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Can States Handle Disasters Without FEMA? The Legal Gaps Business Leaders Should Know

Can States Handle Disasters Without FEMA? The Legal Gaps Business Leaders Should Know

Forbes22-07-2025
HUNT, TEXAS - JULY 6: Vehicles sit submerged as a search and rescue worker looks through debris for ... More any survivors or remains of people swept up in the flash flooding on July 6, 2025 in Hunt, Texas. Heavy rainfall caused flooding along the Guadalupe River in central Texas with multiple fatalities reported. (Photo by)
A year already marked by record-smashing heatwaves, catastrophic storms, and deadly flash floods is forcing business leaders to reckon with an unsettling question: What happens if the federal government pulls back from disaster response? The idea of handling disasters without FEMA is not an abstract worry.
In recent weeks, political debates have intensified over proposals to reduce federal spending on disaster relief or even eliminate the Federal Emergency Management Agency (FEMA) after the 2025 hurricane season, as reported by NBC News. Former President Trump and some congressional leaders have floated plans to shift primary responsibility for disaster recovery to state governments—a move that could leave businesses navigating a patchwork of legal systems without the backstop they've come to rely on for decades.
This uncertainty comes as disasters batter communities from coast to coast. In the first half of 2025 alone, the U.S. suffered at least 15 billion-dollar weather disasters, including historic flooding, tornado outbreaks, and prolonged heat waves, according to Yale Climate Connections. Just this past weekend, flash floods devastated Kerr County, Texas, forcing rescues and shutting down businesses in a region still recovering from earlier storms.
For business owners, investors, and insurers, this brewing shift raises urgent questions: If FEMA disappears, can state laws and budgets fill the gap? Will private enterprises have to shoulder more responsibility for disaster planning and recovery? And which states are prepared—or dangerously unprepared—to protect their residents and economic lifelines in a post-FEMA landscape?
A Federal Safety Net Under ThreatALTADENA, CALIFORNIA - JANUARY 30: People walk past a FEMA sign following a press conference at the ... More Altadena Disaster Recovery Center on January 30, 2025 in Altadena, California. House Democratic leaders and local officials held the press conference near the Eaton Fire burn zone to call for federal disaster assistance following the devastating wildfires in Los Angeles County. (Photo by)
Since its founding in 1979, FEMA has been the cornerstone of America's disaster response. It funds emergency shelters, debris removal, rebuilding grants, and cash assistance for displaced families. Critically for businesses, FEMA programs like the Building Resilient Infrastructure and Communities (BRIC) grant fund projects that reduce future risks, a crucial buffer as extreme weather grows more frequent.
Yet the agency has long faced political crossfire, with critics labeling it bloated or inefficient. Earlier this year, a lawsuit was filed against the Trump administration's previous halt to BRIC funding for certain states, highlighting how political swings can upend even well-established federal programs.
If proposals to wind down FEMA proceed, business leaders would be left relying on a fragmented patchwork of state disaster laws—many of which, my research suggests, lack the resources or legal frameworks to handle large-scale crises.
State Disaster Laws Are A Patchwork of Authority
Every U.S. state has laws empowering governors and local officials to declare emergencies and coordinate response efforts. Yet those powers vary widely in scope, funding, and legal protections for vulnerable communities.
Despite these structures, most states still rely heavily on FEMA for funding, specialized teams, and logistical support. Without FEMA, states would have to cover enormous costs themselves. For example, after Hurricane Harvey, Texas received over $13 billion in FEMA aid, money that state coffers alone could not match.
The Business Risks Of A FEMA Void
Businesses have more skin in this game than ever. Beyond humanitarian concerns, legal and financial risks loom if federal safety nets vanish.
Federal aid often helps cover costs insurers won't, such as temporary housing, debris removal, and infrastructure repair. Without that aid, insurance companies may face larger payouts or withdraw entirely from high-risk markets. In Florida, for example, multiple insurers have already exited the market due to hurricane risks, leaving businesses scrambling for coverage. A weakened federal role could mean higher premiums, stricter underwriting, or outright denial of coverage in disaster-prone regions, especially for small and midsize enterprises without deep cash reserves.
If state laws differ significantly on evacuation orders, business owners may be caught between conflicting mandates. For instance, if local officials order an evacuation, but state law vests that authority only in the governor, businesses face legal ambiguity about when to close operations, protect staff, or move inventory.
Disaster response gaps also raise potential civil rights issues. Federal laws like the Stafford Act prohibit discrimination in disaster aid based on race, disability, or language. Many states lack comparable mandates, meaning vulnerable communities—and businesses serving them—could fall through the cracks if federal oversight disappears.
Companies with operations across multiple states face a regulatory minefield if FEMA's uniform national standards vanish. Without coordinated federal logistics, restoring supply chains and reopening businesses could take longer, increasing downtime and losses.
Which States Are Ready? Which Aren't?
Few states are fully prepared to absorb FEMA's responsibilities. According to my analysis of disaster laws across the South and Mid-Atlantic, only a handful—like Virginia and Texas—have begun integrating equity planning, vulnerable population registries, and robust local emergency powers into state statutes.
Other states, particularly smaller ones with limited budgets, may lack:
That leaves gaps businesses can't ignore. A company operating in Virginia might navigate disaster recovery relatively smoothly, while the same company in Mississippi or Georgia could face a chaotic patchwork of legal obligations, prolonged closures, and community backlash.
What Business Leaders Should Do Now
While FEMA's fate remains uncertain, businesses should:
FEMA's potential dismantling would represent the biggest shift in American disaster management in generations. Businesses that fail to prepare for handling disasters without FEMA amidst a state-led disaster regime risk higher costs, legal headaches, and reputational damage. Disasters don't respect state lines, but the laws governing them increasingly do. For business leaders, understanding those legal boundaries might be the key to survival in a future where the federal safety net is no longer guaranteed.
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"This supports our theory that there is enormous pent-up demand for NVDA chips from China right now," Hedgeye Risk Management analyst Felix Wang wrote in a note to clients. Meanwhile, Microsoft (MSFT), Meta (META), and Amazon (AMZN) rose fractionally ahead of their quarterly earnings reports later this week. Apple (AAPL), Google (GOOG), and Tesla (TSLA) traded down less than 1%. Nvidia (NVDA) led the Big Tech "Magnificent Seven" stocks higher on Tuesday before the market open, climbing 1.4%. The gain came after Reuters reported that the AI chipmaker had ordered 300,000 H20 chips from its contract manufacturer TSMC. "This supports our theory that there is enormous pent-up demand for NVDA chips from China right now," Hedgeye Risk Management analyst Felix Wang wrote in a note to clients. Meanwhile, Microsoft (MSFT), Meta (META), and Amazon (AMZN) rose fractionally ahead of their quarterly earnings reports later this week. Apple (AAPL), Google (GOOG), and Tesla (TSLA) traded down less than 1%. Good morning. Here's what's happening today. Economic data: S&P CoreLogic 20-city home price index (May); Conference Board consumer confidence, July; Job Openings and Labor Turnover Survey (June); Dallas Fed services activity (July) Earnings: Boeing (BA), Booking Holdings (BKNG), Caesars (CZR), Cheesecake Factory (CAKE), Merck (MRK), PayPal (PYPL), Procter & Gamble (PG), Spotify (SPOT), Starbucks (SBUX), SoFi (SOFI), UnitedHealth Group (UNH), UPS (UPS), Visa (V) Here are some of the biggest stories you may have missed overnight and early this morning: The market is finally getting what it wants 35 charts explain markets and the economy right now UnitedHealth stock falls after reporting mixed Q2 earnings Sarepta stock soars as FDA reverses course on gene therapy pause Spotify stock slides after Q2 earnings and revenue miss Trump's DOJ puts companies on notice on tariffs US, EU rush to clinch final details and lock in trade deal Apple to Shutter a Retail Store in China for the First Time Ever Stellantis faces $1.7B hit from US tariffs this year Economic data: S&P CoreLogic 20-city home price index (May); Conference Board consumer confidence, July; Job Openings and Labor Turnover Survey (June); Dallas Fed services activity (July) Earnings: Boeing (BA), Booking Holdings (BKNG), Caesars (CZR), Cheesecake Factory (CAKE), Merck (MRK), PayPal (PYPL), Procter & Gamble (PG), Spotify (SPOT), Starbucks (SBUX), SoFi (SOFI), UnitedHealth Group (UNH), UPS (UPS), Visa (V) Here are some of the biggest stories you may have missed overnight and early this morning: The market is finally getting what it wants 35 charts explain markets and the economy right now UnitedHealth stock falls after reporting mixed Q2 earnings Sarepta stock soars as FDA reverses course on gene therapy pause Spotify stock slides after Q2 earnings and revenue miss Trump's DOJ puts companies on notice on tariffs US, EU rush to clinch final details and lock in trade deal Apple to Shutter a Retail Store in China for the First Time Ever Stellantis faces $1.7B hit from US tariffs this year Trending tickers: UPS, Whilepool and Royal Caribbean Here are some top stocks trending on Yahoo Finance in premarket trading: UPS (UPS) stock fell over 2% before the bell on Tuesday after reporting a drop in second-quarter profit and revenue, as demand took a hit from new "de minimis" tariffs on low-value Chinese shipments and mounting risks from President Donald Trump's trade policies. Whirlpool (WHR) stock fell premarket on Tuesday. after the appliance maker slashed its earnings outlook the day prior. Royal Caribbean (RCL) stock rose 4% before the bell after raising its annual profit forecast on Tuesday, banking on resilient demand for the cruise operator's high-end private island destinations and premium sailings. Here are some top stocks trending on Yahoo Finance in premarket trading: UPS (UPS) stock fell over 2% before the bell on Tuesday after reporting a drop in second-quarter profit and revenue, as demand took a hit from new "de minimis" tariffs on low-value Chinese shipments and mounting risks from President Donald Trump's trade policies. Whirlpool (WHR) stock fell premarket on Tuesday. after the appliance maker slashed its earnings outlook the day prior. Royal Caribbean (RCL) stock rose 4% before the bell after raising its annual profit forecast on Tuesday, banking on resilient demand for the cruise operator's high-end private island destinations and premium sailings. The market is finally getting what it wants Wall Street's busiest week of the summer is turning out to be an inflection point. Yahoo Finance's Hamza Shaban explains why in today's Morning Brief: Read more here. Wall Street's busiest week of the summer is turning out to be an inflection point. Yahoo Finance's Hamza Shaban explains why in today's Morning Brief: Read more here. Spotify stock sinks after Q2 earnings miss Spotify (SPOT) shares fell as much as 10% in early premarket trading Tuesday after the company missed second quarter earnings and revenue expectations. The results follow a remarkable 120% rally over the past year, as the stock rebounded from 2022 lows on the back of price hikes, cost cuts, and investor enthusiasm for AI and advertising. Spotify hit a record high of $738.45 earlier this month, but shares slid to around $635 immediately following the results. Spotify reported second quarter revenue of €4.19 billion ($4.86 billion), missing analyst expectations of €4.27 billion, though up from €3.81 billion in the same period last year. The company posted an adjusted loss of €0.42 ($0.49) per share, sharply missing forecasts for a profit of €1.97 and down from earnings of €1.33 in Q2 2024. "Outsized currency movements during the quarter impacted reported revenue by €104 million vs. guidance," the company said in the earnings release. Operating income also fell short of expectations in the quarter, though subscriber metrics for both premium and ad-supported tiers came in ahead of estimates. Gross margins of 31.5% came in as expected. Spotify's massive rally heading into the earnings report was fueled by a sweeping business overhaul, including layoffs, leadership changes, and a pullback from costly podcast exclusivity. After spending $1 billion to build out its podcast business, the company has since scaled back and narrowed its focus. Still, it remains committed to the medium, paying over $100 million to creators in Q1 alone, including high-profile names like Joe Rogan and Alex Cooper. Read more here. Spotify (SPOT) shares fell as much as 10% in early premarket trading Tuesday after the company missed second quarter earnings and revenue expectations. The results follow a remarkable 120% rally over the past year, as the stock rebounded from 2022 lows on the back of price hikes, cost cuts, and investor enthusiasm for AI and advertising. Spotify hit a record high of $738.45 earlier this month, but shares slid to around $635 immediately following the results. Spotify reported second quarter revenue of €4.19 billion ($4.86 billion), missing analyst expectations of €4.27 billion, though up from €3.81 billion in the same period last year. The company posted an adjusted loss of €0.42 ($0.49) per share, sharply missing forecasts for a profit of €1.97 and down from earnings of €1.33 in Q2 2024. "Outsized currency movements during the quarter impacted reported revenue by €104 million vs. guidance," the company said in the earnings release. Operating income also fell short of expectations in the quarter, though subscriber metrics for both premium and ad-supported tiers came in ahead of estimates. Gross margins of 31.5% came in as expected. Spotify's massive rally heading into the earnings report was fueled by a sweeping business overhaul, including layoffs, leadership changes, and a pullback from costly podcast exclusivity. After spending $1 billion to build out its podcast business, the company has since scaled back and narrowed its focus. Still, it remains committed to the medium, paying over $100 million to creators in Q1 alone, including high-profile names like Joe Rogan and Alex Cooper. Read more here. UnitedHealth stock slips after mixed Q2 results Shares of UnitedHealth Group (UNH) fell nearly 3% after its quarterly results before the bell painted a mixed picture. Yahoo Finance's Anjalee Khemlani reports: Read more here. Shares of UnitedHealth Group (UNH) fell nearly 3% after its quarterly results before the bell painted a mixed picture. Yahoo Finance's Anjalee Khemlani reports: Read more here. Sarepta stock rockets higher after FDA greenlight Shares in drugmaker Sarepta (SRPT) rocketed up over 30% in premarket after the embattled company got the FDA's go-ahead to resume shipments of its Elevdis gene therapy. The greenlight comes after Sarepta put a voluntary pause on shipments for some patients while the US regulator reviewed its safety following deaths. The FDA on Monday recommended that the compa lift that halt. Sarepta's stock is poised to build on a 16% gain on Monday, continuing a recent volatile spell triggered by changing fortunes for its best-selling product. AP reports: Read more here. Shares in drugmaker Sarepta (SRPT) rocketed up over 30% in premarket after the embattled company got the FDA's go-ahead to resume shipments of its Elevdis gene therapy. The greenlight comes after Sarepta put a voluntary pause on shipments for some patients while the US regulator reviewed its safety following deaths. The FDA on Monday recommended that the compa lift that halt. Sarepta's stock is poised to build on a 16% gain on Monday, continuing a recent volatile spell triggered by changing fortunes for its best-selling product. AP reports: Read more here. Nvidia orders 300,000 H20 chips from TSMC to satiate Chinese demand Reuters reports: Nvidia placed orders for 300,000 H20 chipsets with contract manufacturer TSMC last week, two sources said, with one of them adding that strong Chinese demand had led the U.S. firm to change its mind about just relying on its existing stockpile. Read more here. Reuters reports: Nvidia placed orders for 300,000 H20 chipsets with contract manufacturer TSMC last week, two sources said, with one of them adding that strong Chinese demand had led the U.S. firm to change its mind about just relying on its existing stockpile. Read more here. Oil maintains gains with tariffs and OPEC+ supply in sight Oil maintained gains following Trump putting pressure on Russia over the war in Ukraine with economic sanctions against Putin's government on the table. Bloomberg reports: Read more here. Oil maintained gains following Trump putting pressure on Russia over the war in Ukraine with economic sanctions against Putin's government on the table. Bloomberg reports: Read more here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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