Tennessee looks to build statewide disaster fund to fill in FEMA gaps

Tennessee’s senate on Thursday approved a bill establishing a statewide recovery fund to provide disaster aid to local governments and individuals not helped by the Federal Emergency Management Agency.

The bill comes as President Donald Trump’s administration pushes toward a smaller FEMA, shifting greater responsibility for disaster response and preparedness to states.

Gov. Bill Lee’s proposed budget would seed the Governor’s Response and Recovery Fund with $100 million in one-time funds, in addition to a recurring $356,400 to establish four new staff positions. 

The fund could make financial aid more accessible to smaller communities that experience disasters but may not be large enough to qualify for a federal disaster declaration or FEMA assistance. 

But the number and severity of disasters in Tennessee in recent years is raising questions about how far that $100 million will go if FEMA takes a significant step back from post-disaster financial aid.

The senate approved the Lee administration’s bill 29-1. The bill has yet to move through the house.

Tennessee lawmakers approve Helene disaster aid package

“I think we’ve learned this past year, that when disaster strikes, we can no longer rely on some of the bureaucratic processes we put in place to handle grants and try to acquire dollars when we need them,” Sen. Rusty Crowe, a Johnson City Republican, said before the vote. 

Nashville Democratic Sen. Jeff Yarbro said the state is right to look ahead with this bill, but while $100 million is a significant portion of the state’s tightening budget, it may be quickly depleted if FEMA slashes funding. 

Replacing one water plant in Washington County — in Crowe’s district — following Hurricane Helene cost $37 million alone, Yarbro said.

“I think it’s a significant fiscal issue that’s going to occupy our time in the years ahead,” Yarbro said.

State fund’s request process mirrors current FEMA model

The bill expands access to a fund created in 2025 to respond to communities impacted by Hurricane Helene.

When federal aid is unavailable or insufficient, the revamped Governor’s Response and Recovery Fund would provide pathways for local governments and individuals to seek state assistance, said Sen. Ken Yager, a Kingston Republican and one of the bill’s sponsors.

FEMA uses per capita damage cost as a benchmark to gauge whether local and state governments can handle recovery without federal help. Those thresholds currently stand at $4.72 per capita for counties, and $1.89 per capita for states. The president must issue an emergency declaration or a major disaster declaration to release various levels of federal aid.

Yager recalled a tornado that devastated the roughly 600-person Town of Sunbright in 2024.

“They had very few resources to respond to this,” he said. “Their business district was substantially damaged and several homeowners lost everything they had.”

But the town’s damage didn’t meet FEMA’s requirements.

“If this bill were in place at that time, the Town of Sunbright could have been helped,” Yager said.

The Tennessee Emergency Management Agency would be charged with setting rules for the fund. Assistance could be delivered in grants, low-interest loans or no-interest loans. Funding would not be available for costs already covered by federal assistance or insurance.

Money from the fund would be available to eligible counties, cities, municipalities, metropolitan governments or local education agencies if:

• The governor and local jurisdiction has declared a state of emergency or disaster declaration for that area
• Federal assistance is not available or not sufficient to meet recovery needs
• Eligible costs as determined by TEMA exceed the county’s per-capita indicator, which will be set by TEMA and published on its website
• The chief elected official of the local governing body submits a written request and proof of eligibility to TEMA

Individuals would be eligible for funds if:

• They demonstrate Tennessee residency and lawful presence in the United States, and reside in a county that is under a local state of emergency
• They meet proof of loss or need, as defined by TEMA
• The governor has issued a state of emergency or disaster declaration
• State damage costs are not likely to meet FEMA’s threshold for individual assistance under a major disaster declaration
• Eligible costs within a county exceed an amount determined by TEMA
• The local chief elected official’s request to TEMA includes a request for aid for eligible individuals

Mounting disasters put state under financial pressure

In the last five years, Tennessee received more than $732 million in federal assistance under 15 separate major federally declared disasters, according to FEMA data.

That includes $657 million in public assistance for longer-term recovery that the federal government deemed the state could not handle on its own. Another $66.9 million went toward assistance for individuals, and Tennessee received $8.5 million in federal hazard mitigation funds to help the state prepare for future disasters.

Lee sent Trump a request for federal assistance in January after an ice storm knocked out power for more than 300,000 Tennesseans. 

Lee’s request notes that the state is currently managing 23 open major disaster declarations from past events, and recently spent more than $500 million toward Tropical Storm Helene recovery.

The letter also lists multiple events that did not receive federal declarations, meaning state and local governments bore the costs of recovery along with nonprofit organizations. Those disasters further exhausted state resources, “to such an extent that they have strained and will continue to impact budgets for current and past fiscal years,” the letter states.