The states and the local communities, along with orgainzations like the Red Cross, already do almost all of the work of disaster relief. FEMA has only a couple of thousand people and its job is simply to MANAGE the effort. Sometimes it gets in the way. I heard the other day that power companies on Long Island were ready to go out and get the power back on but had to wait for the go-ahead from FEMA.
It's true that the local and state governments often need federal dollars to do the job effectively, but FEMA isn't needed for that. We could easily get along without FEMA, but in the world of big government, once there's an established bureaucracy in place for any purpose whatsoever, we can never get rid of it.