Funding, U.S.

History of U.S. Disaster Funding

Prior to 1889, disaster relief was administered in an ad-hoc basis by the U.S. Department of War, or was largely a local phenomenon. Although appeals were made through newspapers to send money and relief supplies, survivors typically formed committees and administered relief. Beginning with the Thumb Fire in Michigan in 1881, the American Red Cross began to distribute disaster relief as a nongovernmental organization, but even this was informal and at a local scale.

In 1889, in Johnstown, Pennsylvania, the question of social responsibility for disaster relief was raised when a dam maintained by the South Fork Fishing and Hunting Club failed after several days of heavy rains. The spillway had been poorly maintained by the club, and the failure cost 2,209 people their lives, destroyed 1,600 homes, and cost $17 million in damage when a torrent of water obliterated Johnstown. An outcry of community concern over the victims led to the first government-imposed tax designated for disaster relief, when Pennsylvania imposed a 10 percent tax on alcohol for state flood relief. The tax was eventually raised to 18 percent, and today goes into the state's discretionary funds.

Transference of governmental administration of disaster relief activities occurred with the ratification by the U.S. Congress of the Geneva Convention in 1900. The American version included a clause that gave the American Red Cross the right to provide relief in peacetime to victims of national calamities, including natural disasters.

Federal assistance with disasters as a matter of policy began in earnest in 1950, when President Harry S. Truman signed the Disaster Relief Act (DRA) into law. The DRA marked the first time the federal government would be allowed to offer financial support to states recovering from a natural disaster, and allowed the federal government to assist in response activities without ad-hoc legislation. A year later, Kansas and western Missouri suffered extensive flooding, with Kansas City especially hard hit; downtown commerce was devastated. Among the $2.5 billion in floodwater damages, 17 bridges were damaged, and 19 lives were lost. Truman, a native of nearby Independence, Missouri, surveyed the damage and was moved to action, providing draft legislation for a national flood insurance program. Truman discovered that market insurance for flooding was either financially unobtainable or entirely unavailable for residents and most businesses at risk for flooding, and believed the federal government should offer flood insurance that would limit payments to 90 percent of damage. He hoped this designed shortfall would motivate landowners to take personal action as well, and consider moving to higher ground or implement mitigation practices. In 1951, his flood insurance draft legislation wasn't passed. The solution was instead to engineer [Page 229]more reservoirs in Kansas, limiting the amount of water that would filter into Kansas City during future high-water events.

The federal role was expanded into the recovery phase with the Disaster Relief Act of 1966. Two years later, the National Flood Insurance Act of 1968 established the National Flood Insurance Program (NFIP), which subsidized the purchase of insurance in exchange for required floodplain management at local and state levels. The NFIP allowed the federal government to reduce costs by allocating money through private insurance companies to flood victims in participating communities.

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