	Introduction

Signed into law on August 2, 2011, the Budget Control Act (P.L. 112-25, hereinafter the BCA) established a set of limits on federal spending, as well as a set of mechanisms to adjust those limits to accommodate spending that has special priority. One of these mechanisms—a limited allowable adjustment to pay for the congressionally designated costs of major disasters under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereinafter "the disaster relief allowable adjustment" or "allowable adjustment")—represented a new approach to paying for disaster relief. By providing this flexibility in the budget caps, Congress changed the way it approached funding disaster relief and recovery efforts. This report looks at how the adjustment has functioned over the first five years, and what the future of disaster relief (as defined under the BCA) may look like under current law for the next five years and beyond. That limitation is based on a modified 10-year rolling average of disaster relief appropriations calculated by the Office of Management and Budget (OMB). The first calculations of the allowable adjustment, which applied to FY2012, relied entirely on BCA-mandated OMB calculations of past appropriations pursuant to major disaster declarations. The application of this designation has been limited to the allowable size of the disaster relief adjustment in a given year, with costs beyond that limit being designated by Congress as emergency funding. As noted above, the annual total of disaster relief appropriations for years after FY2011 used to calculate the allowable adjustment is based on the congressional designation of appropriations as disaster relief. Using the Allowable Adjustment

The allowable adjustment has been most often used to accommodate budget authority for the Federal Emergency Management Agency's Disaster Relief Fund (DRF)—the primary FEMA account used to fund disaster response activities and pay for ongoing disaster recovery programs. The Disaster Relief Allowable Adjustment: The Next Five Years (FY2017-FY2021)

		Forecasts for the Next Five Years with the Status Quo

As Congress considers the future of federal disaster relief and budgetary controls, it may choose to consider changes to the disaster relief allowable adjustment. The allowable adjustment declines to roughly $6.8 billion as high expenditure years "age out" of the average, before increasing to nearly $7.5 billion in 2021. According to OMB, to be accounted for under the allowable adjustment, and to be included in the calculation of the 10-year rolling average on which the adjustment is based, appropriations must be designated by Congress as disaster relief. Not all costs of major disasters receive the disaster relief designation. Furthermore, the definition of disaster relief in the BCA is a limiting factor—it already excludes some forms of federal disaster assistance by focusing on the major disaster declaration. Disaster Relief After the BCA

As it currently stands, the discretionary spending limits pursuant to the Budget Control Act expire after FY2021. A more fundamental change to how the federal government pays for the costs of disaster relief is also possible.
Signed into law on August 2, 2011, the Budget Control Act (P.L. 112-25, or BCA) established a set of limits on federal spending, as well as a set of mechanisms to adjust those limits to accommodate special categories of spending that has special priority. One of these mechanisms—a limited allowable adjustment to pay for the congressionally designated costs of major disasters under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereinafter "the disaster relief allowable adjustment" or "allowable adjustment")—represented a new approach to paying for disaster relief. By providing this flexibility in the budget caps, Congress changed the way it approached funding disaster relief and recovery efforts.
The disaster relief allowable adjustment is based on a modified rolling average of annual federal government appropriations for the costs of major disasters, pursuant to a methodology laid out in the BCA. Annually, the Office of Management and Budget (OMB) looks back at the past 10 years of disaster relief appropriations. For fiscal years prior to FY2012, OMB has identified appropriations associated with major disaster declarations for use in the calculation. For FY2012 and later years, OMB relies on explicit Congressional designations of appropriations as disaster relief pursuant to the BCA. OMB takes these 10 annual totals of disaster relief appropriations, drops the highest and lowest years, and averages the remaining 8. This modified average is then supplemented by any unused amounts from the average calculated for the previous fiscal year. This calculation generates a limit up to which the discretionary budget caps can be adjusted to accommodate appropriations on major disasters. In practice, this limitation on the size of the disaster relief adjustment has also limited the application of the disaster relief designation. Funds that would meet the definition of disaster relief may not be classified as such.
Implementation of the disaster relief allowable adjustment has allowed Congress to fund the Federal Emergency Management Agency's Disaster Relief Fund (DRF) to a greater degree through annual appropriations, rather than through supplemental appropriations as it had before enactment of the BCA. Allowing the discretionary budget limitations to be adjusted to pay for disaster costs has removed, to an extent, the costs of disaster relief from competing with other annual priorities for funding. However, the allowable adjustment is expected to drop significantly in the near future as two of the highest disaster cost years roll out of the calculated average used in setting the adjustment.
This report examines how the adjustment has functioned over the first five years, and what the future of disaster relief (as defined by the BCA) may look like for the next five years and beyond. Under current law, the allowable adjustment is expected to decline from a high of almost $18.5 billion in FY2015 to between $7.5 billion and $9.5 billion by the time the BCA discretionary spending limits expire after FY2021.
As Congress considers budget planning and potential changes to how it budgets for disaster assistance for a variety of different types of incidents, it may consider whether the allowable adjustment has worked as planned. Congress may also consider changes to how it addresses disaster costs, through changes to the existing structure of the allowable adjustment, or by revisiting other laws.