Disaster aid hits new high
Congress is considering another $20 billion in aid to hurricane-impacted zones.
If 2005 hurricane relief were a separate category in the US budget, the only larger items would be defense, Social Security, Medicare, and Medicaid.
The federal commitment in the aftermath of Katrina, Rita, and Wilma has now hit $88 billion, with at least another $20 billion under consideration in Congress.
This has become the largest disaster relief effort the government has agreed to - more than the combined amount it spent for 9/11, the Florida hurricanes of 2004, the 1994 Northridge earthquake, and 1992's hurricane Andrew (in nominal dollars). It is equal to 20 percent of the US Defense budget for this fiscal year, as well as 20 percent of the $400 billion US budget deficit.
"Other than the war in Iraq, no other part of the budget is making the deficit go up as far or as fast," says Stanley Collander, an independent budget analyst in Washington.
The government outlays may sound huge, but that shouldn't be surprising, say government officials. "The storm was massive in scale. That is why the price tag went so high," says DJ Nordquist, a spokeswoman for Donald Powell, coordinator of federal efforts for the Gulf Coast. "It affected 90,000 square miles - the size of the United Kingdom - and 1.5 million people."
Last week, a 34-member congressional delegation, led by House Speaker Dennis Hastert (R) and House minority leader Nancy Pelosi (D), visited New Orleans to see the damage. Mr. Hastert reportedly made no apology for his earlier comment questioning whether the government should spend money on people living in flood-prone areas. "What I said was, before you rebuild New Orleans, you had better make sure that you don't put [residents] in harm's way. That's why we're here, and that's what we're doing," he told The Times-Picayune newspaper.
The bulk of federal spending is the direct result of hurricane Katrina, although the Office of Management and Budget (OMB) does not break the numbers down that way. Instead, it works on a state-by-state basis. So far, the government is obligated to spend $30 billion in Louisiana, which was hit by Katrina and Rita; $11 billion in Mississippi (Katrina); $2 billion in Alabama (Katrina); $2.6 billion in Texas (Rita); and $2.7 billion in Florida (mainly Wilma). Other states will receive an additional $2.5 billion.
These numbers, however, do not include a giant $11.5 billion block grant that was part of a December Department of Defense appropriations bill, because the money hasn't been awarded or allocated yet. Most of that money will go to Louisiana and Mississippi. It also does not include another $4.2 billion that may be allocated to pay homeowners who did not have flood insurance. And it does not include the cost of the Gulf Opportunity Zone, which will give companies a significant tax break if they invest in the region.
In addition, Congress has allocated billions more, though the money is not obligated to be spent yet.
The $108 billion aid total equals $72,000 per person affected by the storm, to be paid over a number of years.
Some Louisiana residents say the scale of the numbers is not representative of actual spending in the state.
"People will think they just dropped cash on us," says Greg Albrecht, chief economist for the Legislative Fiscal Office in Baton Rouge. "I don't think so."
Instead, Mr. Albrecht says the money has gone into other people's pockets - such as for debris removal and for FEMA trailers built in other states. "But none of that is income here. None of it is brick and mortar in the ground."
Louisiana itself has been slow to send spending plans to federal officials. The Department of Housing and Urban Development has some $6.2 billion in a Community Development Block Grant that is sitting in the Treasury waiting for Gov. Kathleen Blanco (D) to detail how it will be used.
"We will turn those around very quickly," says HUD spokesman Brian Sullivan. "We understand they need to put that money to work very quickly."
A spokeswoman for the Louisiana Recovery Authority says a partial plan will be on the way soon. It will include $100 million in bridge loans to small businesses and another $100 million on infrastructure and economic development needs.
"We had to get approval from the legislature. Now we're in the process of sending in a partial action plan," says the spokeswoman, who asked not to be named.
Monday, Governor Blanco will present the Louisiana legislature with her proposed $7.5 billion budget. At the end of last year, she had cut $600 million from state spending in anticipation of a reduction in revenues. "She is talking about keeping those cuts," says Barry Erwin, head of the Council for a Better Louisiana. "It's a smaller state financially and population-wise for some time."
Because of the surge in rebuilding, however, state sales tax revenue has been stronger than anticipated. In mid-February, the state raised its revenue forecast.
But Albrecht says those gains have already started to slow down. Although state revenue from gambling has been higher than anticipated, the oil and gas sector has been slow to return to pre-Katrina levels. And, he says, the state is still anticipating a 15 percent drop in revenue from fewer income taxes filed.
The state is also negotiating with the Federal Emergency Management Agency over its schedule to repay its share of the costs of Katrina and Rita. By the end of the month, the state owes $158 million as the first installment, says Albrecht. "We've asked for an audit. We want to know what we're being charged for," he says.
This week, the Senate Appropriations Committee will hold hearings on a request for additional emergency spending to help homeowners. The governors of Louisiana, Mississippi, and Alabama will be there.
According to a Jenny Manley, a spokeswoman for Sen. Thad Cochran (R) of Mississippi, the committee hopes to have a markup of the legislation by the end of the month. "We hope to have it to the president no later than Memorial Day," she says.