology for natural hazards in the 
United States. HAZUS-MH, also commonly referred to as The Risk Map 
Assessment Tool, is a powerful program for analyzing potential losses 
from floods, hurricanes and earthquakes. The program couples the latest 
scientific and engineering knowledge with advanced geographic 
information systems technology to produce estimates of hazard-related 
damage before, during, or after a disaster.
    The ODA is a strong partner in the HAZUS modeling community and 
actively works with FEMA's HAZUS program management office and 
developer community to strengthen and support Government and industry 
use of HAZUS technology for responding to, and mitigating against, 
potential disaster losses. Use of the HAZUS-MH program allows the ODA 
to produce more accurate, actionable, and timely information when 
responding to natural disasters.
    In addition to HAZUS-MH, the primary model used by the ODA is the 
Scalability Model. This model is a custom developed program exclusive 
to the SBA. It was designed to further refine and analyze disaster loss 
estimates from models such as HAZUS for the purpose of accurately 
correlating damage estimates into actionable and immediate staffing and 
budgetary projections.
    The ODA has joined the Department of Homeland Security (DHS), FEMA, 
and other Federal partners in establishing the first ever Geospatial 
Concept of Operations (GeoCONOPS). The GeoCONOPS is an effort focused 
on geospatial communities supporting the DHS and the emergency 
management activities under the National Response Framework (NRF). It 
is a multiyear effort designed to document the current geospatial 
practices supporting NRF and Stafford Act activities. The participants 
include the 15 emergency support functions, and other Federal mission 
partners.

National Oceanographic and Atmospheric Administration (NOAA)
    This year, as in years past, Dr. Gerry Bell, climate specialist and 
research meteorologist at NOAA's Climate Prediction Center, will brief 
SBA's Senior Management on NOAA's updated hurricane predictions. Dr. 
Bell specializes in monitoring global climate variability, especially 
patterns related to the El Nino, the multi-decadal cycle, and other 
large-scale atmospheric processes. He is the chief editor and co-author 
of the monthly Climate Diagnostics Bulletin, which provides the latest 
El Nino analysis and diagnosis, along with a description and analysis 
of global weather and climate conditions. This briefing will aid the 
SBA in our strategic planning efforts this hurricane season.
    Another step we took to help small business owners in these areas 
who were repaying existing SBA disaster loans, was to allow them to 
request a deferment. Additionally, the SBA strongly encouraged its 
participating private lenders to consider on a case-by-case basis 
deferment relief for borrowers with SBA-guaranteed 7(a) loans and 504 
loans.

            SIGNIFICANT IMPROVEMENTS SINCE HURRICANE KATRINA

    Since 2005, we have seen a great deal of improvement in our 
disaster program. While we fortunately had a light 2010 hurricane 
season, in fiscal year 2010 we responded to more small-scale disasters 
(51 agency declarations and 15 economic injury declarations) than in 
the past 10 years combined. Following the 2005 gulf coast hurricanes, 
the SBA faced severe challenges in providing disaster assistance in a 
timely fashion. As a result, we made dramatic improvements in our 
operations and processes. Today, by incorporating lessons learned, 
SBA's Disaster Assistance Program has overhauled its processes and 
improved response times. The SBA is now better prepared to process 
loans faster, provide a better quality of service, and be more helpful 
to disaster victims.
    To ensure overall preparedness, the disaster program has increased 
the number of workstations for disaster-assistance employees from 300 
to more than 2,100, and we have brought online a ``surge'' center with 
350 additional workstations. We are currently staffed at approximately 
974 employees with a reserve force of more than 2,000. Additionally, 
the SBA has the ability to request assistance from Small Business 
Development Centers and other SBA resource partners.
    The SBA has also improved its Disaster Credit Management System, 
which now gives the agency improved technology to serve many users, 
with increased disaster recovery capacity from 800 to 10,000 concurrent 
users.
    We have also processed applications within 10 days on average with 
a goal of 14 days for home loans and 18 days for business loans. To put 
this into perspective, the average processing time during the 2005 gulf 
coast hurricanes was 74 days for disaster home loans and 66 days for 
disaster business loans. Additionally, in August 2008, the SBA 
introduced an electronic loan application that allows disaster victims 
to apply for assistance online. Currently, this mechanism accounts for 
approximately one-third of all applications submitted.
    The SBA has also revamped the postapproval process, improving the 
processes and tools for loan closings and funding disbursements. Our 
emphasis is on customer service and accountability, with each approved 
loan being assigned an individual case manager.
    In regards to marketing and outreach, the SBA has developed an 
aggressive plan to reach all potential applicants in an area before a 
disaster strikes. We are concentrating on areas that are vulnerable to 
recurring similar disasters to provide expanded outreach efforts before 
the disaster occurs. Additionally, we have provided all SBA employees 
with access to an online ``Disaster Tool Kit'' with detailed 
information on the agency's role in preparedness, outreach, and 
assistance.
    The SBA has also signed a Memorandum of Understanding (MOU) with 
the American Red Cross and the Agility Recovery Solutions. Both MOUs 
are designed to promote disaster preparedness and educate potential 
disaster victims on the benefits of advanced planning for disasters.
    We have also instituted annual disaster trainings for the SBA's 
Regional Administrators, District Directors, and Disaster Public 
Information Officers. And finally, we are currently involved in an 
overall assessment of our disaster assistance messaging, branding, and 
outreach.
    In closing, we appreciate the opportunity to share with the 
subcommittee the role the SBA plays in small business disaster recovery 
efforts. We firmly believe that the reforms we have instituted have 
enabled us to be prepared to effectively and efficiently respond to the 
needs of our Nation's disaster victims.

    Senator Durbin. Thanks a lot for your testimony, Mr. 
Rivera, and I will have a few questions for you. I'd like to 
invite Dr. Wuebbles, at this point, to proceed with his 
testimony.

STATEMENT OF DR. DONALD J. WUEBBLES, THE HARRY E. 
            PREBLE PROFESSOR OF ATMOSPHERIC SCIENCES, 
            UNIVERSITY OF ILLINOIS-URBANA, ILLINOIS
    Dr. Wuebbles. Thank you. Thank you for the opportunity to 
testify today. I'm professor in atmospheric sciences at the 
University of Illinois and an expert in the physics and the 
chemistry of the atmosphere.
    Along with the many scientific articles I've published in 
peer-reviewed literature, I've also been a leader in national 
and international assessments to look at various concerns about 
our climate system. As a son of an Illinois farmer, I know the 
impacts of severe weather are of great concern, to me, the 
people, and my country.
    As we will discuss, the evidence is strong, and there is an 
increasing trend of a--recent decades for severe weather, 
especially very heavy precipitation events. Scientific analysis 
also suggests that the likelihood for these events is likely to 
further increase as our climate continues to change over this 
century.
    In today's testimony, I will focus on four main points 
about severe weather events in the United States and their 
relationship to changes occurring in our climate system. First, 
there are strong indications that the United States is seeing 
more extreme weather-related events in recent decades than in 
the past.
    We've already had some discussion about what's been going 
on in--in 2011. We've seen more than $32 billion in damages 
already this year, and that doesn't account for recent events 
such as the flooding in Iowa, and in the Midwest, and the--on 
the Missouri River, et cetera, wildfires in Arizona and New 
Mexico during late June, or the heat waves that gripped most of 
the country this last week. This year, 2011, is just part of 
the picture.
    Overall, there's been an increase in some--in key types of 
extreme weather events, at--since at least 1980. Widespread 
changes in temperature extremes have been observed over the 
last 50 years. In particular, the number of heat waves, 
globally, has increased and there has been a widespread 
increase in the number of warm nights, cold days, cold nights, 
and days with frost have become rarer.
    Changes are also occurring in the amount, intensity, 
frequency, and types of precipitation. I'll highlight a few 
specific examples of the observed trends. First of all, we're 
now seeing breaking--we're now breaking twice as many heat 
records as cold records in the United States, and seeing this 
over the last 50 years.
    Since 1957, there has been an increase in the number of 
historically top 1 percent of heavy precipitation events across 
the United States, with an increase in such events of more than 
30 percent in the Midwest and 67 percent in the Northeast.
    Our ongoing analyses of the repeat or recurrent frequencies 
of large precipitation storms, which, by the way, I'm doing, 
the people from the NOAA, are showing that such events are 
occurring more often than in the past. For example, the 
historical 20-year storm in the Midwest, of roughly 4.4 inches 
of precipitation in a single day, has now become the 12- to 13-
year storm event.
    The pattern of precipitation change is one of increases 
generally at high northern latitudes because of--as the 
atmosphere gets warmer, it holds more moisture, and drying in 
the tropics and subtropics over land, so the wetter getting 
wetter and the dryer getting dryer.
    Number two, there is clear scientific understanding that 
the Earth's climate system is changing and that it is largely 
happening because of human activities. There is no debate in 
the scientific community, based on the peer-reviewed 
literature, about the large changes occurring in the Earth's 
climate or the connection of these changes to human activities, 
largely the result of the burning of fossil fuels and other 
human-related emissions.
    The science is clear and convincing that climate change is 
happening, happening rapidly, and happening primarily because 
of human activities.
    Number three, scientific analyses are now indicating a 
strong link between changing trends in severe weather events 
and changing climate. Every weather event that happens nowadays 
takes place in the context of changes in this background 
climate system.
    Globally, the temperatures are higher, the sea level is 
higher, and there is more water vapor in the atmosphere, which 
energizes storms. So nothing is entirely natural anymore. The 
background atmosphere has changed and continues to change 
because of the changing climate.
    It's important to bear in mind that when one considers 
interpretation of specific severe events, it's a fallacy to 
think that individual events are caused entirely by any one 
thing, either human variation or human-induced climate change. 
Every event is influenced by many factors. Human-induced 
warming is now a factor in all climate events.
    I could go on and give other examples, but I think I'll go 
onto number four. Climate analyses suggest that the severe 
weather and storm events are likely to become more common in 
the future. Other modeling results indicate that, if the 
nations continue to increase their emissions of GHG, the U.S. 
ratio of daily record highs to record lows are likely to 
increase by 20 to 1 by mid-century and 50 to 1 by the end of 
the century.
    Our analyses of projected climate changes in the Chicago 
region have shown that the previously unheard of 1995-type heat 
wave is likely to become commonplace by the end of the century, 
occurring, at minimum, every few years. Over the coming 
decades, we can expect that the hottest summer you have ever 
experienced will become the norm. Severe precipitation events 
will also become more commonplace.

                           PREPARED STATEMENT

    Water vapor will continue to increase in the atmosphere, 
along with the water--and large precipitation events will 
continue in intensity and frequency. While we are already 
seeing the climatic effects of heat-trapping gases, it is 
important to recognize that the future lies largely in our 
hands, while we reduce our emissions and have a future of less 
warming and less severe impacts, or while we continue to 
increase our emissions and have a future with more warming, 
more severe weather, including the type of things we've been 
seeing recently. The choice is ours.
    [The statement follows:]

              Prepared Statement of Dr. Donald J. Wuebbles

    Thank you for the opportunity to testify today on the changing 
trends in severe weather and the relationship of these trends to 
ongoing changes in the Earth's climate system, and the risks and 
opportunity those challenges pose for our Nation's energy and economic 
security.
    I am a professor and atmospheric scientist in the Department of 
Atmospheric Sciences at the University of Illinois. I am an expert in 
atmospheric physics and chemistry, and have authored more than 400 
scientific articles in peer-reviewed journals, books, chapters of 
books, and in a number of national and international assessments 
related to concerns about ongoing changes in the Earth's climate and 
atmospheric chemistry. I am a coordinating lead author for the next 
major international Intergovernmental Panel on Climate Change (IPCC) 
assessment of climate change and a member of the Executive Secretariat 
and the Federal Advisory Committee that is undertaking the next U.S. 
National Climate Assessment.
    As the son of an Illinois farmer, I know that the impacts of severe 
weather are of great concern to farmers and many other people because 
of the effects on our economy and on our personal well-being. As we 
will discuss, the evidence is strong that there is an increasing trend 
over recent decades for severe weather, especially very heavy 
precipitation events. Scientific analyses also suggest that the 
likelihood for these events is likely to further increase as our 
climate continues to change over this century. In today's testimony, I 
will focus on four main points about severe weather events in the 
United States and their relationship the changes occurring in our 
climate system.

  THERE ARE STRONG INDICATIONS THAT THE UNITED STATES IS SEEING MORE 
   EXTREME WEATHER-RELATED EVENTS IN RECENT DECADES THAN IN THE PAST

    Analyses from the National Oceanic and Atmospheric Administration 
(NOAA) National Climate Data Center (NCDC) indicate that 2011 has so 
far been one of the most extreme weather, and most costly, years in the 
history of our country. As of early June, there have roughly $32 
billion in damages from severe events in 2011, the highest damage 
costs-to-date for any year since 1980 when the NOAA started tracking 
the major damaging events. The events they have evaluated this year 
include major blizzards last January and February, the outbreak of 
tornadoes in April and May, the drought and wildfires in Texas, New 
Mexico, and Oklahoma during the spring and early summer, and major 
flooding on the Mississippi River. However, these analyses do not 
include the damages from other recent events, such as the effects of 
flooding of the Missouri and other rivers in Iowa and other Midwest 
States, the wildfires in Arizona and New Mexico during late June, or 
the heat wave that gripped most of the Midwest, South, and Northeast 
just last week.
    However, 2011 is just part of the picture. Overall, there has been 
an increase in some key types of extreme weather events since at least 
1980. Widespread changes in temperature extremes have been observed 
over the last 50 years. In particular, the number of heat waves 
globally has increased, and there have been widespread increases in the 
numbers of warm nights. Cold days, cold nights, and days with frost 
have become rarer. Changes are also occurring in the amount, intensity, 
frequency, and type of precipitation (note that these aspects of 
precipitation generally exhibit large natural variability compared to 
temperature, making it harder to detect trends in the observational 
record thus requiring sophisticated analysis techniques). I will 
highlight a few specific examples of the observed trends:

  --We're now breaking twice as many heat records as cold records in 
        the United States (see Figure 1). If the climate weren't 
        changing, the number of record daily highs and lows being set 
        each year would be approximately even. Instead, from 1950 to 
        2009, we have observed a shift to twice as many daily heat 
        records being broken as night-time records. If we look at 2011, 
        so far the heat records outnumber cold records by a ratio of 
        2.2 to 1 (based on the NOAA NCDC datasets). Overall, we're 
        seeing more extreme heat and less extreme cold, as you'd expect 
        in a warming climate.

  --Since 1957, there has been an increase in the number of 
        historically top 1 percent of heavy precipitation events across 
        the United States (see Figure 2 from the U.S. Global Change 
        Research Program (USGCRP), 2009), with an increase in such 
        events of more than 30 percent in the Midwest and by 67 percent 
        in the Northeast. Over the United States as a whole, there's 
        been a 20 percent increase in the amount of precipitation 
        falling in the heaviest events. More intense rainfall means an 
        increased likelihood of floods.

  --Our ongoing analyses (by Ken Kunkel of the NOAA NCDC, one of my 
        students, and I) of the repeat or reoccurrence frequencies of 
        large precipitation storms are showing that such events are 
        occurring more often than in the past. For example (see Figure 
        3), the historical 20-year storm in the Midwest (Note.--A 20-
        year storm has a 5 percent chance of occurring each year so 
        that the odds are that one occurs every 20 years) of roughly 
        4.4 inches of precipitation in a single day has now become the 
        12- to 13-year storm event. Similarly, our analyses are showing 
        that the 5-year storm in the Northeast (3.5 inches in a day) 
        has now become the 3-year storm event.
    The pattern of precipitation change is one of increases generally 
at higher northern latitudes (because as the atmosphere warms it holds 
more moisture) and drying in the tropics and subtropics over land. The 
wet are get wetter and the dry are get drier.
    For some severe weather events, such as tornadoes, lightning, hail 
and strong winds, uncertainties in the data collection make it 
difficult to determine statistically significant trends.
there is clear scientific understanding that the earth's climate system 

     IS CHANGING AND THAT IT IS LARGELY HAPPENING BECAUSE OF HUMAN 
                               ACTIVITIES

    There is no debate within the science community, based on the peer-
reviewed literature, about the large changes occurring in the Earth's 
climate or the connections of these changes to human activities, 
largely the result of the burning of fossil fuels (e.g., see national 
and international assessments of our climate such as USGCRP, 2009 and 
IPCC, 2007). The science is clear and convincing that climate change is 
happening, happening rapidly, and happening primarily because of human 
activities.
    There are an ever-increasing number of many independent surface 
observations that give a consistent picture of a warming world. Such 
multiple lines of evidence, the physical consistency among them, and 
the consistency of findings among multiple, independent analyses form 
the basis for the conclusion from the 2007 IPCC international climate 
assessment that the ``warming of the climate system is unequivocal''. 
As part of the changing climate, along with changes in the mean 
temperature being seen worldwide, there is likely to be an amplified 
change in extremes, both in temperature and in precipitation.

 SCIENTIFIC ANALYSES ARE NOW INDICATING A STRONG LINK BETWEEN CHANGING 
        TRENDS IN SEVERE WEATHER EVENTS AND THE CHANGING CLIMATE

    Every weather event that happens nowadays takes place in the 
context of the changes in the background climate system. Globally, the 
temperatures are higher, the sea level is higher, and there is more 
water vapor in the atmosphere, which energizes storms. So nothing is 
entirely ``natural'' anymore. The background atmosphere has changed and 
continues to change because of the changing climate. It is important to 
bear this in mind when one considers interpretation of specific severe 
events. For example, a pure meteorological analysis of the 2011 would 
events would note their consistency with the behavior from the La Nina 
cold Pacific temperatures found earlier this year and the effects of 
the phase of the North Atlantic Oscillation ocean-atmosphere 
interactions, but would the severity of the 2011 events been as bad as 
they are without the changes in the background climate system. Analyses 
still need to be done to sort this out.
    It's a fallacy to think that individual events are caused entirely 
by any one thing, either natural variation or human-induced climate 
change. Every event is influenced by many factors. Human-induced 
warming is now a factor in all weather events.
    We're seeing more heat waves and they are hotter and they last 
longer. And while we might still have had a particular heat wave in the 
absence of human-induced warming, it would not have been as hot, or 
lasted as long, and such events would not occur as frequently. For 
example, an analysis of the 2003 European heat wave (Stott et al., 
Nature, 2004) that killed tens of thousands of people was shown to be 
about four times more likely due to human-induced warming. And in the 
future, summers that hot will be commonplace, if we continue on our 
current path of increasing emissions of heat-trapping gases.
    The changes occurring in precipitation are also consistent with the 
analyses of our changing climate. For extreme precipitation, we know 
that more precipitation is falling in very heavy events. And we know 
key reasons why--warmer air holds more water vapor, and so when any 
given weather system moves through, all that extra water dumps out in a 
heavy downpour. And in between these downpours there are longer periods 
without rain. So you get this cycle of very wet and very dry 
conditions. And we're seeing this happening now, just as climate 
studies indicated it would.
    A key ingredient in changes in character of precipitation is the 
observed increase in water vapor and thus the supply of atmospheric 
moisture to all storms, increasing the intensity of precipitation 
events on average. Widespread increases in heavy precipitation events 
and risk of flooding have been observed, even in places where total 
amounts have decreased. Hence the frequency of heavy rain events has 
increased in most places but so too has episodic heavy snowfall events 
that are thus associated with the changing climate.

 CLIMATE ANALYSES SUGGEST THAT SEVERE HEAT AND STORM EVENTS ARE LIKELY 
                  TO BECOME MORE COMMON IN THE FUTURE

    Sophisticated computer models of the global climate system are 
being used to determine how severe weather is likely to change during 
the course of this century. For example, in a study of record high and 
low temperatures by Jerry Meehl of National Science Foundation's 
National Center for Atmospheric Research, climate modeling results 
indicate that if nations continue to increase their emissions of 
greenhouse gases in a ``business as usual'' scenario, the United States 
ratio of daily record high to record low temperatures would increase to 
about 20 to 1 by mid-century and 50 to 1 by 2100. The mid-century ratio 
could be much higher if emissions rose at an even greater pace, or it 
could be about 8 to 1 if emissions were reduced significantly.
    Our analyses (see Chicago Climate Action Plan or Wuebbles et al., 
Journal of Great Lakes Research, 2010) of projected climate changes in 
the Chicago region have shown that the previously unheard of 1995 type 
heat wave is likely to become commonplace by the end of the century, 
occurring at minimum every few years. Over the coming decades, we can 
expect that the hottest summer you have ever experienced will become 
the norm.
    As the climate system continues to warm, these models of the 
Earth's climate system indicate severe precipitation events will also 
become more commonplace. Water vapor will continue to increase in the 
atmosphere along with the warming, and large precipitation events will 
increase in intensity and frequency. At the same time, droughts like we 
have been seeing in recent years in the Southwest will likely become 
stronger and more frequent as the climate change continues. Basically, 
we expect the wet to get wetter and the dry to get drier.
    Some people have criticized climate models. However, today's 
climate models encapsulate the great expanse of current understanding 
of the physical processes involved in the climate system, their 
interactions, and the performance of the climate system as a whole. 
These complex numerical models account for the many feedbacks that 
occur through interactions among the components of the climate system:
  --the atmosphere;
  --oceans;
  --land; and
  --cryosphere (which includes sea, lake and river ice, snow cover, 
        glaciers, ice caps, ice sheets, and frozen ground).
    Today's climate models are extensively tested relative to 
observations and are able to reproduce the key features found in the 
climate of the past century, and simulations of the evolution of global 
surface temperature over the past millennium are consistent with past 
climate reconstructions.
    However, these models are not perfect and likely can't ever be 
perfect. Uncertainties arise from shortcomings in the understanding and 
how to best represent complex processes in models. Nonetheless, these 
models do many things well and provide the best representation possible 
of the climate system and its changes.
    Because models do differ in their representation of certain 
processes, we make use of these differences by examining suites of 
models in the climate assessments. However, it is worth noting that 
they all give the same basic story--human-related activities are 
significantly heating up the Earth's climate and altering its 
precipitation patterns and will continue to do so over this century and 
beyond unless the human effects are reduced. Also, despite the 
tremendous improvements in the climate modeling capabilities over my 40 
years as a scientist, the basic response of a significant effect on the 
climate system from human activities continues to be about the same as 
the models were finding 40-year ago. These models are the only crystal 
balls we have--and although not perfect, they are very useful tools. By 
downscaling approaches that account for local/regional observations, 
the results from these models can and are being used to clearly 
illuminate the choices we face--between a future with lower versus 
higher impacts on humanity and ecosystems.
    While we are already seeing the climatic effects of our emissions 
of heat-trapping gases, it is important to recognize that the future 
lies largely in our hands. Will we reduce our emissions, and have a 
future with less warming and less severe impacts, or will we continue 
to increase our emissions and have a future with more warming and more 
severe impacts, including more extreme weather events? The choice is 
ours.




    Figure 1.--This graphic shows the ratio of record daily 
highs to record daily lows observed at about 1,800 weather 
stations in the 48 contiguous United States from January 1950 
through September 2009. Each bar shows the proportion of record 
highs (red) to record lows (blue) for each decade. The 1960s 
and 1970s saw slightly more record daily lows than highs, but 
in the last 30 years record highs have increasingly 
predominated, with the ratio now about 2 to 1 for the 48 States 
as a whole (based on Meehl et al., Geophysical Research 
Letters, 2009).




    Figure 2.--The map shows percent increases in the amount 
falling in very heavy precipitation events (defined as the 
heaviest 1 percent of all daily events) from 1958 to 2007 for 
each region. There are clear trends toward more very heavy 
precipitation for the Nation as a whole, and particularly in 
the Northeast and Midwest. (from Global Climate Impacts in the 
United States, USGCRP, 2009).




    Figure 3.--Using NOAA daily precipitation data (from the 
NOAA NCDC) for 497 stations in the Midwest, we have been 
analyzing the returns for the Midwest in terms of a single-day 
event returning in 5 years, 10 years, and 20 years (we are also 
analyzing multiple-day events). The graph shows the single-year 
analyses and a 10-year running mean of the 20-year storm event 
in the Midwest for data starting in 1930 through 2010 (it does 
not include the huge rainfalls already observed in 2011). As 
would be expected, the annual signal is noisy, but much less 
noisy for the 10-year running mean. This analysis suggests that 
what was a 20-year precipitation event over the Midwest is 
becoming more common over time and has become a 12- to 13-year 
event in recent years.

    Senator Durbin. Thank you very much, Dr. Wuebbles. Franklin 
Nutter is president of the Reinsurance Association of America. 
Please proceed.

STATEMENT OF FRANKLIN W. NUTTER, PRESIDENT, REINSURANCE 
            ASSOCIATION OF AMERICA
    Mr. Nutter. Chairman Durbin, Ranking Member Moran, thank 
you very much for this opportunity. Reinsurance is, 
essentially, the insurance of insurance companies. It serves a 
variety of purposes, but most relevant to this hearing, it is 
the financing of risk for severe and infrequent natural and 
manmade catastrophes.
    We share the subcommittee's concern that an increase in 
severe weather events requires a more forward-looking and 
proactive approach to financing recovery from disasters. I have 
attached to my statement a series of slides, like the ones you 
show here, about the number and the increase in number of 
events, but also the financial impact in the United States and 
outside the United States of natural catastrophes.
    Much of this increase can be attributed to changes in 
weather intensity and climate-related impacts, but a 
fundamental driver is the increase in the number of people 
living in areas vulnerable to natural catastrophes, the 
increase in property values, and the vulnerability of 
construction materials and technology.
    The reality is that our society has moved increasingly to 
areas with the greatest exposure to natural catastrophes, along 
our coasts and rivers, and invaded the natural landscape in 
areas susceptible to wildfire and drought. The subcommittee 
asked that I address how insurers prepare and evaluate this 
changing risk landscape, and how that might be applied in a 
public sector.
    And indeed, as was mentioned by the chairman, the Federal 
Government has much the same insured exposures through the NFIP 
and the Federal Crop Insurance Program. But, of course, the 
Federal Government has the additional responsibility for 
disaster assistance.
    While no one can reliably predict specific weather events, 
this does not preclude financial planning for the likelihood of 
these events, or through--for the reliance of--on the 
scientific community to assess future conditions that can be 
used to make decisions about appropriate policy.
    The insurance industry believes that long-term solutions to 
hazard reduction should be driven by mitigation and adaptation 
strategies. Federal incentives for improved natural hazard 
building codes, improved financing for mitigation and 
relocation of repetitive lost properties in the NFIP, better 
preservation of natural habitats that service protected areas 
for property and people should all be included in the 
Government's portfolio of approaches.
    The insurance industry funds research in this area through 
the Institute for Business and Home Safety, which recently 
opened a research facility, which replicates natural hazards in 
a controlled environment and assesses their impact on 
commercial and residential structures.
    The traditional insurance model is largely an actuarial 
one. A pool of data of actual loss is trended forward, using 
economic factors.
    And insurers rely primarily on three interrelated 
approaches for financial protection for future severe and 
infrequent events, the first being actuarially driven pricing 
that reflects actual risk assessment; the second being 
diversification of its portfolio of insured properties, 
geographically and by line of insurance.
    And the third is the utilization of reinsurance to transfer 
risk beyond which the insurer wishes to retain. In recent 
years, the insurance industry has modified this traditional 
approach to its business by assessing and pricing catastrophe 
risk.
    After Hurricane Andrew in 1992, it was clearly obvious that 
a retrospective loss model, as I had described momentarily 
above, was inadequate, and indeed, misleading for future 
catastrophic events.
    To address this dilemma, probabilistic models were 
developed to assess a financial impact of catastrophic natural 
hazards, simulating possible future events over long periods of 
time, to produce a representative loss scenario.
    As it has become standard practice for insurers and 
reinsurers, I recommend this approach to the subcommittee and 
to the Government as a means for planning for future funding 
needs related to natural catastrophes. These models operate on 
the following principles.
    A hazard component, populated by teams of scientists, 
creates a catalog of thousands of potential computer-simulated 
catastrophes. I might add that most of that information, 
really, is derived from Government programs and Government-
funded programs through the National Science Foundation and 
through the NOAA.
    The engineering component consists of detailed information 
about properties exposed to these events in specific locations 
or regions.
    And the financial component derives information--provides 
information about potential losses for individual properties, 
or groups of properties, and applies a probability of loss.

                           PREPARED STATEMENT

    These models allow users to assess the impact and severity 
of future loss scenarios, analyze the effect of changes in 
conditions, or propose changes in hazard mitigation, assess 
adaptation scenarios, and determine the appropriate pre-funding 
needs.
    In the case of the insurance industry, that would apply to 
the insurance premiums, in the case of Government, the pre-
funding disaster assistance needs. Mr. Chairman, we commend you 
and the subcommittee for looking at this very important issue 
and look forward to exploring the kind of risk management and 
risk-financing techniques used in the private insurance sector 
for public needs. Thank you.
    [The statement follows:]

                Prepared Statement of Franklin W. Nutter

    I am Franklin Nutter, president of the Reinsurance Association of 
America (RAA). Thank you for the opportunity to testify.
    Reinsurance is essentially the insurance of insurance companies. It 
serves a variety of purposes in the financial structure of insurance 
companies, but perhaps the most relevant to this hearing is the 
financing of risk for severe and infrequent natural and manmade 
catastrophes. Reinsurers have borne significant shares of insured 
losses from many major catastrophic events including 55 percent of 
September 11 losses; 33 percent of Hurricanes Katrina; Rita and Wilma; 
40 percent of the recent Japanese earthquake and tsunami; and 33 
percent of the recent Midwest tornadoes.
    We share the subcommittee's concern that an increase in severe 
weather events requires a more forward-looking and proactive approach 
to financing recovery from disasters. Attached to this testimony are a 
series of slides showing a clear increase in the number and financial 
impact of United States and non-United States natural catastrophes 
including geophysical (earthquake); climatological (extreme 
temperature, drought, wildfire); hydrological (flood); and 
meteorological (winter and thunderstorms and related hurricanes and 
tornadoes) events. Much of this increase can be attributed to changes 
in weather intensity and climate-related impacts. However, the 
fundamental driver is the increase in the number of people living in 
areas vulnerable to catastrophic storms, the increase in property 
values in these high-risk areas, and the vulnerability of construction 
materials and technology. The reality is that our society has moved 
increasingly to areas with the greatest exposure to natural 
catastrophes along our coasts and rivers and invaded the natural 
landscape in areas susceptible to wildfire and drought. Where these 
areas once served as natural habitats to wildlife and buffers from 
natural hazards, they are now populated with communities and 
infrastructure.
    The subcommittee asked that I address how insurers prepare and 
evaluate this changing risk landscape and how that might be applied in 
the public sector. Indeed the Federal Government has much the same 
insured exposure through the National Flood Insurance Program (NFIP)--
with 5.5 million homes insured--and the Federal Crop Insurance Program 
(FCIP). The Federal Government has the additional burden of disaster 
assistance following catastrophic events and appears to rely primarily 
on postevent appropriations. No one can reliably predict specific 
weather events more than a few days in advance and there is no reliable 
prediction for earthquakes. That does not preclude, however, financial 
planning for the likelihood of these events or for reliance on the 
scientific community to assess future conditions that can be used to 
make decisions about appropriate policy matters. Support of the work of 
the National Science Foundation and National Oceanographic and 
Atmospheric Administration (NOAA) remain an important part of assessing 
risk from natural forces. The private sector benefits immensely from 
funded research programs by these institutions.
    The insurance industry believes that long-term solutions to hazard 
reduction should be driven by mitigation and adaptation strategies. 
Federal incentives for improved natural hazard building codes, improved 
financing for mitigation and relocation of repetitive loss properties 
in the NFIP, better preservation of natural habitats that serve as 
protective areas for property and people should all be included in the 
Government's portfolio of approaches for minimizing the economic 
consequences of natural disasters--many of which are ultimately borne 
by U.S. taxpayers. The insurance industry also funds research to 
address building features and styles that can significantly reduce 
damage to property. The Institute for Building and Home Safety recently 
opened a new research facility which replicates natural hazards 
(hurricanes, thunderstorms, hail, wildfire) and their impact on 
residential and commercial structures. Its research will lead to 
improved building and community resilience.
    The traditional insurance model applied to automobiles, workers' 
compensation and homes as it relates to non-natural peril insurance 
coverage's is largely an actuarial one: a pool of data of actual losses 
trended forward using economic factors such as cost of living 
adjustments and inflation. Insurers then seek to collect a premium from 
an insured based on this analysis not knowing of course whether any 
specific insured property would suffer damage, but predicting 
reasonably well what the likely loss experience of the pool of insureds 
would be over a period of time.
    Insurers rely primarily on three interrelated approaches for 
financial protection from severe and infrequent events:
      Actuarially Driven Pricing That Reflects Actual Risk 
        Assessment.--Unfortunately, the NFIP reports that it subsidizes 
        about 25 percent of its properties, that 1 percent of the 
        properties account for 30 percent of the losses as repetitive 
        loss properties and then relies on borrowing from the U.S. 
        Treasury for funding shortfalls. The Program is $18 billion in 
        debt to the Treasury at this time.
      Diversification.--Variation of the portfolio of insured 
        properties geographically and by line of insurance.
      Utilization of Reinsurance To Transfer Risk Beyond What the 
        Insurer Wishes To Retain.--NFIP legislation recently passed by 
        the House authorizes the NFIP to purchase reinsurance rather 
        than rely exclusively on Federal debt. The FCIP is already a 
        public private partnership.
    Given the enormous recent losses of property and people to natural 
events, the insurance industry in recent years has modified its 
approach to assessing and pricing catastrophe risk. After Hurricane 
Andrew in 1992, it was clearly obvious that a retrospective loss 
business model as described above was inadequate, and indeed, 
misleading for catastrophic events, particularly if a changing pattern 
of weather and climate were developing. Assessing risk by applying 
historical loss events over current insured properties leads to an 
underestimation of potential losses. To address this dilemma, 
probabilistic models were developed to assess the financial impact of 
catastrophic natural hazards simulating possible future events over 
long periods of time to produce a representative loss scenario. As it 
has become standard practice for insurers and reinsurers, I recommend 
this approach to the subcommittee as a means to plan for future funding 
needs related to natural catastrophes.
    These catastrophe models are provided to subscribers by several 
firms whom I have identified in the appendix and in some cases by 
reinsurers and reinsurance brokers. The models operate on the following 
principles:
  --The hazard component, populated by teams of scientists 
        (meteorologists, seismologists, geophysicists, and 
        hydrologists) creates a catalog of thousands of potential 
        computer simulated catastrophes and applies the intensity of an 
        event at specific locations.
  --The engineering component consists of detailed information about 
        the properties exposed to these events in specific locations or 
        regions (including location data and building characteristics).
  --The financial component provides information about potential losses 
        for individual properties or groups of properties and applies a 
        probability of loss.
    These models allow users to assess the impact and severity of 
future loss scenarios, analyze the effects of changes in conditions or 
proposed changes in hazard mitigation (e.g. building codes, structural 
changes to properties), assess adaptation scenarios and determine the 
appropriate pre-funding needs. In the latter case that would apply to 
insurance premiums, or in the case of the Government, to pre-funding 
disaster assistance needs. These models are routinely updated to 
reflect new scientific or local infrastructure and building 
information. Some of these models have been applied to pandemics, 
terrorism-related events and climate change as well.
    Mr. Chairman, on behalf of the RAA, we look forward to exploring 
the risk management and financing techniques currently in practice in 
the reinsurance industry to determine how the Government can improve 
its financial planning needs related to manmade and natural 
catastrophes.

    Senator Durbin. Thank you very much. I know Senator Moran 
has to go to another meeting, but I thank you for attending 
today. If we have any written questions, we will submit them to 
be entertained by the panel here. Mr. Nutter, I think you sent 
us this chart here. I'm taking a look at it, Top 16 Most Costly 
World Insurance Losses. Is that your chart----
    Mr. Nutter. Yes, I have----
    Senator Durbin. For the insurance?
    Mr. Nutter. I have several. Let me make sure I have the one 
that you're----
    Senator Durbin. Insurance Information Institute? I don't 
think we have that in large font, do we?
    Mr. Nutter. I have that here with me.
    Senator Durbin. Do you? Well, this chart, as it is titled, 
Top 16 Most Costly World Insurance Losses, 1970 to 2011--so 
that's a 41-year period of time. And it says two noteworthy 
things. Taken as a single event, the spring 2011 tornado season 
would likely become the ninth costliest event in global 
insurance history. (50:26 of webcast)




Sources.--Swiss Re sigma 1/2011; AIR Worldwide, RMS, Eqecat; Insurance 
                         Information Institute.

    And then it says 3 of the top 15 most expensive 
catastrophes in the history of the world have occurred in the 
past 18 months. So let me ask you this question, and then I 
think I know the answer, but I want it on the record. Do you 
adjust these dollar losses to inflation?
    Mr. Nutter. These all reflect 2011 dollars. They've been 
adjusted so that they can be reconciled with each other.
    Senator Durbin. So we just can't argue that things are more 
expensive now than they were 20 years ago, and a small event 
today may cost a lot more money than it did 20 years ago?
    Mr. Nutter. That's correct.
    Senator Durbin. These have been adjusted accordingly?
    Mr. Nutter. That's correct.
    Senator Durbin. So, then, this is noteworthy. And let me 
ask you, what is the impact of this kind of information on your 
industry, when the people are trying to decide whether they'll 
write insurance, and if they do, what kind of reserve they 
need, what kind of premiums they charge?
    Mr. Nutter. Well, Mr. Chairman, as you mentioned in your 
opening comments, obviously, the insurance industry looks at 
historical losses and determines whether or not the premiums 
that it's charging reflect the risk that it's assessing.
    But in this area of natural catastrophe, the industry has 
tried to do a better job in assessing the probability of future 
events, and adjusted, you know, these premiums accordingly.
    So, in some cases, insurance companies have looked at their 
exposures, what they've written in high-risk areas. Think 
coastal areas, the State of Florida, the east coast, the gulf 
coast.
    And some insurance companies have pulled back from those 
areas because they feel like that--what they should charge, 
related to the risk of exposure, they can't, or that the 
regulatory system inhibits them, so that they pull back. They 
decline coverage or they nonrenew coverage.
    On the other hand, in our community, the reinsurance 
community looks to right catastrophe risk, largely because it 
does not have regulated premiums, but in fact, operates at a 
very competitive environment not unlike the insurance industry 
in the State of Illinois operates in a competitive rate 
environment. So in our sector, catastrophe risk is somewhat 
counterintuitive. In fact, they look to right this risk, 
believing that they can assess it.
    Senator Durbin. So let me ask you, from an actuarial or a 
statistical point of view, how do they factor in whether 
something is an aberration, a once-in-a-100-year event, or a 
pattern emerging?
    Mr. Nutter. Yes, it really is a probabilistic analysis. 
It's a stochastic analysis, if you will, trying to assess 
whether or not these events are, indeed, outliers.
    I think what we would say is that the outliers have become 
commonplace, not unlike Dr. Wuebbles said that your--you know, 
the hottest day you've experienced will become the norm going 
forward, that the insurance industry looks at these losses as 
being common, largely because of the movement of people into 
these high-risk areas.
    If you looked at the development, as well as population 
shifts to coastal areas in particular, it's pretty notable. So 
we don't--I don't think the industry sees these as outliers, 
any one event, but in fact, a pattern that's going to continue 
and continue to grow going forward.
    Senator Durbin. So you see the weather pattern and also the 
residential or settlement pattern coming together?
    Mr. Nutter. Absolutely, in the wrong way.
    Senator Durbin. Magnifying these losses in the wrong way. 
Let me, if I can, turn to Mr. Rivera, because, following what 
Mr. Nutter has just said, it's very clear that they're looking 
beyond any fiscal year to a pattern that would lead them to 
decide whether to write insurance, and if so, what reserves are 
necessary to protect their risk.
    You discussed the advanced modeling that you're using for 
budget projections for the Federal Government. You have one 
small, but important, part here, SBA disaster loans. And you 
used, as I understand it, these budget projections, for short-
term estimates only--seasonal and annual. So what, if anything, 
are you doing to look to the long term?
    Mr. Rivera. Thank you, Senator. You know, as I'm listening 
to Mr. Nutter here, he's talking about his actuarial approach, 
pricing risk, diversification, and reinsurance. We pick up some 
of those components.
    We do look at historical data that takes in the recent 
weather patterns. We look at the long-term costs, and we do the 
annual assessment based on the Federal Credit Reform Act, since 
1990, and moving forward.
    But the thing that I find very interesting is, in the 
Federal Government, or at least with the Disaster Loan Program, 
the SBA is not able to price risk as the private sector is. So 
for example, a disaster applicant comes to me and whether 
they're insured or uninsured, or underinsured, we go ahead and 
provide that loan to them from that perspective.
    We're open and interested in trying to figure out if we can 
make a connection between what the private sector is doing and 
what we're doing in the Federal Government. I mean, that makes 
a lot of sense.
    But the different perspective of us not being able to price 
our product, for example, the maximum interest rate for a 
homeowner loan can be no more than 4 percent by statute. So 
we're a little bit more boxed in from that perspective.
    Senator Durbin. So let's follow up on that, Mr. Trimble. It 
seems to me that, as I try to take Mr. Nutter's good advice 
about what the private sector is doing and apply it to the 
Federal Government, in our exposure to weather events, Mr. 
Rivera has just identified a problem. The people setting the 
premiums, interest payments, and such, happen to be Members of 
Congress and the President, who enact laws.
    So as we try to envision a more challenging world, in terms 
of risk exposure, has the GAO taken a look at whether or not we 
are adjusting our economic models and projections, in terms of 
premiums collected, monies set aside, or are we just going to 
rely on disaster payments if we get into a fix?
    Mr. Trimble. Well, we looked, as part of a study a couple 
years ago, at two Federal insurance programs, the crop 
insurance and the flood insurance programs. And what we found 
was similar.
    Their perspective was budgeting by year, based on past 
losses. But at that time, the point was also made that those 
programs operate under different constraints and imperatives, 
based on their statutory requirements.
    So we've not done a full examination of the constraints of 
those statutory requirements, in terms of how they operate day-
to-day. I think the question is, what latitude they have to 
incorporate climate change under the existing requirements 
they're under.
    Senator Durbin. Dr. Sullivan, I suspect that some of the 
information that Mr. Nutter and his industry uses comes from 
your agency, in terms of what you are observing and the changes 
that are taking place.
    And you've made a good point about how you need to continue 
to have the technology, keep up with the science, so that you 
can avoid exposure for loss of life and dollar cost that might 
be associated with it. So are you--as you look at these 
projections from the NOAA's point of view, seeing these severe 
weather trends emerging and growing in the future?
    Dr. Sullivan. Senator, we're not assuming in our analyses, 
that the patterns, specifically that we see in past data, will 
remain the patterns that future data will show. Mr. Nutter's 
testimony alluded to this. Excuse me, Dr. Wuebbles's testimony 
alluded to this.
    The 50-year flood is now the 20-year flood, is now the 12-
year flood. So analytical methods that our NCDC personnel use 
in concert, in partnership with a variety of academic partners, 
such as Dr. Wuebbles, test and examine repeatedly, almost 
continually, in fact, those trends, those patterns, and try to 
arrive at some statistical confidence about what slant, what 
trend should be incorporated in forward projections so that we 
have what are called nonstationary statistics.
    I'd also comment, if I may amplify a bit on what I 
mentioned about the IWRSSI effort that we're doing with the 
Corps of Engineers and the USGS. We're working there to make 
all of our data systems, from maps to stream flow data and 
everything in between, fully interoperable and fused on a 
common platform, common portal.
    And that will allow Federal partners, who try to support 
regional, local, and State officials in flood-prone areas do 
the things that Mr. Nutter was talking about, not just give you 
a forecast for a point on a river at a certain point in time, 
but actually let you interactively translate that into specific 
inundation levels that may be expected at your Main Street 
bridge in your neighborhood, and lay that against the Census, 
and other demographic and economic data to readily give you an 
economic outlook for the possible damage that you may be seeing 
if the flood really reaches the stage that's been forecast.
    Senator Durbin. Dr. Wuebbles, I've had the good fortune of 
meeting a lot of Illinois farmers, which is your family 
background. They are courteous and thoughtful people who come 
to visit me and consider an important part of their 
responsibility to help educate a Senator about agriculture and 
the world that they live in, in Illinois or around the Nation.
    And for a period of time there, I'd asked each group of 
farmers from Illinois, who came in to see me, the same 
question. I asked them how many of you believe that man's 
activity on Earth is changing the climate that we live with? Is 
it changing the weather patterns, or the temperatures, the 
world that we live with?
    And I would say, out of, perhaps, 100 farmers, 2 said yes. 
And I would, then, pursue with them, do you believe that things 
are changing in this world? Are glaciers melting? Do you see 
changes in the weather patterns? And if so, how do you explain 
it? If it isn't our activity adding to this, what's causing it?
    And they would kind of be very quiet. I had to probe, come 
on now, give me an answer. And you know, one farmer said to me, 
from Illinois--he said, Senator, 8 years ago, I had a flood. 
Last year, I had a drought. God's going to throw different 
things at me from time to time. It's kind of this divine mood 
swing that they really view as behind this.
    So I'd like to say to you that I'm not going to try to 
resolve that political environmental question here. But I think 
what we try to do in this hearing is to acknowledge what is 
objective and obvious. Something's changing. I don't know the 
reason. I mean, I think I happen to agree with you what the 
reason is.
    But whether or not you agree with your premise, or mine, or 
someone else's, the facts are the facts. Things are changing in 
weather patterns here. I guess the only thing that I know with 
any degree of certainty is what it's like to make 48 round 
trips between Illinois and Washington a year for 29 years.
    I've spent a lot of time in airplanes, and I'll tell you, 
the weather is a mess this year, and I've never seen it this 
bad. And it continues to be bad, way beyond the spring storms 
that we're used to. The point I'd like to get to is whether or 
not we can come to some consensus here, beyond the political 
debate about climate change, about the reality of what we face.
    Within the academic community, where there might be a 
difference of opinion about man's impact on the environment, is 
there at least a common conclusion that things are changing in 
a patterned way?
    Dr. Wuebbles. Basically, yes, I think you'd find very 
strong consensus that a--what's occurring in the long-term 
averages of weather, in the statistics of weather, are 
changing. You know, there's no question about that.
    You know, more than 90 percent of the glaciers in the world 
are decreasing significantly. And there's--I've talked today 
about precipitation events, you know. The data itself is very, 
very strong that things are changing.
    I think, if you had asked the farmers a different question, 
if you'd asked them, are you seeing changes occurring in what 
you're doing in your fields and in trying to get out there each 
year, I think you would have gotten a little bit different 
answer, that you--they definitely are seeing more, in the 
Midwest, in Illinois, more situations of flooding, strong 
precipitation in the spring, can't get out into their fields as 
soon.
    And so I think you would have seen that, yes, they 
definitely have--they know that something's happening. And it's 
not just what it was 30, 40 years ago.
    It's--if we turn back to the science community, you know, 
that's very clear, that, as I said in my testimony, if you go 
and look at the peer-reviewed literature, which is how we--you 
know, scientists judge ourselves by publishing papers and 
having our peers look, examine those papers, before they can be 
published.
    And so it's our way of trying to put in checks and balances 
of it in what we do. You don't find a disagreement about the 
fact that humans are having an impact on our climate system. 
It's just not there. And very, very few papers make it in at 
all. And those that do usually are shot down pretty rapidly 
because they've made mistakes in the evaluation of the data, so 
I think the evidence is quite strong that, you know, it's 
unequivocal that our climate is changing, and that there is a 
strong relationship to what's--what human activities are doing.
    Senator Durbin. So let me try to draw all of you into this 
common question. Going back to Mr. Nutter's premise, I assume 
that, if you guess wrong in the insurance business, it's going 
to affect the bottom line, whether or not you're profitable, 
whether you've collected enough premiums and set aside enough 
reserves. And so we do things a little differently in 
Washington.
    If we guess wrong, in terms of a program that is supposed 
to protect people from a disaster, let's say crop insurance, if 
we guess wrong, we have something called a supplemental 
appropriation, which means we make up the difference with a 
disaster payment.
    And they frequently are coming through the Congress for 
everything you can imagine, from earthquakes in California to, 
you name it, droughts, and fires, and all the rest. So we move 
in with the supplemental appropriations, which are 
unpredictable, and usually just go directly to the deficit, 
with very, very few exceptions.
    Now, I served on the Deficit Commission, the Bowles-Simpson 
Deficit Commission, that the President created. And they 
decided to try to do something about that. And I'm going to ask 
you all to think about this, that have not heard it before, and 
react to whether or not you think this is constructive, is 
complete, or how you might modify it. The Fiscal Commission 
emphasized that restoring fiscal discipline requires honest 
budgeting.
    And a given disaster may, itself, be unpredictable, but the 
need to pay for some level of disaster relief is not. Federal 
budgets rarely set aside adequate resources in anticipation of 
disasters, and instead, rely on emergency supplemental funding 
requests.




    With that premise, the Commission plan explicitly called 
for setting aside funds for disaster relief and establishing 
stricter parameters for their use. The disaster fund budget 
authority would be limited to the rolling--this is the 
operative sentence--average of disaster spending in the most 
recent 10 years, excluding the highest and lowest years.
    Any unused budget authority would be rolled forward to 
increase the disaster fund budget authority available the 
following year. Any spending above the disaster fund limit 
would need to be offset with reductions in spending in other 
areas or special parliamentary procedures.
    So, if you can follow the premise, it's pretty basic. You 
can, without a statistics course, I think, understand it. Take 
the last 10 years. Throw out the highest and the lowest year. 
Average it. And we're going to make sure we have at least that 
amount of money available each year.
    If we don't spend it all, we'll roll it over to the next 
year. Now, apply that model to what you've seen in the last 10 
or 20 years, or what you see coming, and tell me whether or not 
you think that's adequate. What do you think, Mr. Nutter?
    Mr. Nutter. I would start, and I think the insurance 
industry learned a lesson some time ago, that 's not an 
adequate way to do that.
    Senator Durbin. Not adequate?
    Mr. Nutter. Not an adequate way to do that. That as I said 
in the testimony, when prior to Hurricane Andrew, which is 
1992, the industry had an estimate, that the potential losses 
of a hurricane in that area would be about $8 billion. That was 
the number.
    It turned out to be $25 billion when it actually occurred. 
And it really was a change in the thinking of the industry, 
that you can't just presume that the past is prologue. You 
can't take past events, and overlay it on current 
infrastructure and inventory of homes, and presume that 's 
what's going to happen.
    So these probabilistic models that developed, really, were 
an effort to try and look at the probability of much more 
extreme future events. And let me take two of the programs you 
mentioned--have been mentioned here repeatedly, the NFIP. It 
effectively does use an average annual loss scenario for its 
pricing. And it does have some statutory limitations and caps.
    The House of Representatives, just in the last month, 
reauthorized the NFIP and included in there a provision that 
the program was authorized to go to the private reinsurance 
sector and assess the reinsurance sector's capacity and 
pricing. We have encouraged the Senate, when it considers the 
Banking Committee, considers the flood program to do the same 
thing because it does bring in that kind of private sector risk 
assessment scenario that we think would, in fact, change the 
thinking about what you presume.
    The NFIP is $18 billion in debt, not counting the 2011 
storms or whatever borrowing it might have. The debt is to the 
Treasury. It's a postevent funding scenario, as you have said. 
The insurance industry can't do that.
    So the industry relies on a pre-event funding scenario, 
where it assesses risk and tries to price for it. We really 
think, by introducing private sector risk assessment principles 
in programs like the NFIP, would change that mindset, that the 
assumption that's made in the report, valuable as it may be, in 
fact, probably understates, and underestimates, and is really 
misleading about what the costs are likely to be.
    One more quick comment, the Crop Insurance program is 
actually a public-private partnership. You have private 
insurance companies and the Federal Government with both a 
risk-bearing role. And in fact, I read a report the other day 
that said the Federal Government's actually made money in the 
Federal Crop Insurance Program because of that kind of 
involvement with the private sector.
    Senator Durbin. It would seem to me that what you're 
suggesting is that we are understating the premiums necessary 
to cover the risk, which is probably a great political decision 
on our part, but not a very good actuarial decision in terms of 
what we need to pay out. Is that fair?
    Mr. Nutter. Fair comment. I understand the political 
problem of asking people to pay more for their insurance, but 
you're either asking the people who have the risk, who have the 
homes and properties in these areas, to pay a risk-based 
premium, which is what the insurance companies would do, or 
you're asking the taxpayers to, effectively, subsidize those 
decisions by issuing debt after the fact.
    Senator Durbin. Mr. Rivera, what would it mean if we 
followed the private sector model and, as Mr. Nutter has 
questioned, whether or not we can do the past-as-prologue 
premise?
    Mr. Rivera. Chairman Durbin, looking at the chart over 
there. And the SBA chart, if I can just point to it for just a 
minute, the red bars are the supplementals that we've had and 
the green bars is our lending authority. So if you look at it, 
there have been four big spikes. There was one in 1994, we had 
the Northridge earthquake. I think that's the third.
    Senator Durbin. Yes.
    Mr. Rivera. And then we had, in 2005, Hurricanes Katrina, 
Rita, and Wilma. That's the big one in the middle. We had the 
two, the four Florida hurricanes in 2004, and then Gustav and 
Ike in 2008, the 2008 gulf coast hurricanes. So if you look 
over the last--I think that's, since 1992--18, 19 years?
    Senator Durbin. Yes.
    Mr. Rivera. We've really only needed a supplemental in 
those four cases. So the methodology that you mentioned is 
really what we really do. We look back over the last 10 years. 
We knock out the big year, which is Katrina in this case. 
That's the $11 billion year we had. And we average $1 billion a 
year.
    And we have no-year funds, fortunately for us. We're able 
to carry over funds from year to year. So in the event that 
there is a need above the normal appropriations of $1 billion, 
we're able to use it from year to year.
    So the theory, as far as, we should look forward, it's a 
little bit different statutorily, because we use the Credit 
Reform Act and we have to go off of historical data. But in 
this case, out of, you know, 19 years, there's been four major 
supplementals.
    I'm not going to sit here and argue that we should stick 
with our current process because we're willing and would look 
at the opportunity to meet with the insurance company or the 
reinsurers. The parameters that we have from a statutory 
perspective, I think makes the model pretty successful. Now, I 
hope I don't jinx myself, that we don't have a tropical storm 
right now.
    Senator Durbin. I hope we don't.
    Mr. Rivera. I think from that perspective, that's the 
approach that we've been taking.
    Senator Durbin. So Mr. Trimble, I'd like your reaction to 
this Deficit Commission, a 10-year look back. Now, are we stuck 
with that because of the way we do business in Government, as 
opposed to the way Mr. Nutter deals with the insurance 
industry?
    Mr. Trimble. We have not looked at or considered that 
proposal, to my knowledge, I would point to the statement in my 
testimony regarding what the National Research Council pointed 
out, and what we said here, which was, past is not prologue.
    Past models aren't necessarily great predictors. I think 
you'd really have to go into the basics of the statutes these 
guys are operating under and then look at the models. You may 
be able to go historical for a while, but the question becomes 
how long does your luck hold out?
    Senator Durbin. Mr. Rivera, the SBA Disaster Loan Program 
has provided close to $50 billion in loans since it began in 
1953. In contrast to the private sector insurers, SBA cannot 
charge borrowers more or less to price relative risk, based on 
exposure to natural disasters.
    In fact, the SBA disaster loans help borrowers recover 
losses that the private sector insurance does not cover. As 
private sector insurers decline to issue policies in risky 
areas, due to exposure to erratic weather patterns, will more 
and more of the financial burden shift to the Government?
    Mr. Rivera. Chairman Durbin, we do assume the risk. I mean, 
that's part of the program, as we continue to get individuals 
that are underinsured or uninsured.
    Once we do make the loan, we do require insurance. And 
there's a limit on a ``like kind'' event. We will not provide 
any additional insurance for like-kind disasters moving 
forward, so we try to protect ourselves, from that perspective.
    Senator Durbin. Well, let me go to Mr. Nutter. There was 
a--correct me if I'm wrong here--conscious decision made by 
some insurers not to insure in Florida after certain hurricane 
experiences. Is what I just said accurate?
    Mr. Nutter. It's--it's probably an overly broad statement. 
I think some insurers pulled back from the immediate coastal 
areas in Florida, as they did in coastal areas in the gulf 
coast.
    Senator Durbin. And so they made a decision, obviously, 
based on their loss experience, that they couldn't write a 
reliable policy, profitable policy, with any degree of 
certainty in that area. So do we--I know the answer, but I'm 
going to ask you anyway--follow that kind of decisionmaking 
when it comes to our exposure for the Federal Government?
    Mr. Nutter. Chairman Durbin, we--we provide disaster 
assistance to all disaster victims, as long as they have 
repayment ability and are credit worthy. We don't--we do not, 
not make a loan just because the individual does not have 
insurance or doesn't have--what we've discovered in Florida is 
that, after the--the 1992 and the--and the 1994 hurricane 
season, is it--the hazard insurance policy that used to protect 
hurricanes--I mean, homeowners from windstorm insurance--
they've peeled that off, and now--now, they add that on as a 
rider.
    So the insurance company has continued to minimize their 
risk by separating certain aspects of a policy. We find that 
all over the gulf coast.
    Senator Durbin. Let me talk about the gulf for a moment. 
Dr. Sullivan, in your testimony, you mentioned that runoff from 
severe chronic flooding in the Midwest will lead to hypoxic 
dead zones in the Gulf of Mexico. And you stated, the Gulf of 
Mexico dead zone is a particular concern because it threatens 
valuable commercial and recreational gulf fisheries, that 
generate about $2.8 billion annually.
    So what is the size of this dead zone in the Gulf of 
Mexico, compared to that? Let me see if I can point to this 
here. And perhaps, you can identify this a little better than I 
can. Is the bright blue area the dead zone that we're talking 
about here?

            DEPICTION OF GULF OF MEXICO HYPOXIA ZONE IMAGE 




                             Source.--NOAA.

    Dr. Sullivan. Yes, Senator, the red and orange areas are 
the longshore coastal flow. Those regions also are most 
depleted in oxygen, so they also are dead. And the blue zone is 
depleted, to varying different levels, so sort of a contour of 
oxygen depletion in the waters.
    Senator Durbin. And it's not altogether clear in this 
photograph, but we're looking at the continental United States, 
with the Gulf of Mexico in the bright area down to the right 
there. And what I see is the flow of the Mississippi River, and 
all its tributaries into the Gulf of Mexico, and all of those 
chemicals we pay so much for in Illinois, coming down that 
river into the Gulf of Mexico. So what is the size of the dead 
zone that we're talking about here, compared to the 2010 BP oil 
spill?
    Dr. Sullivan. Senator, an estimate was just released--a 
forecast was just released, a couple weeks ago by the NOAA and 
our partners down in Louisiana that the dead zone this year 
will be between 8,500 and 9,400 square miles. Put that in 
perspective. That's about the size of New Hampshire, slightly 
larger than New Jersey. There are crews underway right now that 
are making those measurements.
    So I think, in a few weeks, we'll have an update to that 
figure. The Deepwater Horizon spill, in comparison, was 29,000 
to 31,000 square miles, closer to the size of South Carolina. 
So this is forecast to be one of the largest, if I may, dead 
zones produced by the watershed drainage and runoff, that we've 
seen in many years, coming in, according to the forecast, 
between 8,500 and 9,400 square miles.
    Senator Durbin. So for the record, what is a dead zone?
    Dr. Sullivan. A dead zone is an area where a bulge of 
freshwater, such as comes down the Mississippi River, plus the 
sediments and other chemicals that are in that water, cause a 
blossoming of algae that consumes all the oxygen in the water.
    That burst deprives the oxygen other animals in the marine 
environment require that they need to grow.
    Senator Durbin. And so there's little or no marine life in 
this area?
    Dr. Sullivan. Becomes what's called hypoxic. Marine life 
that's mobile will flee, and they'll sense the oxygen gradient, 
and go somewhere where they can still breathe, if you will. 
Facile or attached marine life from bottom-dwelling creatures 
to plants--plant species that grow along the shores, corals--
they're stuck and they will suffer a degradation, as the oxygen 
is removed from the water.
    Senator Durbin. Heavy rain in the Midwest, water flowing 
down through the rivers, flooding that it causes on the way 
down, the damage----
    Dr. Sullivan. Yes.
    Senator Durbin [continuing]. Ultimately ending up in the 
Gulf of Mexico, creating a dead zone area that is about one-
third, if I was trying to calculate quickly, one-third of the 
area affected by the BP oil spill.
    Dr. Sullivan. Roughly one-third.
    Senator Durbin. All right. So how long will these effects 
last in this dead zone?
    Dr. Sullivan. It's hard to predict how long they will last, 
Senator. It depends on further rainfall. Tropical Storm Dawn, 
which is moving across the western Gulf of Mexico now--
forecasts bring 5 to possibly 7 inches of rain as it goes 
ashore, and then later tomorrow.
    That water and the winds associated with the storm may help 
mix the waters and disperse this bulge of freshwater and the 
chemicals more efficiently. So certainly, factors enter in, but 
it's normally, at least months and some of it endures year-to-
year.
    Senator Durbin. It's not my part of the world, but I assume 
this has an impact on the gulf economy?
    Dr. Sullivan. It would have a tremendous impact, affecting 
the coastal habitat that supports the oyster fisheries, nursery 
grounds for many other commercial fish species that are fished 
in the gulf, the shrimp fishery.
    Senator Durbin. Dr. Wuebbles and Dr. Sullivan, both of your 
testimonies point to the fact that there's a projected rise in 
sea levels. And that will have a dramatic impact on risk in 
many communities. Mr. Trimble has talked about adaptation as a 
result.
    Dr. Sullivan, you point to the effect this will have on 
East Coast communities during El Nino years. And Professor 
Wuebbles, you state that, globally, the temperatures are 
higher. The sea level is higher.
    There's more water vapor in the atmosphere, which energizes 
storms. So what are some of the specific dangers that could 
occur because of these changing weather patterns and this 
rising higher sea level, Dr. Wuebbles?
    Dr. Wuebbles. Well, the--the best analysis right now are--
are indicating that, if we continue the pathway we're going 
without making, you know, extensive decreases in the emissions 
of these, you know, heat-trapping gases that are affecting our 
climate system, that by the end of this century, we may see in 
the order of a--of a meter, and possibly even more, increase in 
sea level.
    Now, it isn't just the increase in sea level that gets you. 
It's the storm surges. So when you have a--a large storm or a 
hurricane, you get even more damage because of, you know, that 
large amount of water that's there. So that itself is a big 
concern. In addition, we can expect that the amount of, you 
know we've been seeing an increase in severe precipitation 
events.
    We can, I think, further expect that we're going to see 
more such events. Basically, the parts of the country where--
which tend to be wet are likely to be wetter. The parts of the 
country that tend to be dry are likely to be dryer. So we're 
going to see an increase both in droughts and in floods that 
are likely to be important to us all.
    Senator Durbin. Mr. Nutter, do you buy that?
    Mr. Nutter. Yes, the industry is very concerned about storm 
surge. I would have said the same thing that Dr. Wuebbles did, 
that the--we've increasingly built properties in very 
attractive coastal areas, often with not a sufficient setback, 
certainly probably in the current environment.
    But if you have an increasing sea level rise and you have 
storms, you're going to have more water pushed on shore and 
more storm surge-related property damage.
    Senator Durbin. And is that why, the insurance industry is 
pulling back from some of these coastal areas?
    Mr. Nutter. It is. It is why a number of insurers have 
pulled back or sought much higher insurance premiums for 
properties in those areas, absolutely.
    Senator Durbin. So Dr. Sullivan, can you help us out here? 
As you project forecasting capabilities, is there any way that 
we can reduce this projected problem and the economic impact of 
these catastrophes?
    Dr. Sullivan. Well, Senator, certainly, if nations around 
the world choose to take GHG mitigation actions and reduce 
those emissions, that would certainly lower the projected trend 
from that cause. This is a problem that's already affecting 
certain coastal communities. New York has planning underway.
    The city of Norfolk, with--where I will visit in a couple 
of weeks, has been experiencing more frequent local inundation. 
And the Navy there is even looking at the prospect of needing 
to elevate their piers to accommodate the changing shoreline.
    So there are some signs there's sea level rise induced by 
continuous and secular change in climate, plus the potential 
that further warming of the planet and associated changes alter 
the large-scale circulation in our major ocean basins.
    There was a 2-foot sea level anomaly in some portions of 
the U.S. east coast, including Chesapeake Bay, back in 2009, 
that was due principally to natural variations in a North 
Atlantic oscillation and effects that this had on the gulf 
stream and longshore currents.
    So we live in a very dynamic environment. We are citing 
tremendously expensive infrastructure, highly built cities, 
dense populations, preferentially in these coastal zones. There 
are certainly things we can do to make our coastal communities 
more resilient. The NOAA has developed a tool called the 
Coastal Resilience Index, intended to help local planners.
    It's a simple, several-hour question and answer exercise 
that planners can use to bring key community stakeholders 
together, and take stock of where they have key 
vulnerabilities, key gaps in their preparedness, and look to 
take immediate and near-term actions to remedy those.
    Senator Durbin. Does anyone have anything they'd like to 
add that we haven't touched on here, that you think might be 
important or relevant, Dr. Wuebbles?
    Dr. Wuebbles. It's just one minor thing, that--an important 
but minor thing for--for this. As we look at--at the 
projections of climate, and we recognize that the--the oceans 
have a large heat capacity. So they respond much more slowly 
than the rest of the atmosphere.
    The real response from these emissions occur 20 to 30 years 
after the initial emissions. So we're seeing the effect right 
now of the emissions we made 20 or 30 years ago. The emissions 
since then have continued to increase, so we can expect larger 
impacts in--over the coming decades just because of that 
impact, effect, that--that the oceans are going to take a much 
longer time to respond. That--that's one of the reasons for 
urgency in considering doing something.
    Senator Durbin. Thanks. I said to my staff, I want to hold 
this hearing. I want to figure out how we can talk about this 
issue because nobody else is talking about it. We stopped 
talking about this on Capitol Hill.
    We decided that the debate over global warming was too 
contentious, too politically charged, and too divided for us to 
have any meaningful conversation about what to do with it. And 
so we stepped away from it. I think it's a big mistake.
    I think that we are overlooking the obvious. Dramatic 
things are happening. They are things that are affecting lives, 
and fortunes, and are going to affect us, and the way we live, 
and the way we govern.
    I don't think we have really measured, adequately, the 
impact of our exposure at the Government level to the things 
that are happening in weather pattern change, nor the exposure 
of our economy to what's going to happen as these unfold. And 
that is unfortunate.
    And I'm hoping that, at least on our watch on the 
subcommittee, that we have raised an issue which is not being 
discussed very frequently on Capitol Hill. And I think we need 
to step back and ask honest questions about whether we are 
portraying our risk and our exposure as taxpayers and as a 
Government against what may likely occur in the near future.
    And I will just say, confessing my bias if I have any, and 
I probably have plenty, I happen to believe that Dr. Wuebbles's 
approach to this is a sensible one, that small changes in our 
lifestyles today can make a dramatic difference in our future.
    And if we ignore them and say let the next generation take 
care of it, then the last point you made is an obvious one. 
Their problems are going to go on much longer and much worse 
than what we've seen.

                     ADDITIONAL COMMITTEE QUESTIONS

    Now, on that happy note, I thank you all for coming. And we 
will probably send some written questions your way. I hope 
you'll have a chance to respond in a timely fashion. The record 
will remain open until next Thursday, August 4, at 12 noon--I 
hope we are gone by then--for subcommittee members to submit 
statements and other materials.
    I greatly appreciated all five of you for taking the time 
in getting us such valuable testimony.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted by Senator Richard J. Durbin
           Questions Submitted to Kathryn D. Sullivan, Ph.D.

    Question. Dr. Sullivan, in both your written statement and verbal 
testimony, you addressed the importance of computer modeling and 
forecasting for the United States to be prepared for severe weather 
events in the long-term.
    Given the importance of accurate models to proper budgetary 
planning, what key enhancements do you think could be made to improve 
these models?
    Answer. As mentioned in my testimony, our Nation's environmental 
predictive capabilities are supported by four foundational pillars:
  --observations;
  --computer models;
  --research; and
  --our people.
    The computer models pillar includes the entire computer-based 
forecast system--which is composed of forecast model software, data 
assimilation software for initializing the model, and a supercomputer 
to carry out the calculations. An accurate forecast requires both 
initial information on the state of the atmosphere, and an accurate 
physical depiction of the evolution of the atmosphere during the 
forecast. The President's fiscal year 2012 request invests in high-
performance supercomputing for the National Weather Service (NWS), 
sustaining the rate of improvement in our numerical weather prediction 
modeling capability that is key to our plans to take advantage of 
improved observations.
    The following key enhancements are critical to improve the models:
      Advanced Data Assimilation.--An analysis is a process resulting 
        in an accurate image of the atmosphere at a given time, 
        represented in a model as a collection of numbers--and data 
        assimilation is an analysis technique in which the observed 
        information is accumulated into the model state. Probably the 
        most important of the enhancements overall, advanced data 
        assimilation techniques are needed to provide more accurate 
        initial conditions using information from observations. New 
        techniques are being developed to extract more usable 
        information from all available observations. These are 
        undergoing testing, and should be operational in 1-2 years.
      Model Physics.--The forecast model contains representations of 
        clouds, precipitation, the daily sunlight radiation cycle, 
        evaporation and heating from the Earth's surface, and more. In 
        nature, each of these elements of physics plays a major role in 
        determining the evolving weather. Generally, the more accurate 
        they are represented in the forecast model, the more accurate 
        the forecast.
      Use of Ensemble-based Forecast Systems.--Making multiple model 
        forecasts with slightly different initial conditions, or with 
        other slight alterations, gives us the ability to make 
        definitive statements about our confidence in the operational 
        forecast. These statements of confidence can be very important 
        to decisionmakers, especially when major events are predicted. 
        For example, if multiple runs of one or more models show strong 
        agreement on the path of a hurricane or the development of a 
        major storm, we can place a high confidence in the forecast and 
        resulting impacts for that event. The higher our confidence 
        level in the forecast, the more likely appropriate action will 
        be taken in advance.
      Model Resolution.--Representing the detailed evolution of the 
        atmosphere depends on the resolution of the forecast model. 
        Following this paragraph are two figures with 12 km and 4 km 
        representations of the topography over Puget Sound, Washington. 
        Clearly, the one with 4 km resolution contains more detail. 
        Experience has shown that forecast models with higher 
        resolution will give more detail and greater accuracy. The 4 km 
        forecast uses 27 times more computer resources than the 12 km 
        forecast, which is why computer power is critical for weather 
        forecasting models used in operational forecasts. Model 
        resolution is particularly important for major weather events 
        such as hurricanes, severe spring and summer convective storms 
        and winter snow and ice storms.

        
        

                                 12 km




                                  4 km

      Improved Observation Network and Observation Use.--Increased 
        information from observations, through the data assimilation 
        process, results in more accurate initial conditions. Critical 
        observations include those from current and future weather 
        satellites (the Joint Polar Satellite System (JPSS), the GOES-R 
        Program), commercial aircraft, Dual Polarization Radar, and 
        advanced technology sensors for measuring temperature and 
        moisture in the lowest 3,000 ft of the atmosphere. Research, 
        leading to operational implementation of new, cost-effective 
        observing systems, is also necessary for progress in this area.
    Again, our Nation's environmental predictive capabilities are 
supported by four foundational pillars:
  --observations;
  --computer models;
  --research; and
  --our people.
    These pillars are completely interdependent, and should be enhanced 
in a balanced way in order to promote a strong and vibrant foundation 
for improvements. For example, investments in supercomputing capability 
strengthen and enhance all four pillars in an integrated way, as all 
benefit from the advanced guidance and improved accuracy delivered by 
the additional computing capacity. All four of the pillars require 
continuous and balanced strengthening in order to achieve significant 
advancements in our environmental prediction capabilities.
    Question. How could better forecasting capabilities help reduce the 
economic impact of the increased natural catastrophes?
    Answer. In addition to advising the public and our partners of 
immediate impacts that threaten life and property, National 
Oceanographic and Atmospheric Administration's (NOAA) environmental 
forecasts and warnings also provide the capability to mitigate the 
economic impact of the wide variety of natural hazards that face our 
Nation through advanced alerts to potential impacts.
    Improved numerical model information would enable NOAA forecasters 
to produce forecasts and warnings with increased confidence, 
consistency, and accuracy. Even a small improvement in forecast 
accuracy can result in more effective and/or timely positioning of 
critical and limited resources ahead of and even during environmental 
disasters. This is key to saving lives and containing cost.
    Specific scenarios follow to illustrate these and additional 
benefits of improved forecasts to users, sectors, or others:

Climate
    Improved seasonal forecasts would enable more effective actions 
across a number of economic sectors, from optimizing the seasonal 
acquisition of road salt supplies, to planning ship routing and timing 
strategies, to long-term actions associated with clothing and food 
supplies. In addition, improved seasonal forecasts would facilitate 
more efficiency in planning the opening and closing of fisheries, and 
recreational areas/beaches.
    Improved forecasting capabilities would enable users of climate 
information to better prepare for extremes in weather and climate and 
attempt to mitigate them. For instance, the State of California 
determined a savings of around $1 billion during the 1997-1998 El Nino 
compared to the 1982-1982 El Nino. This is largely attributed to having 
enough time to implement extensive mitigation activities.\1\ Other 
sectors of the economy that stand to benefit from improved forecasts 
include water resource managers, energy producers, distributors, and 
providers, the transportation and agricultural sectors, to name a few.
---------------------------------------------------------------------------
    \1\ Chagnon, S.A. (ed.) (2000). El Nino 1997-1998: The Climate 
Event of the Century. New York, NY: Oxford University Press, 147-148.
---------------------------------------------------------------------------
Aviation
    Improved forecasting capabilities would reduce economic impacts 
resulting from air traffic delays. The total cost of domestic air 
traffic delays to the U.S. economy in 2007 was as much as $41 billion, 
with an estimated $10 billion lost by industries that rely on air 
traffic for supplies or customers (U.S. Congressional Joint Economic 
Committee, 2008). Weather is the major cause of most flight delays, 
reroutes and cancellations.
    NOAA will support the FAA in its evolution to the Next Generation 
Air Traffic Control System (NextGen) through provision of a four-
dimensional (three-dimensional space along with time) cube of weather 
information, which will be used to project conditions for airline 
trajectories in space and time, requiring improvements in spatial and 
time-scale forecast accuracy.

Winter Storm
    Improved weather modeling would lead to better preparation for 
severe winter storms, including readying of equipment, personnel, and 
supplies to fight effects of a heavy snow, ice storm, or severe cold 
outbreak. Advanced warnings could save additional millions of dollars 
in potential disruptions, power outages, stranded planes, and 
commerce.\2\ In general, improved weather forecasts would support 
optimization of surface rail and road systems, ensure on-time delivery 
of services, minimize infrastructure and capacity damage, and improve 
maintenance scheduling.
---------------------------------------------------------------------------
    \2\ Adams, R., L. Houston, and R. Weiher, (2004, August), ``The 
Value of Snow and Snow Information Services,'' Report prepared for 
NOAA's National Operational Hydrological Remote Sensing Center. 
Chanhassen, MN.
---------------------------------------------------------------------------
Flood
    High-resolution, geo-referenced flood forecast inundation maps 
would enable emergency managers to preposition people and resources to 
more effectively reduce the impacts of flood events. These maps depict 
the areal extent and depth of flood waters, linked with other 
infrastructure and demographic information such as FEMA's HAZUS. It 
would also enable the high-resolution water resources analyses and 
forecasts (e.g., soil moisture, evapotranspiration, ground water, water 
quality, snow water equivalent) necessary to better manage our 
increasingly limited water supply and support routine high-value 
decisions in the transportation, hydropower, agricultural, water 
supply, recreational, and floodplain management sectors.
    Improved forecasts of runoff and stream discharge, if combined with 
high-resolution, geo-referenced flood forecast inundation maps 
depicting the areal extent and depth of flood waters, could also be 
linked to infrastructure- and demographic-based information, to 
facilitate the pre-positioning of resources to reduce the impacts of 
flooding events.

Marine
    Improved forecasting capabilities would help to better inform the 
decisions made by commercial and recreational fishermen, such as 
whether to stay in port, remain at sea, or alter course depending on 
forecast conditions, thus maximizing resources and safety, while 
reducing economic impact and loss of life.
    Charter fishing guides could make better decisions by knowing, days 
in advance, when staying in port or going out would be in the best 
interest of their vessels or customers. Maintenance could be scheduled 
well ahead for bad weather days, saving the economic loss of performing 
maintenance when they could be carrying passengers and earning revenue.
    Large ship (oil tankers, container ships, aircraft carriers) 
operators at sea could alter course and speed to avoid or mitigate 
storm conditions affecting their route, thus preventing loss of cargo 
and/or personnel.
    Coast Guard and other rescue operators could better anticipate 
needs for additional manpower, and adjust staffing to meet anticipated 
needs.

Fire Weather
    Improved forecasting of key fire weather variables such as 
temperature, humidity, and wind would reduce the risk of firefighter 
and public fatalities by providing advanced notice of fire movement and 
extreme fire behavior. This would, in turn, allow appropriate 
evacuations and safe fire management tactics to be implemented in a 
more effective and cost-effective manner.
    Improved fire weather forecasts would also allow for more efficient 
prepositioning of firefighting resources before an anticipated fire 
outbreak. This would increase initial attack success, and therefore 
lower the risk of large, costly wildfires. Also, improved fire weather 
forecasts would support safer and more cost-effective land management 
treatments, and would greatly lessen the risk of escaped prescribed 
burns.

Tropical Storm/Hurricane
    Improved hurricane forecasts would reduce impacts from unnecessary 
evacuations along the Nation's coastlines prior to hurricane landfall. 
These impacts reach farther than the great inconvenience and cost of 
moving large numbers of people out of potential danger, with lost 
business revenues and nationwide resource impacts due to significant 
transportation delays.
    Improved storm surge forecasts would result from improved hurricane 
track and intensity forecasts, resulting in far better mitigation plans 
for resulting flood impacts, targeted to the areas which need it.
    Improved hurricane forecasting would reduce the amount of lives and 
property lost from unforeseen rapid deepening of storms as they 
approach land. An example is Hurricane Charley in 2004, which rapidly 
intensified to a Category 4 hurricane before making landfall in 
southwest Florida, where it claimed at least 16 lives and left tens of 
thousands seeking emergency shelter.
    NOAA's making targeted investments toward improvements in these 
forecasts.
                                 ______
                                 
                Questions Submitted to David C. Trimble

             DANGERS AND DRAWBACKS OF FRAGMENTED MANAGEMENT

    Question. Mr. Trimble, in the Government Accountability Office's 
(GAO) prepared statement you make an observation that can be 
attributed, regrettably, to a wide array of disparate Government 
programs. I recall hearing a similar refrain relating to our Nation's 
fragmented food safety system.
    You explain that ``when agencies do not collaborate well when 
addressing a complicated, interdisciplinary issue (like climate 
change), they may carry out programs in a fragmented, uncoordinated 
way, resulting in a patchwork of programs that can limit the overall 
effectiveness of the Federal effort.'' These stovepipes can also mean 
redundancies, management challenges, and competition for scarce funds.
    What are the key ingredients of a new approach to doing business 
and instituting a Government wide approach?
    Answer. Based on our past work (GAO-06-15, GAO/GGD-00-106) key 
practices that can help agencies enhance and sustain their Government 
wide collaborative efforts include:
--defining and articulating a common outcome among agencies with 
        different missions;
--agreeing on roles and responsibilities in achieving the common 
        outcome;
--establishing compatible policies, procedures, and other means to 
        operate across agency boundaries;
--identifying and addressing needs by leveraging resources, such as by 
        collectively funding interagency initiatives; and
--developing mechanisms to monitor, evaluate, and report on results.
    As we have previously reported (GAO/T-GGD-00-26), perhaps the 
single most important element of successful management improvement 
initiatives is the demonstrated commitment of top leaders to change. 
Top leadership involvement and clear lines of accountability are 
critical to overcoming natural resistance to change, marshalling needed 
resources, and building and maintaining the commitment to new ways of 
doing business.
    Question. What impediments need to be removed in order to make a 
different approach workable?
    Answer. As reported in our October 2009 report on climate change 
adaptation (GAO-10-113), we found that the challenges faced by Federal, 
State, and local officials in their efforts to adapt to climate change 
fell into several categories. First, available attention and resources 
were focused on more immediate needs, making it difficult for 
adaptation efforts to compete for limited funds. Second, without 
sufficient site-specific data, such as local projections of expected 
changes, it is hard to predict the impacts of climate change and thus 
hard for officials to justify the current costs of adaptation efforts 
for potentially less certain future benefits. Third, adaptation efforts 
are constrained by a lack of clear roles and responsibilities among 
Federal, State, and local agencies.
    According to Federal, State, and local officials we interviewed and 
other information we analyzed for our October 2009 report, potential 
Federal actions for addressing such challenges fall into three areas:
  --Federal training and education initiatives that could increase 
        awareness among Government officials and the public about the 
        impacts of climate change and available adaptation strategies;
  -- actions to provide and interpret site-specific information that 
        could help officials understand the impacts of climate change 
        at a scale that would enable them to respond; and
  --steps the Congress and Federal agencies could take to encourage 
        adaptation by setting priorities and re-evaluating programs 
        that hinder adaptation efforts.
    In our October 2009 report, we recommended that the appropriate 
entities within the Executive Office of the President (EOP) develop a 
national adaptation plan that includes setting priorities for Federal, 
State, and local agencies. The Council on Environmental Quality (CEQ) 
generally agreed with our recommendations, and said that the 
Interagency Climate Change Adaptation Task Force will prepare a report 
in October 2011 that documents its progress.
    In addition, our May 2011 report on Federal climate change funding 
(GAO-11-317) found that agencies do not consistently interpret methods 
for defining and reporting the funding of climate change activities, 
and that Federal officials lack a shared understanding of priorities, 
partly due to multiple, often inconsistent messages articulated in 
different sources, such as strategic plans. We also found that existing 
mechanisms intended to align funding with Government wide priorities 
are nonbinding and limited when in conflict with agency priorities. 
Federal officials who responded to a Web-based questionnaire for this 
report and other sources identified ways to better align Federal 
climate change funding with strategic priorities, including:
  --options to improve the tracking and reporting of climate change 
        funding;
  --options to enhance how strategic climate change priorities are set;
  --the establishment of formal coordination mechanisms; and
  --continuing efforts to link related climate change activities across 
        the Federal Government.
    In May 2011, we reported that Federal entities were already taking 
steps to implement several of these options. Specifically, the 
Interagency Climate Change Adaptation Task Force, co-chaired by CEQ, 
the National Oceanic and Atmospheric Administration (NOAA), and the 
Office of Science and Technology Policy (OSTP), was formed to develop 
Federal recommendations for adapting to climate change impacts and to 
recommend key components to include in a national strategy. In 
addition, the NOAA's proposed Climate Service would, according to NOAA, 
provide a single, reliable, and authoritative source for climate data, 
information, and decision-support services to help individuals, 
businesses, communities, and governments make smart choices in 
anticipation of a climate changed future.
    In our May 2011 report, among other things, we recommended that the 
appropriate entities within the EOP, in consultation with the Congress 
clearly establish Federal strategic climate change priorities and 
assess the effectiveness of current practices for defining and 
reporting related funding. We requested comments on a draft of this 
report from the chair of CEQ, the Director of the Office of Management 
and Budget, and the Director of the OSTP. They did not provide official 
written comments to include in our report. Instead, they provided 
technical comments, which we incorporated as appropriate.

   ADDRESSING GOVERNMENT CHALLENGES BY ADAPTING PRIVATE SECTOR TOOLS

    In the prepared statement for the hearing, the GAO sets forth three 
categories of the challenges faced by government officials at all 
levels in their efforts to adapt to climate change.
    The GAO cites ``focusing on immediate needs'', ``insufficient site-
specific data'', and ``lack of clear roles and responsibilities'' as 
the key areas which hamper informed Government decisionmaking.
    GAO references the lack of adequate computational modeling in an 
example about how a Florida marine sanctuary had difficulty planning, 
and lacked inventories and monitoring systems to frame a baseline of 
the types of plants and animals thriving on the resources they managed, 
thus making it hard to know whether particular habitat changes they 
observed are ``normal'' or aberrant.
    Question. Does this data problem facing the Government stem from a 
wholesale lack of any models that could be adapted?
    Answer. Based on our prior work, finding the right model for the 
right application is challenging. Interpreting the output of such 
models can be equally, if not more challenging. Senior Federal 
officials spoke of the need for a ``clearinghouse'' to validate 
available models which can be of varying quality. The National Research 
Council (NRC) is analyzing many of these issues right now in a study 
titled ``A National Strategy for Advancing Climate Modeling.''
    Question. Why do agencies have such difficulty developing the kinds 
of important information they need to analyze impacts and better 
understand long-term exposure to risk as a result of changing weather 
events?
    Answer. As we reported in October 2009, adaptation information 
challenges generally fit into two categories:
  --the difficulty in justifying the current costs of adaptation with 
        limited information about future benefits; and
  --translating climate data--such as projected temperature and 
        precipitation changes--into information that officials need to 
        make decisions.
    According to a recent NRC report, while the costs of policies to 
mitigate and adapt to climate change may be considerable, it is 
difficult to estimate the costs of inaction--costs which could be much 
greater. This report cites the long time horizon associated with 
climate change, coupled with deep uncertainties associated with 
forecasts and projections, among other issues, as aspects of climate 
change that are challenging for decisionmaking.
    As we reported in October 2009, the process of providing useful 
information to officials making decisions about adaptation can be 
summarized in several steps, each of which is complicated. First, data 
from global-scale models must be ``downscaled'' to provide climate 
information at a geographic scale relevant to decisionmakers. Second, 
climate information must be translated into impacts at the local level, 
such as increased stream flow. Third, local impacts must be translated 
into costs and benefits, since this information is required for many 
decisionmaking processes. Fourth, decisionmakers need baseline 
monitoring data to evaluate adaptation actions over time.
    Question. How complicated would it be, in terms of time and 
resources, to compile inventories to establish foundational starting 
points to better recognize and measure environmental change (and the 
impact of an increase in frequency or severity of weather-related 
events) when it is observed?
    Answer. We have not evaluated the time or resources needed to 
establish or improve monitoring systems for weather-related events. 
Regarding efforts to measure environmental change and the impact of an 
increase in the observed frequency or severity of weather-related 
events, NOAA tracks and consolidates data on its climate services Web 
site at http://www.climate.gov/#climateWatch. Data on this site are 
provided by various NOAA centers, including the National Climatic Data 
Center and the National Weather Service Climate Prediction Center. In 
addition, we are currently reviewing the NOAA's U.S. Historical 
Climatology Network, used to track national trends in basic 
meteorological variables such as temperature and precipitation.
    Question. What private sector experiences, techniques, and lessons 
learned would be useful to evaluate and adapt to address the challenges 
the GAO describes?
    Answer. Our 2007 report on Federal flood and crop insurance 
programs (GAO-07-285) found that many major private insurers were 
proactively incorporating some near-term elements of climate change 
into their risk management practices. In addition, other private 
insurers were approaching climate change at a strategic level by 
publishing reports outlining the potential industry-wide impacts and 
strategies to proactively address the issue. Statements from the 
reinsurance industry at your July 28 hearing emphasized these issues.
    In addition, we are beginning an engagement on climate change 
adaptation and infrastructure development. As we noted in our October 
2009 report (GAO-10-113), of particular importance in adaptation are 
planning decisions involving physical infrastructure projects, which 
require large capital investments and which, by virtue of their 
anticipated lifespan, will have to be resilient to changes in climate 
for many decades. The techniques used by the private sector and lessons 
arising from this work may also prove useful.

                         CONCLUSION OF HEARING

    Senator Durbin. This hearing of the subcommittee stands 
recessed.
    [Whereupon, at 3:15 p.m., Thursday, July 28, the hearing 
was concluded, and the subcommittee was recessed to reconvene 
subject to the call of the Chair.]

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