Everyone who is paying attention knows that America’s disaster system is failing victims, communities, and taxpayers. A fundamental responsibility of government is to protect its citizenry. And a tenet of federalism is that the central government and states help one another. But resources are finite. So the trick is to ensure that federal disaster policy helps communities prepare for and respond to disasters in a way that’s fiscally efficient and, more importantly, effective at reducing risk to property and lives.

Under the Stafford Act, when a disaster overwhelms a state’s resources and ability to respond, the affected Governor requests the President declare the event a Major Disaster, which unlocks federal resources. The thing is, MDDs have been steadily growing this century, which is both a product of increased disasters and Governors seeing federal disaster funding as an opportunity. Disaster recovery has a clear cost­—so who would say no to free money to help out? And it doesn’t hurt that lawmakers of both parties receive a hero’s welcome when announcing additional funding for their affected states.

At the same time, the people who are affected by disasters face a confusing matrix of federal programs and applications­—all while their home, place of employment, or even their means to apply for these programs are possibly destroyed. The large dollar signs that accompany federal disaster spending lead people to believe that if a disaster does strike their community, Uncle Sam will be there. In reality, the vast majority of funding goes to public infrastructure not individual assistance. This is a risk communication failure that leads many people not to plan for disaster.

This failure has led to calls for reform. Now, two competing visions are offering different ways out of this mess.

First, the bipartisan FEMA Act, sponsored by House Transportation and Infrastructure Committee Chairman Sam Graves (R-MO) and Ranking Member Rick Larsen (D-WA), opts to modernize how FEMA operates with streamlined application processes, consolidating operations, and restoring cabinet status to the agency—without fundamentally shrinking Washington’s role. This bill passed the committee with a broad bipartisan 57-3 vote, something virtually unheard of regarding substantive legislation this Congress.

More recently, the FEMA Review Council, established by President Trump and composed of administration officials, governors, emergency managers, and outside experts, released its proposed reforms. It envisions a more state-centered system that would narrow federal exposure and push more responsibility back onto states, localities, and private markets.

The diverging views on how the federal government should respond to natural disasters reflect a broader debate in American governance. Should government control costs by limiting commitments, or by managing existing commitments more efficiently? The answer is probably somewhere in the middle, as always. The trick will be not losing sight of the ultimate goal, which is reducing costs by reducing risk, not just cutting off taxpayers and communities.

The Review Council’s framework is the more aggressive fiscal approach. It proposes raising disaster declaration thresholds, tightening eligibility, and reducing the number of events that qualify for federal aid. In practical terms, more storms and floods would remain state problems rather than becoming federal ones. Public Assistance programs would shift toward formula-based and parametric systems­—tied to a physical trigger, like wind speeds or tidal gauges—with the goal of delivering aid more quickly and predictably, while also capping overall federal exposure. Fewer disaster declarations and smaller federal cost-shares would likely reduce long term pressure on the federal spending. But the question remains: will this new system reduce overall costs, reduce risk, and better deliver for communities?

The Review Council’s recommendations focus on forcing tougher tradeoffs into a system that has spent decades avoiding them. As mentioned above, any honest assessment of disaster policy has to grapple with an uncomfortable truth—that the political incentives almost always run in one direction. Governors want federal aid. Presidents rarely want to deny it. And members of Congress are happy to support large emergency packages that sit outside normal budget constraints and can be framed as compassion rather than deficit spending. Structural reform is difficult precisely because every participant in the system benefits from the status quo. Except taxpayers and disaster victims.

The Council’s approach to the National Flood Insurance Program (NFIP) is even more direct. It treats the NFIP’s chronic deficits as a structural problem, which they are. The only people buying flood insurance are those most likely to need it and, despite recent reforms gradually moving toward risk-based rates, many policyholders still receive subsidized rates. Its recommendations favor fuller risk-based pricing, stronger mitigation requirements, and greater reliance on private insurance markets. In essence, it argues that flood insurance premiums should increasingly reflect actual flood risk. But we also know that some high-risk homeowners are low-income and price sensitive and, without means-tested assistance, would go uncovered.

Rather than reducing federal commitments, the FEMA Act it tries to make them function better. The legislation preserves FEMA’s central role and largely leaves Stafford Act declaration authority untouched. Its focus is on streamlining aid delivery, improving mitigation incentives, and reducing repetitive losses over time. Because the Transportation and Infrastructure Committee lacks jurisdiction over NFIP (it’s under the Financial Services Committee) it leaves the program untouched.

All that makes the FEMA Act less dramatic but arguably more realistic. Instead of trying to slash federal exposure outright, it attempts to reduce waste, accelerate rebuilding, and reward resilience. It accepts that Washington will remain deeply involved in disaster recovery whether fiscal purists like it or not, which is probably true.

Administrative reform alone is unlikely to solve the deeper problem of rising disaster costs colliding with political reluctance to limit response and recovery spending, especially during election years. Nor does it fully address the continued development of vulnerable areas that almost guarantee future federal liabilities. But the FEMA Act has one considerable advantage over the Council’s more sweeping blueprint. Namely, that it stands a reasonable chance of surviving Congress and implementation intact.

In contrast, the Review Council skates past some of the challenges in their approach. States, not to mention communities, have differing resources to plan for, mitigate, and respond to disaster. In disaster response, lack of money isn’t always the biggest challenge—it is lack of equipment (which may have been destroyed) and trained responders. It makes much more sense for a cadre of trained federal professionals to be deployed than having every state have enough to respond to a future disaster. Setting accurate parametric triggers across perils and across the country would be daunting and would also likely lead to overpayments and underpayments post-disaster. Lastly, major disasters typically affect multiple states, which would argue for a federal response.

The most plausible path forward is therefore an awkward hybrid. The FEMA Act offers a workable framework for modernizing FEMA and improving incentives to mitigate against future disasters, instead of just rebuilding. The Review Council is right that the current fiscal trajectory is unsustainable—we need to be realistic about the escalating costs of disasters, which means cost-sharing should be revisited and risk-based pricing cannot be avoided. Some combination of tighter declaration standards, stronger mitigation requirements, and more disciplined flood insurance pricing is where we need to head.

The challenge is ensuring reforms reduce actual risk rather than simply shifting costs onto states, local governments, or households. Ultimately, reducing risk is the way to reduce spending. Every home that is elevated, every repetitive loss property mitigated, and every risky development avoided is one less future claim on taxpayers. Otherwise, America will continue its current approach to disaster finance, characterized by rebuilding in the same places, borrowing ever more money, and acting surprised every hurricane season when the bill arrives.