Saving for Natural Disasters: Evidence From Pennsylvania Local Governments

• Published date: 01 June 2023
• DOI: http://doi.org/10.1177/0160323X221145920
• Author: Theodore Arapis,Vaswati Chatterjee
• Date: 01 June 2023
• Subject Matter: Original Research General Interest Articles

https://doi.org/10.1177/0160323X221145920

State and Local Government Review

2023, Vol. 55(2) 120 –138

© The Author(s) 2022

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DOI: 10.1177/0160323X221145920

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Original Research General Interest Article

Introduction

In recent years, natural disasters have been on

the rise all around the globe. In the United States

alone between 2004 and 2013, there were 32%

more presidentially declared disasters, disasters

that exceeded state and local management capac-

ity, than in the previous decade (Government

Finance Officers Association [GFOA] 2015). As

natural disasters continue to increase in severity

and frequency, so does the cost of disaster relief

(Intergovernmental Panel on Climate Change

[IPCC] 2021). In 2020 alone—a year when the

Atlantic had so many tropical storms that meteo-

rologists ran out of names, the Midwest saw its

crop yield flattened, and the West broke histori-

cal records for its wildfires—the cost to govern-

ment for natural disasters reached $22 billion,

$6 billion more than any other year on record

(Siders, Reily, and Niemeier 2020).

While the American disaster management

system appears generous with disaster relief

funding, it is also known for its “bottom-up”

approach and bureaucratic complexity (Lindsay

2012). Once a disaster occurs, local govern-

ments are the first ones to respond; depending on

1145920SLGXXX10.1177/0160323X221145920State and Local Government ReviewArapis and Chatterjee

research-article2022

1Villanova University, Department of Public Administration,

Villanova, PA, USA

2Villanova University, Department of Public Administration,

Villanova, PA, USA

Corresponding Author:

Theodore Arapis, Associate Professor of Public

Administration, Villanova University, Department of Public

Administration, Liberal Arts Room 268, Villanova, PA

19085-1603, USA.

Email: theodoros.arapis@villanova.edu

Saving for Natural Disasters:

Evidence From Pennsylvania

Local Governments

Theodore Arapis1 and Vaswati Chatterjee2

Abstract

For all governments—federal, state, or local—natural disasters impose significant costs. Among the

three, local governments typically respond first using their own resources. Thus, a proactive fiscal

mechanism providing resources for initiating disaster response (e.g., emergency debris removal,

medical services, rescue) appears necessary, especially for governments vulnerable to disasters.

This study explores the role of natural disasters on fiscal savings strategy using data collected by

Pennsylvania municipal executives via our Pandemic Management Survey. Following our findings,

Pennsylvania local governments appear to weigh both their experiences and preparedness level

to face a disaster. While more disaster experiences motivated fiscal savings accumulation, lower

savings were retained among prepared governments. As such, disaster learning and adaptation not

only could limit loss of life and property, but also lead to an efficient fiscal savings strategy.

Keywords

fiscal savings, rainy day funds, natural disasters, disaster relief.

Arapis and Chatterjee 121

the severity of the disaster, additional aid might

flow from higher levels of government (Chen

2020). Local governments, for instance, would

only receive federal assistance if the disaster was

presidentially declared (Federal Emergency

Management Agency [FEMA] 2003). Aid, then,

involves reimbursements of costs from FEMA

rather than immediate advancement of funds

(Hildreth 2009). State governments could also

assist their localities with disasters, but aid

would require in most cases legislative approval,

a process that could add significant delay to the

disaster response (National Conference of State

Legislatures [NCSL] 2021).

Evidently, disaster response involves com-

plex spending arrangements across all levels of

government. As a result, aid often arrives late

and is less than expected. Even with federally

declared disasters, neither the level nor the tim-

ing of reimbursements is guaranteed. New

Orleans, for instance, by the end of the first year

following the Katrina disaster, had received

only 39% of its requested reimbursement

(Hildreth 2009). When a disaster occurs, it is

local governments that act first, using their own

resources to pay for “overtime personnel, debris

removal, emergency medical services, facility

repair and replacement, and rescue and evacua-

tion actions” (Chen 2020, 26). A proactive fiscal

mechanism supporting such actions, therefore,

appears necessary for local governments, espe-

cially those most vulnerable to disasters. It is

important to note that while state and federal aid

can assist with long-term recovery functions

(e.g., rebuilding infrastructure, housing reloca-

tion for displaced populations, and economic

recovery), fiscal mechanisms at the local level

are essential for the efficient mobilization of

resources for immediate protective and response

actions to minimize loss of life and property as

extreme events are actually occurring.

Across local governments, among the most

common fiscal tools used to manage revenue

fluctuations, cover unplanned expenses, and con-

tinue service provision without disruption is fiscal

savings established in the fund balance; the unre-

stricted fund balance in particular (Arapis and

Reitano 2018; Gorina, Maher, and Park 2019;

Hendrick 2006; Wang and Hou 2012). In fact, the

GFOA (2015) has officially recommended that

general-purpose governments should maintain at

a minimum an unassigned fund balance in their

general fund of no less than 2 months of operating

revenues or expenditures. Depending on each

government’s circumstances (e.g., vulnerable to

disasters, dependency upon volatile or discretion-

ary revenues) a higher level could be desired

(GFOA 2015).

While disaster experience might also drive

decisions about fiscal savings (Gorina, Maher,

and Park 2019), due to data limitations, this

topic remains relatively unexplored. To the best

of our knowledge, existing studies exploring the

relationship between natural disasters and fiscal

savings focus exclusively on the state level. Lee

and Chen (2022), for instance, used organiza-

tional learning theory to test how experiences of

natural disasters shape state government fiscal

savings. The level of rainy day funds, their find-

ings suggest, raises as cumulative damage from

prior disasters increases. This relationship was

stronger in governments with high capacity to

build fiscal savings (Lee and Chen 2022). In an

earlier study, Pope and Leland (2019) showed

that state governments use rainy day funds not

only for smoothing cyclical fluctuation but also

in the aftermath of disasters. Politics also play a

role in the management of rainy day funds as in

states controlled by one party usage appeared

increased (Pope and Leland 2019). At the local

level, scholarship has focused exclusively on

the fiscal aftermath of major natural disasters,

specifically by assessing their impact on bud-

geting, spending patterns, and fiscal health.1

But what about their role on fiscal savings

strategy?

Our study advances the fiscal savings litera-

ture by adding new knowledge on the role of

natural disasters on fiscal savings strategy of

local governments. To do so, we use data from

our Pandemic Management Survey (PMS),

which we distributed across Pennsylvania

municipal executives (mayors, city and county

managers and administrators) in the spring of

2021 (February to March). This survey was

designed to assess, among other things, local

governments’ experiences with natural disasters

(e.g., floods, mud slides, sinkholes, extreme

weather events) within the past decade and their

preparedness levels to face future disasters.