Hurricane Sandy has exposed problems with the Federal Emergency Relief Program. While critical infrastructure damaged by storms needs to be quickly replaced, the current national program lacks fiscal restaint, checks to make sure the funding is related to emergencies, and a systematic approach.
First a little history: The highway emergency relief program was first authorized in 1956. As part of the Moving Ahead for Progress (MAP-21) bill, the latest reauthorization of the program dedicates $100 million per year from the highway trust fund. Since $100 million is not sufficient for major disasters, MAP-21 authorizes additional funds on a “such sums as may be necessary” basis. Before Hurricane Katrina this funding came from the highway trust fund. However, with trust fund balances decreasing, in 2005 Congress designated the General fund as the source of future supplementary funding. These funds are typically provided in annual or emergency supplemental appropriations. Funds expended in in the first 180 days for emergency repairs to restore essential traffic, to minimize the extent of damage or to protect the remaining facilities are reimbursed 100% by the federal government. Permanent repairs, which are intended to restore damaged bridges and roads to pre-disaster conditions and capabilities, receive the same 80-90% share as they would receive as a federal-aid highway facility.
Transit facilities have a similar program authorized in MAP-21 that covers most Capital and some Operating costs. There is no dedicated money; all funding comes from the general fund. While the federal share is supposed to be 80%; the DOT Secretary may waive the local match.
Since emergency funds are authorized on a “such sums as may be necessary” basis, the program often receives substantially more funding than is budgeted in any given year. In February 2007, the Government Accountability Office released a report that expressed concerns about the budgetary implications of increased ER spending. As the ER program is mostly funded by general fund revenues when the…
[N]ation faces a pending fiscal crisis, raising concerns about future use of the general fund and the financial sustainability of the ER program ... ER funds are not intended to replace other federal-aid, state, or local funds to increase capacity, correct non disaster-related deficiencies, or make other improvements. However, contributing to future financial sustainability concerns is the fact that the scope of eligible activities funded by the ER program has expanded in recent years with congressional or FHWA waivers of eligibility criteria or changes in definitions. As a result, some projects have been funded that go beyond repairing or restoring highways to pre-disaster conditions ... [such as] projects that grew in scope and cost to address environmental and community concerns.... Congress has also directed that in some cases the program fully fund projects rather than requiring a state match.
The report noted that from 1990 to 2005, 86% of ER program funds were made through supplemental appropriations. This further complicated budgeting and led to project backlogs as states waited for Congressional action on this supplemental appropriations legislation. The nation faces an even bigger fiscal crisis in 2013 yet the emergency appropriations process continues unchanged. If the Senate approves President Obama’s $60.4 billion in Sandy requested-aid, the annual appropriations will be only .00016% of the total or less than 1/1000 of 1%. The $60.4 billion is more money than the budgets for the departments of Interior, Labor, Treasury, and Transportation combined. Clearly, this is not good budget policy.
And then there is the money in the relief bill that has nothing to do with Hurricane Sandy. Unrelated items include $2 million to repair roof damage at the Smithsonian buildings in DC that pre-dates the storm; $4 million to repair sand berms and dunes at the Kennedy Space Center some 1,000 miles away from the storm; $41 million for clean up and repairs at eight military based along the center’s path including Guantanamo Bay, Cuba. The FBI wants $4 million to replace office equipment and furniture while the Customs and Border Protection wants $2.4 million to replace “destroyed or damaged vehicles, including mobile X-Ray machines. The Small Business Administration is seeking $50 million for Women’s Business Development Centers among other priorities. One federal official’s quote is priceless. In defending some of the spending to ABC news he said, “On the federal items, we know what the damage is because we are the federal government.”
The budget request also repeats an Obama Administration pattern of funding substantial improvements to infrastructure rather than sufficient repairs in an emergency budget request. Emergency appropriations are intended to repair conditions to pre-existing status not make improvements. The $13 billion requested for mitigation projects to prepare for future storms should be a part of future annual budgets not an emergency appropriation. Similar to its efforts to make the Gulf of Mexico cleaner than it was prior to the Deepwater Horizon oil disaster, the government is using an emergency process to make non-emergency repairs. Checked by Republicans on regular spending, the White House is trying to find projects already rejected by Congress.
Further, while there has been a great deal of research into planning for disasters, there has been little research or discussion into how to distribute emergency transportation funding. The 2007 GAO report recommended tightening the eligible criteria for funding, rescinding unused emergency funding, and improving communication between DOT offices and local governments. While FHWA has slightly improved its communications, criteria for emergency transportation funding has been loosened not tightened. Most decision makers glanced at the GAO report, threw it in a drawer, and did not think about it again.
There are questions as to the government’s role in disaster funding. Should the federal government distribute funding to state DOTs or another entity? Should states match a larger percentage of the total federal funding? What transit agency should receive emergency federal funding-- an MPO, a regional transit board, or the transit operator? Should Davis-Bacon and other federal stipulations that increase the cost of repairs be in effect during emergencies?
Further, should states receive federal funds even though they have refused to use state funds to fix pre-existing problems? New Jersey, New York, and Connecticut were warned that they would suffer major damage from a hurricane if they did not have an adequate plan for coastal protection. Rather than fix the problem, state leaders decided to punt the problem to the federal government and hope that their good luck would continue. It didn’t. Natural disasters are major tragedies that incur enormous property damage and often tragic loss of life. Due to the emotional nature of the tragedy, there has never been a comprehensive fact-based study that examines how to best solve this problem. Politicians have been very good at lobbying for funding but a complete failure at studying whether the current system is the most-effective way to repair critical infrastructure.
Despite substantial political pressure to do something, Congress should not pass an emergency-funding bill unless three key problem-areas are resolved. First, all non-emergency funding should be eliminated from the bill. This includes future remediation efforts. Protection of critical infrastructure is important but states need to contribute a substantial part of their own resources to such efforts. Second, future transportation bills need to devote a realistic amount of funding to emergency relief. The current lack of sustainable funds for disaster relief leads to unsustainable emergency appropriations. This process lacks planning and fiscal discipline and substantially increases the federal debt. Third, Congress and the White House should commission an outside group of transportation experts to study the most efficient way to distribute transportation resources in emergencies. Upon receipt of this report, Congress and the White House should amend current laws to make disaster relief less political. Hurricane Sandy has highlighted the problems with emergency transportation relief. We need to fix this problem to avoid both physical and financial disaster.