THE POLITICAL ECONOMY OF FEMA DISASTER PAYMENTS
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THE POLITICAL ECONOMY OF FEMA DISASTER PAYMENTS
THOMAS A. GARRETT and RUSSELL S. SOBEL
We find that presidential and congressional influences affect the rate of disaster
declaration and the allocation of FEMA disaster expenditures across states. States
politically important to the president have a higher rate of disaster declaration by the
president, and disaster expenditures are higher in states having congressional
representation on FEMA oversight committees. Election year impacts are also
found. Our models predict that nearly half of all disaster relief is motivated
politically rather than by need. The findings reject a purely altruistic model of
FEMA assistance and question the relative effectiveness of government versus
private disaster relief. (JEL D7, H5)
Disasters are very political events. power will put aside their personal self-interests
ÐFormer FEMA Director James Lee Witt
(Testimony to U.S. Senate, 30 April 1996)
in favor of the public good. In these cases then,
in which people would imagine the government
acting benevolently, it is most important to test
I. INTRODUCTION
the predictions of the public choice model.
A central contribution of public choice Tests of the public choice model to various
theory to the analysis of government activity is cases of government activity have their basis in
in viewing the activities of government, not as what has been called the congressional domi-
determined by some single altruistic dictator, nance model, which postulates that bureaus are
but rather as the result of a process involving very responsive to the wishes of congress. As
individual political agents who react to the discussed by Moe (1987; 1997), Weingast and
incentives they face. This somewhat skeptical Moran (1983), and Weingast (1984), the model
view of government provided by the public suggests that congressional committees having
choice approach can be hard for many people both budget and oversight responsibilities see
to accept, particularly those who believe that in that bureaucrats implement the policy prefer-
many important casesÐsuch as regulation, ences of the legislators (legislators are wealth
income redistribution, tax collection, and gen- maximizers) and that the executive branch
eral government spending for the ``public behaves as an electoral vote maximizer.
good''Ðthat the government acts to maximize There have been several empirical tests of var-
public welfare and that individuals in political ious forms of the congressional dominance
model. Wright (1974), Anderson and Tollison
An earlier version of this article was presented at the (1991), and Couch and Shughart (1997) find
2001 Public Choice Society meetings in San Antonio, that New Deal spending across states was cor-
Texas, and the 2001 Southern Economic Association
annual meetings in Tampa, Florida. We have benefited related with congressional power and the
from the helpful comments of an anonymous referee of importance of a state's electoral votes in the
this journal and discussions with Daniel Sutter, Jacob next presidential election. In a study of Federal
Gersen, John Charles Bradbury, and Brian Knight, as
well as other program participants. Remaining errors are Reserve policy, Grier (1987) finds that Fed
our responsibility. The views expressed here are those of the policy is influenced by changes in the leadership
authors and do not necessarily reflect official positions of of the Senate Banking Committee. Faith et al.
the Federal Reserve Bank of St. Louis, the Federal Reserve
System, or the Board of Governors.
Garrett: Senior Economist, Research Division, Federal
Reserve Bank of St. Louis, St. Louis, MO 63102. ABBREVIATIONS
Phone 1-314-444-8601, Fax 1-314-444-8731, E-mail FEMA: Federal Emergency Management Agency
tom.a.garrett@stls.frb.org FTC: Federal Trade Commission
Sobel: Associate Professor, Department of Economics, IRS: Internal Revenue Service
West Virginia University, Morgantown, WV 26506.
Phone 1-304-293-7864, Fax 1-304-293-5652, E-mail OLS: Ordinary Least Squares
rsobel2@wvu.edu
496
Economic Inquiry
(ISSN 0095-2583) DOI: 10.1093/ei/cbg023
Vol. 41, No. 3, July 2003, 496±509 # Western Economic Association InternationalGARRETT & SOBEL: FEMA DISASTER PAYMENTS 497
(1982) show that Federal Trade Commission of about $3 billion for about 50 declared dis-
(FTC) case rulings tend to be more favorable asters each year. Relief varies greatly from
for firms with headquarters in a district having year to year, however, and hit a high in 1994
representation on FTC congressional over- when FEMA disaster expenditures exceeded
sight committees. Finally, Young et al. (2001) $8 billion.
present strong evidence that Internal Revenue The vast majority of FEMA operations and
Service (IRS) audit rates are substantially expenditures are undertaken under the rules
lower in states that are politically important and processes established by the Robert T.
in the next presidential election and are also Stafford Disaster Relief and Emergency Assis-
substantially lower in the congressional dis- tance Act (Public Law 93-288), hereafter
tricts of members on key congressional com- referred to as the Stafford Act. This act estab-
mittees overseeing the IRS. lishes the process for requesting a presidential
Here we examine whether congressional and disaster declaration, defines the types of relief
presidential influences affect the rate of disaster that are available for relief expenditures, and
declaration and the allocation of federal disas- also defines the conditions for obtaining assis-
ter relief payments made by the Federal tance. From a budgetary standpoint, expendi-
Emergency Management Agency (FEMA).1 tures under the Stafford Act come from the
This article has several distinct advantages portion of FEMA's budget known as the Pre-
over earlier works on congressional domi- sident's Disaster Relief Fund. In addition to
nance, afforded by the unique nature of disas- FEMA's activities under the Stafford Act,
ter declaration and relief. The potential exists there are several additional, smaller programs
for political influence to impact the process at undertaken outside the Stafford Act, such as
two distinct stages: whether or not a disaster is the flood insurance program and the U.S. Fire
declared, and then how much money is allo- Administration.
cated for the disaster. After a disaster strikes The activities of FEMA are subject to con-
a particular area, the governor makes a request gressional oversight by several committees. In
to the president for disaster assistance. After the House of Representatives, for example,
receiving a governor's request, the president there are four committees partially responsible
then decides whether or not to declare the for the oversight of FEMA. Two of these com-
state or region a disaster area. Only after mittees oversee the activities of FEMA under
a disaster has been declared by the president the Stafford Act, and the other two oversee the
can disaster relief be given. FEMA is in charge smaller, non±Stafford Act activities. A similar
of determining the level of relief funding for the process is present on the Senate side of FEMA
area, but further appropriations are deter- congressional oversight.
mined by Congress in cases requiring large
amounts of funding beyond FEMA's allocated Sources of Political Influence
budget.
FEMA was created by an executive order of The process for FEMA disaster relief sug-
President Carter in 1979 that essentially gests there are two potential sources by which
merged many separate disaster relief agencies political influence may enter into the process,
that had already been in existence. FEMA is both of which we test empirically. The first
responsible for allocating federal money to avenue of political influence is in the process
areas that have been adversely impacted by of disaster declaration. Disaster declaration is
natural disasters, such as hurricanes, earth- solely in the hands of the president. The
quakes, tornadoes, fires, and severe flooding. Stafford Act also provides the president no
However, a great deal of FEMA funding is also concrete set of criteria on which to declare
allocated for more minor weather pheno- a disaster. Given that disaster declaration is
menon, such as thunderstorms, snowstorms, a decision left entirely to the president, and
and ice storms. FEMA disaster relief is based because there is such a wide range of possible
on the idea that federal aid is necessary to sup- weather phenomenon for which disasters may
plement state and local relief. On average, be declared, it is possible that the president may
FEMA provides annual relief expenditures be more likely to declare a disaster in a state
that is politically important. Also, because the
1. May (1985) and Platt (1999) further discuss the Stafford Act allows the president to unilater-
politics and process of federal disaster relief. ally declare a disaster without the approval of498 ECONOMIC INQUIRY
Congress, it is possible that the president may FEMA Disaster Expenditures
use this power to punish or reward legislators
who support or oppose his policies or just sim- FEMA disaster expenditures were obtained
ply tarnish the image of opposing party legis- for all 50 states over the period 1991 to 1999.
lators in hopes of reducing their probability of These include expenditures on all declared dis-
reelection. asters, such as earthquakes, floods, snow-
The potential for presidential political storms, hurricanes, tornados, and so on. The
manipulation is in part due to the wording of expenditure data are censored in that not every
the Stafford Act, which was made more general state in a given year had a disaster declared, so
in 1988. Federal assistance under the Stafford some observations take the value of zero.2 An
Act should be awarded when the incident ``is of examination of the raw data reveals that some
such severity and magnitude that effective states received significantly higher disaster
response is beyond the capabilities of the relief than other states over the nine-year sam-
state and the affected local governments and ple period. The top ten and bottom ten states in
that federal assistance is necessary.'' The vague terms of disaster relief received (1996 dollars)
language of what constitutes a disaster means are shown in Table 1. Not surprising is the
that an official federal disaster could have finding that the bigger, more populated states
occurred whenever the president said it did. like California, Florida, and Texas received
In fact, before the Stafford Act was modified significantly more funding, because these states
in 1988, the average number of disasters a year along with several others in the top ten are
between 1983 and 1988 was 25. Between 1989 subject to relatively common disasters, such
and 1994, the average number of disasters as earthquakes, hurricanes, flooding, and
a year increased to 41. tornados.
The second avenue of political influence The raw data also allows an interesting
may occur through congressional oversight. examination of recent major disasters and
This is spurred by the important fact that the the level of relief received. Many Midwestern
Stafford Act specifically prohibits the use of and Southern states bordering the Mississippi
any arithmetic formula to determine disaster River had significantly higher FEMA disaster
relief to any geographic area. In other words, relief in 1993 than in other years due to the
there are no set criteria on which levels of massive floods that year. In 1992, the year
FEMA disaster expenditures are based. It is of Hurricane Andrew, Florida received
important for the agency to be in good standing $1.86 billion in FEMA disaster expenditures,
with the oversight committees, because these or roughly 72% of Florida's total disaster
committees can have considerable influence expenditures received over the sample period.
over the agency. In 1992, for example, the Similarly, of California's $8.87 billion in dis-
House Appropriations Committee found evi- aster relief over the sample period, $7.24 billion
dence of excessive and wasteful spending by was received in 1994, the year of the Northridge
several senior executives at FEMA, such as earthquake.
chauffeur-driven cars. The Appropriations
FEMA Oversight Subcommittees
Committee readily cut several executive posi-
tions and reduced the budgets of others Are disaster expenditure levels solely a result
(Washington Post, 1992). Given the power of of the natural occurrence and size of the dis-
oversight committees, it is thus possible that aster, or does congressional influence also
states that are represented on these committees determine disaster expenditure levels? To
overseeing FEMA receive a disproportionately explore whether those states having greater
larger amount of money for disaster relief to representation on FEMA oversight commit-
remain in the good graces of the oversight tees receive higher FEMA disaster expendi-
committees. tures, we researched which House and Senate
subcommittees have FEMA oversight respon-
II. DATA DESCRIPTION sibilities and how many legislators from each
state for a given year serve on each oversight
This section provides an overview of several
key variables we use in our empirical tests of
2. Of the 450 observations on disaster expenditures,
political influence on disaster declaration and 162 had a value of zero. Over the nine-year sample period,
expenditures. all 50 states received some disaster relief.GARRETT & SOBEL: FEMA DISASTER PAYMENTS 499
TABLE 1
Total FEMA Disaster Expenditures by State, 1991 to 1999
Top Ten States Bottom Ten States
Expenditures Expenditures
State (in millions) State (in millions)
California $8,871.5 Nevada $38.3
Florida 2,594.0 New Hampshire 30.7
North Carolina 950.3 Connecticut 28.7
Illinois 686.6 Colorado 28.6
Georgia 640.5 Delaware 24.3
North Dakota 590.5 Rhode Island 19.2
Minnesota 510.7 Montana 15.8
Texas 506.2 New Mexico 10.5
New York 502.8 Utah 1.8
Louisiana 426.2 Wyoming 1.1
Note: Data obtained from FEMA and is converted to real 1996 dollars.
subcommittee. This information was obtained the Banking and Financial Services Commit-
from the Almanac of American Politics over tee, which oversees the Flood Insurance Pro-
various years and was confirmed by FEMA. gram. In the Senate, the three subcommittees
There are a total of nine subcommittees that are (1) the Oversight of Government Manage-
oversee FEMA: four in the House of Repre- ment and District of Columbia subcommittee
sentatives and five in the Senate. Of the four of the Government Affairs Committee; (2) the
subcommittees in the House, two oversee Housing Opportunity and Community Devel-
major disaster funding (the Stafford Act) and opment subcommittee of the Banking, Hous-
two oversee more minor FEMA programs, ing, and Urban Affairs Committee; and (3) the
such as fire prevention, flood insurance, and Science, Technology, and Space subcommittee
earthquake safety programs. In the Senate, of the Commerce, Science, and Transportation
two subcommittees also oversee disaster Committee.
expenditures and three oversee other FEMA The number of members on each of the nine
programs. In the House, the two subcommit- subcommittees is relatively constant over the
tees that oversee disaster relief under the years, although membership can vary. A listing
Stafford Act are (1) the Water, Resources, of each subcommittee and the average number
and Environment subcommittee of the Trans- of members on each committee over the period
portation and Infrastructure Committee; and 1991 through 1999 is provided in Table 2. In
(2) the Veterans Administration, Housing and addition, membership is not uniform across the
Urban Development, and Independent Agency statesÐsome states may have more than one
subcommittee of the House Appropriations legislator on an oversight subcommittee,
Committee. In the Senate, the two Stafford Act whereas other states may have no legislators
oversight subcommittees are (1) the Clean Air, on a subcommittee.
Wetlands, Private Property and Nuclear Safety
subcommittee of the Environment and Public Presidential Influence
Works Committee; and (2) the Veterans
Administration, Housing and Urban Develop- Federal disaster declaration is open to poli-
ment, and Independent Agency subcommittee tical influences because there are no established
of the Senate Appropriations Committee. set of criteria the president uses when deciding
The non±Stafford Act oversight committees whether or not to declare a disaster, and the
are, in the House, (1) the Basic Research sub- president has unilateral authority to declare
committee of the Science Committee, which a disaster. The process of disaster declaration
oversees the U.S. Fire Administration and involves the governor of the affected state
the Earthquake program; and (2) the Housing contacting the president, with the president
and Community Opportunity subcommittee of making the final decision as to whether or500 ECONOMIC INQUIRY
TABLE 2
FEMA Oversight Committees and Average Membership
Average Number of
Members 1991±1999
Stafford Act oversight subcommittees
House of Representatives
Water, Resources, and Environment 30
Veterans Administration, Housing and 11
Urban Development, and Independent Agency
Senate
Clean Air, Wetlands, Private Property, 7
and Nuclear Safety
Veterans Administration, Housing and 11
Urban Development, and Independent Agency
Non±Stafford Act oversight subcommittees
House of Representatives
Basic Research 20
Housing and Community Opportunity 28
Senate
Oversight of Government Management 5
and District of Columbia
Housing Opportunity and 11
Community Development
Science, Technology, and Space 9
Source: Subcommittee membership by state for each legislator is from the
Almanac of American Politics. FEMA oversight by the above subcommittees
was confirmed by the Almanac and FEMA.
not a disaster is declared. The public choice presidential elections from 1956 to 1996 that
model predicts that those states politically were won by a Democrat (America Votes, var-
important to the president are likely to have ious years). This percentage was then entered
more disasters declared. In fact, an article in into a formula that produces a maximum value
American Spectator (1996) summarized several of one if the percent of elections won is 50%,
stories from the nation's top newspapers doc- and has a value that symmetrically decreases to
umenting that many states who had bona fide zero as the percentage of elections won
disasters were overlooked, while electoral vote- approaches either 0% or 100%.3 This value is
rich states, such as California and Florida, had then multiplied by the number of electoral
disasters declared in the wake of mild natural votes in each state (from the Federal Register)
occurrences. Downton and Pielke (2002) to give us our electoral importance variable.
provide evidence of this by showing that pre- Thus, if the president has a 50±50 chance of
sidential flood declarations are greater in years winning a state, then the electoral importance
when the president is running for reelection. of that state is equal to the state's number of
Willet (1989) and Tabellini and Alesina electoral votes, whereas a 0% or 100% chance of
(1990) suggest that the political importance winning a state provides an electoral impor-
of each state can be measured by its expected tance of zero.
number of electoral votes. We construct a mea-
sure, which we term electoral importance, that
considers that the president has a greater incen- 3. The formula we used is Y 1ÿ4(Xÿ0.5)2, where X
is the percent of presidential elections between 1956 and
tive to declare more disasters in those states 1996 won by a Democrat and Y is the weighting factor
where his chance of reelection is near 50% having a maximum value of one at X 50% and a minimum
(i.e., battle-ground states), compared to states value of zero at X 0% or X 100%. Y is multiplied by the
where his chances are greater than or less than number of electoral votes in a state to arrive at the measure
of electoral importance. Because Y has an inverted U shape,
50%. To compute our measure of electoral the value of Y is the same if we used the percent of pre-
importance, we first calculated the percent of sidential elections that were won by a Republican.GARRETT & SOBEL: FEMA DISASTER PAYMENTS 501
State governors often serve as the link political influence of oversight committees and
between the president and a state's constitu- the president. To evaluate the impact of over-
ency, especially in election years. Governors sight committee membership and presidential
are often seen beside the president as he influence on disaster expenditures and declara-
tours or campaigns in the state. During election tions, it is important that we control for the size
years governors of the same political party as of the natural disaster in our empirical models.
a presidential candidate often publicly offer We consider two variables that serve as mea-
their endorsement of the candidate. Governors sures for the size of a disaster. One variable is
also offer public comments on the president's the dollar amount of private property insur-
agenda. Whether the comments are favorable is ance claims due to natural disasters, provided
surely dependent on the political party affilia- by the American Insurance Services Group,
tion of the governor and the president. Given Inc. This variable is available by state by
these relationships between governors and the year and is simply the total dollar amount of
president, the public choice model suggests that private property insurance claims that were
the president may declare more disasters in filed as a result of a natural disaster. The second
those states whose governor is of the same variable is Red Cross financial disaster
political party as the president. We include a assistance, which includes monetary payments
dummy variable that accounts for this rela- to individuals and families along with food,
tionship that has a value of one if the governor medicine, and so on. It is expected that the Red
from state i in year t is from the same political Cross financial assistance variable and the pri-
party as the president, and has a value of zero vate insurance claims variable are both directly
otherwise. related to the level of FEMA disaster expendi-
Finally, because the Stafford Act allows the tures.4 Thus, if we think of total FEMA disaster
president to unilaterally declare a disaster with- assistance as having both an altruistic compo-
out the approval of Congress, it is possible that nent (based on the severity of the disaster) and
the president may use this power to punish or a politically motivated component, by includ-
reward legislators. A Democratic president ing the Red Cross and private insurance vari-
may decide not to declare a disaster in a state ables in the regression we can control for the
with predominately Republican representation severity component and isolate the politically
in Congress, either to punish the legislators for motivated component of FEMA expenditures.
not supporting his policies or just to hurt the
legislators politically, especially in congres-
sional election years. In addition, disaster III. EMPIRICAL METHODOLOGY
declaration may act as a sort of log-rolling
between the president and Congress. The abil- This section presents the two empirical
ity of the president to use disaster declaration as models we use to test for political influence
a political tool, however, is tempered by the over disaster declaration and FEMA disaster
severity of the disaster and the nationwide expenditures. Recall that the disaster declara-
attention it receives. We compute for each tion and relief process is that the president de-
year the percent of legislators from each state cides whether or not to declare the state or
in the U.S. Congress that are Republican and region a disaster area after receiving a request
the percent of legislators from each state in from the governor. Only after a disaster has
Congress that are Democrats. For years in been declared by the president can relief be
our sample in which George H. Bush was pre- provided by FEMA. The first model we present
sident, this Congress variable is the percent of accounts for those factors, political and other-
legislators from each state that are Republican, wise, influencing the rate of disaster declaration
and for Bill Clinton years the Congress variable by the president. The second model explores
is the percent of legislators from each state that the factors influencing FEMA disaster expen-
are Democrat. ditures to states, namely, whether states having
greater representation on FEMA oversight
committees receive higher FEMA disaster
Controlling for Disaster Size payments.
Of course, disaster declaration and expen-
4. We discuss the potential simultaneity between
diture levels are directly related to the severity FEMA expenditures and the Red Cross and private insur-
of an actual disaster besides the possible ance variables later in the article.502 ECONOMIC INQUIRY
A Model of Presidential Disaster Estimating (3) will provide coefficient esti-
Declaration mates, and finding @E [yitjx]/@x provides
the marginal effects. These measure the
The number of presidential disaster declara- impact of each explanatory variable on the
tions by state by year was provided by FEMA. mean rate of occurrence for disaster
Over the period 1991 through 1999, the number declaration.
of presidential disaster declarations ranged We anticipate the electoral importance vari-
from 98 in Texas to 1 in Wyoming. Florida and able to be positive, suggesting that the rate of
California had 23 and 16 disasters declared, disaster declaration is higher in those states
respectively. Most states had between 1 and that are politically important to the president.
20 disasters declared over the sample period. If the president rewards governors of the same
To explore the determinants of presidential dis- political party, then the governor variable
aster declaration, one could, using ordinary should be positive. If disaster declaration is
least squares (OLS), regress the number of pre- used as a tool by the president to politically
sidential disasters declared in state i in year t on help legislators of the same political party (or
a vector of explanatory variables, including harm legislators of the opposing political
state electoral importance and the governor party), a positive relationship is expected
dummy variable.5 However, the count nature between the Congress variable and the rate
of the dependent variable will render OLS of disaster declaration. We also include per
inconsistent, as well as introduce heteroscedas- capita income to explore whether relatively
ticity into the model. The number of disasters wealthier states receive more or less favorable
declared, like the disaster expenditure variable, treatment by the president, along with a set of
is censored. Also, the nonzero observations regional and year dummy variables to control
take values of yit 1, 2, 3, and so on depending for unobserved state and time effects. The coef-
on the number of disasters the president ficient estimates for the 1992 and 1996 year
declared. To consider the count nature of the dummy variables are reported to reveal any
dependent variable, we estimate the disaster differences in the mean rate of presidential dis-
declaration model using a Poisson regression aster declaration during an election year (1991
model. is the omitted category).6 In an attempt to
The basic Poisson model (see Greene, control for the actual number of disasters in
2000) is the state that year, we also include the number
1
y
Prob Yit yit eÿlit litit =yit !, of disasters declared by private insurance
companies as an independent variable in the
yit 0, 1, 2, 3, . . . , regressions.7
where lit is the average number of occurrences
(in this case disasters declared) within the given
space and time interval (state and year). It is A Model of FEMA Disaster Expenditures
commonly assumed that lit takes the form We examine the impact of oversight
2 ln lit b0 x: committee membership on FEMA disaster
expenditures by regressing FEMA disaster
Given the nonlinear nature of the model,
maximum likelihood is the favored estimation 6. There are a total of nine regional dummy variables,
approach. The likelihood function for (1) can and a state's assignment to a particular region is based on
be written, using (2), as the assignment given by the U.S. Bureau of the Census. The
nine regions are: New England, Mid-Atlantic, East North
y Central, West North Central, South Atlantic, East South
ln L ln eÿlit litit =yit ! Central, West South Central, Mountain, and Pacific
(omitted).
X
n X
T
7. The number of disasters declared by private insur-
3 ln L ÿlit yit ln lit ÿ ln yit !: ance companies is from the American Insurance Services
i1 t1 Group, Property Claim Services. According to the indus-
try, a weather event is considered a natural disaster if total
damages in a geographic area exceed $25 million. This value
5. It would be of interest to explore what percent of has increased over time to reflect increases in building costs.
disaster declaration requests by state governors were Insurance payments are based solely on individuals' insur-
honored by the president. However, the number of disaster ance claims and are not influenced by the level of federal
declaration requests was not available. disaster relief.GARRETT & SOBEL: FEMA DISASTER PAYMENTS 503
expenditures on several subcommittee vari- subcommittee variable because the Stafford
ables and other explanatory variables. The Act directly involves disaster relief, the primary
models take the form: function of FEMA.
We then separated the Stafford Act and
4 yit b0 x eit non±Stafford Act variables to explore any dif-
ferences between Senate and House subcom-
mittees. Senators and representatives face
yit 0 if yit 0, different median voters. Also, given that dis-
asters are normally isolated to a small geo-
graphic area, one might expect House
yit yit if yit 40:
members from the impacted district to be
more responsive to the disaster (and thus
Given the censored nature of the dependent exert more influence) than a senator from the
variable, performing OLS on Equation (4) will same state. This is because for most natural
result in inconsistent coefficient estimates. A disasters, a House member will have a higher
Tobit regression model is used to account for percentage of his or her constituency impacted
the censored data and arrive at consistent coef- by the disaster than a senator from the same
ficient estimates. The Tobit coefficients each state. The benefit FEMA can provide a legisla-
measure the impact of the explanatory variable tor on an oversight committee in terms of
on the dependent variable given that a disaster increased votes or support is thus higher for
has been declared (positive values of yit only). representatives than it is for senators. In this
The marginal effects are each interpreted as environment, Goff and Grier (1993) suggest
the effect of the explanatory variable on the that senators will be less politically effective
expected value of the dependent variable, and less likely to apply influence relative to
incorporating both their effect on the probabil- House members. Furthermore, as noted in
ity a disaster is declared and the level of disaster the introduction, it was the House Approp-
expenditures. Whether one is interested in riations Committee that took action against
the Tobit coefficients or the marginal effects excessive spending at FEMA. This suggests
depends on the question at hand. Although that FEMA may be more responsive to this
we generate both estimates, we are primarily and possibly other House committees.
interested in the Tobit coefficients. To explore these possible differences be-
We generate two oversight subcommittee tween Senate and House subcommittees, we
variables to test whether states having greater separated the Stafford Act variable into two
representation on Stafford Act and non± new variables, one reflecting House subcom-
Stafford Act oversight subcommittees receive mittees overseeing the Stafford Act and the
higher FEMA disaster payments. One variable other reflecting Senate subcommittees oversee-
represents the total number of legislators from ing the Stafford Act. Similarly, we divided the
state i in year t that serve on one or more of variable for non±Stafford Act oversight sub-
four Stafford Act oversight subcommittees committees into both a Senate variable and
(shown in Table 2). The other variable repre- a House variable.
sents the total number of legislators from state i Other variables in the disaster expenditure
in year t that serve on one or more of the five model include private insurance property
non±Stafford Act FEMA oversight subcom- claims from natural disasters and Red Cross
mittees. For any state within a given year, sub- financial disaster assistance. These variables
committee membership by state ranges from control for the size of the disaster and are
zero to seven for all of the Stafford Act over- expected to be positive. As in the disaster
sight committees and ranges from zero to ten declaration model, we also include regional
for all of the non±Stafford Act subcommittees. and year dummy variables with the 1992 and
Membership by state also varies year to year in 1996 dummy variables reported to reveal dif-
terms of the number of legislators on each sub- ferences in the mean level of disaster expendi-
committee from each state. Although we expect tures during an election year. Finally, the
both subcommittee variables to be positive number of FEMA disasters declared is in-
and significant, we also expect the Stafford cluded in the models because the number of
Act oversight subcommittee variable to be disasters declared is a determinant of the prob-
larger than the non±Stafford Act oversight ability that the expenditure variable is nonzero.504 ECONOMIC INQUIRY
TABLE 3
Factors Impacting the Rate of Presidential Disaster Declaration;
Poisson Regressions, Marginal Effects
Variable Model (1) Model (2) Model (3)
Constant 0.486 (0.87) 0.510 (0.90) 0.539 (0.94)
Private insurance, number 0.103 (4.43) 0.105 (4.47) 0.086 (3.44)
of disasters declared
Per capita income ÿ 0.285 (1.29) ÿ 0.297 (1.34) ÿ 0.383 (1.67)
Percent of Congress same Ð 0.082 (0.33) 0.063 (0.24)
party as president
Governor from same Ð 0.124 (1.03) 0.153 (1.25)
political party as president
Electoral importance Ð Ð 0.017 (2.04)
1992 election year dummy variable 0.431 (1.60) 0.437 (1.62) 0.424 (1.56)
1996 election year dummy variable 0.923 (3.73) 0.923 (3.72) 0.974 (3.89)
Regional and year dummy variables Yes Yes Yes
Observations 448 448 448
Log likelihood ÿ 600.21 ÿ 599.53 ÿ 597.08
Notes: Dependent variable is the number of presidential disasters declared in state i in year t. Absolute t-statistics in
parentheses. The restricted log likelihood for the models (all b's 0) is ÿ648.84. The coefficient on per capita income is
interpreted per a $10,000 change. All coefficients are interpreted as their impact on the mean rate of disaster declaration.
1991 is the omitted year dummy variable. The sample period is 1991 to 1999.
, , and denote significance at 1%, 5%, and 10%, respectively.
IV. EMPIRICAL RESULTS significant in the third specification only, pro-
viding slight evidence that states having higher
Presidential Disaster Declaration
per capita income have a lower rate of disaster
The results from three different Poisson declaration than lower-income states, possibly
regressions are shown in Table 3.8 The first suggesting lower-income states are favored
specification only includes the number of pri- over higher-income states.
vate insurance disaster declarations and state We find evidence that certain political incen-
economic variables. The second specification tives facing the president significantly impact
includes the Congress variable and the gover- the rate of disaster declaration. Those state
nor dummy variable, and the third specifica- having a higher electoral importance have a
tion includes the electoral importance variable. higher rate of presidential disaster declaration.
All specifications contain regional and year This finding is consistent with Downton and
dummy variables.9 Pielke's (2002) finding that a greater number of
As expected, the private insurance disaster floods are declared by the president in election
declaration variable is positive and significant years. We also find evidence that the mean rate
in all three specifications. Per capita income is of presidential disaster declaration was higher
during an election year compared to a non-
8. One feature of the Poisson model is that it assumes
that the mean of the dependent variable0 is equal to its
election year (1991). The mean rate of disaster
variance, or E [ yitjx] Var[ yitjx] lit eb x. A test of this declaration during an election year was higher
assumption can be conducted. The test, proposed by for Clinton than for Bush. The coefficients on
Cameron and Trivedi (1990), is commonly called a test for the 1996 election year dummy variable are
overdispersion. They essentially test whether the variance
of y is equal to its mean, or Ho: var[ yit] uit, H1: var[ yit] greater in magnitude than all other year
uit a g(uit). Rejecting Ho (a 6 0) suggests that the var- dummy variables, suggesting that the mean
iance is not equal to the mean. In this case, a negative
binomial regression can be performed. We performed the
overdispersion test for our three presidential models. In to eight, with each value between zero and eight having at
each model the coefficient a was not significant at conven- least one observation (the average number of disasters in
tional levels, suggesting the Poisson model is appropriate. the sample is 1.5). Effective estimation of the Poisson model
9. In Texas in 1996 there were 33 disasters declared and requires no large break in the count sequence of the depen-
in 1998 there were 56 disasters declared. For all other obser- dent variable, so these two observations from Texas had to
vations the number of disasters declared ranged from zero be omitted to estimate the models.GARRETT & SOBEL: FEMA DISASTER PAYMENTS 505
TABLE 4
Determinants of FEMA Disaster Expenditures, Tobit Coefficients
Variable Model (1) Model (2) Model (3)
Constant ÿ102,372,356 (1.66) ÿ156,432,467 (2.43) ÿ147,856,974 (2.32)
Insurance property 0.253 (19.68) 0.245 (18.77) 0.244 (18.82)
claims from disasters ($)
Red Cross disaster assistance ($) 16.003 (5.93) 14.214 (5.22) 14.459 (5.34)
Number of presidential 10,961,440 (2.61) 8,788,234 (2.08) 7,921,685 (1.88)
disasters declared
Number of legislators on Stafford Ð 26,169,930 (2.06) Ð
Act oversight committees
Number of legislators on non±Stafford Ð 13,896,506 (1.36) Ð
Act oversight committees
Number of senators on Stafford Ð Ð ÿ14,718,707 (0.52)
Act oversight committees
Number of senators on non±Stafford Ð Ð ÿ21,036,191 (0.94)
Act oversight committees
Number of representatives on Stafford Ð Ð 36,568,792 (2.33)
Act oversight committees
Number of representatives on non±Stafford Ð Ð 24,689,388 (1.96)
Act oversight committees
1992 election year dummy variable ÿ9,658,313 (0.15) ÿ2,620,343 (0.04) ÿ4,488,710 (0.07)
1996 election year dummy variable 136,735,863 (2.24) 144,883,460 (2.39) 146,639,194 (2.44)
Regional and year dummies Yes Yes Yes
Number of observations 450 450 450
Log likelihood ÿ6,075.10 ÿ6,070.63 ÿ6,068.09
Notes: Dependent variable is FEMA disaster expenditures. Absolute t-statistics in parentheses. Each coefficient is
interpreted as the impact on FEMA expenditures given nonzero (positive) levels of FEMA disaster expenditures. 1991 is
the omitted year dummy variable. The sample period is 1991 to 1999.
, , and denote significance at 1%, 5%, and 10%, respectively.
rate of disaster declaration in our sample was FEMA Payments and Congressional
highest in the year of Clinton's reelection cam- Influence
paign. We find no evidence that those states
having a governor of the same political party An important issue that arises regarding the
as the president have, on average, a higher rate estimation of the disaster expenditure models
of disaster declaration. The insignificant coef- is the possible endogeneity of the subcommit-
ficient on the Congress variable suggests that tee variables, thus resulting in possible biased
disaster declaration in a state is not influenced coefficient estimates. The question is, are leg-
by the political party of the state's legislators, islators from states having relatively more dis-
suggesting that the president does not punish asters more likely to be on a FEMA oversight
legislators of the opposing political party. committee than legislators from less disaster-
Several results from our disaster declaration prone states? Weingast and Marshall (1988)
regressions support the public choice model provide evidence that at least to some degree
that political agents respond to the incentives legislators will attempt to self-select to those
they face. Evidence clearly shows that the rate oversight committees that are relevant to their
of disaster declaration across states is not only constituents' interests. To test for the endo-
a function of disaster occurrence but is deter- geneity of the committee variables within
minant on the political benefits that a state can a Tobit framework, we follow the procedure
offer the president. In the next section we outlined in Smith and Blundell (1986). The
explore whether political incentives impact the procedure involves regressing the committee
distribution of FEMA disaster expenditures, variables on the explanatory variables in
given that a disaster has been declared by the Table 4 (and other identifying variables), keep-
president. ing the residuals from these regressions, and506 ECONOMIC INQUIRY
including the residuals in the final Tobit Table 4.13 All three specifications reveal that
model.10 A Wald test (distributed as c2) is private insurance disaster payments and Red
then conducted on the null hypothesis that Cross disaster assistance are directly related to
the residual slopes are jointly equal to zero FEMA disaster expenditures, as expected.
(no endogeneity). We computed a Wald statis- We find strong evidence that political incen-
tic for the two models containing subcommit- tives are significant determinants of FEMA
tee variables. The Wald statistic for the disaster relief payments. The Stafford Act
endogeneity test of the two subcommittee vari- oversight subcommittee variable in model (2)
ables shown in model (2) was 4.90, and the is positive and significant, revealing that those
Wald statistic was 4.68 for the endogeneity states having greater representation on FEMA
test of the four committee variables in model oversight subcommittees received higher
(3). Both Wald statistics are less than the c2 FEMA disaster relief. This finding and the
critical values of 5.99 and 9.49, respectively. The fact that the non±Stafford Act oversight vari-
results suggest that the committee variables are able is not significant supports the greater
not endogenous.11 influence that Stafford Act subcommittees
We regress FEMA disaster expenditures in have on disaster relief compared with non±
state i in year t (including the observations with Stafford Act subcommittees.
values of zero) on private insurance disaster Model (3) breaks the Stafford Act and non±
payments, Red Cross disaster assistance, the Stafford Act variables into separate Senate
number of FEMA disasters declared, regional and House variables. The evidence supports
and year dummies, and the oversight subcom- the hypothesis that FEMA is more likely to
mittee variables.12 The coefficient estimates be responsive to House members. House mem-
from the three tobit regressions are shown in bers have a higher percentage of their consti-
tuency impacted by a disaster than a
corresponding senator, and it was the House
10. Additional variables must be included in the first-
Appropriations Committee that reprimanded
stage regression for identification purposes. The other vari- FEMA in the past for excessive spending.
ables we included in the committee regressions were per We also find evidence that the average level
capita income, population, the number of households, of disaster expenditures during election year
and the number of farm acres.
11. The fact that we find committee assignments to be 1996 (Clinton's reelection year) was signifi-
exogenous yet we claim disaster relief is politically desirable cantly greater than during a nonelection
may seem like a contradiction. The important fact here is yearÐroughly $140 million higher. Only
that the subcommittees that oversee FEMA are also
responsible for overseeing other functions of government 1994 (the year of the Northridge earthquake
that would much more heavily drive the desire to be on the in California) had a higher average level of relief
committees. In addition, because natural disasters are ran- than 1996. The average level of disaster expen-
dom and uncertain, it seems legislators would not actively ditures in 1992 (Bush's reelection year) was not
seek to be on disaster oversight committees for the sole
purpose of manipulating disaster aid because the opportu- significantly different than the previous year.
nities to take advantage of this assignment are not clear and The results from model (2) suggest that on
foreseen in advance. However, once a disaster does occur in average, states having legislators on a Stafford
a committee member's state, FEMA is in a position to gain
from increasing expenditures above their ``normal'' levels. Act oversight subcommittee received an addi-
12. It is possible that FEMA expenditures influence the tional $26 million in FEMA disaster expendi-
amount of Red Cross expenditures and private insurance tures for each legislator on a subcommittee.
expenditures (i.e., both variables could be endogenous).
Using model (3), we empirically tested for the endogeneity
Model (3) reveals that states having House
of Red Cross expenditures and private insurance disaster members on a Stafford Act oversight subcom-
expenditures with the same methodology used for commit- mittee received an additional $36.5 million,
tee variables. The Wald test statistic was 0.30 for private whereas House members on non±Stafford
insurance expenditures and 0.32 for Red Cross expendi-
tures. Both values are less than the c2 critical value of 3.84, Act subcommittees generate $25 million. The
suggesting neither variable is endogenous and no simulta- average impact for a state having a House
neity exists with FEMA disaster expenditures. This is inter- member on a FEMA oversight committee is
esting in its own right, but we believe the explanation is that
private insurance claims are paid solely on individuals' 13. We also included economic and demographic vari-
insurance benefits and the level of damage. In addition, ables in the Tobit regressions, such as per capita income,
the Red Cross provides expenditures on specific items, population, per capita transfer payments, farm and non-
such as food, temporary shelter, medicine, and so on, farm income, and retirement payments. Each of these vari-
that are available immediately after a disaster strikes, ables were found to be highly correlated with the private
whereas FEMA simply issues checks to impacted indivi- insurance and Red Cross variables and were insignificant in
duals several days or weeks after the disaster. each regression specification.GARRETT & SOBEL: FEMA DISASTER PAYMENTS 507
TABLE 5
Determinants of FEMA Disaster Expenditures, Marginal Effects
Variable Model (1) Model (2) Model (3)
Constant ÿ 43,153,624 (1.69) ÿ 65,973,788 (2.51) ÿ 62,421,761 (2.37)
Insurance property claims 0.107 (14.24) 0.103 (13.89) 0.103 (13.87)
from disasters ($)
Red cross disaster assistance ($) 6.75 (5.73) 5.995 (5.08) 6.104 (5.19)
Number of presidential 4,620,641 (2.61) 3,706,347 (2.08) 3,344,350 (1.88)
disasters declared
Number of legislators on Stafford Ð 11,036,900 (2.05) Ð
Act oversight committees
Number of legislators on non±Stafford Ð 5,860,709 (1.35) Ð
Act oversight committees
Number of senators on Stafford Act Ð Ð ÿ 6,213,894 (052)
oversight committees
Number of senators on non±Stafford Act Ð Ð ÿ 8,880,988 (0.94)
oversight committees
Number of representatives on Stafford Act Ð Ð 15,438,489 (2.32)
oversight committees
Number of representatives on non±Stafford Ð Ð 10,423,283 (1.96)
Act oversight committees
1992 election year dummy variable ÿ 4,071,326 (0.15) ÿ 1,105,103 (0.04) ÿ 1,895,028 (0.07)
1996 election year dummy variable 57,639,065 (2.24) 61,103,113 (2.40) 61,907,643 (2.44)
Regional and year dummies Yes Yes Yes
Notes: Dependent variable is FEMA disaster expenditures. Absolute t-statistics in parentheses. Each marginal effect
reflects the impact on the expected amount of disaster expenditures, as each variable impacts the probability of a disaster
being declared and the level of expenditures. 1991 is the omitted year dummy variable. The sample period is 1991 to
1999. Number of observations is 450.
, , and denote significance at 1%, 5%, and 10%, respectively.
roughly $31 million in additional disaster relief relief in a state, it is interesting to calculate how
for each House member on a subcommittee. much of total FEMA disaster relief over our
The Tobit coefficients in Table 4 measure sample period is motivated politically rather
the impact of each subcommittee variable on than by disaster severity or frequency. The pre-
FEMA disaster payments given that a disaster dicted values (for nonzero observations only)
has been declared. The marginal effects of each from the regressions shown in Table 4 are the
variable show the impact each variable has on predicted level of total FEMA disaster expen-
the expected level of FEMA disaster payments, ditures given that a disaster has been declared.
considering both the impact on the probability The level of FEMA disaster payments that are
of disaster declaration and the level of expen- a result of congressional oversight can be com-
ditures once a disaster has been declared. The puted by multiplying the significant coefficient
marginal effects from the three regressions in estimates from each oversight subcommittee
Table 4 are shown in Table 5. The marginal variable by the actual number of legislators
effects also provide significant evidence of con- on each type of subcommittee (Stafford or
gressional influence over the level of FEMA non-Stafford), and then summing over each
disaster payments, with the results directly sup- significant subcommittee variable. The ratio
porting those shown in Table 4. of this value to the total level of FEMA expen-
ditures gives the percent of total FEMA pay-
ments that are due to political influence. This
FEMA Payments: How Much Is Due to
calculation for model (3) suggests that 44.5% of
Political Influence?
total FEMA disaster payments are due to
Although we have shown that congressional representative membership on FEMA over-
oversight impacts the level of FEMA disaster sight committees. Based on our data, sample508 ECONOMIC INQUIRY
period, and estimated coefficients, this simula- disaster relief provided over the sample period,
tion suggests that nearly half of all FEMA dis- our models suggest that nearly half of this
aster relief is explained by political influence total is due to political influences rather than
rather than actual need. by need.
Although FEMA is often promoted as a
savior for individuals and communities hit
V. SUMMARY AND CONCLUSION
by a disaster, we find evidence that disaster
declaration and the level of FEMA disaster
In this article we examined how congres- expenditures are both politically motivated.
sional and presidential influence impacts These findings cast doubt on FEMA's altruis-
FEMA disaster expenditures across the states. tic goal of financial assistance to those most in
Using state level FEMA disaster expenditure need, and questions the role of government
data from 1991 through 1999, we explore versus private agencies in providing disaster
whether those states that are politically impor- relief.
tant to the president receive higher FEMA
disaster expenditures than other states. We
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