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Federal Relief Costs from Sandy Likely to Be Big, and Contested

Source: NY Times

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Posted on 05 Nov 2012 by Neilson

Federal costs from Hurrican SandyThe first trickle of federal funds has started to go out after Hurricane Sandy - $29 million to rebuild highways, $30 million to hire temporary workers to help with the cleanup. But lawmakers are just beginning to tally what is certain to be a multibillion-dollar bill for the federal government at a time of fiscal restraint.

At least initially, New York, New Jersey and other states most affected by the storm will be spared the traditional fights in Washington over disaster assistance, thanks to a little-noticed provision in last year's budget agreement that arose from the debt-ceiling fight and resulted in Congress setting aside roughly $12 billion for disaster relief.

The Federal Emergency Management Office has $7.5 billion to spend this fiscal year, and an additional $5 billion could be made available with no spending offsets required in other government programs.

While that will help in the short term, the East Coast states hit by the giant storm will almost certainly request billions in additional federal dollars, which would require appropriations by Congress and could set off partisan - or geographic - wrangling and stir longstanding concerns about fraud and waste.

New York state officials have already started to apply pressure on the federal government to cover a greater share of the rebuilding cost than is provided under the law, seeking 100 percent reimbursement for major infrastructure projects compared with the 75 percent automatically provided in major disasters. State officials have also talked of an ambitious new sea wall system, with a possible price tag of at least $10 billion, that could protect New York from a future superstorm.

"Our counties are responding to the continued impacts of multibuilding fires, tunnel closures, power losses to hospitals and other critical infrastructure, destroyed homes and sheltered populations - all in the midst of historic flooding that has complicated emergency response operations exponentially," Gov. Andrew M. Cuomo wrote to President Obama on Wednesday.

Lawmakers from New York and elsewhere, perhaps wary of any requests for new federal spending that could become political fodder, so far are playing down the need for additional money. But when pressed, they acknowledge that they could soon follow.

"I think there is a very good chance we are going to need more than that," Senator Charles E. Schumer, Democrat of New York, said in an interview Thursday of FEMA's disaster-relief reserves. "But the immediate needs are being taken care of without people looking over their shoulders."

President Obama has pledged to speed federal aid to the hard-hit states, winning praise from state and local officials of both parties. But so far, the flow of money has been relatively modest in a disaster that economists estimate could leave up to $30 billion to $50 billion in damage, costs borne by individuals, businesses, insurers and the federal government.

The Federal Emergency Management Agency had approved the distribution of more than $40 million in temporary housing aid and other assistance to 98,000 victims of the storm as of 3 p.m. Friday.

The government ultimately paid out more than $7 billion in so-called individual and household assistance in the aftermath of Hurricanes Katrina and Rita in 2005, an indication of how the bill from Hurricane Sandy could skyrocket.

The Department of Labor, meanwhile, has already kicked in another $30 million to hire temporary workers to help with the cleanup, New York and New Jersey officials have announced. And the Department of Transportation has given what it calls "quick release emergency funds" totaling $29 million so far to five states, to help them start to rebuild roads, bridges, tunnels and other transportation infrastructure damaged in the storm.

But it is clear this is just the start of the federal costs.

After Hurricanes Katrina and Rita, the federal government eventually allocated at least $120 billion, including $14 billion to rebuild 350 miles of levees and flood walls around greater New Orleans.

Lawmakers and federal officials say they are determined to guard against fraud, which has marred past recovery efforts. Mispayments and fraud were estimated to cost at least $600 million in the aftermath of Hurricanes Katrina and Rita.

"Just as disasters bring out the best in most people, they bring out the worst in some," said Representative Lou Barletta, Republican of Pennsylvania. "We need to make sure disaster recovery funds go to the people who truly need them. Those who are found to commit fraud and abuse should be punished severely because they are taking money from those who truly need it."

Representative Steve King, an Iowa Republican, said during a debate in his re-election campaign on Tuesday that while he favored assistance to the battered states, they needed to come up with a plan on how to spend it. After Hurricane Katrina, he said, "they spent it on Gucci bags and massage parlors and everything you can think of in addition to what was necessary."

Officials at FEMA said this week that they were committed to trying to block abuses, citing computer systems that will compare home addresses given by victims with public databases to make sure that applicants are not filing false claims, while also using computer programs to attempt to ensure victims do not register twice for aid.

But it remains unclear if FEMA can meet the challenge. A report issued last year by the Department of Homeland Security's inspector general noted that the agency had far too few employees dedicated to investigating fraud - assigning just 6 people nationwide to the effort, compared with 21 in 2007.

"FEMA begs people to call and apply even if they are not sure they are eligible," the Inspector General's report said, quoting agency employees, about the push to sign up people for disaster aid.

FEMA's 2012 disaster-relief allocation will certainly be enough to cover the initial response, FEMA director W. Craig Fugate said this week. But the widespread flooding in areas where many residents do not have flood insurance will probably mean requests to the federal government to provide more federal financing to the government-backed flood insurance program, which already is facing a deficit.

FEMA is only authorized to provide each homeowner a maximum of about $30,000 in assistance, far short of the damage many of those without flood insurance have suffered.

"This is going to require a very substantial recovery effort," Mr. Fugate said on Friday.


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