CBO: $1 Billion in Flood Adaptation Could Cut $3–4 Billion in Future Damage Over 30 Years

A new report from the Congressional Budget Office says federal spending on flood adaptation can lower future federal disaster-relief and flood-insurance costs over the long run, even though those expected savings generally would not count as offsets in the agency’s official cost estimates for legislation.

The nonpartisan budget office said in its report, released Tuesday, that every $1 billion spent by the federal government on flood adaptations — including required state and local matching funds — would reduce future flood damage by about $3 billion to $4 billion over 30 years in today’s dollars. If future disaster-relief appropriations follow patterns seen from 2000 to 2019, that same $1 billion would reduce future discretionary disaster-relief outlays by about $1.8 billion over 30 years using Treasury borrowing rates, CBO said. It also would reduce National Flood Insurance Program claims, premiums and federal subsidies by about $0.3 billion over the same period.

Those estimates matter because flood losses are already large and rising. CBO said flooding caused about $55 billion a year, on average, over the decade ending in 2024, measured in 2025 dollars. It projects flood damage will rise by about one-quarter to one-third by 2050, in real terms, because of climate change and continued development in flood-prone areas. The report gives lawmakers a budget-focused estimate of what upfront mitigation spending could save later.

“On average, every $1 billion spent by those agencies for flood adaptations — taking into account the required contributions from state and local governments — will reduce future flood damage by about $3 billion to $4 billion over 30 years, measured in today’s dollars, CBO estimates,” the report said.

CBO looked mainly at two places where adaptation spending could affect the federal budget later: discretionary disaster-relief spending, which is money Congress typically appropriates after disasters, and the National Flood Insurance Program, the federal program that sells flood coverage in participating communities.

The agency presented the disaster-relief savings using two discounting methods, a way of converting future savings into today’s dollars. Using Treasury borrowing rates, CBO estimated that $1 billion in flood-adaptation spending would reduce future disaster-relief outlays by about $1.8 billion over 30 years. Using a fair-value discount rate, which generally produces a lower present-value estimate, the reduction would be about $1.4 billion.

CBO also gave ranges around those estimates. The reduction in future disaster-relief outlays could be $1.2 billion to $2.5 billion using Treasury rates, or $0.9 billion to $2.0 billion using fair-value rates. For the flood insurance program, CBO estimated that each $1 billion of federal flood-adaptation spending would reduce claims, premiums and federal subsidies by about $0.3 billion over 30 years under either discounting approach. It said the expected reduction per NFIP policyholder would be about $70 over 30 years using the Treasury-rate approach.

The report draws primarily on analyses of projects funded by the U.S. Army Corps of Engineers and the Federal Emergency Management Agency, the main federal agencies supporting flood adaptations. CBO said Army Corps and FEMA spending specifically on flood adaptations averaged roughly $2 billion a year from 2020 to 2024, in 2025 dollars.

To produce the estimates, CBO reviewed and adjusted benefit-cost analyses from those agencies, using a standardized 30-year time frame and accounting for state and local cost sharing.

The report also pointed to an important budget-procedure catch. “In the cost estimates that CBO prepares for legislation, the agency generally does not incorporate the effects of current spending on future discretionary appropriations,” it said. In practice, that means lawmakers could face official scores that show the upfront cost of adaptation spending without crediting the later expected savings in disaster aid.

For flood insurance, CBO added another piece of context: “By about fiscal year 2032, the bulk of NFIP policyholders will pay premiums that reflect their full estimated risk of losses from flooding,” the report said. That means future savings to the program are expected to come less from underpriced insurance and more from lower flood damage itself.

The bottom line from the report is straightforward: CBO expects flood adaptation spending to reduce future federal costs, but Congress’ scorekeeping rules generally will not treat those expected long-run savings as offsets when legislation is officially priced.