Lydia Woodley is a staff writer and first-year MPA student.

Crises and natural disasters strike worldwide every year, leaving countless victims in desperate need of recovery assistance. Events such as hurricanes, wildfires, and floods have become increasingly frequent and severe, often overwhelming local resources and prompting affected individuals and localities to seek help from organizations like the Federal Emergency Management Agency (FEMA). FEMA was established in 1979, and in 2003, it was integrated into the Department of Homeland Security, with a mission to “help people before, during, and after disasters.” State-level politicians have long discussed whether states rely on federal aid too much and how to improve the funding process so it is more equitable and reliable.

The window for gradual reform has closed. With the Trump administration moving to scale back FEMA’s funding, states are being forced to confront a new reality: preparedness can no longer be reactive or dependent on federal support. This shift demands more than rhetorical calls for resilience; it requires immediate administrative and budgeting reforms at the state level. As states brace for impact, they must reassess their emergency management structures, strengthen rainy day and disaster relief funds, and invest proactively in mitigation infrastructure. By making these changes now, states can better absorb the fiscal and operational fallout that is likely to follow reduced federal support and increasingly severe natural disasters.

FEMA Restructuring and Budget Reductions

In June 2025, President Trump stated that FEMA should be eliminated and disaster response should return to the state level. He declared a desire to “wean off” FEMA and immediately distribute less federal recovery funding. While only Congress can formally abolish FEMA–controlling its funding, legal mandate, and oversight–the administration has already begun restructuring and scaling back the agency through actions that don’t require congressional approval. Their actions have included appointing a FEMA Review Council to recommend reforms, cutting staff, and raising the financial threshold for disaster declarations by over 70%. In making these changes, the Trump Administration has altered FEMA’s budget authority and administrative capabilities.

These changes to FEMA come as the cost of weather-related disasters continues to rise, driven by more intense storms, wildfires, and floods, as well as population growth in high-risk areas. Even if FEMA outlasts this period of reduced funding, the uncertainty surrounding continued federal support makes it clear that states must act now to ensure that they can withstand disasters on their own in the future.

States Now Face New Challenges

 States are now up against a far more uncertain disaster response landscape, where federal funding may be reduced, delayed, or conditioned in new ways, even as the frequency and cost of natural disasters continue to rise. From 2011 to 2024, for example, 99.5% of congressional districts faced at least one federally declared major disaster. And, in 2024 alone, 27 weather-related disasters caused over $1 billion in damages each, nearly three times the average number of billion-dollar natural disasters seen annually in the early 2000s. Without a reliable federal backstop, governors and state legislatures must confront difficult fiscal tradeoffs. 

This fiscal shift is especially difficult because many states have grown deeply reliant on federal disaster funding. Eric Cannady, the Deputy CFO and Budget Director of the District of Columbia’s Office of Budget and Planning, in a discussion via Zoom interview conducted in February 2026, explained to me how states that experience disasters regularly have come to expect federal assistance as part of their financial planning. For years, Cannady says the prevailing logic was, “Why not take the free money?” As a result, some states have structured their disaster response systems around the assumption that federal reimbursement will follow. Without reserves or contingency plans, states may be forced to redirect funds midyear, potentially sending budgets into a fiscal tailspin.

Pathways that states can take to become more resilient can be sorted into two categories: administrative and budgeting. What follows are some possible budgetary changes that can be made by states now. My next article will explore administrative changes. 

Budgetary Solutions

Invest in preparedness: States must treat preparedness as a core governance function rather than the sole responsibility of an emergency management agency. Many states lack the administrative capacity, technical expertise, or financial flexibility to manage catastrophic events independently. Maria Bernadzikowski, Director at Howard County Office of Emergency Management (State of Maryland), in a discussion with the author via phone interview conducted in March 2026, shared that FEMA grants have funded a majority of her office’s staff positions, totalling nearly 80% of Emergency Management positions in Maryland. These jobs have been cut as federal grants to the state have been cancelled. In turn, current staff are stretched thin, leading to a loss of knowledge and skill. Investing in programs that focus on strengthening preparedness can help make recovery more manageable for a smaller staff and save money in the long run.

Preparedness requires ongoing planning, training, and coordination to identify threats, assess vulnerabilities, inventory resources, and establish effective warning systems before disasters strike. At the same time, hazard mitigation efforts, such as retrofitting buildings and infrastructure and implementing disaster-ready building safety codes, must be prioritized to reduce long-term risk. Currently, most mitigation funding comes from federal grants, and many states operate few or no mitigation programs of their own. By establishing or expanding state-funded recovery and mitigation programs, states can stabilize early disaster activities, close gaps created by higher federal thresholds or delayed reimbursements, and reduce reliance on unpredictable federal aid.

Invest in the rainy day fund: One of the most effective ways states can proactively budget for disasters is by establishing a dedicated statewide disaster account with a consistent and protected revenue source. Rather than scrambling to identify funds after a crisis, one way states can contribute to a rainy day fund is by accumulating reserves during lower-cost years to offset major disaster events. These accounts can be funded through annual general fund deposits, systematic deposits of surplus one-time revenue, or dedicated revenue streams. Earmarking revenue ensures stability and reduces competition with other budget priorities. For example, North Dakota deposits oil revenue into its disaster relief fund up to a set balance, while Montana directs excess general fund revenue into its fire suppression fund at the end of each budget cycle.

However, research suggests that simply creating a reserve account is not enough—its structure determines whether it will actually function as intended. Eric Cannady explained in his interview that the creation of a rainy day fund is the most realistic and effective way to prepare for the future. Moreover, any fund should have a strong statutory backing, so that it is formally established through legislation and insulated from political interference. Cannady further noted that reserves need to be protected by strict legal parameters governing when and how funds may be accessed in order to prevent reserves from being “raided” for non-emergency purposes and preserving them for true disaster events. Cannady also stressed that disaster reserves should be funded with unrestricted general fund dollars rather than restricted revenue streams, ensuring flexibility during emergencies. While jurisdictions could theoretically raise taxes to build reserves, he noted that most are unlikely to do so. Instead, deposits typically come from surplus revenue, general fund allocations, or a designated portion of an existing tax. The funding mechanism may vary by state, but the principle remains consistent: deposits must be predictable, recurring, and legally protected. Without these structural safeguards, disaster funds risk becoming politically vulnerable and fiscally unreliable—particularly when federal disaster aid becomes less predictable.

Looking to the Future

Ultimately, the debate over FEMA’s future is not simply about federal spending, but about governance, responsibility, and preparedness in an era of escalating climate risk. While FEMA has served as a critical financial backstop for states for more than four decades, growing uncertainty at the federal level makes it clear that reliance alone is no longer a sustainable strategy. States have to decide if they are going to restructure their budgets now or wait until it’s too late. 

Photo by Andy Feliciotti on Unsplash

The views expressed in Policy Perspectives and Brief Policy Perspectives are those of the authors and do not represent the approval or endorsement of the Trachtenberg School of Public Policy and Public Administration, the George Washington University, or any employee of either institution.