[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

                      PRIORITIES FOR DISASTERS AND
                        ECONOMIC DISRUPTION: THE




                               BEFORE THE

                            SUBCOMMITTEE ON

                                 OF THE

                              COMMITTEE ON
                        HOUSE OF REPRESENTATIVES


                             SECOND SESSION


                              May 6, 2010


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                 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
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
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
PHIL HARE, Illinois



 Subcommittee on Economic Development, Public Buildings, and Emergency 

           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
Pennsylvania, Vice Chair             ANH ``JOSEPH'' CAO, Louisiana
DONNA F. EDWARDS, Maryland           PETE OLSON, Texas
  (Ex Officio)




Summary of Subject Matter........................................    vi


Fernandez, Hon. John R., Assistant Secretary of Commerce for 
  Economic Development, Economic Development Administration......     5
Fugate, Hon. Craig, Administrator, Federal Emergency Management 
  Agency.........................................................     5


Norton, Hon. Eleanor Holmes, of the District of Columbia.........    28
Oberstar, Hon. James L., of Minnesota............................    32


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













                         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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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.


    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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.
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    Mr. Fernandez. Thank you.
    Ms. Norton. This hearing is adjourned.
    [Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]