The Trump administration is considering major changes to the federal government’s emergency management approach that would shift more responsibilities to state, local, tribal, and territorial governments. Though the exact changes and the timeline for implementation remain unclear, the administration’s plans would mean the federal government would have a more limited role by declaring fewer major disasters, contributing less money to disaster recovery, and limiting federal spending on hazard mitigation programs that aim to reduce future disaster losses.
State leaders, emergency management professionals, and policy experts largely agree on the need for federal reforms. This includes shifting more responsibility to state and local governments so they have clearer incentives to reduce the ballooning cost of disasters and invest in disaster resilience.
Currently, the federal government spends tens or even hundreds of billions of dollars per year on disaster management. However, President Trump has said his administration intends to “phase out” the Federal Emergency Management Agency (FEMA) after this hurricane season and place a significant amount of this financial burden on state and local governments.
In a new analysis, we find that many states—especially those at high risk of disasters and with limited fiscal capacity—lack resources to shoulder a greater share of disaster recovery costs.
If the administration reduces the federal government’s role in disaster management, states will need to adjust their budgeting practices to account for their increased responsibilities.
With less support from FEMA, many states won’t have the emergency disaster funds needed to weather a major disaster
By definition, disasters are infrequent events that present unexpected costs. State governments have limited tools for dealing with such costs, and tracking the budgetary resources available for short-term disaster response and long-term disaster recovery is challenging even for researchers and policy experts.
To understand whether states have enough funds set aside for potential disaster response and recovery, we analyzed the National Association of State Budget Officers’ dataset on state budgets from 2019 (the most recent year with data for all 50 states). Since then, some states have created new disaster-specific funds, have increased contributions to existing ones, or—in the face of costly disasters—have had to draw down those funds to cover immediate needs. Florida established the Emergency Preparedness and Response Fund in 2022 to ensure more-flexible disaster spending. In contrast, available data (PDF) suggest California now has less funding set aside for disaster response than in previous years, likely because of multiple, recent, high-cost disasters. However, comprehensive, comparable data across all states remain limited.
In fiscal year 2019, most states had emergency disaster funds—one of the few tools states have to proactively manage likely, but unpredictable, disaster costs. Some funds were specifically focused on disaster relief, such as North Carolina’s State Emergency Response and Disaster Relief Fund, which had $54 million in reserve funds. States also set aside money in reserve funds for broader purposes, such as California’s Special Fund for Economic Uncertainties ($5.39 billion).
Building on our previous analysis of how proposed changes to FEMA and the federal government’s disaster recovery role could affect federal disaster funding, we estimate the costs that could be shifted to state and local governments. Though the scope and timeline of changes to the federal government’s role in disaster recovery is still unclear, our analysis applies the proposals detailed in an April 2025 memo from FEMA that intend the following:
- limit disaster declarations to events with per capita impact four times the current threshold,
- eliminate presidential disaster declarations for snowstorms,
- cap the public assistance federal cost at 75 percent, and
- no longer issue Hazard Mitigation Grant Program funds after disasters.
Though it’s currently unclear if the administration’s proposals include changes to FEMA’s Individual Assistance programs, we estimated these would only be provided if a presidential major disaster declaration were issued. We don’t include significant postdisaster funding that states and local governments receive from other federal agencies, such as the US Department of Housing and Urban Development and Small Business Administration, meaning the overall costs shifted to states could be even higher than those reflected here.
To illustrate how these changes could affect states’ resources, we calculate how much funding each state wouldn’t have had access to in 2019 (most recent year with data availability) had these proposals been in place (referred to as “at risk” funding in this post). We then examine at risk funding relative to the funding states had in disaster reserve accounts that same year.
In 2019, 31 states received federal disaster response and recovery resources. That’s nearly $1.3 billion in federal resources state and local governments couldn’t access after one-year of disasters under the Trump administration’s proposals.
Of those 31 states, only 5 states had enough resources set aside in their budget to cover the costs of disasters in 2019. These funds cover essential response and recovery activities, including individual and household assistance, critical infrastructure repairs, and actions to reduce hazard exposure. Absent federal support, states would need to identify own-source revenue to cover costs or face a more prolonged, incomplete recovery, with significant well-being and economic implications for communities.
Across the 25 states that didn’t have sufficient funds set aside, the difference was, on average, $37.9 million in nominal terms. In 2019, North Carolina had $54 million in reserve funds but would have faced a $46 million shortfall recovering from Hurricane Dorian and Tropical Storm Michael without the $100 million in FEMA resources it received. Though a single year is only a snapshot in time, it highlights how much emergency funding states could need if the federal government curtails spending.
Rainy day funds could help states prepare for fewer FEMA resources, but disasters aren’t states’ only unexpected expenses
Rainy day funds are another fiscal tool states use to plan for disasters, but they aren’t as effective as dedicated emergency funds because they’re designed to support states when they face an unexpected economic downturn and revenue shortfalls—not to act as a catch-all for unexpected expenses.
Still, some states like Oregon have used rainy day funds for disaster purposes. As of 2025, all but four states have rainy day funds, ranging from $240 million in South Dakota to upwards of $20 billion in Texas.
Overall, states’ rainy day funds are in a relatively strong position thanks to temporarily strong revenues during the pandemic. In response to recent years’ fiscal uncertainty, several states have formalized rules to build and maintain these reserves more consistently to better handle economic volatility. But these reserves are limited. And the pressures on state budgets are growing as the federal government shifts other financial responsibilities to states.
In Florida, Hurricanes Ian and Nicole (2022) would have cost the state an additional $563 million in nominal terms if the proposed changes to FEMA had been in effect. This would have represented roughly 21 percent of the state’s rainy day fund at the time and about 1 percent of the state’s total tax revenue.
In 2020, Louisiana was hit by multiple storms, followed by Hurricane Ida and other weather events in 2021. Under the proposed reductions in FEMA support, Louisiana would have faced an estimated $592 million in additional costs in 2020 and $768 million in 2021 (in nominal terms), far exceeding the state’s rainy day funds in both years. The amount of FEMA funding Louisiana received was equivalent to 5.2 percent of its total state tax revenue in 2020 and 6.3 percent in 2021.
Other states vulnerable to disasters like California and New York have greater fiscal capacity and larger rainy day funds, which means they could absorb the loss of FEMA funding more readily. But even in these states, the fiscal impact could be severe, especially in years when disasters are widespread or especially costly.
Taking on more disaster management responsibilities would be toughest for states at high risk of disasters with low fiscal capacity
If the administration reduces the size and role of FEMA and the federal government in disaster management, states would need to adjust their budgeting practices to account for their increased responsibilities.
To assess states’ capacity to offset FEMA funding losses through own-source revenue generation, we looked at each state’s overall fiscal capacity using per capita personal income (PCPI). PCPI represents a state’s ability to raise revenues from its own sources, with lower values indicating reduced ability to raise revenues. Though not a perfect measure (PDF), it’s used in most federal grant allocation formulas. For example, FEMA explicitly incorporates PCPI (PDF), alongside total taxable resources, to evaluate states’ need for supplemental assistance.
Our analysis indicates losing FEMA funding would be especially hard on states at high risk of disasters and with low fiscal capacity, such as Louisiana and North Carolina. These states also often have limited rainy day funds.
States with higher fiscal capacity, stronger rainy day reserves, and diversified revenue structures, like California and New York, could more easily weather the short-term impacts of losing FEMA funding.
How state and local budget managers can prepare for an evolving federal emergency funding landscape
Emergency managers are already preparing for a hurricane and wildfire season during which states may receive significantly less federal support by updating their emergency plans, establishing staffing surge capacity, and stockpiling essential materials. State policymakers and budget officials could support emergency managers’ efforts to ensure sufficient funding is available to support recovery by taking the following steps:
- Bolster state-level emergency reserve funds. States should proactively expand their own disaster reserve funds to ensure they can respond rapidly to emergencies. This may involve legislative action to increase fund balances or creating automatic triggers for fund replenishment.
- Strengthen regional coordination and public-private partnerships. States could strengthen collaboration with local governments, neighboring states, and the private sector to pool resources, share expertise, and streamline emergency response. This includes investing in shared infrastructure for emergency response. Existing networks to share staff and technical capacity could serve as models to pool funding resources.
- Invest in local capacity and risk mitigation. States could revisit and update building codes, invest in infrastructure upgrades, and provide technical assistance to rural and disadvantaged communities most vulnerable to disasters. By strengthening local resilience and preparedness, states can reduce future disaster costs and improve recovery outcomes, even with reduced federal support.
- Encourage and expand insurance coverage: As many communities struggle to afford and access insurance (PDF), state insurance regulators and agencies can take steps to expand coverage and close the protection gap. Efforts to work with insurers to incentivize household mitigation activities, like fortified roofs, can reduce overall losses.
With 2025 projected to be an above-normal hurricane season, state and local policymakers need both short- and long-term fiscal strategies to boost disaster resources to ensure communities can recover from storms and reduce losses from natural hazards.
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