BAILEY, Colo. -- A wind-whipped fire has burned at least 800 acres of grass and brush and forced the evacuation of hundreds of homes in this mountain town.

One person suffered smoke inhalation, and one firefighter had a sprained ankle.

The Federal Emergency Management Agency has agreed to pay for a large portion of the costs for labor, equipment and evacuation associated with the fire, which forced at least two schools to close on Tuesday and threatened 500 homes on Wednesday.

Officials said they were concerned about expected wind gusts of up to 30 mph by Wednesday afternoon. Helicopters and tankers were to drop retardant on the flames in Park County, in an area where at least 12,000 people live.

The American Red Cross opened a shelter at a school.

A winter drought has left Colorado forests, farms and ranges bone dry, ushering in an early wildfire season. Gov. Bill Owens on Tuesday asked the federal government to declare a drought emergency, and released $450,000 in emergency funds for firefighting.

"This is a statewide emergency that requires a statewide response," Owens said.

Meanwhile, a fire that blackened 600 acres last week in the Cache le Poudre Canyon northwest of Fort Collins flared up Tuesday. About 40 firefighters were trying to stifle the 10-acre blaze, Forest Service officials said.