[Congressional Record Volume 144, Number 135 (Thursday, October 1, 1998)]
[Senate]
[Pages S11294-S11297]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       CBO COST ANALYSIS--S. 2361

 Mr. CHAFEE. Mr. President, on September 11, 1998, the 
Committee on Environmental and Public Works filed Senate Report 105-
326, to accompany S. 2361, the Disaster Mitigation Act of 1998. When 
the report was filed, the letter and analysis of the cost of the 
legislation prepared by the Congressional Budget Office, as required by 
Section 403 of the Congressional Budget and Impoundment Control Act, 
was not available to the committee. That information was received on 
September 29, 1998. Therefore, I request that the letter from the 
Congressional Budget Office and cost analysis be placed in the 
Congressional Record.

                                                    U.S. Congress,


                                  Congressional Budget Office,

                               Washington, DC, September 29, 1998.
     Hon. John H. Chafee,
     Chairman, Committee on Environment and Public Works, U.S. 
         Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for S. 2361, the Disaster 
     Mitigation Act of 1998.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Kristen 
     Layman (for federal costs) and Lisa Cash Driskill (for the 
     state and local impact).
           Sincerely,
                                                  June E. O'Neill,
                                                         Director.

     CONGRESSIONAL BUDGET OFFICE COST ESTIMATE, SEPTEMBER 29, 1998

                S. 2361: Disaster Mitigation Act of 1998

(As ordered reported by the Senate Committee on Environment and Public 
                        Works on July 29, 1998)


                                summary

       S. 2361 would amend the Robert T. Stafford Disaster Relief 
     and Emergency Assistance Act to authorize a predisaster 
     mitigation

[[Page S11295]]

     program and make changes to the existing disaster relief 
     program.
       S. 2361 would emphasize predisaster mitigation in order to 
     reduce the long-run costs of disasters. If the authorized 
     funding for mitigation efforts is provided and used 
     judiciously, enactment of this bill could lead to substantial 
     savings to the federal government by reducing the need for 
     future disaster relief funds. CBO cannot estimate the 
     magnitude of such savings because we cannot predict either 
     the frequency or incidence of major natural disasters.
       The bill would authorize the appropriation of $175 million 
     ($35 million a year) over fiscal years 1998 through 2002 for 
     a predisaster mitigation program. In addition to these 
     specified authorizations, other provisions in S. 2361 would 
     result in changes in discretionary spending, assuming 
     appropriation of the necessary amounts. In total, CBO 
     estimates that implementing S. 2361 would require net new 
     appropriations of $585 million over the 1999-2003 period: 
     $140 million from the amounts specified in the bill ($175 
     million minus the 1998 authorization of $35 million) and $445 
     million from other provisions. That spending may be offset by 
     savings in regular and emergency appropriations for disaster 
     relief, but CBO cannot estimate the timing or precise amounts 
     of the potential savings. Over the next 10 years, such 
     savings could exceed the $140 million that the bill would 
     authorize for predisaster mitigation efforts over fiscal 
     years 1999 through 2002.
       S. 2361 also would affect direct spending by speeding up 
     the disbursement of some existing disaster relief funds; 
     therefore, pay-as-you-go procedures would apply. CBO 
     estimates that outlays from such funds would be $230 million 
     higher in 1999 than they would be under current law, but that 
     there would be no net change in direct spending from this 
     provision over the 1999-2003 period. S. 2361 would affect 
     direct spending in two other ways that would have no 
     significant budgetary impact. It would expand the 
     definition of public safety officer to include certain 
     federal and state emergency management personnel, thereby 
     increasing payments for death benefits from the public 
     safety officers program administered by the Department of 
     Justice. The bill also would raise offsetting receipts by 
     an estimated $3 million each year, but that increase would 
     be matched by higher spending because the Federal 
     Emergency Management Agency (FEMA) would be allowed to 
     spend those receipts without appropriation action.
       S. 2361 contains no intergovernmental or private-sector 
     mandates as defined in the Unfunded Mandates Reform Act 
     (UMRA) and would significantly benefit the budgets of state, 
     local, and tribal governments.


               description of the bill's major provisions

       Title I would establish a program to provide financial 
     assistance to state and local governments for predisaster 
     mitigation activities. The predisaster mitigation program 
     would expire on October 1, 2003. S. 2361 would require the 
     President to transmit a report to the Congress that would 
     evaluate efforts to implement the predisaster hazard 
     mitigation programs and recommend a process for transferring 
     greater authority over the program to states.
       Title I also would remove a yearly cap of $50,000 per state 
     on the grants that the President makes for improving and 
     maintaining disaster assistance plans and would increase the 
     maximum federal contribution for mitigation costs from 15 
     percent to 20 percent.
       Title II would combine any expenses not chargeable to a 
     specific project into a single category called management 
     costs. It would direct the President to establish standard 
     rates for reimbursing states for such costs.
       In addition, title II would reduce the federal government's 
     share of costs for repairing damaged facilities from 90 
     percent to 75 percent, but would allow the President the 
     flexibility to make the contribution as much as 90 percent if 
     the President determines that funds will be used for 
     mitigation activities. Title II would also allow the 
     President to use the estimated cost of repairing or replacing 
     a facility, rather than the actual cost, to determine the 
     level of assistance to provide. S. 2361 would establish an 
     expert panel to develop procedures for estimating the cost of 
     repairing a facility.
       Title II would combine the Temporary Housing Assistance 
     (THA) and Individual and Family Grant (IFG) programs into one 
     program, and would eliminate the community disaster loan 
     program, a program that assists any local government that has 
     suffered a substantial loss of tax revenues as a result of a 
     major disaster.
       Finally, title II would authorize the President to provide 
     assistance to any local government that helps to suppress a 
     fire that threatens the destruction of public or private 
     forests and grasslands.
       Title III would expand the definition of public safety 
     officer to include permanent employees of FEMA and employees 
     of state or local emergency management agencies whose duties 
     are determined to be hazardous and related to a major 
     disaster. As a result, more employees would be eligible for 
     death, disability, and education benefits.


                estimated cost to the federal government

       CBO estimates that implementing S. 2361 would result in 
     additional discretionary outlays of $582 million over the 
     1999-2003 period ($137 million from authorizations specified 
     in the bill and $445 million from other provisions). These 
     costs are likely to be at least partially offset by future 
     savings resulting from predisaster mitigation efforts, but 
     CBO cannot estimate the magnitude or timing of such savings. 
     S. 2361 would speed up spending of certain existing funds and 
     would thus affect direct spending. However, we estimate no 
     net change over the 1999-2003 period from that timing shift. 
     S. 2361 would also increase offsetting receipts and direct 
     spending of such receipts by approximately $3 million each 
     year from 1999 through 2003.
       The estimated budgetary impact of certain provisions in S. 
     2361 is shown in the following table. The table does not 
     reflect some potential savings and costs from provisions that 
     may affect discretionary spending but for which CBO cannot 
     estimate the likely effects. In particular, we cannot 
     estimate the potential savings in the costs of future 
     disaster relief from the increased spending on predisaster 
     mitigation activities that would be authorized by S. 2361. 
     The costs of this legislation fall within budget function 450 
     (community and regional development).

                                    [By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                   1998       1999       2000       2001       2002       2003
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION
Spending for Disaster Relief Under Current
 Law:
    Budget Authority/Authorization Level \1\..      1,920        327        335        344        352        361
    Estimated Outlays.........................       2,00      2,580      2,060      1,741      1,211        844
Proposed Changes:
    Specified Authorization for Predisaster
     Mitigation:
        Authorization Level...................          0         35         35         35         35          0
        Estimated Outlays.....................          0         18         32         35         35         17
    Estimated Authorizations:
        Authorization Level...................          0        197         62         62         62         62
        Estimated Outlays.....................          0        197         62         62         62         62
Spending for Disaster Relief Under S. 2361:
    Estimated Authorization Level.............      1,920        559        432        441        449        423
    Estimated Outlays.........................      2,000      2,795      2,154      1,838      1,308        923
                                           CHANGES IN DIRECT SPENDING
Estimated Budget Authority....................          0          0          0          0          0          0
Estimated Outlays.............................          0        230      (\2\)       -138        -92     (\2\)
----------------------------------------------------------------------------------------------------------------
\1\ The 1998 level is the amount appropriated for that year, including $1.6 billion for an emergency
  supplemental appropriation provided in Public Law 105-74. The remainder of the 1998 level is the regular
  appropriation of $320 million. The levels shown for 1999 through 2003 are CBO baseline projections assuming
  increases for anticipated inflation. Alternatively, if the comparison were made to a baseline without
  discretionary inflation, the current law authorization level would be $320 million each year, but the
  incremental cost of the bill would be the same.
\2\ Less than $500,000.

                           basis of estimate

       For the purposes of this estimate, CBO assumes that S. 2361 
     will be enacted near the beginning of fiscal year 1999, and 
     that the amounts authorized and estimated to be necessary 
     will be appropriated near the start of each fiscal year.
     Spending Subject to Appropriation
       S. 2361 contains provisions that would result in both costs 
     and savings to the federal government. CBO estimates costs 
     associated with provisions that would: Authorize 
     appropriations for predisaster mitigation, increase the 
     federal contribution for mitigation costs, combine the 
     Individual Family Grant program and the Temporary Housing 
     Assistance program, remove a cap on grants for disaster 
     assistance plans, and increase certain disability and 
     education benefits by expanding the definition of public 
     safety officers.
       CBO estimates savings associated with provisions that 
     would: Allow the President to use the estimated cost of 
     repairs rather than the actual cost, and eliminate the 
     community disaster loan program.
       CBO cannot estimate the discretionary effects of provisions 
     that would: Achieve long-run savings associated with the 
     predisaster mitigation efforts, encourage provision of 
     financial assistance rather than provision of housing units, 
     establish standardized rates for reimbursement of management 
     costs, provide grants for the testing and application of 
     hazard identification technologies, establish a pilot program 
     to determine the desirability of state administration of 
     parts of the disaster relief program, and authorize

[[Page S11296]]

     the President to provide fire suppression assistance to local 
     governments.
       Provisions with Estimated Costs. Under current law, 15 
     percent of the estimated amount of grants made with respect 
     to a major disaster would be provided to the state for post-
     disaster mitigation activities. S. 2361 would increase this 
     percentage to 20 percent for all major disasters declared 
     after March 1, 1997. FEMA spent $332 million for post-
     disaster mitigation from March 1, 1997, to August 31, 1998. 
     If the contribution were raised by one-third, the federal 
     government would make an additional $111 million in grants 
     for its share of mitigation activities during this period. To 
     assess future costs, CBO based its projection on the average 
     annual amount of such expenses over the last five calendar 
     years--$313 million. Using that five-year average, the rate 
     increase from 15 percent to 20 percent would require 
     increased funding for the federal contribution of $104 
     million a year over the next several years. In total, CBO 
     estimates that implementing this provision would require the 
     appropriation of $655 million over the 1999-2003 period: $135 
     million for the 1997-1998 period and $520 million for the 
     1999-2003 period. This estimate assumes that the funds to 
     pay for the provision would come from future 
     appropriations.
       CBO estimates that combining the Individual Family Grant 
     program and the Temporary Housing Assistance program would 
     result in additional costs of approximately $40 million per 
     year from 1999 through 2003. Under current law, the federal 
     share for the IFG program is 75 percent of the actual cost 
     incurred. Combining the IFG and THA programs would change the 
     federal match to 100 percent.
       CBO estimates that the costs associated with removing the 
     yearly cap of $50,000 per state on the grants that are made 
     to states for improvement of disaster assistance plans would 
     be about $1 million per year. FEMA currently provides the 
     maximum $50,000 grant to each state for disaster assistance 
     planning. Under S. 2361, FEMA would no longer be bound by the 
     cap and might increase spending on state disaster assistance 
     programs, although such spending is subject to appropriation. 
     Additional spending on state disaster assistance plans could 
     result in future savings if improving these disaster plans 
     reduces FEMA's long-run costs.
       S. 2361 would make certain federal and state emergency 
     management employees eligible for disability and education 
     benefits. Enacting the legislation could increase payments of 
     these benefits, assuming appropriation of any necessary 
     amounts. CBO estimates that the effect on discretionary 
     spending would be less than $500,000 a year because the 
     number of additional people qualifying for these benefits 
     would likely be very small.
       Provisions with Estimated Savings. CBO estimates that 
     allowing the President to use the estimated cost of repairing 
     a facility, rather than the actual cost, to determine the 
     level of assistance to provide would result in savings of 
     approximately $56 million per year. According to FEMA, 
     reliance on the estimated cost rather than the actual cost of 
     repair would reduce the administrative burden on the agency. 
     S. 2361 would also establish an expert panel, including 
     representatives from the construction industry, to develop 
     procedures for estimating the cost of repairing a facility. 
     If the actual costs of repair are greater than 120 percent or 
     less than 80 percent of the estimated costs, CBO assumes that 
     FEMA could receive compensation for overpayments or provide 
     compensation for underpayments. Savings from this provision 
     may be partially offset by the additional costs of 
     establishing an expert panel, estimating the cost of repairs 
     with more precision, and evaluating the accuracy of 
     estimates. CBO estimates that this provision would result in 
     an overall 25 percent reduction in administrative costs after 
     accounting for additional costs described above.
       Based on data provided by FEMA, CBO estimates that 
     eliminating the community disaster loan program would result 
     in savings of approximately $23 million each year from 1999 
     through 2003.
       Provisions with Effects CBO Cannot Estimate. The potential 
     budgetary effects of various provisions of S. 2361 are 
     uncertain because they depend upon the extent and nature of 
     future disasters, the manner in which the Administration 
     would implement certain provisions, and the extent to which 
     states would participate in certain programs.
       CBO cannot estimate the potential savings associated with 
     the predisaster mitigation efforts proposed in this bill. 
     Mitigation efforts could achieve substantial savings if 
     damages from future disasters are lessened as a result of the 
     predisaster mitigation measures provided for in the bill. In 
     addition, S. 2361 would encourage the provision of financial 
     assistance to disaster victims for rental of alternative 
     housing accommodations rather than directly providing housing 
     units. CBO expects that this provision would result in 
     savings, but we cannot estimate the amount of the savings. 
     Finally, S. 2361 also would establish standardized 
     reimbursement rates that would reduce the administrative 
     burden of compensating states for indirect costs not 
     chargeable to a specific project. This provision is also 
     likely to result in some savings in FEMA's administrative 
     costs, but CBO has no basis for estimating the likely amount 
     of such savings.
       In addition, S. 2361 would authorize grants for 50 percent 
     of the cost of testing new hazard identification technologies 
     (such as improved floodplain mapping technologies) and would 
     establish a pilot program for the devolution of certain 
     responsibilities to the states. At this time, CBO cannot 
     estimate the costs associated with these provisions, or any 
     potential savings that might later accrue from implementing 
     them.
       Finally, based on information from FEMA, CBO estimates that 
     the provision authorizing the President to provide additional 
     assistance to local governments for fire suppression would 
     probably have no significant net budgetary impact. Additional 
     costs for providing this assistance are likely to be at least 
     partially offset by administrative savings; but CBO cannot 
     estimate the precise net effect of this provision.
     Direct Spending
       Enacting S. 2361 would affect direct spending by speeding 
     up the disbursement of funds that have already been 
     appropriated for post-disaster mitigation under section 404 
     of the Robert T. Stafford Disaster Relief and Emergency 
     Assistance Act. The bill would allow the President to use 
     such funds for the predisaster mitigation program if the 
     funds are not obligated within 30 months after the 
     declaration of the disaster for which they were provided. 
     Based on information from FEMA, CBO estimates that 
     currently approximately $460 million would be eligible for 
     use by the predisaster mitigation program under this 
     provision. Under S. 2361, CBO expects that those funds 
     would be spent between 1999 and 2001, instead of between 
     2000 and 2002, as under current law. Outlays would 
     increase by $230 million in 1999 and drop by an equal 
     amount over fiscal years 2001 and 2002. The net direct 
     spending effect of this provision would be zero over the 
     1999-2003 period. More funds, in addition to the estimated 
     $460 million, could become available in the future for 
     shifts to predisaster mitigation activity, but we cannot 
     estimate the likely amount. Finally, this provision could 
     lead to an increase in future appropriations to replenish 
     the disaster relief fund's resources for post-disaster 
     mitigation, but the magnitude and timing of any such 
     effect is uncertain.
       In addition, the bill would change the definition of public 
     safety officer to include permanent employees of FEMA and 
     employees of a state or local emergency management agency 
     whose duties are determined to be hazardous and related to a 
     major disaster or emergency. CBO estimates that any change in 
     direct spending would be less than $500,000 a year because 
     the number of additional beneficiaries is likely to be very 
     small.
       The bill would expand FEMA's authority to sell temporary 
     housing. Under the Balanced Budget Act of 1997, proceeds from 
     nonroutine asset sales may be counted as a reduction in 
     direct spending for pay-as-you-go purposes only if such sales 
     would entail no net financial cost to the government. CBO 
     estimates that the sale of temporary housing under S. 2361 
     would not result in a net cost to the government. Based on 
     data provided by FEMA detailing the sale of manufactured 
     homes and trailers, CBO estimates that this provision would 
     result in increased offsetting receipts of approximately $3 
     million each year. Because the agency could then spend the 
     new receipts, without appropriation action, this provision 
     would have no net effect on direct spending.
       The provision relating to sales of temporary housing would 
     direct the President to deposit all receipts from such sales 
     into the disaster relief fund, where they could be spent 
     without further appropriation. Under current law, any 
     receipts obtained are deposited into the general fund of the 
     Treasury (and thus are not available for spending). This 
     change would result in increased direct spending related to 
     sales that would occur under current law. But based on 
     information from FEMA, CBO estimates that any such effect 
     would be insignificant because receipts from sales under 
     existing authority are expected to be negligible.


                      pay-as-you-go considerations

       The Balanced Budget and Emergency Deficit Control Act sets 
     up pay-as-you-go procedures for legislation affecting direct 
     spending or receipts. The net changes in outlays that 
     are subject to pay-as-you-go procedures are shown in the 
     following table. The use of existing unexpended balances 
     for predisaster mitigation will increase outlays in 1999, 
     but have no net impact over the next five years. CBO 
     estimates that other effects on direct spending would be 
     less than $500,000 a year. (Enacting the bill would not 
     affect governmental receipts.) For the purposes of 
     enforcing pay-as-you-go procedures, only the effects in 
     the current year, the budget year, and the succeeding four 
     years are counted.

                                                        [By fiscal year, in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    1998       1999       2000       2001       2002       2003       2004       2005       2006       2007       2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays.............          0        230          0       -138        -92          0          0          0          0          0          0
Changes in receipts............                                                       Not applicable
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page S11297]]

        estimated impact on state, local, and tribal governments

       S. 2361 contains no intergovernmental mandates as defined 
     in UMRA and would significantly benefit the budgets of state, 
     local, and tribal governments. The bill would authorize $175 
     million over the next five years to assist in predisaster 
     mitigation projects, and the percentage of funds available 
     for post-disaster mitigation activities would be increased. 
     The 25 percent state matching requirements for individual and 
     family grants and certain housing assistance would no longer 
     be required, reducing the burden on states by an estimated 
     $40 million per year.
       The bill would also amend the definition of public 
     facilities to exclude public golf courses, making them no 
     longer eligible for funding under the Stafford Act. In 
     addition, states or local governments which take longer than 
     three years after declaration of a major disaster to file a 
     claim for assistance would be subject to a potential 
     reduction in the federal government's share of their claim.


                 estimated impact on the private sector

       The bill would impose no new private-sector mandates as 
     defined in UMRA.


                         previous cbo estimate

       On August 5, 1998, CBO prepared a cost estimate for H.R. 
     3869, the Disaster Mitigation Act of 1998, as ordered 
     reported by the House Committee on Transportation and 
     Infrastructure on June 25, 1998. H.R. 3869 differs from S. 
     2361 in that it would provide higher authorization levels for 
     the predisaster mitigation program and would add new 
     restrictions to the funds that a private nonprofit facility 
     could receive for repair and replacement of damaged 
     facilities. H.R. 3869 does not contain provisions that would 
     affect fire suppression assistance and public safety officer 
     benefits as S. 2361 does. Other differences in the two bills 
     do not affect the cost estimates.
       Estimate prepared by: Federal Costs: Kristen Layman, Impact 
     on State, Local, and Tribal Governments: Lisa Cash Driskill.
       Estimate approved by: Robert A. Sunshine, Deputy Assistant 
     Director for Budget Analysis.

                          ____________________