Wildfires Are Burning State Budgets

The state forester for the Nevada Division of Forestry (NDF), Kacey KC, wants to pay the vendors and partner agencies that helped fight recent wildfires in the state the millions of dollars her department owes them. She’s writing them IOUs instead. 

“This is our current situation and unfortunately creates a hardship for vendors and cooperators in the process,” she says. 

State legislators have approved millions of supplemental allocations this year through their contingency fund to cover the bills that racked up from fighting wildfires. That’s how the NDF is increasingly covering its bills as its upfront budget of $4.5 million rarely covers the division’s annual expenses, particularly for wildfires. The division has already relied on these contingency funds twice during the current fiscal year, which is only half over.

However, it’s not just a tight budget choking the cash flow. Nevada, like all states prone to burn, must wait months, even years, for federal reimbursement on wildfires that scorch a mix of state and federal land. In fact, federal agencies owe Nevada millions of dollars for firefighting costs that Nevada has paid up front in the last few years. One invoice for $343,000 dates back to a fire in the fall of 2020.

That one-two punch of meager annual budgets and slow reimbursements is increasingly burdening Western states’ budgets as they experience larger, more destructive wildfires.

“It can take several years for whatever the unpaid balance is to finalize,” says Colin Foard, manager for the Fiscal Federalism Initiative in the Pew Charitable Trusts. “In the meantime, that’s money the state has expended.” 

When wildfires blow up, federal, state and local agencies, as well as private contractors, unite to try and avert disaster. Settling all their bills is a complicated slog, and while states typically draw on general funds to pay up front for wildfire costs, the lag time for reimbursement from the federal government is one reason why states are struggling to adequately budget for wildfires, according to a recent report from the Pew Charitable Trusts. 

“The federal government is using the states like a bank. That’s a problem,” says Laura McCarthy, New Mexico’s state forester. “They take up to 24 months to reimburse us.” 

To be fair, the inverse can also happen—situations in which states owe the Forest Service, Bureau of Land Management or other federal land management agencies money for fire suppression. But recent statistics show that nearly three-quarters of acreage that burns nationwide is on federal land. In Nevada, where 87 percent of the land is owned by the federal government, wildfires rarely start and stay on state land. A cost-sharing agreement is typically hatched while the smoke is still lingering at the site of the blaze, indicating how much of the cost each agency will be responsible for. After that, though, states are left holding the bag, waiting for repayment as expenses work their way through many layers of bureaucratic approval.

Ryan Shade, with Nevada’s Division of Forestry, says as climate change continues to increase the number of wildfires and their severity, states will have to scramble even more to bridge financial gaps as they await reimbursement. 

“The financial burden will continue to increase and increase,” says Shade. “If the reimbursements are not happening in a timely manner, the scale of the impact that we’re currently feeling will just continue to increase every year.”

Bigger Fires, Small Budgets

Though most Western states avoided a catastrophic wildfire season this past spring and summer, that doesn’t reflect the long-term trend. The average annual acreage burned from 2017 to 2021 was 68 percent larger than the annual average from 1983 to 2016. It’s not surprising then that the U.S. Department of the Interior and the U.S. Forest Service have nearly doubled their combined spending on wildfire management in the last decade.

Fire doesn’t recognize boundaries, and often covers both state and federal jurisdictions, as well as county, municipal and private lands, leading to a complex process of billing and reimbursement between various levels of government to cover the costs associated with suppressing and recovering from the blaze. 

Beyond reimbursing one another, governments also share some of the overall costs. For example, federal grants are available when wildfires are especially difficult to fight due to the threat they pose to communities, even when they aren’t on federal land.

Every state has a different system for how they manage wildfire costs, but unlike the federal government, states must balance their spending and revenue every budget cycle, making the reimbursement piece especially important. 

“I have to pay back the contingency fund, or the money goes back into the general fund to the state. At the end of the year, almost every year, I’m giving money back,” says KC. It’s a “very complicated mathematical equation,” she says.

The Pew report, which looked at how Alaska, California, Florida, Nevada, Texas and Washington budget for wildfire, found that each state primarily uses general fund dollars to pay for wildfire costs upfront, and they rely on backward-looking estimates based on past suppression costs to decide how much funding to put into that budget. This approach, the report says, is putting a “strain” on state budgets.

Washington, for example, looks at a 10-year rolling average of fire suppression costs, removes the two highest and lowest cost years, and averages the remaining six years to determine suppression appropriations. Alaska bases its wildfire suppression appropriation on the least expensive year of the past 10 years and relies on supplemental funding for any additional costs.

“By relying on supplemental emergency funds it is obscuring the true cost (of wildfire),” says Foard, adding that not only is it hard to track all the supplemental funding handed over to fight fire, but because states tend to look at their spending in averages over years, even if states do include all the supplemental or emergency funds used during a fire season, the older, cheaper years drag the average down even as costs go up.

This backward-looking formula may have worked well when seasons were rather predictable, but that’s not the case any more, as most states are seeing an overall trend of increasingly large, destructive and costly fires. For instance, Washington experienced a particularly active fire season in 2019 and needed about $80 million in supplemental appropriations above what was budgeted based on the state’s historical average, which in recent years totaled around $24 million annually.

In Nevada, where the state operates on a biennial budget, KC says there have been years when she’s depleted her $4.5 million so quickly, she’s had to borrow from her second year to make it through the first year. “So there are times when I start my second year completely in the negative,” she says. Those budget shortfalls do not affect staffing, she says, as that money comes from a separate NDF budget dedicated to covering personnel. 

Still, the financial puzzle can make it hard to quickly purchase new equipment and can delay payments to private contractors who may have supplied bulldozers, aircraft or additional personnel on a wildfire.

“Hardships caused by delayed payments for some small businesses and local government assets could force them to make the decision to no longer respond to fires in Nevada,” KC says. “This may lead to increased costs of wildfire for Nevada because the response may need to come from out of state.” 

Money and Mitigation  

When state budgets fall short in covering the costs of fighting fires, they can siphon money away from prevention and mitigation efforts for future fires, such as prescribed burns, mechanical thinning and homeowner education. However, the Pew report does see this tide turning. 

California recently approved climate funding that appropriates $2.7 billion over four years for wildfire and forest resilience. In the last two years, Washington, Alaska and Nevada have also dedicated funding to wildfire mitigation efforts. And in 2018, the federal budget contained a provision known as the “wildfire funding fix,” which created a new pot of money for the Department of the Interior and the Forest Service to draw on when fire needs exceed annual suppression budgets, preventing the urge to cut funding for programs to prevent future fires to free up money for the costs of suppressing fires now. 

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The Pew report gives several recommendations to more efficiently cover the costs of dealing with the new era of wildfires. They include better tracking of state spending on wildfire, protecting mitigation funds from “fire borrowing” and creating state budgets that more accurately reflect rising risk. 

In Nevada, KC’s working with her billing team to try to get partial payments from various federal agencies to help cover the $4 million in bills that are piling up. As president of the National Association of State Foresters, she often hears frustration about the lag time in reimbursements, but KC says it’s important to recognize that the system isn’t broken; it allows for a number of government and private agencies to attack a wildland fire swifty, with the assurance that eventually all expenses will get covered. 

But as wildfire costs soar, she knows if budgets don’t start reflecting the true cost of fires, and reimbursements don’t speed up, the financial jigsaw that follows the blaze will get increasingly challenging to solve.

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