The top-rated creditworthiness of the New Jersey Shore depends on the willingness of the federal government to keep shelling out after natural disasters, according to Moody’s Investors Service.
The report could be read as a warning to coastal communities around the country that are threatened by climate change: If Congress and the White House cut spending for the Federal Emergency Management Agency and other disaster-relief agencies, it could threaten their ability to access the credit market.
“Without FEMA at all, states and local governments would have less resilience to climate shocks, increasing exposure and risk,” said Moody’s Managing Director Lenny Jones in an email. “At some point, increases in risk and exposure result in lower credit quality.”
Moody’s reported this week that five years after Superstorm Sandy, three of the Jersey Shore counties hardest hit -- Atlantic, Monmouth and Ocean -- have kept their top-grade credit ratings. The first explanation offered is the massive federal spending after Sandy: $420 million for short-term coastal restoration, another $365 million for breakwaters, bulkheads and related projects, and $2.5 billion authorized for reducing the risk of future storms. Much of that money was for New Jersey.
That level of assistance isn’t assured. In August, Moody’s warned about the effect of President Donald Trump’s proposed cuts to FEMA’s budget -- and worse, what would happen if Congress stopped making supplemental appropriations for disaster relief after big storms. "The loss of FEMA support would be a severe credit negative for some state and local governments," Moody’s wrote in a report released Aug. 23.
Two days later, Hurricane Harvey struck Texas, the first in a record series of hurricanes and wildfires that have tested the federal government’s appetite for disaster relief. FEMA came within days of running out of money for Texas victims before Congress provided additional funds in September; in October, Trump warned that federal assistance to Puerto Rico after Hurricane Maria can’t go on forever.
The pressure on the federal government to reduce its disaster spending will only grow. The U.S. Government Accountability Office reported that extreme weather has cost the federal government more than $350 billion over the past decade. By 2050, those costs could increase by $12 billion to $35 billion a year.
Republican Senator Susan Collins of Maine and Democratic Senator Maria Cantwell of Washington, who together commissioned the report from GAO, said in a statement that this year’s natural disasters are expected to cost at least $300 billion -- an amount they called unsustainable.
"Our government cannot afford to spend more than $300 billion each year in response to severe weather events," Collins said in a statement.
This article was provided by Bloomberg News.