This deepens the discrepancy. If fire departments get less money during severe droughts, we would expect even more fires or even more intense fires during droughts, which should lead to more financial damage.

This compares areas subject to fires to areas with few such fires. But we’re not trying to explain a discrepancy between areas. Even in areas where there are typically few fires, we’d still expect more financial damage from fires during droughts.

It’s reasonable to think there’s less vegetation during droughts. So, (C) suggests there would be fewer large, hard-to-control grass fires during a drought than during average rainfall. This could be why there’s less financial damage from grass fires during long droughts.

We already know that there are more grass/brush fires during periods of long drought than during periods of average rainfall. The cause of these fires, whether human negligence or lightning, doesn’t suggest we’d see less financial damage from fires during a drought.

This fact would apply equally to both the long drought period and the average rainfall period. So we’d still expect fires during the long drought periods to cause more damage overall, since there are more fires during these periods.