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INFORMATION RELATING TO THE FEDERAL APPROPRIATIONS FOR KATRINA RECOVERY

Prepared by the Office of the Governor   GCN    Filed 1/4/06


Soon after Katrina, the Congress and the President approved appropriations of $60 billion to fund the federal Disaster Relief Fund, the account which FEMA uses to fund Stafford Act activities required by federal law (e.g. debris removal, rebuilding schools and other public buildings).  The Fiscal Year 2006 Department of Defense Appropriations Act (H.R. 2863) includes $29 billion for specific needs arising from Hurricane Katrina that are not covered by the Stafford Act.  This $29 billion includes funding for activities in Mississippi, Louisiana, and Alabama ranging from homeowner assistance to social services; rebuilding of federal facilities in the affected areas (e.g. levees, VA hospitals); helping states which are housing evacuees; and replenishing the accounts of federal agencies which have been involved in the recovery (e.g. the Department of Defense). Therefore, not all of the $29 billion will be spent in Mississippi, Louisiana, and Alabama.  Additional assistance is provided through other pieces of federal legislation, as noted.

More information on funding specific to Mississippi:

Community Development Block Grant Program

- $11.5 billion is made available for "disaster relief, long-term recovery, and restoration of infrastructure in the most impacted and distressed areas related to the consequences of hurricanes in the Gulf of Mexico in 2005."

- These funds will be administered by an entity or entities designated by the Governor.

- The Secretary of Housing and Urban Development will allocate the $11.5 billion to the affected states, but no state can receive more than 54% of the total amount.

- Prior to the funds being obligated, the state will submit a plan to the Secretary of Housing and Urban Development detailing how the funds will be used.  The Secretary is also required to establish procedures to prevent fraud and abuse, including duplication of benefits.

- The state can use up to 5% of its allocation for administrative expenses.

The Mississippi Development Authority, which already administers CDBG funds provided by the federal government each year, will administer Mississippi's share of the Katrina CDBG funds.  

1) Assistance to Homeowners

In 1968, Congress created the National Flood Insurance Program (NFIP) in response to the rising cost of taxpayer funded disaster relief for flood victims and lack of private insurance options for flood insurance.  The NFIP is a federally-guaranteed insurance program which is marketed by private insurance agents.  In conjunction with this program, the federal government, through the Federal Emergency Management Agency (FEMA), establishes Special Flood Hazard Areas (commonly known as the flood plain or the flood zone).
When a potential homeowner secures financing to buy, build, or improve structures, it is routine for the insurance agent who markets the NFIP, who therefore is an agent of the federal government, to inform the homeowner that he or she does not need flood insurance because he or she lives outside of the flood plain.  Therefore, most homeowners do not buy flood insurance; rather they buy homeowners' property and casualty insurance.
An estimated 35,000 homes outside of the flood plain without flood insurance were destroyed by Hurricane Katrina's storm surge on the Mississippi Gulf Coast.  These homeowners relied to their detriment on the federal government with regard to flood insurance.  The majority of the CDBG funds will be used to help these homeowners.
Under the initial plan, the CDBG funds will compensate a homeowner for the value of a home up to a maximum grant of the insured value or $150,000, whichever is less, for homeowners which meet the following criteria:

1) Home must be outside the flood zone established by the federal government.
2) Home must have been owner-occupied.
3) Home must have had homeowner or similar insurance coverage at the time of Katrina's landfall.

These criteria are designed to eliminate the possibility of assistance to homeowners who lived within a known flood area and yet did not maintain flood insurance, or homeowners who did not maintain standard home insurance.  To prevent duplicate compensation, FEMA assistance and insurance settlements will be deducted from the grant amount.

In return for this financial assistance, a homeowner must:

1) Rebuild to the new requirements set by the FEMA flood advisory maps (e.g. higher elevation) to mitigate against future risks.
2) Rebuild to the International Building Code Standard or higher.
3) Maintain flood insurance on the rebuilt property.


2) Improvements for Water and Wastewater systems

A by-product of Hurricane Katrina will be that many people will move north off the coast into areas which do not have sufficient water and sewer systems.  Under the Stafford Act, FEMA will pay to repair and replace previously existing systems, but the Stafford Act does not authorize payment for capacity building.  Under the guidance of the Mississippi Department of Environmental Quality, these CDBG funds will be used for water and wastewater system improvements.

3) Implementation of local economic development plans

Working with the Mississippi Development Authority, cities and counties most affected by Katrina will have access to funds to help rebuild and renew their areas.

4) Implementation of regional economic development plans

The Mississippi Development Authority will use CDBG funds for projects which have a positive impact on multiple localities.

5) Financial relief for the ratepayers of investor-owned-utilities

CDBG funds will partially offset the large rate increases required to pay for the restoration of utilities in the affected areas.  Absent assistance, these rate increases would impede economic development efforts.  This is modeled on the September 11th assistance to the for-profit utilities in New York and would treat for-profit customers the same as the customers of non-profit utilities.

Highways

A total of $2.75 billion is made available for the Federal Highway Administration's "Emergency Relief Program."  Although Mississippi's share is not specified in law, FHW and MDOT agree that Mississippi's share is approximately $740 million.  These funds will pay for the reconstruction of federal highways in Mississippi such as Highway 90, I-10, etc.  These funds are 100% federal (no state match required) with no time limit on when MDOT must complete the project.



Social Services Block Grant

A total of $550 million is available for the states affected by the 2005 hurricanes.  These funds flow from the U.S. Department of Health and Human Services through the Governor to the Mississippi Department of Human Services.  The Governor's office anticipates approximately $200-$220 million of SSBG funds will be directed to Mississippi.  By comparison, Mississippi's SSBG allotment for FY 06 is $16.7 million.  

SSBG funds are used for:

A) Self-Sufficiency:  Social support services which directly relate to decreased government or non-government assistance in daily living.
B) Protection: Social support services which are essential to the protection or well-being of an individual or family.
C) Maintenance: Social support services which are necessary to allow an eligible individual to maintain an existing standard of living.
D) Other: Social support services which are related to the overall well-being of an individual and relate to one or more of the categories above but do not fit under the specific category because of definition.

DHS currently uses some of its SSBG allocation and transfers the remainder to the Departments of Mental Health and Health.


Education

K-12 Education

$750 million is provided for the areas affected by Hurricanes Katrina and Rita to assist in the "restart" of schools.  These funds are for operating the schools; not for reconstruction (reconstruction is paid for by FEMA under the Stafford Act).   The U.S. Secretary of Education will allocate the $750 million to the various State Departments of Education, and each State Superintendent of Education will accept applications from school districts.  The State Superintendent will make the decisions regarding the award of funds.

$650 million is provided for temporary impact aid for displaced students.  These funds flow from the Secretary of Education to the State Superintendent to the schools.  A displaced student is defined as a student "who enrolled in an elementary or secondary school (other than the school that the student was enrolled in, or was eligible to be enrolled in, on August 22, 2005) because such student resides or resided on August 22, 2005," in a declared disaster area.  The State Department of Education estimates there may be as many as 25,000 displaced students in Mississippi schools.  Each school may receive up to $6000 per student and $7500 per special education student.  However, if $650 million is not enough to fund all the displaced students, the U.S. Department of Education will reduce the amount of impact aid per student.

Higher Education

The $95 million funding earmarked for higher education is to be appropriated directly to the IHL Board for both community colleges and universities. This will be a direct federal government appropriation utilizing the pre-exisiting LEAP Scholarship Program. IHL has agreed to make an interagency transfer of some funds to the State Board of Community and Junior Colleges.


Medicaid

The Deficit Reduction Act of 2005, S. 1932, includes provisions affecting health care in Mississippi, including fiscal relief for the state Medicaid program.  The U.S. House of Representatives and the U.S. Senate have both approved the conference report for this bill, but three points of order in the Senate caused changes which will require the House to vote again when they return January 31st or soon thereafter.

$2 billion is provided for the eligible states affected by Hurricane Katrina for a variety of purposes.  The Governor's office is working with the U.S. Department of Health and Human Services to determine how the funds will be allocated among the allowable categories and among the states.  

The funding provided is primarily for allowable expenses as outlined below:

- For the state share of Medicaid services from August 24, 2005, through June 30, 2006, for evacuees from other states and for individuals that resided in one of the lower 47 counties of Mississippi receiving benefits under an approved multi-state 1115 demonstration project (Katrina Waiver).  (Preliminary estimate: $20 million in total dollars.  This is based on an estimate of 10,000 enrollees in the waiver as of the end of January 2006.  Currently, Mississippi has approximately 3,000 enrollees.)

- For the total uncompensated care costs incurred for medically necessary services from August 24, 2005, through January 31, 2006, for evacuees from other states and for individuals that resided in one of the lower 47 counties of Mississippi who do not have other coverage for such assistance through insurance, including (but not limited to) private insurance, Medicaid or SCHIP, or state-funded health insurance programs. (Preliminary estimate: $75 million - $100 million)

- For the state share until June 30, 2006, of services for individuals that reside in one of the lower 47 counties of Mississippi who are eligible for benefits under the regular Medicaid or SCHIP program.  (The Division of Medicaid estimates the state share for individuals that reside in one of the lower 47 counties of Mississippi who are eligible for benefits under the regular Medicaid or SCHIP program from September 1, 2005, to June 30, 2006, to be $345 million.  However, it is important to note that not all of these funds are General Fund-equivalent appropriated dollars.)

- For costs associated with restoring access to health care in the impacted communities per the Secretary's approval and within his authority.  (No cost estimate at this time.)

Law Enforcement

$125 million is provided to assist governments in hiring additional police officers in the affected areas and in areas will significantly increased populations due to evacuees.  These funds may be used to provide personnel, equipment, training, technical assistance, and information systems for more widespread apprehension, prosecution, adjudication, detention, and rehabilitation of offenders who violate such state and local laws.  

The United States Attorney General will develop the plan of how the funds will be allocated among the states and local jurisdictions.

Workforce Training

$125 million is provided for National Emergency Grants from the U.S. Department of Labor to affected states.  Uses for these funds include providing training capacity and direct training in skills needed in the rebuilding effort, temporary employment for affected individuals, and workforce training for new and expanding businesses.  

Mississippi has already received a commitment of $50 million in NEG funding.  With the new funds, the Department of Labor has committed to the Governor's office that an additional $45 million will be available after July 1, 2006.


Coastal Restoration
  
The Corps of Engineers is provided $10 million to conduct an analysis and design for "comprehensive improvements or modifications to existing improvements in the coastal area of Misssissippi in the interest of hurricane and storm damage reduction, prevention of saltwater intrusion, preservation of fish and wildlife, prevention of erosion, and other related water resource purposes at full Federal expense."  It is expected that this study will provide detailed recommendations on how to proceed with barrier island reconstruction, as proposed by the Governor on December 5, 2005.

The Corps of Engineers is provided $75 million for enhancing estuarine habitats in Mississippi.  This follows the Governor's proposal regarding oyster reef and coastal marsh restoration.  The Mississippi Department of Marine Resources will assist the Corps as these projects develop.

The Corps of Engineers is provided $75 million to accelerate completion of authorized projects in the State of Mississippi along the Mississippi Gulf Coast.


Other Items of Interest

- The Katrina appropriations package includes $1.987 billion, as requested by the President, for Navy Shipbuilding and Conversion.  These funds will assist Northrop Grumman to "replace destroyed or damaged equipment, prepare and recover naval vessels under contract; and provide for cost adjustments."

- The Katrina package includes increased funding for USDA housing programs which provide subsidized loans and housing repair funding.

- The Katrina package includes funding to repair vital federal facilities in Mississippi, including:

o $292.5 million for the repair and renovation of the VA hospital in Biloxi.
o $45 million for the Armed Forces Retirement Home in Gulfport.
o $277.2 million for the Naby to help rebuild the Seabee base in Gulfport and the Stennis Space
             Center.
o $43.4 million to help rebuild Keesler Air Force Base.
o $45 million for the Keesler Medical Center.
o $82.8 million for new Navy housing in the Gulfport/Stennis region.
o $324.8 million for housing at Keesler Air Force Base.
o $48.9 million for Navy housing at the Naval Air Station Meridian and at the Seabee base in
            Gulfport.


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