by Joseph Coletti
Senior Fellow, Fiscal Studies, John Locke Foundation
Nobody knows when a hurricane or a recession will hit North Carolina, but everybody knows they will. State legislators kept spending in check and built up a $2 billion Savings Reserve to have money available for either. They have drawn down $750 million of that amount plus $100 million from other sources to help eastern North Carolina recover and rebuild after Hurricane Florence inflicted an estimated $13 billion in damages on the state.
Gov. Roy Cooper originally requested $750 million “down payment” on $1.5 billion over five years split between recovering from this storm and increasing “resiliency” for future storms. His proposal would have used $331 million from the Savings Reserve, $331 million from the unappropriated fund balance and $90 million from other sources. The unappropriated fund balance, however, will likely be used to fund appropriations next fiscal year, and disaster relief is an appropriate use of the Savings Reserve.
Legislators set aside $850 million for hurricane relief and recovery and have committed all but $95 million of it. Their top priority in October was to provide $200 million in matching funds for federal assistance. In addition, with the appropriations this week, legislators have committed state funds with no federal match totaling $290 million to help farmers affected by the storm and its flooding, $147 million to repair and renovate government buildings, schools, colleges, and universities, $35 million for housing assistance, $21 million for coastal storm damage, $12 million for commercial fishers, $12 million for health needs, $10 million for small businesses, $8 million for school nutrition, and the remainder covering other areas. Legislators also directed the budget director to provide a plan to replenish the $750 million from savings.
Gov. Cooper’s desire is to use money not simply to replace what existed but to reduce exposure to flooding and other damages. Most attention has been given to the coast, but more flooding in the past two hurricanes has been inland from overflowing rivers. The Department of Public Safety has been developing new floodplain maps, but one of the requests this year is for more gauges to have better floodplain mapping. Flooding this time broke 28 streamflow records, and all 84 U.S. Geological Survey gauges had levels in the five highest measured.
N.C. Emergency Management Director Mike Sprayberry told the Joint Select Committee on Storm-Related River Debris/Damage that Brunswick and Columbus counties have had four 100-year storms in the past 20 years. Martin Doyle, a professor of river science and policy at Duke University, said eastern North Carolina has a one-in-six chance of a major flooding event in any given year, same as one of the state’s universities winning the national championship in basketball.
Federal funds make wise spending a challenge. Associated Press reported, “Gov. Roy Cooper on Wednesday asked congressional budget-writers and the state’s congressional delegation to provide another $6.3 billion in federal recovery funds on top of the $2.5 billion already expected.” That is in addition to automatic spending including payments from the National Flood Insurance Program.
The National Flood Insurance Program subsidizes the cost of homeowners insurance only if someone builds in a flood plain. Then it forces homeowners through red tape and systematically underpays. It was also $20 billion in debt before hurricane season, and the Congressional Budget Office expects it to lose $1.4 billion annually.
A National Wildlife Federation study from 1998 found that 40 percent of flood insurance program payments, or over $2.5 billion, went to properties that flooded multiple times. It concludes that “many buildings have been rebuilt in place and at original elevations … and remain eligible for subsidized insurance.”
Rutherford Platt, David Salvesen, and George Baldwin, in a 2002 paper published in the journal Coastal Management, found that political pressure after a disaster could overwhelm attempts to limit public costs for repetitive losses. They closed the paper with two quotes from the News & Observer, the first in November 1997:
In the Wake of Hurricane Fran, North Carolina’s coastal communities and residents mined taxpayer accounts to rebuild in fragile areas. Such generosity encourages overdevelopment, at great expense.… The allocation of hundreds of millions in taxpayer dollars has led the federal government to undermine what state officials have been trying to do for decades—discourage development in coastal areas that are vulnerable not just to hurricanes but to heavy storms of any kind.
The second in September 1998:
When a natural disaster strikes, government does, indeed, have a reasonable responsibility to help people rebuild their homes, their businesses, and their lives. … But those are not open-ended obligations. Extending insurance in the face of irresponsible placement of property, building infrastructure that storms are bound to wash away, and encouraging any policy that continues a cycle of predictable damage and guaranteed repair—that sounds like the recipe for chronic disaster. (Sept. 3, 1998)
Looking back 10 years after Katrina, Peter Boettke of the Gulf Coast Recovery Project at the Mercatus Center saw how federal, state, and local governments’ response to a natural disaster could interact with responses by businesses and communities. Several important lessons flow from our studies, including:
Maybe Gov. Cooper and state legislators will look beyond the checkbook and look first to what is happening in the community. And maybe the federal government will end the well-intentioned National Flood Insurance Program that subsidizes rebuilding homes where they are vulnerable to frequent flooding. While they wait for that, the people in these areas can strengthen the bonds they forged during this trial so that their communities will be more resilient regardless of state or federal policy.