[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
PRIORITIES FOR DISASTERS AND
ECONOMIC DISRUPTION: THE
PROPOSED FY2011 BUDGETS FOR FEMA AND EDA
=======================================================================
(111-111)
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
May 6, 2010
__________
Printed for the use of the
Committee on Transportation and Infrastructure
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JAMES L. OBERSTAR, Minnesota, Chairman
NICK J. RAHALL, II, West Virginia, JOHN L. MICA, Florida
Vice Chair DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of JOHN J. DUNCAN, Jr., Tennessee
Columbia VERNON J. EHLERS, Michigan
JERROLD NADLER, New York FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida JERRY MORAN, Kansas
BOB FILNER, California GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas HENRY E. BROWN, Jr., South
GENE TAYLOR, Mississippi Carolina
ELIJAH E. CUMMINGS, Maryland TIMOTHY V. JOHNSON, Illinois
LEONARD L. BOSWELL, Iowa TODD RUSSELL PLATTS, Pennsylvania
TIM HOLDEN, Pennsylvania SAM GRAVES, Missouri
BRIAN BAIRD, Washington BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington JOHN BOOZMAN, Arkansas
MICHAEL E. CAPUANO, Massachusetts SHELLEY MOORE CAPITO, West
TIMOTHY H. BISHOP, New York Virginia
MICHAEL H. MICHAUD, Maine JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania JEAN SCHMIDT, Ohio
TIMOTHY J. WALZ, Minnesota CANDICE S. MILLER, Michigan
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma
MICHAEL A. ARCURI, New York VERN BUCHANAN, Florida
HARRY E. MITCHELL, Arizona BRETT GUTHRIE, Kentucky
CHRISTOPHER P. CARNEY, Pennsylvania ANH ``JOSEPH'' CAO, Louisiana
JOHN J. HALL, New York AARON SCHOCK, Illinois
STEVE KAGEN, Wisconsin PETE OLSON, Texas
STEVE COHEN, Tennessee VACANCY
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico
JOHN GARAMENDI, California
VACANCY
(ii)
?
Subcommittee on Economic Development, Public Buildings, and Emergency
Management
ELEANOR HOLMES NORTON, District of Columbia, Chair
BETSY MARKEY, Colorado MARIO DIAZ-BALART, Florida
MICHAEL H. MICHAUD, Maine TIMOTHY V. JOHNSON, Illinois
HEATH SHULER, North Carolina SAM GRAVES, Missouri
RUSS CARNAHAN, Missouri SHELLEY MOORE CAPITO, West
TIMOTHY J. WALZ, Minnesota Virginia
MICHAEL A. ARCURI, New York MARY FALLIN, Oklahoma
CHRISTOPHER P. CARNEY, BRETT GUTHRIE, Kentucky
Pennsylvania, Vice Chair ANH ``JOSEPH'' CAO, Louisiana
DONNA F. EDWARDS, Maryland PETE OLSON, Texas
THOMAS S. P. PERRIELLO, Virginia
JAMES L. OBERSTAR, Minnesota
(Ex Officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
TESTIMONY
Fernandez, Hon. John R., Assistant Secretary of Commerce for
Economic Development, Economic Development Administration...... 5
Fugate, Hon. Craig, Administrator, Federal Emergency Management
Agency......................................................... 5
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Norton, Hon. Eleanor Holmes, of the District of Columbia......... 28
Oberstar, Hon. James L., of Minnesota............................ 32
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Fernandez, Hon. John R........................................... 38
Fugate, Hon. Craig............................................... 60
SUBMISSIONS FOR THE RECORD
Fernandez, Hon. John R., Assistant Secretary of Commerce for
Economic Development, Economic Development Administration,
response to request for information from the Subcommittee...... 46
Fugate, Hon. Craig, Administrator, Federal Emergency Management
Agency, response to request for information from the
Subcommittee................................................... 70
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HEARING ON PRIORITIES FOR DISASTERS AND ECONOMIC DISRUPTION: THE
PROPOSED FISCAL YEAR 2011 BUDGETS FOR THE FEDERAL EMERGENCY MANAGEMENT
AGENCY AND THE ECONOMIC DEVELOPMENT ADMINISTRATION
----------
Thursday, May 6, 2010
House of Representatives
Subcommittee on Economic Development, Public
Buildings and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
room 2167, Rayburn House Office Building, the Honorable Eleanor
Holmes Norton [Chairwoman of the Subcommittee] presiding.
Ms. Norton. The hearing will come to order. Before we
begin, we note that Mr. Fugate is on his way to Tennessee
because of the disaster there. I am going to do our opening
statements, the Ranking Member and myself, go to Mr. Fugate and
ask him questions first, before I go to Mr. Fernandez, in light
of the Tennessee disaster, which, of course, is first priority.
Good morning and welcome all, especially our witnesses, to
today's hearing, which will review the Administration's
proposed Fiscal Year 2011 budgets for the Federal Emergency
Management Agency and the Economic Development Administration.
The agencies before us today have much in common beyond the
jurisdiction of this Subcommittee. FEMA is best known for
providing assistance to citizens, States and communities in the
aftermath of natural and man-made disasters. The Economic
Development Administration, or EDA, provides assistance to
communities around the Country facing economic distress from a
number of different causes, including disasters. One merely
needs to open the newspaper to see the critical need for the
programs of these agencies, both of them, whether floods,
tornadoes, or earthquakes that have struck this year or the
effects of the so-called ``Great Recession''.
While, for the most part, the Subcommittee agrees on a
bipartisan basis with the policies and views of the agencies
before us today, we are exercising our constitutional duty to
provide the active and vigorous oversight that is always
necessary. For Fiscal Year 2011, the President has requested
$7.294 billion for FEMA, an increase of $186 million over last
year.
We strongly support this necessary funding for FEMA.
However, a more pressing budget issue for FEMA is the shortfall
in the Disaster Relief Fund. In February, FEMA announced that
it was limiting expenditures from the Disaster Relief Fund due
to diminishing funds. According to FEMA, reimbursements for
nearly a billion dollars in reconstruction and post-disaster
mitigation projects are being held up pending additional
appropriations into the fund.
To address this shortfall, the President has requested a
supplemental appropriation of $5.1 billion for the Disaster
Relief Fund. The Committee supports this request as
indispensable to FEMA'S obligations. On March 24, 2010, the
House passed H.R. 4899, the Disaster Relief and Summer Jobs Act
of 2010, which would, I think, authorize the $5.1 billion
sought by the President. Unfortunately, the Senate has not yet
taken action on H.R 4899. Actually, it was an appropriation
bill, but the Senate has not taken action on this bill.
While we support much that is in FEMA'S budget request,
there are a number of items we find troubling. Generally, the
budget proposal seeks to move all-hazard programs, such as
Emergency Management Performance Grants, Fire Grants and Safer
Grants into the same budget account as the terrorism
preparedness grants. In previous years, Congress has rejected
this proposal, and the Committee recommends that Congress do so
again.
More troubling is the proposal to merge the all-hazard
Citizen Corps program into the State Homeland Security Grant
Program. By law, funds from the State Homeland Security Grant
Program must be used specifically for terrorism preparedness.
Citizen Corps is a community-based program that helps citizens
and communities across the Country prepare for all hazards, not
only terrorism hazards.
And the hazard that Mr. Fugate is about to attend to is the
far more difficult of what FEMA does, mercifully, because we,
of course, don't want terrorism hazards. The Committee
previously asked FEMA staff how the all-hazards nature of
Citizen Corps can be maintained if this program is merged into
the State Homeland Security Grant program. Unfortunately, staff
has not received a response, so we will address this question
today.
A recurring theme at our hearings on FEMA is the continued
attempts by the Department of Homeland Security to appoint
Principal Federal Officials, or PFOs, in major disasters and
emergencies declared under the Stafford Act. The PFO is an
administrative creation of DHS that duplicates the position of
the Federal Coordinating Officer, which is a position appointed
by the President and created by the Stafford Act. The confusion
between these two positions was a factor in the failed response
to Hurricane Katrina, and we are not going to continue to
repeat any part of that failure through this official
duplication.
To avoid this problem in the future, Congress enacted a
number of provisions to prevent PFOs from being appointed in
major disasters and emergencies declared under the Stafford
Act. Despite this clear congressional mandate for a number of
years now, the concerns raised by local elected officials and
State and local emergency managers, as well as the tragic
lessons of Hurricane Katrina, despite all of that, the
Administration's 2011 budget proposal seeks to remove the
prohibition on appointing PFOs. We intend to pursue this matter
further with Mr. Fugate at today's hearing.
Although small, relative to FEMA'S budget, EDA plays an
outsized role in responding to disaster-stricken communities
with grants and assistance to rebuild the economic
infrastructure. Man-made or natural disasters alike, EDA's
important function is in helping communities to plan how best
to deploy not only EDA funding, but funding from a variety of
sources, both public and private, places EDA at the center of
governmental response to any disaster.
For reasons I hope witnesses are prepared to explain, the
President's Fiscal Year 2011 budget requests only $286.1
million for EDA, an actual reduction of $6.8 million, at a time
when this nation is responding to the most severe economic
crisis in generations. Forgive me if I say, please! While this
Subcommittee understands the request for greater flexibility in
order to respond to a myriad of economic distress scenarios, we
fail to understand how EDA intends to respond to a significant
increase in demand for its programs during the Great Recession
with fewer, albeit more flexible, resources.
Again, during a period when national unemployment remains
stubbornly high, reaching double digits in some communities,
including my own district, which has segments in the poorest
parts of the jurisdiction of unemployment rates above 20
percent, it is unclear why the Administration has reduced EDA's
budget.
We will ask the appropriators to grant a clearly necessary
increase for EDA. This hearing has intentionally brought EDA
and FEMA here together to better understand how EDA's
experience in responding to disasters can be paired with the
necessary response to an economic disaster, as I and many of my
fellow Members would argue is the case in our respective
districts. Many communities are experiencing levels of
unemployment and poverty never experienced previously, at least
in memory.
Last week, this Subcommittee held a hearing with testimony
from the Regional Economic Development Commissions. In
Appalachia, for example, job gains of the last decade were
erased because of the loss of manufacturing industries, lack of
investment capital, and population loss during the recession.
Urban and suburban America, alike, are similarly affected by
conditions such as the significant decline of auto
manufacturing and its impact from Detroit to Fremont.
Common both to FEMA and EDA is helping communities recover
from disasters, especially in the long-term recovery. Both FEMA
and EDA have specific statutory authority for long-term
disaster recovery and have historically played important roles
in long-term recovery. We were pleased to hear that the
President is undertaking a review of long term recovery and we
look forward to the President's report, and we need that report
very soon. That process is being lead by FEMA and the
Department of Housing and Urban Development.
Notwithstanding EDA's specific statutory authority and
history in providing assistance to communities in long-term
recovery, it appears that EDA has been playing, at best, a
minor role in this process. This Subcommittee wants to see EDA
more closely involved with the long-term recovery plan that the
President is now designing so that EDA's experience can be
brought to bear. We hope the witnesses can address this issue
today and very much look forward to testimony from each of
them.
Ms. Norton. I am pleased to ask our distinguished Ranking
Member if he has any opening remarks.
Mr. Diaz-Balart. Thank you. First, let me thank you, Madam
Chairwoman, again for having this hearing today on the
priorities and the proposed fiscal year budgets for FEMA and
EDA. The Administration's fiscal year 2011 proposed budget is
$246 million for EDA's Assistance Program and the President's
budget also proposes $7.3 billion for FEMA, and $5.1 billion in
supplemental appropriations has also been requested for the
Disaster Relief Fund.
EDA and FEMA both have missions that are clearly very, very
important for our Country. Now, EDA, as we know, was
established by Congress to leverage Federal funding to help
areas that are severely economically struggling. FEMA'S
mission, as we all know, is critically important to our Nation
and the Administration is actually proposing a number of policy
changes.
Like with EDA, we must really evaluate proposals for
changes in programs and policies to ensure that they are
consistent with FEMA'S very critical role and very missions.
For example, the Administration is proposing that the
consolidation of FEMA'S State and local programs into the
larger State Homeland Security Program. Combining programs that
require a nexus to terrorism with those intended to be all-
hazards, like Citizen Corps and others, is frankly likely to
create confusion and add to the administrative burden on the
States, rather than to streamline them.
This Committee, the Subcommittee and the full Committee,
the Chairman and the Ranking Member of the full Committee, as
well as us believe that FEMA should be taken out, and the
Administration seems to be going in the other direction, which
I think we need to look at very carefully. In addition, it
would obviously be important for this Subcommittee to
understand the proposal to modify the predisaster mitigation to
include a FEMA-HUD partnership on sustainable communities.
Finally, Madam Chairwoman, I hope to hear from our
witnesses today on other key issues related to the roles of
FEMA and EDA on the work of the long-term recovery working
group and any progress that FEMA has made on its review of
regulations and policies to better prepare for the future and
to respond to widespread disasters. Again, unfortunately, we
have one--well, at least one--going on right now.
I would also like to recognize the urgent need for Congress
to approve the supplemental appropriations for the Disaster
Relief Fund. With the ongoing recovery efforts in Louisiana,
the recent flooding in parts of our Country--and I know that
Director Fugate is going to be heading out there himself
shortly--the beginning of hurricane season, the oil situation,
we must ensure that the dwindling funds in the DRF are
replenished.
So with that, Madam Chairwoman, I look forward to hearing
from our witnesses. Thank you very much.
Ms. Norton. Thank you, Mr. Diaz-Balart.
Mr. Fugate of FEMA, the Administrator of FEMA.
TESTIMONY OF THE HONORABLE CRAIG FUGATE, ADMINISTRATOR, FEDERAL
EMERGENCY MANAGEMENT AGENCY; THE HONORABLE JOHN R. FERNANDEZ,
ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT,
ECONOMIC DEVELOPMENT ADMINISTRATION
Mr. Fugate. Well, thank you, Chairman Norton and Ranking
Member Diaz-Balart, others Members of the Committee. I am going
to keep my opening remarks short because I have submitted my
written statement for the record, if that is acceptable, ma'am.
And based upon your questions, I think that you raised many
of the issues and you talked about the budget in general, so I
am not going to repeat that as well. But on behalf of the
President and on behalf of Secretary Napolitano, we were
looking at this year's budget the constraints of the current
fiscal economic situation we are in to make our recommendations
in that environment.
It is our intention at FEMA that we are all-hazards and
that the programs and funding levels recommended are a
continuation of previous recommendations that this
Administration has made, really, to a degree that were
unprecedented previously, where many of these items were never
recommended. So we continue that level of funding from our
previous request.
There are a couple of things I would like to draw attention
to because they are not really all that--they don't have a
constituency that is going to speak to them, but I need to
speak to them, and that is a request, and it is the one area
that FEMA did request an enhancement in our management and
administrative costs--these are our baseline costs of running
FEMA itself--of $23.3 million for infrastructure and
facilities.
Many people are going to look at these requests in these
times and question that priority and why I put that priority
there, and it comes back to the people at FEMA. Congress
blessed FEMA with tremendous authority and resources after
Hurricane Katrina, almost doubling the size of the workforce.
But in the regions and in many of the facilities we, no
additional funding was provided for additional space; our
maintenance repairs, in many cases, had been deferred from
years to year; and I felt that it was important that we
identify this one area as a priority, as the Administrator, to
ensure that staff had the tools they need and the facilities to
work from to do their primary job.
Many of the other areas that you have raised I will be more
than willing to answer in the question phase of this, but I
thought it was important just to highlight that. When we talk
about a lot of things, talking about facilities for staff
doesn't always get a lot of constituents interested, but on
behalf of my staff, I am their constituent. I want to make sure
that people that work at FEMA have the facilities they need to
do their job. So that is why we did request a $23.3 million
increase in the facilities and deferred maintenance to get
caught up and provide that workspace.
I think probably, due to time and the questions you asked,
Madam Chairwoman, I am going to conclude my statement there.
Again, we are committed to the all-hazards approach. The
President, Secretary, and I do understand our role and are
committed to carrying out the intentions of Congress. And, with
that, I will stop.
Ms. Norton. Thank you, Mr. Fugate. I am going to do
questions for you, in light of your trip to Tennessee. Is there
anything you can tell the Committee about the status, any
update you can give us on recovery efforts from the floods and
the tornadoes, for that matter, that struck the Gulf States
last month or, for that matter, the oil spill?
Mr. Fugate. Well, in the last couple weeks we have had
multiple States being impacted by severe weather, most notably,
a couple weeks ago we had tornado outbreaks that struck
Louisiana, notably, Mississippi with loss of life and Alabama
with loss of life. Mississippi has received a declaration for
the disastrous tornadoes; Alabama has received a disaster.
The following weekend we had extensive flooding again with,
I believe, now reported--I am not sure of the final tally, but
it was being reported by the State of Tennessee over 29
fatalities in the State of Tennessee, with flooding in
Kentucky.
Based upon my trip there to meet with the governor's team,
the governor requested from the President a disaster
declaration for the State of Tennessee. The President declared
that Tuesday, and we have working with Tennessee to identify
all of the communities that have been impacted and add those on
to the declaration.
So those areas in the Southeast, again, following on with
flooding we have had in the Northeast, up in much of the New
England States, as well as a water main that broke in
Massachusetts with boiled water orders and an emergency
declaration, ongoing disasters in North Dakota, Minnesota,
South Dakota, we have been fairly active in a lot of disasters,
many of which may not be receiving national attention, but we
have been supporting those governors and local communities.
Ms. Norton. In light of those multiple disasters and the
shortfall in the Disaster Relief Fund, can I ask you how much
is left in the Disaster Relief Fund?
Mr. Fugate. The number I am going to give you is one that
you probably wouldn't expect, but it comes out of some work
that has been done by FEMA as a result of our opportunity or
our desire to close out disasters. We currently have been able
to increase the amount of money in the Disaster Relief Fund. We
are a little under $1 billion. Part of that has been due to the
fact that we have been in immediate needs funding since
February, so we have not been funding any permanent work, only
emergency response. Part of that has been we have been
aggressively closing out old disasters and de-obligating old
disasters.
The Inspector General report recently issued pointed out
that FEMA did not have a formalized process of doing these
things. Our staff have been working to address these concerns
and our staff have been very successful in taking a lot of
disasters that we had obligations for, but not had expended
funds, and, working with the agencies that had been tasked,
have been able to de-obligate and return back into the DRF
funds.
Our estimate now is that we will exceed the fund levels
based, upon current response, sometime in June. Again, that
still leaves----
Ms. Norton. Some time in June what? I am sorry.
Mr. Fugate. About June. We don't have an exact date
because, as this Tennessee disaster ramps up, there are going
to be a lot of response costs here. But our projections are
about June time frame we would potentially reach a zero fund
balance, or close to a zero fund balance.
Ms. Norton. That would mean depletion of the fund.
Mr. Fugate. Yes, ma'am.
Ms. Norton. What would you do if the fund were depleted?
Mr. Fugate. At that point, we would be in a situation that
FEMA could not reimburse or mission-assigned with reimbursement
other Federal agencies. However, under the Stafford Act, the
President does have the authority to mission-assign Federal
agencies in response without reimbursement. So our ability to
respond to the immediate emergency needs we believe we can
continue.
But, as you also pointed out, we are getting close to and
will probably be over $1 billion shortly, and funding for
permanent construction that we have on our books, that is not
counting some outstanding projects still with the State of
Louisiana, one being the recovery school district, which is a
combination of all the school districts. That, in itself, is
over $1 billion. So we are seeing considerable work that is not
able to move forward and permanent work based upon open
disasters and disasters that have just occurred.
Ms. Norton. Well, this Subcommittee and Committee are
certainly pressing. The funding is in the supplemental, of
course.
Could I ask you the status--you spoke about multiple
disasters. Well, Washington had a taste of what you go through
throughout the Country this winter. What is the status of the
presidential declaration? Have any funds been distributed to
the affected areas in the National Capital region?
Mr. Fugate. Madam Chairwoman, I would have to respond back
in writing. I am not sure how much we have dispersed to the
District. They had two declarations for snow emergencies; I
believe we had the one that was back-to-back, where we had the
weekend-to-weekend. I do not have at my disposal right now what
those dispersals are, but----
Ms. Norton. Could you, in seven days, in writing, send to
the Subcommittee an accounting of how much of the status of the
presidential disasters in the District of Columbia and the
counties adjoining this capital that were affected, the status
of the presidential declaration itself; whether the funds have
been requested, that is, the paperwork done by the counties and
localities; and what funds, if any, by amount, have been
distributed, within seven days? We would appreciate that.
The PFO, you know this is a craw in the throat of the
Committee and the Subcommittee. We were shocked to find the new
administration had funded a PFO. This is a duplicative officer
not authorized by statute, despite bipartisan support here and
in the Senate for one person held accountable. Can you assure
us that this Administration will not support duplication of the
person in charge of a Stafford Act disaster?
Mr. Fugate. Madam Chairman, I rarely read my notes, but I
want to make sure I get this absolutely right, because I think
the answer I am about to give has been the one that you have
pressed us for, and it is the Administration has no objection
to this restriction passed by Congress in reference to the
Principal Federal Official. The Department has made a decision
not to appoint PFOs for presidentially declared disasters under
the Stafford Act, and we will be updating our planning and
response documents, as necessary, to strike the reference of a
Principal Federal Official in those disasters under a Stafford
act.
Ms. Norton. We are very pleased to hear that response. We
really would never like to have to raise that issue again. I
think--and you are a long-term professional in the field, Mr.
Fugate--that there is no difference among professionals in the
field about one person accountable in a disaster, just like
there is one general and one president. That is how it always
goes in the chain of command.
One more question before I go to my Ranking Member, and
that is about the Citizen Corps and the all-hazards program
being transferred to the State Homeland Security Grant Program,
which has a very specific purpose. We don't understand that
switch and would like you to explain, and we can't understand
why FEMA has not responded to our request, because we regarded
this as an urgent matter and wrote to FEMA concerning it
sometime ago. So perhaps you would like to explain in person.
Mr. Fugate. Yes, Madam Chairwoman. The intention here is to
streamline grant applications process, but I understand that
there is an unintended consequence of doing that. And although
we have made our recommendation, we will seek out and will
follow the guidance Congress gives us on these programs. I
understand the concerns. I am committed to being all-hazard.
This is the unintended consequence, I believe, and us trying to
streamline a grant process where each one of these grants right
now is an individual----
Ms. Norton. You can streamline the grant process to the
point where somebody is applying for something he has no right
to apply for. Now, Congress was very specific about the State
Homeland Security Grant program and what it desired the program
to be used for, and we are very much for efficiencies, but this
efficiency tends to conflate purposes, and that is not the kind
of efficiency we are after. So what would you do? Can we ask
that the all-hazards program remain separate from the State
Homeland Security Grant Program?
Mr. Fugate. We are committed to working with Congress and
following the direction Congress gives us. These are the
recommendations, but we understand the concerns and are
committed to working with Congress on moving forward in our
recommendations.
Ms. Norton. I appreciate that answer. I am going to ask,
Mr. Fugate, that you have staff meet with our staff, our
Committee staff within the next seven days to discuss this
issue so that we can work together. I think we are both on the
same page.
And I am going to go to Mr. Diaz-Balart.
Mr. Diaz-Balart. Thank you very much, Madam Chairwoman. It
is great to see that a lo of the issues that I wanted to bring
up, you already brought up.
Ms. Norton. You and I have been on the same page about all
of these.
Mr. Diaz-Balart. We have been, and we continue to be, and I
think it is important that this Committee continue to work as
closely together. Madam Chairwoman, as you know, Mr. Fugate is
exceedingly accessible. I have had the opportunity to speak to
him on a number of issues. You call and he will immediately
call you back.
Since that, and since I know your schedule, I am just going
to ask you a couple questions, Mr. Fugate. One is when do you
expect FEMA'S review of the Public Assistance Program, the
rules, to finally be completed? Do you have any idea of the
status and any updates to tell us as to what you are finding?
Mr. Fugate. What I am finding is we need to follow the law
and the rule. I will give you some examples. When Secretary
Napolitano went down to New Orleans, at the direction of the
President, to look at the recovery, we made a decision, or she
made a decision at that time to change the leadership of what
was then called the Long-Term Recovery Office.
FEMA brought in a Federal Coordinating Officer, Tony
Russell, to address that issue, and in less than a year's time
Tony was able to free up and move over $1 billion in funding
that had been held up. One of the things that Tony Russell
likes to point out is we did not change Stafford Act, we did
not change the CFR that governed that, nor did we change out
about 90 percent of the people. It was taking our program and
focusing on the outcomes, and not the process.
So what we are finding is that, as I testified all the way
back from my confirmation, but before you as well, that the
Stafford Act provides tremendous flexibility. Even the CFR,
with its complexity, is a very robust tool, but we, in many
cases, ourselves have limited our decision-making ability. So
part of that first step is going back and dividing it into what
does the law say, what does the rule say, and does our process
provide the answers we need.
That is an ongoing process. I don't know if I ever will
complete it, but it is our goal to make sure that we are
focused on the outcomes and the intentions that Congress had in
the Stafford Act and, within our CRF, identify those areas
where we may have issues that require legislative remedies. But
what I am finding, by and large, is it is the application of
the programs, the process, not the law, that we have to work on
and to streamline and clarify so that we are focused on
outcomes.
I will give you one example, sir: fire stations. We were
hung up in Louisiana and New Orleans over fire stations because
part of our process said we had to determine how much damages
were due to deferred maintenance versus the storm itself. We
required records to demonstrate that. Those records were in a
building that was flooded. They could not produce those
records; therefore, our process would not let us go forward
with determining what was eligible for reimbursement.
Tony Russell brought a very simple common sense approach it
and said was it a fire station before the hurricane hit? Yes.
Was the station destroyed? Yes. Then we are going to make the
assumption that it is eligible to be replaced and move forward
with the project.
Mr. Diaz-Balart. Common sense. Well, we look forward to
that continuing effort.
Secondly, I want to bring up an issue of American Samoa,
which is worrisome. The Office of the Inspector General's
report has some interesting observations. One of them is the
issue about the housing. FEMA ordered, I guess to get started,
provided $3.9 million to build eight homes. That is a heck of a
lot of money when you look at the cost of housing in FEMA, and
it seems that, when you are looking at homes that, potentially,
brand new, spanking new there go for up to $100,000 and FEMA is
providing way above that, there seems to be a serious, serious
disconnect and there seems to be, obviously, a lack of--well, I
mean, whatever you want to call it; I don't want to put names
on it.
But have you had the opportunity to look at that? And it
would be great if you could get back to us on that, because it
seems, right there, that that is a ton of money that the
taxpayer is sending, spending a lot more than should be spent
for something that is needed, but that obviously is not being
done efficiently.
Mr. Fugate. Congressman, this is an area that we knew
that--you have to remember we are about half a year into this
from when the tsunami hit. At the time the tsunami hit, the
original estimates, working with the governor's team, was they
were going to need about 150 homes built. And looking at what
tools we had available, we had a preexisting contractor that
was already available, that had already been identified as a
resource to start construction.
Because, when we build a home, we have to deal with
environmental review, archeological and a lot of things that
the average homebuilder does not deal with, we did a pilot up
to, but did not cost $3.9 million to start the construction on
eight homes. Because this would require bringing materials in
and other things, and there were a lot of unknown costs in
starting this up, we provided this contract to begin the
process. But the intention was not that eight homes would cost
$3.9 million; it was up to $3.9 million. Part of that would be
the initial construction so we could get a cost-per-unit cost
and see how to economize that.
My Deputy Administrator, Rich Sereno, traveled to American
Samoa several weeks ago, met with the folks on the ground, met
with the community, and the situation has changed in that the
original estimate of 150 homes has gone to 50 homes. We are
working back through our acquisition staff to modify the scope
of work and the contract. One of the things we want to do is,
because we have fewer homes to be built, we want our contractor
to work with local folks to employ them. We also want to look
at available materials and other things. Plus, we found that we
had some requirements in there that were not necessary that
were raising the cost as well.
So we are, again, going with the eight pilot homes. That
cost will be contained, it will not be $3.9 million; that was
just a maximum amount that we were going to commit to this
initial 150 homes. We had some things that we had to look at as
far as bringing materials there, bringing work crews, and,
based upon 150 homes, we knew we were going to have to bring a
lot of outside resources. With the number dropping down to 50
homes, we are going to work--and the contractor is agreeing to
this--redefine the scope of this, look at more local hires, and
look at more local materials, which will bring that cost down.
Mr. Diaz-Balart. Well, again, I appreciate that. I know
that is how you work, and you are a common sense person who
solves problems. It would be great, though, if you could let us
know, once you have an idea of how much we are spending per
home, just to get us that information.
Mr. Fugate. Yes, sir.
Mr. Diaz-Balart. Madam Chairwoman, just on a lighter note,
you know, we think so much alight, but I am even supporting
your hairdo.
[Laughter.]
Mr. Diaz-Balart. So thank you.
Ms. Norton. I did notice that, Mr. Chairman. I did notice
that we were twins up here. It is getting hot.
Mr. Fugate, I know that the Predisaster Mitigation Program
has been an important program and it is a favorite of this
Subcommittee. We authorized this program a year ago. It was
just marked up in the Senate last week. That body moves slowly.
It says deliberately; all we know is slowly. You are not
supposed to libel the other body or even speak ill of your
friends over there, but we do suffer some frustration when
programs that are as important as this take as long as this one
does, so there is going to be a whole rush, I am sure, to get
some stuff here in the last several months. But what happens if
this program is not reauthorized, does it go out of existence?
Mr. Fugate. It would go out of existence. That program is
strictly a program that is tied to the authorization and the
funds. Without funds, we would not be able to carry out
mitigation projects. And probably the thing that would be of
most concern to me is not only the mitigation projects, it is
the fact that this provides planning dollars for States and
local communities to get local mitigation.
What I have found is, if you don't have disasters, getting
communities to really understand that in the process of
applying for mitigation grants that--here is what will happen.
Oftentimes communities will think about mitigation only when
there is a disaster, not think about it ahead of time, and then
oftentimes have no incentive to plan ahead that, if a disaster
strikes, how to reduce future impacts. And the fact that this
money is available to all States, irregardless of a disaster,
keeps mitigation as a tool local and State emergency managers
can constantly talk about because there are grant dollars
available for communities.
I think probably the most value to this may not be the
actual projects, but the fact that, without a disaster,
Congress has indicated that mitigation is important and that
funds are available, and it gets communities thinking about
mitigation that would otherwise not consider that because they
haven't had recent disasters.
Ms. Norton. It will be interesting to hear your report at
some future date about whether mitigation played any role in
the multiple disasters you are tending to now.
Last year, in the fiscal year 2010 request, the
Administration proposed changing the program, the Predisaster
Mitigation Program. Currently, it is a competitive program to a
program distributed through a formula based on what we saw, and
I think most agreed, was a flawed Homeland Security
methodology. Congress strongly objected. Has this proposal been
tabled?
Mr. Fugate. I would have to go back and research that. I
think the intention here is, again, in doing a competitive
process, not every State would get some base funding, and the
intention here was, I think, to try to make sure that, as much
as possible, as many States could receive at least some
funding. And, again, the interest here was, if you could keep
mitigation in front of policymakers and decision-makers, even
if it is just in a grant program, it keeps the focus on
mitigation as a future tool.
Ms. Norton. I understand that concern and goal. It is very
hard to find, in the Federal system, a better way to distribute
funds except competitive distribution. Yes, we do have
distribution per capita. This little bit of money is not meant
to be spread across the Country. We want to encourage
mitigation activity improvement. And when people have to
compete, that is what happens. This Committee strongly
objected; Congress strongly objected.
I am going to ask you, in seven days, to report to the
Committee on whether the formula-based, based on a much
disputed Homeland Security methodology approach, has been
tabled.
Mr. Fugate. Yes, ma'am.
Ms. Norton. Seven days, please.
We have now passed a landmark health care bill. We were
chagrined, and have been chagrined in this Subcommittee, to
note that temporary FEMA workers, DAEs, I guess they are
called, were not guaranteed health care. Are they covered in
some form or fashion by the new health care bill?
Mr. Fugate. I am not aware of that. It is something that we
are looking at as well. One of the things that we did do that
had not been done previously was, as Disaster Assistance
Employees are actually working, previously they did not get
sick time or vacation time. We have changed that so now that,
when a Disaster Assistance Employee is actually working, they
will incur sick time, and this allows us to do something we
previously could not do.
If you were at a deployed disaster and you got sick, our
only previous alternative was actually take you off the clock
or send you home while you were sick, particularly if you had
just a minor illness that required a few days. And because you
were oftentimes on per diem and travel, it became very much a
management issue of how do you deal with somebody who has to be
just only a couple days, don't really need to go home, but the
minute they are not working, they are not eligible for their
travel and their per diem.
So we have built in sick days; we have built in vacation
leave that can be built up by DAEs, which was previously not
offered; and we are looking at, with the Office of Personnel
Management and others, what does the new health care bill look
like when it comes to temporary employees under the DAE status
and what programs will be available.
Ms. Norton. Staff informs me that in our Stafford Act bill,
H.R. 3377, the health care for the DAEs would be covered. They
would have to be given the opportunity to go to the Federal
employees health plan. What an embarrassment this is for the
Government. We go around trumpeting how everybody, ninety-some
percent of Americans can have health care, except, of course,
people who work for the Federal Government. That just cannot
be.
Now, what is the status of this bill? Our bill is expected
to come to the Floor soon, so that would be mandated. I commend
you for the improvements that you have noted, but nothing can
take the place, as we have learned all too poignantly, of
health care.
Now, some of these people may have health care. It is just
the opportunity; they would have to pay for it themselves. But
without even the opportunity that is available for the average
American now to buy on the exchanges and the rest, and if you
are a Federal employee, of course, you have to come in to our
own plan. Without that opportunity, we look like a bunch of
hypocrites.
So we have to deal with that this year, before the end of
this fiscal year. And that should be done if H.R. 3377--I am
going to ask staff to inform me what is keeping this bill from
going to the Floor. Here, I have been criticizing the Senate.
For goodness' sake. Time is passing.
Could I ask a question about the administrative law judges?
Mr. Fugate, you may recall that we were so distressed with the
hold up of billions of dollars in Louisiana that we worked on a
plan that would get us beyond the stalemates that had
accumulated in Louisiana, leaving that money on the table. Even
as we were distributing stimulus money, there was billions of
dollars on the table in Louisiana. The administrative law
judges are in place. I understand they have had some effect on
some projects.
What is your view of the way that is working? I should tell
you we are going to have a hearing on them at some point, but I
would be very interested if you have any view of the
administrative law judges in place. Not the judges themselves,
but the mechanism.
Mr. Fugate. Well, as the Chairwoman knows, this was done
specifically for the Katrina-Rita disasters, and we are, again,
in arbitration on multiple projects, probably the most notable
one was Charity, which we had reached an impasse. Arbitration
actually ruled in favor of Charity Hospital. And in reviewing
that, as well as others, as I said, part of this was to review
what the arbitration panel would find and how they would rule,
we actually took one of our projects that was going to
arbitration and we settled.
And, again, as I go through this, I find, in many cases,
that I am not so sure the positions that FEMA took were
defendable in the first place. The arbitration panel, in many
cases, were quite vocal in that. So, again, that is being
factored in to our process. Ideally, this is a symptom or a
cure to a symptom that should not exist. Our process and our
program should not be so difficult that we have to resort to
arbitration to get to the answer.
Ms. Norton. Does the coming of arbitration--because you
mentioned compromise or settlement--does it tend to bring on
settlement as we move toward arbitration? Are we trying to do
is--if the threat of arbitration can do that, then it has
accomplished its purpose.
Mr. Fugate. Well, some of the projects we went through
arbitration and we argued our position; the other side argued
theirs; and in many cases the other side has prevailed. I think
that there are fewer projects that went to arbitration than we
thought initially, and I think that goes back to the good work
that was done by Tony Russell and his team in Louisiana.
You know, when we were originally looking at this, we
thought this would be in the hundreds. It has not turned out to
be that way. But some of those projects were so--I think had
gotten to the point where we had gotten--we just weren't able
to get to an agreement, and there had to be a process that got
it passed; and Charity, I think, was a good example. We had
reached an impasse on both sides and it took that arbitration
process to get an answer.
Ms. Norton. We have never used it before. We are just
trying to find a way to get beyond stalemates that hurt both
sides. And, yes, each side has a reason to husband the money of
its side, but we have to break through that, especially given
the delay and especially a disaster as huge as the Gulf Coast
disaster was.
Let me ask you about something else that came out of this
that just shocked me, Mr. Fugate. We learned that in--leave
aside arbitration. We learned that FEMA has a process by which
FEMA gets an expert, the State gets an expert, and they dual it
out. Nothing in the statute requires that. So you set up an
adversary process from the beginning. So what I want to know is
why can't, whenever there is an expert needed on various
aspects of recovery, whether it is a particular housing or
construction or demolition, you name it, shouldn't there be an
agreement on both sides on one expert, so that we don't set up
an adversarial relationship right from the beginning?
Mr. Fugate. Well, Madam Chairwoman, I think you raised a
point that our staff has concurred with, and that is in certain
types of decisions, if you have a licensed professional who is
making a definitive statement and is attesting to that, that
both sides would agree to recognize that. In this case I am
speaking to a licensed professional engineer, licensed in the
State that they are in. If a local jurisdiction or State brings
forth a finding that a licensed professional engineer has
certified and attested to, we will take that at face value and
not bring in a separate expert.
Ms. Norton. Are you doing that now, Mr. Fugate?
Mr. Fugate. That is how we are going forward.
Ms. Norton. Oh, you have my congratulations. The notion of
saying let's act like we are in court, when the Stafford Act
doesn't require that; the Stafford Act just requires you to get
it done. This is such a common sense approach, for you to agree
in the beginning. Then you don't have, probably, the kind of
adversarial process that builds up so that you are going to
need arbitration for the final outcome because every step of
the way you have built in an adversarial approach. We want to
hear more about that as well at the hearing on the
administrative law judges.
We have been joined by Mr. Cao and Mr. Perriello. I will go
to Mr. Cao next, then.
Mr. Cao. Thank you, Madam Chair.
First of all, I just want to thank Administrator Fugate for
your quick response, or at least your staff's quick response
with respect to a couple of my inquiries when you were in the
Homeland Security Committee a couple weeks ago, was it?
Mr. Fugate. Last week, sir.
Mr. Cao. Last week. So I thank you for your staff's
response on my questions concerning the CDL. I believe that you
are working on that issue on a case-by-case basis.
What I want to learn from you is when you look at the
forgiveness application on a case-by-case basis, and let's
assume that you will receive about 15 to 20 applications that
you deem to be not qualified under the rules as promulgated by
FEMA, what would be your next step?
Mr. Fugate. We will go back to the applicants and go do we
have more information. But if we get to the point where we are
not able to go forward with that application on a full
forgiveness or partial forgiveness, or how that would work, we
are working that through our Regional Administrator, Tony
Russell. And then as he identifies those and flags those, he
sends them to headquarters to see what additional work we can
do.
Mr. Cao. Now, in our last meeting I asked you about the
special CDL in connection with Oxner, and, as you know, Oxner,
right after Katrina, signed an agreement with the State to
treat the people who were uninsured because of Charity Hospital
being damaged by Katrina, and under the special CDL program,
funding is available to assist local governments in providing
essential services to their communities.
And under the implementing regulations promulgated by DHS
and FEMA, private, non-profit hospitals such as Oxner are
eligible for funding under the special CDL program. And this is
your own explanation of the CDL regulations: FEMA specifically
determined that if a local government deems it appropriate, it
may provide proceeds from a loan under this special CDL program
to an operator of a private, non-profit facility that provides
the community essential services, such as a volunteer fire
department, volunteer emergency medical provider, or a
hospital. I just quoted verbatim from your own explanation.
So, as you know, the delegation also wrote a letter to you
to express their concern about this matter. My question here is
what would be the specific and immediate action that FEMA will
take to address this issue of the special CDL in regards to
Oxner?
Mr. Fugate. Congressman, I am not as briefed on that as
Tony Russell is, but I also know there were other challenges in
that the original special CDL was made to the local government.
They were willing to transfer some of that to Oxner and there
were some additional issues that were brought up on our side in
dealing with that. And I would have to defer back or respond
back in writing as to the actions that the Regional
Administrator is taking in that matter.
Mr. Cao. Thank you.
My next question is to Mr. Fernandez. As you know,
Hurricane Katrina----
Ms. Norton. We are waiting. Mr. Fernandez has not delivered
his----
Mr. Cao. Oh, I am sorry.
Ms. Norton. Because Mr. Fugate is on his way to Tennessee.
Mr. Cao. OK, that is fine. I will wait, then. Thanks.
Ms. Norton. Mr. Perriello is not here for the moment.
For your reference, Mr. Fugate, the discussion that led me
to wonder, and I am so pleased with your response about having
one expert, by the way, the absurdity of it was that apparently
FEMA paid for both their expert and our expert, doubling the
money for the taxpayers and creating on its own dime an
adversarial process.
So since we have to pay for them, let's just pay for one.
It was the people from St. Bernard Parish came in, it was very
pitiful about mold consultants, and they needed an arbitrator,
as it were, for these mold consultants, which gave me the
notion that maybe one consultant would do it. But you are
already there.
Have there been other forms of dispute resolution. We are
not wedded to arbitration. Have there been other forms of
dispute resolution used during Katrina or since you have been
Administrator that you would recommend so that we could short-
circuit disputes?
Mr. Fugate. Well, one of the things that was done in New
Orleans and Louisiana was providing higher level expertise in
looking at some of the more complex projects, and by bringing
in some staff to support the team there, we were able to clear
the backlog of projects that would otherwise have probably gone
to arbitration. And again it goes back to, in many cases, we
had built a system that was delegating decision-making at the
highest level, not where the work was being done.
So you are trying to resolve an issue and work with the
applicant; yet, if the solution has to go up through multiple
layers back to headquarters for a decision, it loses something
in translation. And what we found by bringing the people to the
applicants and sitting down and going over them with these
projects, we were able to clear a lot of backlog, but also
resolve issues that made, as you point out, were common sense
solutions within the law, within the rule, that the people that
were the decision-makers were empowered to make those decisions
at the point at the State level working in partnership, versus
it coming all the way back to headquarters. And that is our
intention with our regions.
Part of the reason I am asking for that $23.3 million is we
know that when we can get answers closest to where the problems
are, we get better outcomes. And part of this is, again,
supporting our regions and their need for additional facility
support so that we can continue to bring FEMA to our customers,
not make our customers come to FEMA. FEMA headquarters, by the
way.
Ms. Norton. That is a very important moving the decision
down. This has been one of the banes of our existence here and
complaint about FEMA, that everything had to travel to
headquarters, people far removed, and they have to get
together, then they really have to go back down and talk to the
people on the ground and really find out what to do. So that is
another important common sense--I won't even call it
innovation, it is a way I think a field operation like FEMA
ought to be operating.
Look, you have been in office now about one year, Mr.
Fugate. You have just discussed some significant changes.
Perhaps you would like to discuss others. And I would like to
ask you what changes do you still feel need to be made at FEMA.
What was your biggest surprise?
Mr. Fugate. Well, probably my biggest surprise wasn't my
biggest surprise, but that was the fact that I was joining a
lot of good folks and a good team, and that in many cases, when
I look back, I try to say what have I actually done, and I
don't have a whole lot to report for that, but the team has
done a lot. And I think, if nothing else, was just recognizing,
in many cases, that if I empower my staff and give them clear
direction, I am going to get a much better outcome than if I am
trying to do everything and direct everything.
So for my first year I am very proud of the folks I have
been able to join. I think we are making progress, but that
progress is really being done by the staff themselves, and my
role in that is to make sure we are going in the right
direction, but empower staff and empower decision-makers where
we can do the greatest good.
So that is my commitment, to empower my regional
administrators; that is my commitment to my team that we are
not always going to be perfect, we are going to make mistakes.
And I have told my staff if we make mistakes for the right
reason and there is criticism, I will take the criticism.
But I don't want to be so afraid of doing the right thing
that we do nothing for fear of making a mistake. So my first
year here I am very proud of the folks I have been able to join
and, if anything, being able to allow them to do their jobs
more effectively.
Ms. Norton. I will ask the Ranking Member if he has anymore
questions.
Mr. Diaz-Balart. No, thank you, Madam Chair.
Ms. Norton. Mr. Fugate, can I ask, on the Disaster Relief
Fund, which is a subject of great worry to this Subcommittee,
within 30 days, can you provide us with a breakdown of the
amounts in projects being held up by State?
Mr. Fugate. Yes, ma'am. In fact, I believe we could
probably be faster than that based upon our current accounting.
But I want to come back to something, and that is the
support of you and Chairman Oberstar and this Committee in
supporting us, and the letters you have written and the support
you have given to us for that DRF. You know, we are able to
continue our immediate response, but we are seeing an
increasing backlog of construction, and in some of our States,
like the Dakotas, they have a season that they can only do
construction during the summer and early fall months.
So, again, there is an urgency there. The flooding that
took place over a year ago, as they get back into the time
frame where they can actually begin construction, they are not
able to move forward and they will not be able to do
construction once winter sets back in.
So the urgency here, as you have expressed, as Chairman
Oberstar has expressed, as Congressman Diaz-Balart has
expressed, and your support I think goes a long way in helping
us make the case that this is something we need action on and
we do support the letters, the statements, and the commitment
to allow FEMA to do the job you expect of us, and that is to
support our State and local governments in response but, most
importantly, in recovery and mitigation of past disasters.
Ms. Norton. Well, disaster relief is automatic stimulus
today, especially when that is work that has to be done. Let's
get it done now.
Let me just ask you a final question on Katrina recovery.
Since the new Administration came into office, we have seen
measurable progress in moving forward on recovery from
Hurricane Katrina. You have discussed some of that. Can you
give us an update on the status of public assistance and
mitigation projects for Hurricane Katrina?
Mr. Fugate. In general, I know that we have been able to, I
believe it totals a little over $1 billion right now that we
have moved in the past year. Several big projects, though, are
in the final stages. One of the things is the recovery school
district, which is the ability to take all of the impacted
schools and do one project, versus individual projects. That is
moving through the system. That is going to be a very large
project, but it will give, as far as the repair and the
replacement of schools, a huge amount of infusion of local
construction in those areas.
Mitigation and other projects are moving through. I had the
opportunity to be in Louisiana several weeks ago at the
invitation of the governor and Homeland Security Emergency
Management Director, Mark Cooper, and, in meeting with many of
the parish presidents, it was heartening to hear that they felt
that FEMA was being responsive, was moving all these projects.
In fact, the biggest thing that I hear is not really a
complaint, it is a plea: it is don't go back to what we used to
do; keep doing what you are doing.
And one of the most important things was we will agree to
disagree, but what we cannot do is to stop communicating. And
that is the situation that, in many cases, we found that, in
working with our partners at the State and local level in
dealing with the recovery from Katrina, we had literally
stopped talking; we were passing paper and became
dysfunctional.
So we have agreed that there are going to be times when
people want to do things that the Stafford Act will not allow
us to do, and we will agree to disagree. But we are not going
to stop communication and working as a team. And I think when
you do that, that brings about the need for arbitration and
other processes.
But when you can continue to work, communicate, and tell
people up front what we can and cannot do as the Federal
Government, and be consistent in that message, local officials
have told me that is one of the most important things that FEMA
can do, is be consistent. And if the answer is no, give them
that answer so they know what the next steps are going to be,
but don't string this process along or don't change decisions
arbitrarily or because of changing staffs, because that is the
most difficult part for local officials as they try to plan
their recoveries.
Ms. Norton. You have shown flexibility in understanding
your mandate under the Stafford Act. One of the concerns of the
Subcommittee was the rigidity with which the Act was being
administered; so rigid that we had to pass a law essentially
telling FEMA to do what FEMA already could do. Could we ask
that, if you are ever in doubt about the Stafford Act, instead
of going by the book just because some lawyer at FEMA does his
job, and their jobs are to read statutes narrowly, this is not
a narrowly worded statute, it is a remedial statute, and the
final authority would be the Subcommittee and the Committee. So
we ask, when in doubt, instead of having back and forth
disputes with local jurisdictions, if you would refer the
matter to the Subcommittee, we would be pleased to be of
assistance.
Mr. Fugate. We will do that, Madam Chair.
Ms. Norton. Mr. Fugate, we have been pleased with your
startup year. We are very pleased to see that you are going to
be on the ground in Tennessee, so you are excused at that point
to go tend to what we regard as even higher priority duty than
even being here this morning. Thank you, sir.
Mr. Fugate. Thank you, Madam Chairman.
Ms. Norton. Mr. Fernandez, we apologize. We usually let
both of our witnesses testify and then ask questions seriatim
of each, but felt we had, this time, to, in light of the
emergency, let Mr. Fugate go first. I know you, as a disaster
expert yourself, would be the first to understand that.
We are pleased to receive your testimony at this time. John
Fernandez, Assistant Secretary of Commerce, Economic
Development Administration.
Mr. Fernandez. Thank you, Chairwoman Norton and Ranking
Member Diaz-Balart. I guess it is only appropriate that we
would go second because, certainly in the context of disaster
relief, we view ourselves as a second responder.
This hearing is extremely timely, as we are responding to
two disasters, one natural and one man-made; and though not a
first responder, EDA has a long history of promoting economic
recovery following disasters and is already mobilizing staff to
assist communities reeling from these catastrophic events.
In response to a string of devastating natural disasters in
2008, Congress appropriated $500 million in disaster
supplemental funds to our Economic Adjustment Assistance
program. Here is one example of what we did following the
Midwest floods. Those floods destroyed the city-central, coal-
fired boilers that provided steam heat and hot water for St.
Luke's Hospital and Coe College in Cedar Rapids, Iowa.
When the utility company announced its plans not to rebuild
its boiler facility, the hospital and the college were left
without permanent heating capacity. Both institutions could not
continue to operate without an affordable and reliable energy
supply.
The college estimated that their energy costs would
quadruple and the 540-bed hospital faced cutting services vital
to the community. EDA invested $4.65 million in disaster
supplemental funds to help construct and install an upgraded
energy-efficient system. EDA's assistance was critical to
helping the hospital and the college keep their doors open,
saving approximately 3,150 jobs.
EDA's investments stem beyond rebuilding in the wake of
disasters. We strive to simultaneously create new economic
opportunities. For example, EDA invested $10 million in
disaster supplemental funds to renovate and expand the Center
for Technology and Workforce Development, a biotech business
incubator on the campus of the University of Texas Medical
Branch at Galveston. This project will not only allow the 14
companies that were displaced by Hurricane Ike to return to the
incubator, but will expand the facility's capacity to add 24
additional biotech companies.
Economic disasters, whether caused by forces of nature or
be they man-made, bring their own unique set of challenges.
EDA's Economic Adjustment Assistance Program is the key to our
success in responding quickly and effectively. This program
allows for a wide range of technical, planning, financing, and
infrastructure assistance. Moreover, this investment program
can be multifaceted, which allows us to develop an integrated
response.
Perhaps the best example of this integrated approach is
occurring right now in Moraine, Ohio. In June of 2008, GM
announced its plans to close it Moraine assembly plant,
eliminating 5,000 direct jobs and thousands more indirectly.
Within two weeks of GM's announced, EDA's Chicago staff began
working with local and State officials to develop a strategic
response to the plant closure.
To guide recovery efforts, EDA subsidized the development
of a comprehensive economic development strategy for the
greater Dayton region. With the strategy in place, EDA staff
continues to provide technical assistance on implementation
measures, including working with the Moraine officials on
alternatives for redeveloping the former GM site. Additionally,
EDA funded a revolving loan fund to provide capital to support
existing businesses, while encouraging the development of new
businesses to spur job creation.
For fiscal year 2011, EDA has requested $246 million for
its Economic Development Assistance Programs. While this figure
is on par with EDA's fiscal year 2010 appropriation, the
agency's request includes a significant shift of resources
within EDA's seven programs. EDA has asked that the largest
percentage of our funds, or $125 million, be allocated to the
Economic Adjustment Assistance Program.
While the Public Works Program remains an extremely useful
tool, as EDA's most flexible program, the Economic Adjustment
Assistance Program is critical to our ability to effectively
respond in real-time to economic dislocations.
Madam Chairwoman, Ranking Member Diaz-Balart, and Members
of the Subcommittee, I want to thank you for the opportunity to
testify today. I especially want to thank you for your
consistent and incredibly strong support for this agency, and I
know on behalf of all my colleagues at EDA, we truly appreciate
that, and I look forward to any questions you have.
Ms. Norton. Thank you, Mr. Fernandez. Your budget before us
now proposes a reduction in funding from the Public Works Grant
account to the Economic Adjustment Grant account. Do you
envision doing a similar number of infrastructure-related
projects even with an $86 million reduction in public works
funding?
Mr. Fernandez. Madam Chairwoman, the vast majority of our
economic adjustment funds in fact go to capital projects as
well, nearly 60 percent. What we do believe is that, with the
Economic Adjustment Fund flexibility, it gives us the ability
to be more creative, provide more integrated responses, and, as
we are experiencing right now with multiple disasters prior to
any additional supplemental appropriations, we have more
flexibility with those economic adjustment of funds to give the
kind of soft infrastructure support that is critically needed
immediately after an economic disruption, whether it is man-
made or a natural disaster. So we would continue to certainly
invest in a lot of capital projects; it is just having that
flexibility we believe is very important.
Ms. Norton. Well, you have used your flexibility very well,
and I defer to your expertise there; it certainly sounds
reasonable. What has been the response, though, of the economic
development districts to this shift?
Mr. Fernandez. Well, I won't speak for them. The response
to the direction we are trying to take EDA I think I can
confidently say has been very positive. We have been engaged
with stakeholders aggressively since I came on board in
September; we are working closely with them. We appreciate
their input and we can't do our job without them. So I have met
with many of the representatives of the economic development
districts and I think I can say safely that they are generally
happy with the direction we are going.
Ms. Norton. Has there been any upward spike in grant
applications this fiscal year?
Mr. Fernandez. Yes. I can tell you last year's numbers we
had for the Economic Development Adjustment Programs
themselves, north of a billion dollars worth of requests.
Ms. Norton. I am sorry, I can't hear you. Would you speak
more directly into the microphone?
Mr. Fernandez. We had north of a billion dollars in
requests last year.
Ms. Norton. A billion dollars as opposed to what last year?
Mr. Fernandez. That was last year. We had $1.2 billion. To
date I couldn't tell you the exact number, but I think we are
north of--we are almost at the $500 million mark already this
year. So, yes, there is a lot of demand.
I can give you realtime numbers on the Community Trade
Adjustments Program, which I think is a reflection of demand as
well. That program that Congress created included a little over
$36 million in funding, which is very similar in its
applications to the Economic Adjustment Program. I think we had
131 applications for north of $100 million in requests. So,
yes, there is certainly a demand for programs.
Ms. Norton. Would you, within 30 days, submit to this
Subcommittee a list of grant applications this year relative to
the same time period last year?
Mr. Fernandez. Absolutely.
Ms. Norton. You will note that we put both you and Mr.
Fugate on the same panel because we are trying to create
greater synergy between the two of you because we believe it is
already there; you just don't have the kind of funding that
would enable you to pick it up as easily. Now, you know, you
have some recent disasters going on. Absent an emergency
supplemental appropriation, would EDA just be left out of
responding to some of the disasters going on now, like the oil
spill and the floods in Tennessee?
Mr. Fernandez. Not completely, Madam Chairwoman. I mean, we
are in fact engaged today. Shortly after the oil spill, for
example, our office staff, our regional staff in Atlanta and
Austin both became engaged with their local and State economic
development counterparts. They actually deployed to the regions
and met with officials. Today, in fact, Secretary Locke, along
with our Deputy Assistant Secretary are in Biloxi, Mississippi,
and going over to Pensacola, Florida, as well. So we are able
to use our economic development representatives to provide
technical assistance.
Where we are hamstrung, candidly, is to deploy significant
resources in the short-term for things like additional disaster
coordinators and some of the softer technical support that is
available through our economic adjustment program. For our
Atlanta region and our Austin region, their pipeline for fiscal
year 2010 Economic Adjustment Assistance funding is taxed.
It would be very difficult to squeeze out additional
resources. We will do everything we can, obviously, but that is
one of the reasons why we think the flexibility of the Economic
Adjustment Program is so important, and that is why we would
like to see a higher percentage of our funds in it, so that we
can respond quickly to these kinds of sudden economic
disruptions, whether they are natural or man-made.
Ms. Norton. I am going to ask the Ranking Member if he has
any questions at this time.
Mr. Diaz-Balart. Not at this time, Madam Chairwoman.
Ms. Norton. Thank you, Mr. Diaz-Balart.
I just have a few more questions. We were very intrigued
last week at the hearing--it was the Economic Development
Commissions--to hear how the Delta Regional Commission does its
grant programs with the provision of their grant agreements
that requires a payback by the applicant if they do not
generate the number of jobs promised originally. Apparently, it
is working. People know you don't play with the Delta Regional
Commission.
Does EDA operate its programs with similar provisions? If
not, would you consider doing so?
Mr. Fernandez. Well, when I was mayor, those type of
clawback provisions were very important. We certainly have
accountability measures that we follow in regard to our
grantees. One of the distinctions, however, between their work
and ours is that they are making their grants directly to a
recipient with the expectation of them creating the jobs. We
work through intermediaries. So it is not that it can't be
done--and we certainly want to hold people accountable--it is
just that we don't give the assistance directly to a company
who is creating those, where we can hold them as directly
accountable.
Ms. Norton. But you give the assistance in fact to who?
Mr. Fernandez. Typically, it is the city, a town, a county,
a public----
Ms. Norton. Who, of course, depend your expertise and
advice and counsel.
Mr. Fernandez. Correct.
Ms. Norton. So I recognize the difference. It is an
important difference. Would you be willing to at least try this
out in an appropriate circumstance to see whether it would work
and save the taxpayers money?
Mr. Fernandez. Sure. And I think there are instances where
our support is much more direct; and in those cases it would be
totally appropriate.
Ms. Norton. The Committee would very much be interested in
hearing from you in writing any circumstances where you think
this might be tried out. We cross-examined the Delta Commission
very closely, and they are headed by a former auditor. They
know how to account for circumstances beyond the control of the
grantee, and they know how to negotiate in advance. I don't
know what your record is or whether you know what the record is
in, in fact, producing jobs promised from EDA seed money. Have
you any sense of the regularity with which commitments are in
fact kept to produce jobs by the numbers?
Mr. Fernandez. I can recall that within the last couple of
years that Grant Thornton did an extensive study. We used a
third-party company to actually evaluate the track record of
EDA, and they reported back that, in fact, the actual job
numbers and private sector leverage was very consistent with
the grantee estimates. And that actually validated even an
earlier study by Rutgers University. So I think our track
record is very strong. If anything, we take great pains to be
extremely conservative in our projections.
Ms. Norton. Well, you have a great deal of credibility with
us in that regard; that is why we are at pains to understand
why there would be any reduction in funding. Why was there a
reduction in funding for EDA?
Mr. Fernandez. Well, there are two things to consider here.
One is that EDA is one of the agencies trying to address the
broader economic challenges our Country faces. And in the
President's budget there are substantial new investments, for
example, in infrastructure; there are substantial new
investments in education; there are substantial new investments
in research and development, all of which are incredibly
important pillars to a framework for sustainable economic
growth. EDA is focused on building globally competitive
communities. We are one piece of that overall framework. So in
the context of the entire budget, there is great emphasis on
rebuilding and building a stronger economy for our Country.
The recommendation for more funding in economic adjustment,
frankly, is in line with that broader administrative framework.
Ms. Norton. Well, we don't understand that at all. We don't
understand the reduction in the budget of the agency. Now, we
understand the Economic Adjustment Grant account flexibility,
but we have made no objection to that. We don't understand how
the agency's mission in a time of recession is aided by an
absolute reduction in its budget as opposed to last year. What
was the rationale given to you for that? We understand you are
not the OMB.
Mr. Fernandez. Well, our proposal is exactly in line with
what we proposed in fiscal year 2010, and we certainly
appreciate the additional support that Congress provided us.
Ms. Norton. So you are saying that this year's budget is
the same budget?
Mr. Fernandez. It is, but for the $2.1 million adjustment
on the salaries and expenses for----
Ms. Norton. So any adjustment you got last year came from
the Congress, you are saying?
Mr. Fernandez. It did, and we certainly appreciate that.
Ms. Norton. So we don't really have support in this
Administration for EDA; they leave it to the Congress every
year to come forward and give EDA more money.
Mr. Fernandez. Well, you know, in light of the
discretionary freeze that was in place for agencies throughout
the Government, the fact that we were not reduced I think is an
expression of that support. And I don't want to sugar-coat
this, and I absolutely appreciate and respect the support that
this Committee provides EDA, but in many instances it is the
technical assistance, the strategic engagement, it is the
leveraging of other resources----
Ms. Norton. That takes money too, Mr. Fernandez.
Mr. Fernandez. It does, but it doesn't take as much as some
of the large, complex infrastructure----
Ms. Norton. It certainly isn't helped by an $86 million
reduction. I don't expect you to defend--I put you between a
rock and a hard place. You are supposed to defend the
President's budget, not ask for more money, so I understand,
and we don't want to put you in an untenable position.
Mr. Cao?
Mr. Cao. Thank you, Madam Chair.
Mr. Fernandez, I have two questions to ask you. The first
one concerns the Port of New Orleans. Hurricane Katrina, as you
already know, caused severe damage to the Mississippi Gulf
Coast Outlet, we call MRGO, and rendered it unusable for most
shipping activity.
In fact, the waterway was closed by the Army Corps of
Engineers by the WRDA Act of 2007. Now, with the closure of the
MRGO Federal funding of approximately $16.5 million is required
to relocate port terminals that were dependent upon the
navigability of MRGO for ports and maritime operations to
address these relocation funding needs.
In order to prevent further economic devastation to the
port and the greater New Orleans region, Section 3082 of WRDA
2007 authorizes such funding by the EDA for the relocation of
port facilities affected by the closure of the MRGO. However,
based on what I have been hearing so far, the Port of New
Orleans has been unsuccessful in its efforts to obtain the
requested funding from the EDA.
Can you describe to me the immediate actions, if there are
any, that are being taken by the EDA to assist the Port of New
Orleans in this matter and to utilized unobligated or other EDA
funds for the necessary relocation of port facilities?
Mr. Fernandez. Congressman Cao, honestly, I will respond to
that formally, as soon as I can get you that information after
this hearing. I don't know, off the top of my head, what the
status or the process was by which they made those requests. I
known that, post-Katrina, EDA has invested over $41 million in
the region, but I don't know what the status of any specific
requests might have been related to those port facilities. But
I will get you that information.
Mr. Cao. OK. Well, it is Section 3082 of WRDA 2007. If you
can look into that.
And my next question to you concerns the oil spill. As you
know, the oil spill will impact and possibly devastate the
economic conditions, as well as the livelihoods of fishermen. I
know that there is a $1 billion fund that was established by
the Federal Government to address some of those needs. Are
there any programs that you might have that individuals and
businesses can possibly tap into?
Mr. Fernandez. I would say, first and foremost, we believe
that the responsibility lies squarely with BP, and I think the
Administration is extremely committed to ensuring that British
Petroleum fully compensates the communities and the individuals
and businesses directly impacted by that spill. So, first and
foremost, we believe that is where the responsibility lies.
As I mentioned earlier, we are certainly providing
technical assistance. We are engaged actively, communicating
with our partners in the region to help sort through what some
of these recovery actions may require. But we believe the
responsibility clearly lies with BP.
Mr. Cao. But, in the meantime, while we are--or at least
while the people try to get BP to pay up its obligation, do you
have any programs available possibly that people, during the
interim, can tap into?
Mr. Fernandez. Well, certainly, our existing Economic
Development Adjustment Programs, in most instances, would be a
source of potential support. As I mentioned earlier, our
account for the Economic Adjustment Assistance Program is very
reduced. There certainly are some funds in the Public Works
budget that might be available.
Mr. Cao. Well, if you can, can you ask one of your staff
members can they provide us with very specific programs in
writing so that we can provide the information to our people
down there in the 2nd District?
Mr. Fernandez. Absolutely. We would be happy to do that.
Mr. Cao. Thank you. And what do you predict as the short-
term and long-term effects with respect to economic development
in the region?
Mr. Fernandez. As impacted by the oil spill? It is hard to
predict exactly because of the uncertainty regarding the
continual oil spill, but there is certainly the capacity to
have a very dramatic impact on the region. As you know better
than I, there are parts of the economy that have not fully
recovered from Katrina, so that really complicates even the
existing recovery efforts. So the magnitude, while I can't give
you a specific number, there is no question it could be
devastating for the region and beyond.
Mr. Cao. And assuming that it could be devastating and
assuming that BP would be liable for most of it, do you
anticipate your department to be somehow involved in this
recovery process also? And if you do anticipate your agency to
be involved, what concrete plans do you have, if any?
Mr. Fernandez. Well, as I mentioned, we are engaged working
with the local officials now, helping to develop strategies to
recovery. I mean, that work usually includes a range of
activities: interim, immediate support for disaster
coordinators to help get more boots on the ground; it involves
doing assessments in partnership with FEMA.
Often, they will, in essence, contract with the EDA to do
the economic impact assessments. We can begin with Revolving
Loan Funds to stabilize some of the financial hits that many of
the businesses are taking. And then certainly we can begin to
actually fund recovery strategies, whether they are repairs of
existing facilities or constructions of new investments that
help rebuild and regain economic activity.
Mr. Cao. Madam Chair, if you could allow me one last
question?
Ms. Norton. Certainly so, Mr. Cao.
Mr. Cao. Thank you very much.
Mr. Fernandez, can you tell me what lessons have you and
your agency learned from Katrina and the oil spill, and what
plans do you have in place or what plans are you presently
discussing to better address and to better help the people in
devastated areas for future emergencies like the oil spill or
Katrina?
Mr. Fernandez. Yes. As Chairwoman Norton and Mr. Fugate
discussed, the Administration has learned many lessons from
Katrina. The coordination, the communication, breakdowns were a
real problem, so there is a tremendous amount of work going on
with the ongoing integration of missions between the different
Federal agencies. The President has a long-term recovery
framework working group that is very active and hopefully will
have a final report to the President shortly. I can tell you in
the context of that planning, the Economic Development
Administration is co-leading the Department of Commerce
participation in that new framework, along with our colleagues
at NOAA, and we have taken a lead role on the community
recovery elements of that plan.
I think that while there were many problems, to put it
mildly, in response to Katrina, I can say that I think the
collaboration between the local economic development partners
and EDA were pretty solid. We worked with our existing economic
development districts, we worked with representatives from the
International Economic Development Council and others to give
the kind of essential technical assistance, planning assistance
to help build strategies for long-term recovery. There is
always room for improvement, and we are certainly open to doing
that.
Mr. Cao. Thank you. I yield back.
Ms. Norton. Thank you, Mr. Cao.
Just a few more questions, Mr. Fernandez. The Subcommittee
is pleased with EDA's focus on regionalism. We wonder, though,
whether or not this will have an impact, perhaps unintended, on
rural areas which don't have access to universities or to high-
tech industries.
Mr. Fernandez. It is a very good question and it is one
that we get asked often. If you look at the investment history
of EDA, and even in the most recent year, the majority of our
funding has gone to what would be defined as rural areas, and
the way we look at the regional strategies is to actually
connect many of those smaller towns or rural areas that may
lack a university or other similar institutions to the broader
regional economy, and the goal is to provide a bridge between
communities, not to perpetuate a divide.
Ms. Norton. We have many calls for regional commissions,
and we have created some regional commissions. I wonder if that
is a reflection on EDA. Does it mean that EDA is spread too
thinly and not able to assist many regions of the Country?
Mr. Fernandez. From my perspective, that is not the case. I
can't say with certainty what the legislative intent has always
been behind the establishment of these broader commissions.
They certainly are diverse in their size and scope, and in
their operations, as well. I believe that our regional offices
have coverage.
One of the things we are working on that I know the
Committee would be interested in is seriously looking at our
processes so that we can actually free up personnel to do more
of the high touch external work, rather than process. So we
have engaged in a very extensive review of our grant
application process with a goal of having a more effective,
transparent, and accessible system, but one that also enables
us to deploy more resources out in the field, meeting with our
stakeholders and helping to engage in these kind of
collaborative economic development projects.
Ms. Norton. You expeditiously set about your stimulus
spending. Would you explain some of the job creation activities
that have resulted from EDA's stimulus spending?
Mr. Fernandez. Yes. And I think at a previous hearing I
believe we gave you a detailed summary of all of the projects.
Ms. Norton. I am looking now for the kinds of jobs that
were created.
Mr. Fernandez. There is a range of them. In Minnesota we
invested in a project is going to facilitate the investment of
a new steel plant, so those will be solid manufacturing jobs.
We have invested in--unfortunately, I have drawn a blank. I
know in Indiana we invested in a high-tech training facility to
foster more job creation in the information technology sector.
Unfortunately, I am kind of drawing a blank on some of the
other projects, but it has been a wide range of investments,
from more research-oriented positions to manufacturing
positions to small businesses.
Ms. Norton. Finally, Mr. Fernandez, you will recall my
question to Mr. Fugate on this White House long-term disaster
recovery working group. We are trying to figure out just where
you figure in this. Are you at the table at all, sir? After
all, long-term recovery is about economic development.
Mr. Fernandez. It is. And, as I mentioned, we are at the
table and EDA was tasked, along with NOAA, to co-lead the
Department of Commerce's participation----
Ms. Norton. To do what?
Mr. Fernandez. We are co-leading the Department of Commerce
engagement in that working group.
Ms. Norton. What does that mean, please?
Mr. Fernandez. We are representing EDA, as well as other
agencies throughout the Department of Commerce, as part of the
working group. So we are heavily engaged in that process.
Ms. Norton. Do you believe you are as engaged as FEMA and
HUD are with this process?
Mr. Fernandez. I believe so.
Ms. Norton. Well, we are going to look for your
fingerprints on this project as well, Mr. Fernandez. We very
much appreciate your very important testimony here today. Thank
you.
Mr. Fernandez. Thank you.
Ms. Norton. This hearing is adjourned.
[Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]