FEMA's cost-share policy for the public assistance program that repairs, restores or replaces public facilities of all kinds (buildings, roads, public utilities, water and sewer projects, etc.) was part of the original Disaster Relief Act of 1974. That statute authorized the President to help state and local governments in the repair or replacement of public facilities and mandated that "the federal contribution for grants made under this section shall not exceed 100 per centum of the net cost." However, the defined cost-share commitments (not the waivers) were originally established by regulation in 1980. As one observer explained, The nonfederal contribution to all other assistance remained subject to negotiation until May 1980, when FEMA administratively adopted a general policy of requiring state and local governments to agree to pay 25 percent of the eligible costs of public assistance programs. This policy removed the administrative problem associated with attempting to determine a "reasonable" commitment for each disaster. This administrative policy was codified into law in amendments to the Stafford Act contained in P.L. 100-707 , in 1988: Minimum federal share – Except as provided in paragraph (2), the Federal share of assistance under this section shall not be less than 75 percent of the eligible cost of repair, restoration, reconstruction, or replacement carried out under this section. Currently, a state must have accumulated more than $133 in damages per capita within the state to reach a traditional cost-share waiver for sections 403, 406 and 407. Sections 403, 406 and 407 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , the Stafford Act) address emergency assistance, infrastructure damage and debris removal. These sections all share the same statutory language regarding the federal share; that it "shall not be less than 75 percent of the eligible costs." The cost-shares are reflective of the Stafford Act's fundamental insistence on state participation and that the State "will comply with all applicable cost-sharing requirements of this Act." Emergency assistance (Section 403) can entail overtime payments for safety personnel, reimbursements for actions the state has taken such as executing an evacuation plan or sandbagging to prevent additional flooding. It can also include the provision of federal resources (equipment, supplies, contracted assistance) referred to as Direct Federal Assistance, such as providing temporary facilities for essential community services such as temporary classrooms for schools. Section 406 is the repair or replacement of public infrastructure. The actual categories are: A – Debris Removal, B – Emergency Protective Measures, C – Road Systems and Bridges, D – Water Control Facilities, E – Buildings, Content and Equipment, F – Utilities, and G – Parks, Recreational Facilities and Others. Also, non-profit organizations may be eligible for this form of assistance if they are providing "critical services" such as power, water, water treatment, emergency medical service or other similar service. Assistance for debris removal under Section 407 is generally used (with some exceptions) for the removal of debris from publicly owned lands. Typically this aid involves clearance of debris from main public roads to provide access for the community to their homes, jobs and public services. Information provided by FEMA indicates that the larger cost-share adjustment, affecting Public Assistance categories C through G, has been done 54 times, amounting to about 21% of all cost-shares and occurring for less than 0.5 % of all major disasters declared since 1985. These figures point to an exceptional event being needed to qualify a state for the reduction in cost-share. An adjustment of the cost-share from 25% state and local share of a project to 10%, as proscribed in regulation, can greatly reduce the costs of the disaster for state and local governments while increasing federal expenditures. As noted earlier, the state and local cost-share had been placed in regulation in 1980 and was then codified in law in 1988. But the greatest attention to the cost-share, and provisions for its adjustment, were made in the spring of 1993. The cost-share amount was set at $64 per capita for the Midwest floods of 1993. FEMA increased this amount through rulemaking initiated with a proposed rule in 1998 and set in regulation in April of 1999. The rule stated that the $64 amount had been in use since 1985, so bringing it up to current dollars in 1999 would set the per capita amount at $75. The rule then increased the effective amount to $85 beginning on January 1, 2000, to $100 per capita on January 1, 2001, and then adjusted that amount for inflation after January 1, 2002, based on the Consumer Price Index. As of 2013, the per capita amount of damage required for a cost-share adjustment is $133. That amount far exceeds the per capita costs that FEMA employs when determining if an incident qualifies for a disaster declaration. In comments on the proposed rule for cost-share adjustments, several parties noted that there was no analysis of the original per capita threshold and that any raising of that amount would not consider individual state capabilities and would also discourage states from taking mitigation measures that would limit the impact of future disasters. FEMA's response indicated that since the base threshold amount had not been changed for a number of years it was in need of adjustment. Rather, the $64 threshold is simply a yardstick to determine when the economic impact of a disaster is of such severity that it warrants recommendation for a cost-share adjustment. We are quite willing to work with our state partners to identify capability or mitigation measures that might justify consideration of a cost-share adjustment. However, we view that as a longer-term effort separate from this rule. With respect to measuring economic impact, no commenters offered alternatives to the use of a per capita impact although two did suggest that we lower the threshold to $50 per capita. We believe instead that the 1985 threshold should be brought up to current dollars and adjusted annually using the Consumer Price Index for All Urban Consumers, since that is the legislative basis for annually adjusting the small project grants under the Public Assistance Program and grants under the Individual and Family Grant Program. Some have questioned whether the per capita amount employed by FEMA is reasonable based on average per capita amounts of damages for major disaster declarations. Some postulate that the per capita threshold may be set at too high an amount for most states to qualify for a reduced cost-share. Others suggest that the threshold is set at an appropriate level that signals an extraordinary event meriting special consideration for a reduced state and local share. In some catastrophic events, such as Hurricane Katrina, the estimated eligible damage amounts crested the cost-share threshold early in the disaster recovery period (in the case of Katrina, two months following the event) and the cost-share was adjusted. For other events, such as Hurricane Floyd that hit North Carolina in 1999, the cost-share waiver was not made until one year later, when the accumulated total eligible costs had surpassed the state per-capita threshold. The time involved in determining whether a state has reached its threshold can be important, since many decisions made at the state and local level are based on the amount of cost-share that the entities anticipate when selecting and prioritizing projects. As of February 2013, a total of 244 cost-share adjustments have been made for major disaster declarations over the last 24 years. The Appendix of this report provides a listing of cost-shares adjusted by FEMA from 1985 to 2013. It may be useful to break down the large number of waivers into four, non-exclusive categories: 1. repairs or replacement of structures, roads, and other permanent work; 2. cost-share waivers for U.S. territories; 3. cost-share waivers for a limited time period; and 4. other historical waivers that used a cap of state per capita costs. Category 1 represents cost-share adjustments for the PA program (generally beyond emergency work, encompassing PA categories C through G). These are the waivers intended to be made through FEMA's cost-share adjustment process as defined in regulation using a per capita threshold amount of damage. While the majority of cost-share waivers have met this threshold, others have been included for various reasons that will be detailed throughout this report. Category 2 represents a significant number of the adjustments (with more eligible categories of spending included) provided to the U.S. territories due to the provisions of the Insular Areas Act that allow for broader cost-shares with a less stringent threshold than that described for Category 1 for permanent work. The territories account for 59, or just over 25%, of all cost-share adjustments. The Insular Areas Act provides for a waiver of "any requirement for local matching funds under $200,000 (including in-kind contributions) required by law to be provided by American Samoa, Guam, the Virgin Islands and the Northern Mariana Islands." Category 3 represents a substantial number of the cost-share adjustments. These are the short-term or time-limited variety, such as waiving of the cost-share for a 72 hour (or other limited) period while states and local governments address the most significant, and costly, immediate problems. The time periods involved have ranged from 48 hours all the way up to 319 days. These waivers are not tied to the per capita threshold but are based on FEMA's judgment regarding the severity of a situation. These adjustments are based on FEMA regulations that offer limited relief for the start of the disaster. The regulation states: (d) If warranted by the needs of the disaster, we recommend up to one hundred percent (100%) Federal funding for emergency work under Section 403 and 407, including direct Federal assistance, for a limited period in the initial days of the disaster irrespective of the per capita impact. The language of the regulation with phrases such as "if warranted" and "a limited period" provide a significant amount of discretion to FEMA and the actions resulting from this regulation rest on FEMA's judgment of a disaster situation.