This study examines Brazil’s fiscal response to extreme weather events, analyzing relief funding and risk mitigation policies. Using SPEI data from 1997 to 2019, we identify floods and droughts across 5,474 municipalities and apply a difference-in-differences with matching approach. Our findings show that droughts do not affect intergovernmental transfers, creating financial pressure, while floods increase grants, improving fiscal balances but failing to boost flood mitigation spending, revealing a moral hazard in reliance on higher-level government resources.