[Senate Hearing 111-102]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 111-102
 
 THE ROLE OF THE COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM IN DISASTER 
                                RECOVERY 

=======================================================================

                                HEARING

                               before the

                AD HOC SUBCOMMITTEE ON DISASTER RECOVERY

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 20, 2009

                               __________

       Available via http://www.gpoaccess.gov/congress/index.html

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           JOHN McCAIN, Arizona
MARK PRYOR, Arkansas                 GEORGE V. VOINOVICH, Ohio
MARY L. LANDRIEU, Louisiana          JOHN ENSIGN, Nevada
CLAIRE McCASKILL, Missouri           LINDSEY GRAHAM, South Carolina
JON TESTER, Montana
ROLAND W. BURRIS, Illinois
MICHAEL F. BENNET, Colorado

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


                AD HOC SUBCOMMITTEE ON DISASTER RECOVERY

                 MARY L. LANDRIEU, Louisiana, Chairman
CLAIRE McCASKILL, Missouri           LINDSEY GRAHAM, South Carolina
ROLAND W. BURRIS, Illinois
                      Ben Billings, Staff Director
                  Andy Olson, Minority Staff Director
                       Kelsey Stroud, Chief Clerk
















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Landrieu.............................................     1
    Senator Graham...............................................    16

                               WITNESSES
                        Wednesday, May 20, 2009

Dominique Duval-Diop, Senior Associate, PolicyLink...............     5
Melanie Ehrlich, Ph.D., Member of the Louisiana Recovery 
  Authority Housing Task Force, and Founder, Citizens' Road Home 
  Action Team....................................................     7
Karen Paup, Co-Director, Texas Low Income Housing Information 
  Services.......................................................     9
Reilly Morse, Senior Attorney, Mississippi Center for Justice....    10
Hon. Roger F. Wicker, a U.S. Senator from the State of 
  Mississippi....................................................    16
Hon. Haley Barbour, Governor of the State of Mississippi.........    18
Paul Rainwater, Executive Director, Louisiana Recovery Authority.    20
Charles S. (Charlie) Stone, Executive Director, State of Texas, 
  Office of Rural Community Affairs..............................    22
Frederick Tombar, Senior Advisor, Office of the Secretary for 
  Disaster and Recovery Programs, U.S. Department of Housing and 
  Urban Development..............................................    24

                     Alphabetical List of Witnesses

Barbour, Hon. Haley:
    Testimony....................................................    18
    Prepared statement with attachments..........................   101
Duval-Diop, Dominique:
    Testimony....................................................     5
    Prepared statement...........................................    35
Ehrlich, Melanie, Ph.D.:
    Testimony....................................................     7
    Prepared statement with attachments..........................    47
Morse, Reilly:
    Testimony....................................................    10
    Prepared statement...........................................    82
Paup, Karen:
    Testimony....................................................     9
    Prepared statement with attachments..........................    66
Rainwater, Paul:
    Testimony....................................................    20
    Prepared statement with an attachment........................   120
Stone, Charles S. (Charlie):
    Testimony....................................................    22
    Prepared statement with attachments..........................   130
Tombar, Frederick:
    Testimony....................................................    24
    Prepared statement...........................................   140
Wicker, Hon. Roger F.:
    Testimony....................................................    16

                                APPENDIX

Charts submitted by Senator Landrieu.............................   143
Copy of a bill submitted for the record by Mr. Stone.............   146
Supplemental Federal Appropriations--State of Mississippi, 
  submitted by Governor Barbour..................................   150
Frank A. Silvestri, New Orleans, LA, prepared statement..........   155
Supplemental comments of Karen Paup to questions asked during the 
  hearing by Senator Landrieu....................................   159
Response from Mr. Morse to questions asked during the hearing by 
  Senator Landrieu...............................................   162


                       THE ROLE OF THE COMMUNITY
                    DEVELOPMENT BLOCK GRANT PROGRAM
                          IN DISASTER RECOVERY

                              ----------                              


                        WEDNESDAY, MAY 20, 2009

                                   U.S. Senate,    
              Ad Hoc Subcommittee on Disaster Recovery,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:39 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Mary L. 
Landrieu, Chairman of the Subcommittee, presiding.
    Present: Senators Landrieu and Graham.

             OPENING STATEMENT OF SENATOR LANDRIEU

    Senator Landrieu. Thank you for joining me today. I am 
going to call the hearing of our Subcommittee to order, and 
hopefully we will be joined by my Ranking Member, Senator 
Graham, who is currently attending an Armed Services Committee 
hearing, but he hopes to be here shortly.
    Let me begin by welcoming all of our witnesses. We are 
going to have two, I think, very good and informative panels 
this afternoon. But the purpose of today's hearing of the 
Subcommittee on Disaster Recovery is to really examine the role 
of Community Development Block Grant (CDGB) Programs in 
disaster recovery.
    Since 1993, Congress has increasingly used the Community 
Development Block Grant Program to support short- and long-term 
recovery from natural and man-made disasters, starting with 
Hurricane Andrew in 1992; the Midwest floods in 1993 again; 
then the Oklahoma City bombing of 1995; Midwest floods in 1997; 
the terrorist attacks in New York, Virginia, and Pennsylvania 
in 2001; Hurricanes Katrina, Rita, and Wilma in 2005; 
Hurricanes Gustav, Ike, Dolly, and the Midwest floods in 2008.
    In the past 4 years alone, Congress has appropriated over 
$26 billion in Community Development Block Grant (CDBG) funds 
for disaster relief. That makes this source one of the 
principal means of financing recovery in the United States. And 
because of the numerous times it has been used and the amount 
of money involved, it should signal a real interest on the part 
of Congress to determine if this is the best way to provide 
funding to States and local communities after a disaster. And 
if it is, why; and if it is not, is there a better approach? 
That is really what this hearing is about this afternoon.
    As we all know, the Community Development Block Grant 
Program was created in 1974, basically, at the request of 
mayors, of which my father was one at the time, indicating that 
the Federal Government should provide more direct aid to cities 
and areas that are struggling to develop with limited 
resources. The Federal Government should be a partner, the 
program was created, and it has operated generally that way 
ever since.
    But these Community Development Block Grant formulas are 
allocated annually, as we might remember, to over 1,000 
communities, entitlement communities, in 50 States and five 
territories, to support neighborhood revitalization, housing 
rehabilitation and economic development. Before spending funds, 
States must submit action plans to HUD for approval. Eligible 
activities span across a range of 25 different categories. And 
I believe it was that versatility and flexibility that led 
Congress initially to think that this might be the best way to 
send relatively large sums down to States and local 
communities. Hopefully, this Subcommittee will shed light on 
whether that was a good decision or not.
    More than $20 billion in emergency Community Development 
Block Grant appropriations have gone to five States along the 
Gulf Coast since 2005 to support recent hurricane relief. In 
addition to HUD, we have invited State officials here today 
from the three largest recipients of this funding to offer 
their perspectives on this program. We have also asked housing 
advocates from the nonprofit community in those three States--
Texas, Mississippi, and Louisiana--to share their experiences 
using these funds, advocating on behalf of homeowners and 
renters alike, and their impressions of the States' management 
of these programs.
    Community recovery depends on more than housing, but 
approximately, as you can see from the charts up here, both for 
Mississippi and Louisiana--and I am sorry we do not have a 
chart made for Texas, but we will shortly--the bulk of the 
funding has gone to housing.\1\
---------------------------------------------------------------------------
    \1\ The charts referred to by Senator Landrieu appears in the 
Appendix on page 143
---------------------------------------------------------------------------
    Hurricanes Katrina and Rita destroyed, as we will recall--
and I think it is important to frame for this hearing--over 
250,000 homes in Louisiana, 61,000 in Mississippi, 75,000 in 
Texas, either completely destroyed or severely damaged, 
rendering unhabitable the dwellings.
    Mississippi dedicated 53 percent of its initial $5.5 
billion for housing. Louisiana has subsequently dedicated 83 
percent of its $13.4 billion, which was received not at one 
time but over the course of, I think, 2\1/2\ years. Texas 
dedicated 84 percent of its initial $503 million from Hurricane 
Rita to housing, but has only allocated up to 48 percent of its 
$1.3 billion recent allocation for Hurricanes Ike and Dolly.
    Louisiana and Mississippi had some similarities and some 
differences. With Texas, as well. Louisiana and Mississippi 
opted to use a State-managed program model. Texas, in the last 
3 years, has actually tried all three different approaches, a 
local, a regional, and State approach. We will hear from them 
about that.
    Louisiana originally set up a rehabilitation program that 
incentivized applicants to rebuild within the State, thinking 
that a public policy, trying to set up a program that really 
encouraged people to rebuild in the neighborhoods that were 
seriously destroyed, would be a good way to begin. Ultimately, 
the State decided to go a different route.
    Mississippi had originally created a compensation program 
instead, which provided grants to recipients regardless of 
whether they decided to rebuild in their area or leave the 
region or the area entirely. We will hear about the pros and 
cons of those two approaches.
    Both States designated funding to be administered through 
different State-wide entities; in Louisiana's case, the 
Louisiana Office of Community Development, and in Mississippi, 
the Mississippi Development Authority. Both States capped 
homeowner grants at $150,000 and launched homeowner assistance 
programs before launching programs to assist renters. 
Unfortunately, Texas was forced to cap its homeowner grants for 
Hurricane Rita at $65,000 due to inadequate funding, in their 
view. I would like to hear more about that. Both States have 
also commissioned independent reviews of their housing programs 
to evaluate performance procedures in service delivery.
    As you can see from the chart,\1\ Mississippi, because of 
its initial upfront and fairly immediate allocation of $5.5 
billion, was able to meet, according to the State, their 
housing needs. There is some dispute of that which we will hear 
today from our second panel. But, nonetheless, was able to also 
direct a considerable portion of their allocation from Congress 
to infrastructure revitalization and economic development, $570 
million going to the Port of Gulfport alone, and $641 million 
to overhaul the coastal's region waste-water infrastructure.
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 145.
---------------------------------------------------------------------------
    Louisiana, because the need was so much greater in terms of 
the destruction of the housing units, dedicated a much larger 
portion for homeowner assistance and some rental assistance as 
well, and then had much less money available to be used for 
infrastructure and virtually none or limited for economic 
development, as you can see.
    So this is just a broad outline of how this money was 
generally used for the recovery. The questions are really 
important and are outstanding as to whether this is the right 
approach or not; and how it could be improved?
    I would like to mention, bringing us kind of up to date on 
where we are today, that in the very last round of HUD money 
for Texas and Louisiana primarily and some of the Midwest 
States, based on our difficulty moving some of that money out 
of Washington, down to the State level, the Members of Congress 
insisted that one-third of the money appropriated to HUD be 
allocated to the States within 60 days. I am happy to say that 
was done.
    The problem is that two-thirds of the money is still 
sitting in Washington. And now an additional, I think, 8 months 
has passed, and that money is still sitting here because we 
were not able to get more than that directed out of the door in 
60 days. So we are going to ask HUD what their plans are to get 
that money down to the States and communities that, obviously, 
need it.
    HUD, according to their testimony today, has not yet 
developed a review process for groups of projects, such as 
groups of homes in a single neighborhood, requiring many of 
these individual homeowners to go through their own individual 
environmental impact plan, which is required under the 
Community Development Block Grant Program for obvious reasons, 
but it becomes questionable as to why you need an individual 
environmental impact statement for every individual home when 
it is clear that the entire neighborhood of 7,000--8,000 in 
some instances--homes were destroyed in a particular 
neighborhood. We will be interested to see how that is coming 
along. Nor has the agency developed a consolidated review 
process for multiple funding streams from different agencies. 
So when the communities receive FEMA money for hazard 
mitigation, it is not always coordinated with the money that 
comes from HUD. Hopefully, this hearing can shed some light on 
how that could be done better.
    So in conclusion, our hearing objectives are, is the 
Community Development Block Grant Fund the right Federal 
program for recovery? If not, what is the right program? How 
can HUD improve the program's administration? How can States 
improve their administration? Could Congress provide more 
legislative instructions to the agency about this situation? 
What have Louisiana, Mississippi, and Texas done alike, what 
have they done differently, what have they done well, what have 
they done poorly? Housing programs, have they been designed to 
effectively assist homeowners and renters alike? Have special 
populations of seniors, the disabled, other populations that 
have great difficulty, been included, as they should have been, 
in our efforts? Should States focus housing assistance on 
compensating homeowners or incentivizing the re-population of 
an area? And there are any number of questions that we hope to 
answer for today.
    So without going any further, let me just add, particularly 
for Louisiana's Road Home program, which is a program I am 
particularly interested in as a Senator from Louisiana. We want 
to also find out today if the appeals process that is set up 
for Road Home is independent, expedient, and fair? Are Road 
Home grants being awarded on an accurate and consistent basis? 
If there is going to be surplus in Road Home, what will that 
surplus be and how is the State planning to allocate it?
    In addition, we want to try to find these answers as 
quickly as possible because hurricane season is literally just 
a few weeks away. We would like to believe if we have to go 
through this again, that we would go forward in a much better, 
more focused way. And I am not sure that 3 weeks is enough time 
to fix everything; that is problematic. But at least this 
hearing will give us, and I think this new Administration, a 
chance to start trying to create and fashion and tailor a 
program that really meets the needs more directly than I think 
this program has been able to do, despite the many good efforts 
of many people in this room.
    So why don't we bring the witness panel forward, Dominique 
Duval-Diop, Melanie Ehrlich, Karen Paup and Reilly Morse.
    Our first witness today is Ms. Duval-Diop, who is the 
Senior Associate for PolicyLink. In this role, she directs 
research and informs policymaking about equitable distribution 
in the use of hurricane recovery redevelopment resources. Prior 
to this, she assisted in the start-up of the Louisiana Recovery 
Authority, acting as its Director of Long-Term Planning. We 
look forward to hearing from you today.
    Our second witness will be Dr. Melanie Ehrlich, the Founder 
of Citizens' Road Home Action Team (CHAT). Dr. Ehrlich founded 
CHAT in September 2006 and runs the all-volunteer effort with 
no budget, 895 members, by E-mail and through bi-weekly 
meetings. She is also a professor at Hayward Human Genetics 
Center. We look forward to your comments today.
    Two other panelists. Karen Paup is the Co-Director of the 
Texas Low Income Housing Information Service in Austin, Texas. 
Ms. Paup has worked for the last 25 years solving affordable 
housing problems in Texas. She has testified previously before 
this Subcommittee, and I am happy to invite her back to hear 
her testimony today.
    Finally, Reilly Morse, senior attorney in the Katrina 
Recovery Office of the Mississippi Center for Justice in 
Biloxi, Mississippi. Mr. Morse is a third-generation 
Mississippi lawyer, former municipal judge and prosecutor, a 
survivor of Hurricanes Katrina and Rita, and he is here to give 
his views about efforts in Mississippi to provide affordable 
housing for renters particularly, but homeowners as well.
    I think this panel will shed some light on some of the 
difficulties and challenges that still remain.
    I am very happy that on our second panel we will be joined 
by Governor Haley Barbour from Mississippi; Paul Rainwater, 
representing the State of Louisiana; and Charlie Stone, 
Executive Director of the Office of Rural Community Affairs, 
representing Texas.
    So we will have all three States represented, but let's 
first hear from our panel of advocates in your views about 
whether Community Development Block Grants are the right source 
of funding, how they have been used from your perspective--well 
used or misused. And we would like you to limit your comments, 
of course, to 5 minutes. Thank you.

    STATEMENT OF DOMINIQUE DUVAL-DIOP,\1\ SENIOR ASSOCIATE, 
                           POLICYLINK

    Ms. Duval-Diop. Good afternoon, Madam Chairman, Senator 
Landrieu, and Members of the Subcommittee, who have been 
working diligently over the years to monitor and provide 
guidance about disaster recovery. My name is Dominique Duval-
Diop, and I am a senior associate at PolicyLink, as well as a 
board member of Equity and Inclusion Campaign, which is a 
nonpartisan policy advocacy campaign advocating for an 
equitable Gulf Coast recovery.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Duval-Diop appears in the 
Appendix on page 55.
---------------------------------------------------------------------------
    I want to begin by thanking you for your continued efforts 
to oversee and monitor the State-managed housing programs 
created in the aftermath of the hurricanes and also for 
inviting me to testify on the role of the CDBG program in 
disaster recovery.
    PolicyLink is a national research and action institute 
advancing economic and social equity. We have offices in 
Oakland, New York, New Orleans, and Los Angeles, and since 
2007, we have invested significant resources in monitoring the 
development, implementation, progress, and impact of 
Louisiana's housing recovery programs.
    Throughout our analysis, we have partnered with State 
agencies, such as the Louisiana Recovery Authority and the 
Louisiana Housing Finance Agency. We have also convened or 
supported the convening efforts of hundreds of nonprofits, 
faith-based and community-based groups to inform our analysis 
and also help craft recommendations.
    There is no objective measure for how fast such a massive 
recovery effort should move, but the challenges facing 
homeowners and renters who confront ever-changing program rules 
and who are left with insufficient resources to rebuild, 
coupled with the Catch-22 of ending temporary help before 
rental replacement units are available, continues to place a 
significant burden on impacted residents and communities that 
they are struggling to rebuild. So you will hear in the 
testimonies today, as well as read in the written testimonies, 
many figures and statistics, but we must remain aware of the 
real human impact of how these funds have been spent and what 
we can do to improve outcomes.
    In my testimony, I want to highlight the following ongoing 
concerns, particularly the insufficient allocation of CDBG 
resources towards activities that support the core mission of 
the program, which is to take care of the needs of the low 
income and the most vulnerable. We have done a good job in 
Louisiana of allocating the lion share of our resources towards 
housing recovery, but we have allocated much less to the 
recovery of affordable rental housing units. About 14 percent--
and I think our numbers are a little different from those 
presented on the two figures that are displayed. But about 14 
percent, according to my calculations, has been designated to 
repair or replace affordable rental units, including public and 
assisted housing and also supportive housing and homeless 
supports.
    The rental resources will only replace about two-fifths of 
the 82,000 rental units that were damaged or destroyed in 
Louisiana; and, furthermore, few, if any, of the CDBG resources 
have been targeted specifically at the needs of families who 
are forced to move out of the State after the storms and who 
seek to return home. While, as of April 2009, 43 percent of the 
Road Home applicants who closed were low to moderate income, 
and 53 percent of the disbursements went to those individuals, 
whether or not they were able to rebuild is a different matter. 
And this is related to some of the program policies that were 
put in place related to grants calculation formulas.
    There is also a need to focus on neighborhood level 
recovery by creating structural supports for nonprofit 
organizations. We have seen a concentration of blight in 
certain neighborhoods, and we are all well aware of problems 
that exist in areas such as the Lower 9th Ward and the 
connection between residents who face huge rebuilding gaps and 
are unable to repair, and the properties that were sold to the 
State (to the Louisiana Land Trust). The confluence of these 
factors really serves to concentrate blight in certain areas.
    We have worked with a mosaic of community organizations 
that have arisen or expanded in disaster-affected areas to help 
residents navigate the path to recovery. But until recently, we 
have not, really as a State, invested significant resources in 
that community infrastructure, that nonprofit infrastructure. 
And the lack of that substantial and sustained investment in 
community infrastructure from the outset of hurricane recovery 
has stifled the organic recovery process and community 
ingenuity. We have missed the opportunity to contribute to the 
creation of sustainable and resilient communities, communities 
that are able to initiate and invest in their own recovery and 
redevelopment.
    Community participation in the crafting of CDBG programs 
has also been another missed opportunity. Community 
participation can play a critical role in shaping policies and 
programs that address community needs.
    Since the State received funding for Hurricanes Gustav and 
Ike, they have required an extensive citizen input process for 
the local subgrantees, but for its State-level action plans, 
the State has been operating under an expedited citizen comment 
period, which does not provide the community a good opportunity 
to influence the crafting of programs, and this is another 
missed opportunity.
    I welcome your questions. I see I am over time. I have a 
little bit more to say, but we can----
    Senator Landrieu. We will cover that in the questions.
    Ms. Duval-Diop. Sure. Thank you.
    Senator Landrieu. Thank you very much. Ms. Ehrlich.

STATEMENT OF MELANIE EHRLICH, PH.D.,\1\ MEMBER OF THE LOUISIANA 
 RECOVERY AUTHORITY HOUSING TASK FORCE, AND FOUNDER, CITIZENS' 
                     ROAD HOME ACTION TEAM

    Ms. Ehrlich. Thank you. I am Melanie Ehrlich, and I am the 
founder of the grassroots organization, Citizens' Road Home 
Action Team. Thank you, Senator Landrieu, for giving me this 
opportunity to testify.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Ehrlich with attchments appears 
in the Appendix on page 47.
---------------------------------------------------------------------------
    I would like to start with the bottom line. First, there 
are very large numbers of South Louisiana hurricane victims 
hurting badly because of broken promises from the Road Home 
program. I have letters here--I deposited a copy with you, 
Senator Landrieu--that were sent just within the last few days 
to you and several other congressmen, urging for help about the 
Road Home program and the HUD investigation that I will mention 
later.
    These letters attest to the unconscionable unfairness that 
is widespread in grant processing, I am sorry to say. The 
considerable amount of remaining program funds should be spent, 
first and foremost, to fix Road Home's short-changing of 
applicants due to grant processing mistakes. This can only be 
done by serious reform of appeals. The second point of our 
bottom line is that our complaint to the HUD inspector 
general's office about these problems should no longer be 
delayed.
    Nonetheless, thank goodness that Congress funded the Road 
Home program for South Louisiana for the tens of thousands of 
fortunate applicants. However, for tens of thousands of unlucky 
applicants, this has been an ordeal for 2 or 3 years. Thousands 
of applicants have not received the promised help because this 
program often did not follow its own rules, withheld 
information about its rules, made the rules extraordinarily and 
unnecessarily complicated, and used ever-changing rules to 
downsize grants or to leave hurricane victims still waiting for 
grants.
    From interactions with more than 1,400 applicants and many 
meetings and E-mails with top Road Home officials, I saw that 
the underlying policies and implementation of the program put 
the needs of the contractor, ICF International, and the State 
above the desperate needs of the applicants.
    Louisiana's recovery and its people have suffered because 
of gross unfairness, especially, but not exclusively, for low 
to moderate-income applicants whom CDBG is supposed to help; a 
lack of transparency concerning the program's rules and 
regulations; double standards and inconsistent treatment; 
systematic--ignoring phone calls, faxes, certified letters from 
desperate applicants for many months or more than a year; an 
appeal system that often rubber-stamped the mistakes of the 
contractor apparently with no written standards; an obligatory 
pre-appeals process that was fraudulent and kept applicants out 
of appeals, often permanently; and refusal to give applicants 
important notices in writing and data from their file to 
understand their grant and any errors.
    Here are just two quotes from editors of the New Orleans 
Times-Picayune in October and December 2008.
    ``The Road Home program has messed over so many people in 
so many ways, over such a long period of time, that at this 
point, it takes a particularly egregious error to attract 
attention.''
    ``ICF International's incompetence was well established. 
There is public anger over its failures.''
    HUD should insist that Louisiana Recovery Authority (LRA) 
use the substantial amount of unallocated funds, first and 
foremost, to fix Road Home errors that are not due to the 
applicants' mistakes, and this can only be done by having a new 
fair appeals system to take care of these mistakes and 
applicants unfairly left in limbo.
    HUD should insist that applicants who made no intentional 
mistake not be asked to repay money resulting from program 
errors that were not obvious to the applicants. Our 39-page 
complaint to the HUD Office of the Inspector General should be 
put back on the fast track instead of being delayed for 6 
months or longer--when almost all the money will probably be 
spent. Our allegations of serious mismanagement, waste and 
abuse and evidence of contractor fraud should be evaluated 
fairly, notwithstanding HUD's involvement in oversight of the 
program and the addition of a former Road Home contractor to 
HUD's disaster recovery staff recently.
    I hope, Senator Landrieu, that you will read my summary of 
pleas from applicants, asking for justice and fairness. Thank 
you for your consideration, and we thank the American people 
for their generosity.
    Senator Landrieu. Thank you very much. Ms. Paup.

   STATEMENT OF KAREN PAUP,\1\ CO-DIRECTOR, TEXAS LOW INCOME 
                  HOUSING INFORMATION SERVICES

    Ms. Paup. Madam Chairman Landrieu and Members of the 
Subcommittee, thank you for the opportunity to testify today on 
the effectiveness of CDBG in meeting post-hurricane housing 
needs in Texas. I would like to express my appreciation to you 
and the members of your staff who are working to create a 
better future for long-term disaster recovery.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Paup with attachments appears in 
the Appendix on page 66.
---------------------------------------------------------------------------
    I am Karen Paup. I am co-director of the Texas Low Income 
Housing Information Service. We are a nonprofit organization 
that advocates affordable housing for low-income Texans. The 
two most serious problems with the administration of CDBG 
disaster recovery in Texas are the unconscionably slow pace of 
providing housing assistance and with the Hurricanes Ike and 
Dolly allocation, diversion of CDBG away from housing toward 
lower-priority infrastructure and economic development 
activities.
    Out of the 5,175 homes contracted to be rehabilitated or 
reconstructed with CDBG for Hurricane Rita, less than a 
thousand homes in Texas are complete or under construction. 
Much time was lost due to Texas' reliance in round one on 
Hurricane Rita funding of local government consortia, known as 
Councils of Government. The councils had little to no 
experience in carrying out housing programs resulting in 
painfully slow implementation.
    Due to this poor performance, the State housing agency 
undertook administration of round two funds. And as I explained 
in my written testimony, although this program has been slow to 
get up to speed, we believe that, ultimately, it will be 
successful.
    In our view, tragically, in its plan for the latest round 
of CDBG disaster assistance, the $1.3 billion for Hurricanes 
Ike and Dolly survivors, Texas has returned administration to 
the Councils of Government and individual local governments. We 
believe this will result in great delay of assistance to 
hundreds of thousands of families who need housing.
    Also a great concern to us is the local councils' strong 
tendency to maximize the use of disaster funds for 
infrastructure, as has been demonstrated by their decision to 
devote only about half of the funds for Hurricane Ike and Dolly 
survivors to housing. And of those funds, we expect little will 
go to help low-income renters, even though low-income renters 
were disproportionately displaced by Hurricane Ike. These 
decisions will leave many thousands of Texas hurricane 
survivors without any housing assistance.
    To summarize from my written testimony, we make several 
recommendations for improving the CDBG disaster program.
    First, we recommend a clear mandate by Congress that our 
Nation's first goal in disaster recovery is for survivors to 
quickly obtain a decent affordable home in a quality community.
    Second, we recommend coordination between FEMA and HUD. 
FEMA needs to compile accurate damage estimates with income 
data on survivors, along with their housing needs, so that 
Congress can appropriate the right amount of housing. And this 
goes to your question, Senator Landrieu, earlier about the 
funding for Texas. Part of that is due to the inaccurate 
estimates by FEMA of the needs in Texas. Once that funding is 
in place, FEMA and HUD need to work together so that low-income 
families have seamless case management as responsibility 
transfers from FEMA to HUD.
    Third, in place of this single CDBG program, we recommend 
Congress establish two disaster recovery block grants, one for 
housing and the other for other needs. The housing grant should 
prioritize serving the most vulnerable members of the low-
income population, that is the elderly, persons with 
disabilities, and single parents with children.
    Fourth, poorly housed and chronically impoverished families 
struck by disaster need a permanent, not just a temporary, 
housing solution. We believe that the housing block grant 
should make available to renters and homeowners, who choose to 
do so, to take a Section 8 voucher, and in some cases where it 
would be economically beneficial to them, to move to another 
community.
    Fifth, we ask Congress to ensure that HUD monitors and 
enforces fair housing laws in Federal disaster programs. And 
this goes back again to the idea that people need to be able to 
move to areas of greater economic opportunity if they choose to 
do so. We also recommend the establishment of a HUD disaster 
preparedness and recovery office charged with working with 
local and State governments for rapid carrying out of housing 
programs.
    In conclusion, the experience of low-income, Gulf Coast 
hurricane survivors illustrates the need for carefully crafted 
programs. Texas has struggled for almost 4 years to come up 
with the correct approach to post-disaster housing. After a 
false start, we feel that Texas has at last a potentially 
successful program in place for Hurricane Rita survivors. 
Unfortunately, the State's new plan for Hurricane Ike and Dolly 
survivors is based on a model that has already proven too slow 
and which directs funds away from critical individual housing 
recovery needs.
    We urge the Subcommittee to work quickly to enact reforms 
that ensure future rounds of disaster funding avoid these 
problems and delays. Thank you.
    Senator Landrieu. Thank you, Ms. Paup. Mr. Morse.

  STATEMENT OF REILLY MORSE,\1\ SENIOR ATTORNEY, MISSISSIPPI 
                       CENTER FOR JUSTICE

    Mr. Morse. Thank you for inviting the Mississippi Center 
for Justice to testify about our State's use of Community 
Development Block Grant funds for disaster housing recovery. 
Mississippi is capable of achieving impressive results in 
assisting homeowners when it chooses to do so. The State's 
Phase I program paid out over 18,000 grants to insured 
homeowners located outside the Federal flood plain who were 
damaged by Hurricane Katrina's large storm surge. Phase I 
covered almost all households in this category. It moved 
quickly, was more generous, about $74,000 in an average grant, 
and had a $150,000 cap.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Morse appears in the Appendix on 
page 82.
---------------------------------------------------------------------------
    The next homeowner grant program, known as Phase II, 
targeted lower-income residents and covered homeowners with or 
without insurance, inside or outside the Federal flood plain. 
It compensated 8,000 households, fewer than it should have, and 
paid less on average, about $47,000, and had a lower cap, only 
$100,000.
    Sadly, Mississippi's remaining housing programs continue a 
downward trend. Over 7,300 coastal homeowners whose dwellings 
were destroyed by Hurricane Katrina's Category 3 winds, some 
nearly blocks from the shore, were excluded by Mississippi's 
arbitrary choice to assist only homeowners damaged by flood 
waters. For this group, Mississippi gets a zero.
    Today, between 3,000 and 4,000 households face deadlines to 
leave FEMA trailers or Mississippi cottages. Several thousand 
others live in unrepaired homes and seek relief from charitable 
organizations. Mississippi offered no assistance to homeowners 
like Joe Stevens, a fisherman who lost his leg to diabetes, his 
daughter to suicide, and his house, eight miles north of the 
Mississippi Sound, to a tornado spun from Hurricane Katrina.
    Another is James Johnson, who retired just before the storm 
after 50 years at a local lumber company. Mr. Johnson saw the 
home he had built and lived in for almost 60 years destroyed by 
Hurricane Katrina's winds. But he is ineligible for a Federal 
home loan or grant because Mississippi tells wind-damaged 
homeowners you are on your own.
    If either of these men had lived in Louisiana, they would 
have been compensated under the Road Home program, or if they 
were major employers, like an electric utility, a State port, 
or a shipyard, Mississippi would reward them with grant funds. 
It would not matter if these businesses had not gotten enough 
insurance or if their loss was caused by wind. They would be 
generously compensated.
    Mississippi's housing programs wrongly deem folks like 
James Johnson as undeserving or irresponsible, but it is not 
irresponsible to be poor in a coastal region dominated by low-
wage service industry jobs, where 30 to 40 percent of the 
population earns too little to meet basic needs without Federal 
assistance, and where, thanks to a legacy of racial segregation 
and discrimination, African Americans have lower median incomes 
and homeownership rates and higher poverty rates than their 
white neighbors.
    It is certainly not irresponsible to be a renter if you 
cannot afford to buy a house, and landlords are not responsible 
for the barriers to reconstruction that have crippled the 
rental recovery. They needed, and their tenants deserved, a 
quicker and more robust response than 10 percent of the rental 
funds having been spent after 3 years in Mississippi.
    The disaster CDBG programs require the States to spend at 
least 50 percent of the funds to benefit lower-income persons 
who lack their own economic safety net. By the end of 2008, 
Mississippi had spent only about 21 percent out of $2.6 billion 
in CDBG funds on its low-income residents, while Louisiana 
easily met the 50 percent requirement.
    Mississippi chose to do less for its more vulnerable 
citizens, and U.S. Department of Housing and Urban Development 
has rubber-stamped this outcome with five waivers of the low-
income requirement. The State's ability to restore balance is 
crippled by its diversion of $600 million away from more 
pressing housing needs to finance a non-hurricane related 
massive expansion of a State-owned port.
    Now, the State has confidently predicted in its testimony 
that all segments of Hurricane Katrina-affected housing stock 
will be assisted by programs at current funding levels, but its 
own numbers in Governor Barbour's testimony show that about 
42,000 units will be restored. And as, Senator Landrieu, you 
noted, we had 61,000 destroyed, so there is a big gap.
    Mississippi's request for 5,000 additional Section 8 
vouchers is standing alone, an inadequate solution. More 
subsidized rentals must be built in the affected region to be 
matched with these vouchers and to meet other needs. And 
vouchers do not help Mr. Johnson, who at age 74 should not be 
uprooted from his family property and put into an apartment 
complex five counties away just because a landlord has a 
vacancy there.
    Mississippi should aim for as impressive results for lower-
income renters and wind-damaged homeowners as it has for those 
lucky enough to be first in line for Federal relief. With 
another hurricane season approaching, our State should 
immediately reallocate money to increase small rental, 
subsidized apartment construction, and, yes, help needy 
windstorm-damaged homeowners. This reallocation will create 
jobs and revitalize our tax base and our economy as readily as 
the economic development programs from which much of these 
housing funds were diverted. Thank you.
    Senator Landrieu. Thank you all very much. It has been 
really terrific testimony that you have provided. Before I get 
into my brief questions, I would like to ask each of you to add 
anything that you want to your testimony that perhaps you did 
not cover or raise an issue that someone else's comments 
spurred to your mind.
    I know that, Ms. Duval-Diop, you did not get to cover 
everything, so is there something you want to add before I go 
to my questions?
    Ms. Duval-Diop. Yes, thank you, Senator. I would like to 
talk a little bit more about the connection between policies 
that were developed and their impact. Particularly, the Road 
Home formula was crafted--was changed in August 2006. 
Previously, it would have allocated gap funding to cover 
damages up to $150,000. The change instead changed the formula 
to rely only on the pre-storm value of the house and cap gap 
funding for low income families to $50,000. And so that 
disfavored homes that were traditionally devalued; homes in 
low-income, African American communities, as well as more 
middle-class communities.
    So we have seen that because of this change, about 47 
percent of all applicants who chose to rebuild had a gap, a 
substantial gap. On average, State-wide, the gap is about 
$35,000, and it is much larger in some of those neighborhoods, 
such as New Orleans East and the Lower 9th Ward.
    The second example I would like to put forth is for the 
Small Rental Repair Program. Nonprofit entities knew from the 
very beginning that it would be very difficult for owners of 
small rental properties, who were affected by the storms, not 
only for their own homes, but also their rental properties, to 
garner credit to get loans to be able to rebuild their home if 
they did not have sufficient insurance because of the impact 
that the storms had on their credit ratings. But the program 
was set up in such a way that they had to go and get that 
financing. And we wasted a lot of time trying to get these 
small landlords to be able to take advantage of the program, 
which is, actually, targeted at creating a lot of affordable 
housing. It could really get us off the ground.
    So the State, 3\1/2\ years later, made the change to allow 
for upfront financing for these small landlords. If we had done 
that in the past, 2 or 3 years ago, we would not be in this 
situation. We would see a lot of affordable rental housing 
redeveloped through this program. So that is another example of 
the need to listen to the community voice and the wisdom of the 
community to be able to craft programs that specifically 
address the needs of those who are the most vulnerable.
    So I just wanted to highlight that. And, again, for the 
Road Home surplus, we are very anxious about what is going to 
be done with those funds, how much those funds are projected to 
be, and really making sure that they stay in the program to 
address the needs of folks who have had errors, through no 
fault of their own, who received lower grants than they were 
due. Those funds need to continue to be targeted at those 
individuals. Thank you.
    Senator Landrieu. Thank you. Doctor, anything you want to 
add?
    Ms. Ehrlich. Yes, two points. One from what Dr. Duval-Diop 
just said about low-income applicants to the Road Home program. 
One of the things that has just thrown so many of these low-
income applicants for a loop is changes in determination of 
eligibility for what is called the Additional Compensation 
Grant for those who had less than 80 percent of the area median 
income. Those rules changed midstream. And so many applicants 
who expected were told, yes, you are eligible. I will not go 
into the details, but if you want to ask me about them, I can 
tell you what I know. Those changes in the rules kicked so many 
people out of that program.
    Related to that is that the letters, the award letters for 
the standard grant that went out, so many people--we do not 
know the numbers, but there must be huge numbers from the 
feedback that we get from so many places. So many people who 
were told you will get a grant for a certain amount of money--
here it is on a gold piece of paper, yellow piece of paper. It 
is called the Gold Award Notice.
    So many of those people had their grants strongly downsized 
because of changes in rules, recalculations, that wasted 
contractor money, meaning wasting taxpayer money; for no good 
reason, reevaluation. And they show up at closing, and many of 
those people only found out at closing, you are getting $20,000 
less; or you are getting $30,000 less.
    The last point I want to make about appeals that I did not 
have a chance to say--and it is a very important point, that 
this should be the money that has not been spent yet, this is 
the main thing it should go to is, really, well-revamped 
appeals, which has been so flawed. It concerns so many of us 
that LRA recently, a few months ago, said that they would re-
open appeals because of acknowledging that there were many 
applicants who had problems with the pre-appeal process and 
never had a chance to appeal fairly. And then that procedure, 
which is written at the LRA website, that applicants who passed 
the deadline could still continue with an appeal or open up an 
appeal, that was withdrawn with no public notice and no 
explanation.
    This is very troubling because the most important thing to 
be done with the remaining money is to fix the grants for 
people who were short-changed unfairly. It has made a 
tremendous difference. So many people are facing foreclosure, 
cannot come back to our State, are in terrible duress because 
they have been short-changed. Thank you.
    Senator Landrieu. Well, we most certainly are going to ask 
that question of the Louisiana program representatives that are 
here.
    Ms. Paup, anything else that you have to add?
    Ms. Paup. The other witnesses have made a number of 
excellent points, and I echo their concerns with rental 
housing. It is an issue that has not been fully addressed in 
Texas. My organization is the client for a University of Texas 
graduate school class that is researching, particularly, 
Galveston's rental housing needs, and we will have more 
information over the summer on that. But nobody is moving 
forward with re-creating rental housing. And this situation of 
the rental housing stock is similar to what we have heard about 
from New Orleans. It is a lot of small--in Mississippi--
landlords, and there is not a way for them to recover.
    Senator Landrieu. Well, I think that is very important for 
people to really grasp the challenge here. And being this is my 
hometown, I know a little bit about the city of New Orleans. 
But if my memory serves me correctly, only about 40 percent of 
all the residents in the city were homeowners. We had one of 
the highest rental rates in the United States. I think 60 
percent of the residents were renters. But not renters in the 
traditional sense when you think of suburban America; where 
people are renting in larger apartment complexes. There are 
renters in doubles, where a family owns the home but only lives 
in one side and rents out the other side, or they live in a 
four-plex, where they own the building. They may live in one 
unit, but they rent out three.
    This is the way many older cities, I think, came to be, and 
I think along the Gulf Coast it was similar, where you get 
shotguns and shotgun doubles. We call them camel-back doubles.
    Actually, interestingly, my family, my father ended up 
becoming mayor and secretary of HUD, but our family became 
homeowners in that way, bought our own home when I was very 
young and could not afford to live in the whole house. So we 
lived in one side of it and rented out the other until my 
mother had her sixth child, and we could not fit in one half. 
And we had to knock the wall down to take the other part of the 
house. But I think that our family story is very similar to 
thousands and thousands and thousands.
    How did the Road Home program treat this kind of 
homeownership in the Road Home program? Was the funding 
directed for single-family detached homes? And if you had a 
home that you only lived in one portion of, how were you 
treated in the Road Home program?
    Now, I can ask this question to the LRA folks that are 
here, but does anyone want to comment or testify to that?
    Ms. Duval-Diop. It is my understanding that folks who are 
in that situation could have chosen to either benefit from the 
small rental repair program or from the homeowner program, but 
not both.
    Senator Landrieu. Even though you lived in one part of the 
house as a homeowner and rented the other, you could not apply 
to both programs.
    Is that your understanding?
    Ms. Duval-Diop. That is my understanding, but I am sure the 
LRA has a more specific response.
    Senator Landrieu. OK. Go ahead.
    Ms. Ehrlich. To address that, we have heard from homeowners 
in that situation who applied for the homeowner program. And 
they went through the program, and then they said, no, you 
should apply to the rental program. And they discontinued their 
homeowner application, and then the rental program said, no, 
you are not qualified for the rental program. Even people who 
lived in duplexes, it took the State a huge amount of time 
before they developed rules for duplexes. So people in anything 
other than the traditional, single-family home had an 
especially hard time with the Road Home program.
    Senator Landrieu. Thank you all. I do have questions, but 
in light of time, and because we want to give the second panel 
an adequate amount of time to address some of the issues 
raised, I would like to let you know that I will be submitting 
some questions to you for the record. The record will remain 
open. If you can be prompt in your response, and we will follow 
up that way. But thank you very much for your testimony today.
    Ms. Duval-Diop. Thank you.
    Senator Landrieu. We are going to wait for Governor 
Barbour, who I understand is on his way. We will take a 5-
minute recess while we get some of these other things set up, 
and I will return in a moment.
    [Recess.]
    Senator Landrieu. If the second panel will take their 
seats?
    Thank you all for joining us this afternoon. We are honored 
to have a distinguished panel for the response and explanation.
    Let me just briefly introduce our panel, and then we have 
Senator Roger Wicker, who is here, to give a special 
introduction to the Governor of Mississippi. The panel will 
begin with comments from Governor Barbour, who will be 
introduced in just a moment. We will then turn to Paul 
Rainwater, who is the Executive Director of the Louisiana 
Recovery Authority. In his role, he serves as the governor's 
authorized representative to FEMA and the State's chief 
hurricane recovery advisor, providing direction and daily 
oversight of Louisiana's recovery from Hurricanes Katrina, 
Rita, Gustav, and Ike. Mr. Rainwater is very familiar to this 
Senator, having worked for our office for a while, and has done 
outstanding work with the Louisiana National Guard. He is a 
very good leader for this effort, so we are happy to have him.
    Charlie Stone is the Executive Director of the Office of 
Rural Community Affairs for the State of Texas. Mr. Stone has 
been with this office since 2002 and has assisted in the 
response to Hurricanes Rita and Ike. We thank you, Mr. Stone.
    Finally, we will hear from Fred Tombar, III, our witness 
from HUD, who will be speaking about HUD's view of this current 
situation, hopefully what they are doing to assist in improving 
this situation, and we are looking forward to that testimony.
    But let me turn it to Senator Wicker to introduce Governor 
Barbour. And then before you speak, Governor Barbour, I am 
going to ask our Ranking Member, who has joined us, if he has 
any comments before the panel begins.
    But go ahead, Senator Wicker, because I know----
    Senator Wicker. Well, I will be happy to defer to Senator 
Graham.
    Senator Landrieu. OK. Go right ahead.

              OPENING STATEMENT OF SENATOR GRAHAM

    Senator Graham. I am ranking member, like most people, on 
three or four committees, and they are all meeting at 2:30. We 
have the Military Personnel Subcommittee. I am going to have to 
leave. But I did want to come and just tell the governor of 
Mississippi you have done a heck of a job. We are really proud 
of you. I think you have been a model of what leadership is 
about under tough circumstances. And to everyone else on the 
panel, you provide a lot of expertise.
    To our Chairman, Madam Chairman, you have really informed 
the Congress in a very important way. You have relevant 
hearings. I have learned a lot, and I look forward to working 
with you. The Community Development Block Grant Program, if we 
can make it better, if we need to replace it, let me know. But 
the more flexibility to the people in harm's way, the better, 
as far as I am concerned. And I just wanted to acknowledge 
Governor Barbour for the service you have provided the people 
of Mississippi and really the country at large, and look 
forward to helping you.
    Thank you, Madam Chairman, for having this hearing. I will 
leave in a minute, but glad to be with you.
    Senator Landrieu. Well, thank you. And I know everybody's 
schedules are particularly busy this week.
    Senator Wicker.

  STATEMENT OF HON. ROGER F. WICKER, A U.S. SENATOR FROM THE 
                      STATE OF MISSISSIPPI

    Senator Wicker. Thank you, Madam Chairman. I am certainly 
delighted to be here today with Governor Haley Barbour. Let me 
say, Senator Thad Cochran would like to have been here also, 
but he is handling the Supplemental Bill on the floor. So I am 
standing in place of the senior Senator.
    I appreciate Governor Barbour's service and leadership to 
the State of Mississippi and to the Nation. There is a great 
deal of insight that can be learned from Governor Haley 
Barbour's exemplary leadership during Hurricane Katrina, and I 
hope the Subcommittee will find his testimony useful in moving 
forward to determine the role of the Community Development 
Block Grant Program in disaster recovery.
    I want to commend the Chairman and the Subcommittee for 
having testimony from various viewpoints, and I am glad that 
another fellow Mississippian is here today. My schedule 
prevented me from hearing Reilly Morse's testimony, but I was 
able to review his prepared statement.
    Every Mississippian remembers where they were and what they 
were doing on August 29, 2005. Hurricane Katrina came ashore as 
the worst natural disaster ever to hit North America, not just 
Mississippi, but the entire continent. Its 30-foot storm surge 
and winds of over 125 miles per hour changed the entire Gulf 
Coast forever. And in spite of the enormous challenges 
Hurricane Katrina placed on Mississippi, it gave us an 
opportunity to prove to the rest of the country the strength, 
perseverance, and pride of the people of our State.
    After the storm hit, as a member of the House 
Appropriations Committee at the time, I worked closely with 
other members of the Mississippi congressional delegation, 
Senator Cochran and Governor Barbour, to craft a disaster 
recovery bill that adequately met the needs of all States 
impacted by the storm.
    As we worked to draft a bill, it became evident that the 
disaster recovery funds needed to be flexible so that States 
could identify and respond to their most pressing needs. 
Immediately after the storm, Mississippi faced the challenge of 
rebuilding communities from the ground up. When you are faced 
with that challenge, the priorities quickly change and the 
recovery process constantly evolves.
    The congressional intent of the CDBG for Hurricane Katrina-
related recovery is clear. It was designed to allow State 
leaders, such as Governor Barbour, to work with mayors, county 
supervisors, and other State officials in coordination with HUD 
administrators to allow flexibility in the rebuilding process. 
State and local leaders understand the rebuilding needs more 
than a bureau official in Washington, DC, and I believe this is 
a key reason why the CDBG program has been effective in 
Mississippi.
    In the first wave of CDBG funds for Hurricane Katrina-
related recovery, the HUD secretary is specifically authorized 
to issue waivers from previously enacted CDBG regulations to 
allow the use of such funds for ``the necessary expenses 
related to disaster relief, long-term recovery and restoration 
of infrastructure'' directly related to the consequences of 
Hurricane Katrina. In general, the Emergency Supplemental Act 
states that at least 50 percent of the funds must primarily 
benefit homeowners with low to moderate incomes. Indeed, as 
Governor Barbour will testify, to date, Mississippi has used 
over 70 percent of its CDBG funds on housing-related projects.
    Recently, there has been some discussion about the State of 
Mississippi's use of CDBG funds for the rebuilding of the Port 
of Gulfport. It is indeed clear that the use of CDBG funds to 
rebuild the Port of Gulfport is consistent with the intent of 
the law, since the project is a necessary expenditure resulting 
from Hurricane Katrina and is needed to restore infrastructure 
in addition to addressing the long-term recovery needs of 
Mississippi.
    Chairman Landrieu, I want to commend you for having this 
hearing today on the role of the CDBG program in disaster 
recovery. Although the program was not initially envisioned as 
a disaster recovery program, it has turned out to be the best 
mechanism to move Federal dollars to the State in circumstances 
such as Hurricane Katrina.
    The program is certainly not without its problems and 
flaws. As you will hear today, some of the waivers are 
problematic and the use of CDBG funds for disaster recovery 
purposes is far from perfect. That is why I am glad the 
Subcommittee is holding this hearing today. I want to commend 
the Chairman for your Subcommittee's work and commitment to 
improving disaster recovery and response. Much has been 
accomplished, but we still have more work to do. As the 
Chairman well knows, the media coverage may have diminished, 
but Hurricane Katrina is far from over. Thank you very much.
    Senator Landrieu. Thank you very much. I appreciate it.
    Governor Barbour, why don't you go ahead and begin. I 
appreciate if you contain your comments to about 5 minutes, and 
then we will have lots of opportunities for questions and 
comments.

 STATEMENT OF THE HON. HALEY BARBOUR,\1\ GOVERNOR OF THE STATE 
                         OF MISSISSIPPI

    Governor Barbour. Thank you, Madam Chairman. And to the 
Ranking Member, thank you for allowing me to be here today. 
Senator Wicker, I am grateful for your very generous 
introduction.
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    \1\ The prepared statement of Governor Barbour with attachments 
appears in the Appendix on page 101.
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    When Hurricane Katrina hit almost 4 years ago, it 
obliterated everything in its path in Mississippi. It is like 
the hand of God had wiped away the coast. And it was clear that 
in this utter destruction that this is not a standard disaster, 
and the standard disaster laws were not going to cover it. The 
Stafford Act was not designed for mega disasters.
    On November 1, 2005, Mississippi submitted its recovery 
plan to the Administration, to the Congress, to our 
legislature, and to the public in Mississippi. And, Madam 
Chairman, I believe you have a copy of that plan.
    We thought at the beginning we would be asking for help 
from different Federal agencies. We were not smart enough in 
our Mississippi government to realize that Chairman Cochran and 
Chairman Landrieu and some others would realize that this CDBG 
program would give much more flexibility. So instead of asking 
DOT to fund our poor and asking this agency and that agency, 
you gave us $5.481 billion of CDBG money with maximum 
flexibility. And hundreds of times since then, I have praised 
Congress for allowing us the latitude to set Mississippi's 
priorities rather than to have to do what were Washington's 
priorities. And that could never had happened without the CDBG 
program.
    Senator Wicker has mentioned one of the very important 
things about this is we were focused on a comprehensive 
recovery and that Congress recognized to do so. HUD had to be 
required to waive. There is language in the bill, the law, that 
says the secretary ``shall'' waive various things, and that 
allows us to go forward with a comprehensive recovery.
    We formed a governor's commission on recovery, rebuilding 
and renewal, and much of our program stems from what that 
commission said that they thought we should do. We are about 
rebuilding communities as a whole, infrastructure, economy, 
and, yes, housing. Housing has been and remains our top 
priority.
    I realize that different people can cut the numbers up 
different ways. Our view is that 71 percent of our CDBG money 
has either gone directly or indirectly to housing. I think the 
couple of difference is we have two major indirect programs, 
two major programs that benefit housing indirectly. One is our 
regional wastewater and water to allow people to move away from 
the coast. We had to spend an enormous amount of money to put 
in water or sewer because we just could not have thousands of 
new homes with septic tanks. All that water flows in the same 
direction. It goes south toward the Gulf. So we had to have 
regional water, wastewater, sewage treatment, in order to allow 
people to move inland.
    Second, we have a repair mitigation program that saved 
homeowners and others about $440 million because our utility 
rates would have gone up 35 percent had we not been able to 
treat our investor-owned utilities the same as the co-ops. So 
we have a little bit different figures there just based on 
different categorization.
    We have recently completed a housing study. We have put a 
tremendous amount of money into housing that is in here, into 
our homeowner grant program, which was our beginning program. 
But we have learned in the last several months that the biggest 
issue for housing on the Mississippi Gulf Coast today is not 
lack of housing units. We have about 4,000 houses for sale in 
the bottom six counties of Mississippi, and we have hundreds 
and hundreds of empty apartment units. The problem is, the 
people that are left in FEMA housing and in Mississippi 
cottages cannot afford to pay market rent. They are people who 
much have deep subsidy HUD vouchers. They were living, many of 
them before the storm, in 80-year-old houses that had no 
mortgage, no insurance, and they were paying $100 to $200 a 
month. You cannot build to the building code, and insure it, 
and have any housing like that today.
    One of our big requests before the Congress today is for us 
to receive 5,000 vouchers, deep subsidy vouchers. Louisiana was 
ahead of us on this last year, but we waited, frankly, until 
the order came for people to evacuate the FEMA housing because 
now we have more than 4,000 families that are going to have to 
find a place to stay.
    The flexibility of the CDBG money is enormous to us. We 
designed the program coming in and asked Congress to allow us 
to go forward with it. And as you can see, Madam Chairman, 
virtually everything we have done in Mississippi was in the 
November 1 plan, whether it was the port, whether it was 
regional wastewater, whether it was homeowner grant program, or 
low-cost rental housing. And the CDBG program has made that 
possible.
    Let me just make one point. The deeper we have gone into 
the recovery after the storm, the less HUD has been willing to 
waive the CDBG rules. We had five major waivers early on. Three 
of them were not renewed after their 2-year period. Now, the 
good news is that HUD said they were not renewing them because 
we did not need them; that is that we did not need the low-mod 
waiver again because they were comfortable that we were serving 
low to moderate income at a level where that was not needed.
    I will close, ma'am, by saying this. In addition to the 
5,000 housing deep subsidy vouchers, with which we have talked 
to the Administration and they have been very positive about 
recognizing the need, we also--just as you had to get the 
levees rebuilt in and around New Orleans, we need to get the 
barrier islands rebuilt. The Corps of Engineers was ordered to 
conduct a study in the December 2005 fist emergency supplement 
for Hurricanes Katrina and Rita, and that study is now done. 
And we have very patiently waited and said we are not going to 
ask for the money until the Corps has done the study.
    Well, the study is done now, and we particularly need the 
part of that study funded that rebuilds the barrier islands. 
They are the speed bumps that knock down hurricanes. You have 
levees to protect you. We have beach facing the ocean. But 
those speed bumps matter. Remember, Hurricane Katrina, before 
it crossed the mouth of the river and came up the edge of 
Louisiana and hit the Chandeleurs, was at one point a Category 
5 hurricane. It hit Mississippi as a Category 3 hurricane. 
Unprecedented storm surge, but the wind was down 155 miles an 
hour.
    The other thing that we need, we have talked about to this 
Subcommittee before, is for FEMA to allow us to use some of our 
hazard mitigation money for survivable and interoperable 
communications. But that is not CDBG money, ma'am, so I will 
not bore you with that subject.
    Senator Landrieu. Thank you, Governor. I appreciate it. Mr. 
Rainwater.

 STATEMENT OF PAUL RAINWATER,\1\ EXECUTIVE DIRECTOR, LOUISIANA 
                       RECOVERY AUTHORITY

    Mr. Rainwater. Thank you, Madam Chairman. It is very good 
to see you. Senator Graham and Senator Wicker, thank you. And, 
Senator Landrieu, thank you so much for the support that you 
have given the State of Louisiana, as we will recover now from 
four storms, Hurricanes Katrina, Rita, Ike, and Gustav.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Rainwater with an attachment 
appears in the Appendix on page 120.
---------------------------------------------------------------------------
    You mentioned the numbers earlier, and I will not go 
through them again, but 240,000 homes destroyed; 82,000 
apartment units, small rental, mom and pop renter units 
destroyed. Right now, 4 years after the storm, we have 2,700 
people in Louisiana who are still living in FEMA trailers, and 
26,000 people are still living in the Disaster Housing 
Assistance Program, a transitional closeout program, which, by 
the way, thank you for your support in getting that extended. 
And we also thank Secretary Donovan for all the hard work. He 
heard very quickly what was happening with the Disaster Housing 
Assistance Program and helped us in Louisiana, and we are 
transferring people right now.
    But in the aftermath of Hurricanes Katrina and Rita, 
obviously, we have received $13.6 billion in Community 
Development Block Grant money for disaster recovery. We broke 
that up into three different main programs. One was our Road 
Home program. Two was I think some housing programs, which was 
Road Home, Small Rental, and what we call a piggyback program, 
which was taking low-income housing tax credits and taking 
Community Development Block Grant money and laying that over 
the top.
    Then, last but not least was our economic development 
program, which our State carved out a small pool of about 
several hundred million dollars to help with grant loan 
programs, technical assistance, workforce development. But the 
business need, as you know, dwarf the funding. More than half 
of the businesses in New Orleans had been affected by this 
storm in some form or fashion, either the actual facility 
damaged or, obviously, folks were closed down for months and 
months. We never got the money we needed for economic 
development, but our first priority in Louisiana was 
recovering--basically, our cornerstone to recover was the Road 
Home program, which has been mentioned here today.
    To date, we have closed 124,000 grants in the Road Home 
program. Since the beginning of January 2008, we dispersed more 
than $2.2 billion to 28,400 applicants; $822 million of that 
was a very creative elevation grant program that we started. 
And I will tell you that we revamped the appeals process. You 
hear it quite a bit, but in the old program there was what was 
called a dispute resolution program. We got rid of that. We set 
up a two-tier appeals process, one at the contractor level and 
then another one reviewed by the State itself. It is taking 60 
to 90 days to run through that appeals process. We manage it 
everyday.
    We also went out and did more than 20 outreach sessions to 
the poorest of the poor, elderly. I took entire staffs out, 
over a hundred staff people, to 20 different locations around 
this State, many of those in New Orleans and St. Bernard, 
attorneys, policy folks, and just sat down and worked through 
Road Home issues.
    Now, is it a perfect program? No, it is not. And I did not 
write the rules. I thought it was cumbersome. There have been 
many conversations about what has been the best way to do it; 
should it have been a rehab program or a compensation program? 
And we ran a compensation program. A rehab program might have 
taken a little bit longer, but people would have had been paid 
out what they were owed.
    What we did is we just filled a gap. That is what those 
dollars were meant for. And I think in many ways, there was an 
over-expectation about what Road Home could or could not do. 
But nonetheless--very quickly, in our small rental program, 
last year, when we took over this program, there were only 
about five closings that have occurred or five units that had 
opened in the small rental. We are up to 1,400 now, and we are 
getting ready to adjust the program to advance payments to 
those mom and pop renters who want to get back into the academy 
in New Orleans and live that American dream. And so that is 
what we are focused on.
    Our piggyback program which pares the CDBG money, what goes 
on in low-income housing tax credits, which, by the way, two of 
the big four are using piggyback programs, we have worked very 
closely with HUD on that. We have created more than 7,548 
rental units State-wide, 2,364 of those in the city of New 
Orleans. We have another 5,230 units that we feel are going to 
open at the end of this year.
    So there are some success stories. Is it a perfect program? 
No, it is not. But we have transitioned the Road Home program, 
and all our three programs, to a new contractor. We have broken 
that contract up into three different pieces. And I will tell 
you, that there were over 19 performance measures in the three 
contracts that require very tough measurements on behalf of the 
companies, and performance standards at the beginning so that 
everyone knows what is expected at the beginning of their 
contract.
    Thank you, Madam Chairman.
    Senator Landrieu. Thank you very much. Mr. Stone.

STATEMENT OF CHARLES S. (CHARLIE) STONE,\1\ EXECUTIVE DIRECTOR, 
       STATE OF TEXAS, OFFICE OF RURAL COMMUNITY AFFAIRS

    Mr. Stone. Madam Chairman, my name is Charlie Stone. I am 
the Executive Director with the Office of Rural Community 
Affairs. And for clarification, I just want to say that my 
agency is responsible for the non-housing disaster recovery 
activities. In the State of Texas, we have two sister agencies 
that respond to disasters designated by the governor of the 
State. We have the Texas Department of Housing Community 
Affairs that handles the housing disaster recovery, and we do 
the non-housing.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Stone with attachments appears in 
the Appendix on page 130.
---------------------------------------------------------------------------
    I want to get straight to the point since we are limited in 
time. I do not want to read the testimony, but you raised a 
very important point in your remarks earlier today, and I think 
it has already been addressed by several people. The question 
was, is CDBG the right program for disaster recovery and 
response? And I will agree with every testimony that we have 
heard so far. We do believe CDBG is the correct program. We 
know it is the most flexible, and we have had great success 
with it, although it is not a perfect program.
    So I want to talk about some things that we could do at the 
Federal level to make changes to the program in order to make 
the CDBG program one that would be more effective and more 
responsive, and keeping in mind who we really serve. We serve 
the people who have been most devastated, the cities and the 
counties who have been devastated by disasters.
    I have a Texas-sized chart to my left.\2\ We had to bring 
one in.
---------------------------------------------------------------------------
    \2\ The chart referred to appears in the Appendix on page 137.
---------------------------------------------------------------------------
    Senator Landrieu. I was noticing that. Everything is bigger 
in Texas.
    Mr. Stone. Well, we wanted to prove that is still true, so 
we brought this chart. This top time line that you see on the 
chart--Madam Chairman, you also have that in your handout. It 
is on three pages, but it is on this chart. This is a living 
time chart for our response to Hurricane Rita and that time 
line, in all honesty, is just too long. What you are looking at 
represents all the nuances that we have to go through to get 
CDBG funds out the door, and that is in effect for all 50 
States.
    Basically, just to give you an overview of that, it took us 
about 360 days to complete all of our Davis-Bacon Act 
requirements in order to get contracts out and operational. It 
took us 486 days to complete all of the environmental review 
contracts and get those done; 685 days, after Hurricane Rita 
struck Texas was when our first expenditure of non-housing CDBG 
dollars actually took place; 1,194 days, we had 88 percent of 
the funds distributed.
    If you look below, we have another chart.\1\ Actually, now 
the time line goes to May, and we did not have time to put that 
on there, but we are at 95.6 percent expended for non-housing 
funds in the State of Texas. That is 3 years and 7 months after 
Hurricane Rita hit the Texas coast, and that is entirely too 
long.
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 138.
---------------------------------------------------------------------------
    So the question then is, what is with the lower chart or 
how do we get to the lower chart? Well, that lower chart 
represents what we think we could do with CDBG dollars for non-
housing issues and recovery if we incorporated some of the 
changes that I have recommended to you in my testimony.
    These changes are not things that we came up in a vacuum in 
the State of Texas. I serve on the board of the Council of 
State Community Development Agencies (COSCDA) which is a 
nationwide organization made up of all 50 States. Under 
COSCDA's leadership, we brought eight States together, 
including your State, using their CDBG staff who reviewed these 
proposals with us, including Mississippi, Alabama, Florida, 
Ohio, Wisconsin and California. We came up with a proposal, 
which we have as part of this testimony, that we believe we 
could have done on this second chart, which means that 12 
months before Hurricane Ike hit the Texas coast, we would have 
been completely finished with disaster recovery on non-housing 
issues in Texas. Believe me, that would have been a dream come 
true if we could have done that.
    What we are proposing are changes to Title I of the Housing 
and Community Development Act of 1974 as amended.\1\ In the 
handout that I gave you, I am not going to read it all because 
my time is rapidly going away, but I will say that two primary 
things that need to be done is that we need to look at CDBG 
from the standpoint if it is used to handle a mega disaster, 
then changes need to be made to the statute.
---------------------------------------------------------------------------
    \1\ The copy of the bill submitted by Mr. Stone appears in the 
Appendix on page 146.
---------------------------------------------------------------------------
    Basically, we are asking for two primary key things that 
need to be done. One is to waive--for disasters over a billion 
dollars, Davis-Bacon requirements for just 12 months. Not 
eliminate them. We know that is a good law and it needs to be 
in place for the regular CDBG program, but when we have a mega 
disaster, we do not need to be weighted down with Davis-Bacon 
acts. We need to put people's lives back together.
    The other thing that is most important is that the 
environmental review takes too long. We feel in the State of 
Texas, and all of these other States too, that disasters need 
to be exempt from environmental review, when it is necessary, 
to control risk or recover from the effects of disasters or 
imminent threats to public safety. We are just asking for a 12-
month window to get these program funds out quickly as 
possible.
    All of the other recommendations that are in here, a lot of 
these are codifications. I will not go through those but I can 
answer questions later on other things that need to be changed. 
We have made some good recommendations, Madam Chairman, and I 
will be happy to answer your questions.
    Senator Landrieu. Thank you, Mr. Stone. I am very happy to 
hear that this proposal is going to come forward by you and 
several other States that have been involved in trying to help 
come up with a better more expedited approach. I am looking 
forward to learning more about that. Thank you.
    Mr. Tombar.

STATEMENT OF FREDERICK TOMBAR,\1\ SENIOR ADVISOR, OFFICE OF THE 
 SECRETARY FOR DISASTER AND RECOVERY PROGRAMS, U.S. DEPARTMENT 
                OF HOUSING AND URBAN DEVELOPMENT

    Mr. Tombar. Thank you, Chairman Landrieu, for hearing my 
testimony today. I am Fred Tombar, and I am a Senior Advisor to 
Secretary Shaun Donovan at HUD. It is my honor to join you 
today to discuss the administration of the Community 
Development Block Grant (CDBG) funds for disaster recovery 
following Hurricanes Katrina, Rita, Gustav, and Ike.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Tombar appears in the Appendix on 
page 140.
---------------------------------------------------------------------------
    On behalf of Secretary Donovan, I want to express HUD's 
commitment to seeing the Gulf Coast recovery through. That 
commitment began with our efforts to ensure that disaster 
survivors receiving assistance through DHAP were able to make a 
smooth transition off of that program. We worked with your 
staff, Madam Chairman, and FEMA, to provide additional 
assistance to families through August 31, 2008. Also, on March 
5, 2009, Secretary Donovan joined you and Secretary Napolitano 
on a trip to the Gulf Coast to see firsthand the state of the 
recovery. I want to tell you that President Obama and Secretary 
Donovan are both committed to helping the Gulf Coast fully 
recovery.
    Since 1993, CDBG funds have been a tool for disaster 
recovery activities in States and communities. Once an 
appropriation has been made, HUD responds quickly to allocate 
the funds. As you pointed out, Chairman Landrieu, there have 
been three supplemental appropriations of CDBG funds to the 
Gulf Coast since Hurricane Katrina made its landfall on August 
29, 2005. The first appropriation was $11.5 billion. The next 
in June 2006 was $5.2 billion. And the final was $3 billion, 
specifically to close gaps on the Road Home homeowners 
assistance program.
    I am pleased to report that, to date, a total of $19.673 
billion in CDBG funds has been appropriated for the five Gulf 
States to fund housing programs, totaling over $15.4 billion or 
73 percent. To date, the States have expended $12.2 billion in 
CDBG recovery activities. Over $11 billion has been dispersed 
for housing assistance activities. That is nearly 89 percent of 
all funds expended towards housing activities.
    The first two CDBG supplemental appropriations were clear 
in their intent and conferred flexibility on the States. As 
Governor Barbour pointed out, the first CDBG supplemental 
stated that HUD must waive all regulations and statutes that 
would hinder implementation of States' plans. Only four areas 
were exempt from that mandate, though: Fair housing, 
environmental review, civil rights, and labor standards.
    The second supplemental bill modified the direction on 
waivers to States that HUD may approve waivers. As Congress 
intended, the eligible States have substantial flexibility in 
designing their programs, establishing funding levels, and 
carrying out activities to achieve their goals. This approach 
has allowed each State to tailor its recovery programs to best 
address the needs of its citizens. HUD's primary role has been 
to provide technical assistance and to monitor the use of those 
funds.
    The Secretary of HUD has pledged to work with States on a 
case-by-case basis to waive rules when possible. HUD is also 
working with the Administration to analyze disaster response 
recovery tools, nationwide, to identify needs for improvement.
    With respect to Hurricanes Gustav and Ike, these storms 
delivered a second blow to areas that had been struck by 
Hurricanes Katrina and Rita. Congress appropriated an 
additional $6.5 billion in CDBG disaster recovery funding in 
September 2008. Of this amount, as you noted, $2.145 billion 
has been allocated to 14 States with the largest going to 
Texas, Louisiana, and Iowa. Secretary Donovan intends to 
allocate the remaining funds that you asked about in the very 
near future, once we complete our allocation review process.
    HUD's goal was to quickly get the money to the States so 
that they could begin using the funds for their recovery 
efforts while retaining our financial oversight role. Following 
an appropriation of CDBG funds for disaster recovery, HUD 
publishes a notice in the Federal Register that contains the 
allocation of funds and program requirements, including waivers 
requested by the States and alternative requirements. 
Subsequent notices are published as HUD grants additional 
waiver requests from States. Unless there has been a 
significant policy or legal issue, HUD has reviewed and 
responded to those additional waiver requests very quickly.
    While not everyone agrees with every program choice that a 
State makes, HUD has found overall compliance with program and 
financial rules to be very good. A continuous improvement 
process regularly evaluates obstacles and seeks both short and 
long-term solutions. In addition, fraud and abuse has been 
minimized thanks to the collective diligence of Federal, State, 
and local officials.
    As I said in the beginning of my testimony, and others on 
this panel have attested, CDBG recovery funds have been 
critical as a tool for assisting States and communities. CDBG 
has an advantage of providing flexible funding with State and 
local decisionmaking and responsibility. The challenges are 
that the disaster recovery activities can be complex, require 
tough local decisions, and may require grantees to acquire 
additional capacity to carry them out.
    Thank you for the opportunity to appear before this 
Subcommittee. This completes my testimony, and I look forward 
to your questions.
    Senator Landrieu. Thank you very much. And I really 
appreciate you keeping what could literally be hours of 
testimony to 5 minutes. I will continue to have as many 
hearings as it takes until we get this correct.
    I think we all can agree that a lot of progress has been 
made, and that while the Community Development Block Grant 
Program is the most flexible available, I think that I heard 
all of you say that you would suggest some changes to the 
program.
    Is that a correct interpretation of what I have heard? Does 
anyone disagree with that?
    So what I am hearing is that while it may be the most 
flexible program, it could be changed or modified to be even 
more effective. That is what I hope the outcome of this hearing 
will be, to try to find some specific suggestions along those 
line.
    Mr. Stone, and let me clarify for the record, we asked the 
governors of the States to testify. Each governor made the 
decision. You were recommended by Governor Perry. I did not 
know that you were not the housing person, so I am sorry. But 
you are the CDBG person, and your testimony is still going to 
be very well received, and hopefully we will have an 
opportunity for the housing person from Texas to testify.
    Let me, though, ask this of HUD, perhaps. And I am on the 
Appropriations Committee, as you know. I do not know and cannot 
quite put my hands on the formula that is in place under the 
law that would drive the initial allocation to States after a 
disaster. As you may remember, it seemed that those decisions 
were not necessarily driven by formulas at the time.
    So one of my questions to you, Mr. Tombar, and perhaps, 
Governor Barbour, would be how would you recommend the Federal 
Government distribute Community Development Block Grant funding 
in the aftermath of a disaster? Should it be based on the 
number of housing units lost, single family homes, the number 
of total units lost, or should it be based on the number of 
houses lost plus the number of businesses lost?
    Should it be based on the number of people displaced? 
Because part of my struggle is going back to the beginning of 
this, how those funds were initially distributed. And I am not 
sure that we have come to any consensus about that yet. And it 
is something that HUD is going to have to quickly come to a 
consensus about in the event that we are faced with another 
catastrophic disaster, hopefully not, in this hurricane season.
    So I am going to just throw this question out for your 
comments. I have a document here that I am going to submit for 
the record.\1\
---------------------------------------------------------------------------
    \1\ The information of Senator Landrieu appears in the Appendix on 
page 146.
---------------------------------------------------------------------------
    Senator Landrieu. We went through, after Hurricanes Katrina 
and Rita, and estimated--and this is all from FEMA 
information--number of lives lost; number of people displaced; 
number of homes destroyed as between Louisiana, Mississippi and 
Texas; number of hospitals destroyed; number of schools 
destroyed; number of flood insurance claims; number of SBA loan 
applications; total insured losses; total uninsured losses; and 
total number of jobs lost.
    So my first question would be, given that there is no real 
formula for distribution under the disaster Community 
Development Block Grant--now, under the regular Community 
Development Block Grant Program, there is a pretty tight 
formula. I think that formula is based on population and some 
weight for need or income. If I am correct, there is some 
rigorous formula applied that directs how much money goes to 
each State and each city under the regular program?
    Mr. Tombar. Yes, ma'am.
    Senator Landrieu. But under the disaster program, is there 
such a formula?
    Mr. Tombar. No, there is not. And part of the reason is 
because disasters vary so greatly. And the last appropriation, 
the one that you mentioned, covered floods in Iowa and Indiana 
as well as hurricanes that devastated Louisiana and Texas, and 
ice storms that hit other States. So the type of damage caused 
by disaster, a federally declared disaster, varies. And, 
therefore, the type of assistance that may be needed and how we 
go about calculating equitably how that assistance is 
distributed varies.
    Senator Landrieu. And I can appreciate that disasters are 
very different in terms of their scope and nature, in terms of 
hurricanes versus tornados, versus ice storms, versus 
earthquakes. But you are not testifying that you do not think 
that there is an equitable way to distribute the funding. You 
are testifying that we do not yet have such an equitable way. 
Is that correct?
    Mr. Tombar. Well, what happens is--and this past allocation 
is indicative of it--the Congress has given the Secretary 
direction as to what types of things it would like the 
Secretary to prioritize when making the distribution. And so, 
if I remember correctly, in this last 2008 allocation, 
appropriation, it was for economic impact for housing loss and 
for business, I think loss of business, some impact on 
business. Those are factors that are taken into consideration.
    Part of the reason--you mentioned that we have been a 
little deliberate in getting out the balance of the 2008 
allocation. Quite frankly, part of the reason is because 
Secretary Donovan is taking seriously this question, this very 
question that you are asking. And that is, how best to allocate 
the money looking at the range of things that happen in a 
disaster, the range of the disasters that happens. But most 
importantly, how do we go about doing activities that would, in 
fact, prepare States and communities for the next disaster. 
Because what our experience has shown is that those States that 
are likely to get disaster funding are likely to get hit by a 
disaster again, we are here talking about Hurricanes Ike, 
Gustav, Katrina, and Rita. And as I pointed out in my 
testimony, Hurricanes Ike and Gustav sent a second blow to some 
of those same communities that were hit by Hurricanes Katrina 
and Rita.
    So preparing those communities for the next disaster is one 
of the things that the Secretary is looking to do with CDBG 
funding.
    Senator Landrieu. Governor Barbour, let me ask you if you 
have any recommendations as to how Congress might--in a 
catastrophe like Hurricanes Katrina or Rita, that hit multiple 
States, multiple parishes, multiple counties--how would you 
suggest Congress equitably allocate that funding to make sure 
that Mississippi receives its fair share, Louisiana receives 
its fair share, and Texas receives its fair share?
    Do you have any recommendations based on the experience 
that you have been through the last 4 years?
    Governor Barbour. Yes, ma'am.
    Madam Chairman, you may recall at the time, some of the 
things that were done with CDBG money for Hurricanes Katrina 
and Rita had never been allowed before. Florida had four 
hurricanes the year before. They had no housing grant program. 
They had no Home Again or Road Home program.
    What we did in Mississippi, and what I really suggested at 
the time when asked by others, we prepared a plan that we 
thought if you took what Mississippi was entitled to under the 
Stafford Act, what was not covered, what magnitude, and what 
would it take to cover it, and we literally prepared a plan and 
presented it. And I do think the best way for Congress and the 
Administration to equitably do this is not to try to come up 
with some mathematical formula or some rigid guideline, but to 
force the States to say this is what we need, and then to scrub 
it. And States may be unreasonable or excessive or not know 
what they are talking about. But that to me is the best way to 
do it, to do it on a one-by-one basis. Obviously, this is not 
going to be done for every disaster. I assume it is only going 
to be done for the mega disaster, the giant disaster.
    So that was the way that I thought at the time, and nothing 
has made me think differently. Make the State prepare a plan 
and let the Federal Government decide if they think that is 
reasonable and how much of it, if any, should be funded.
    Senator Landrieu. Well, that is very interesting, and this 
is a very critical question that HUD and the new President has 
to consider. The governor has just testified that, in his view, 
when a major catastrophic disaster hits, he has qualified his 
statement to say--maybe not in every disaster, but in a 
catastrophic disaster--governors should be allowed to actually 
assemble a plan of recovery, present it to the Federal 
Government, have it looked at thoroughly but in a short amount 
of time, and then basically fund it.
    When Governor Barbour did that, and he presented his plan 
to Congress--and his plan, which I think you have given me a 
copy of, was a $5.5 billion plan--Congress actually did that 
and gave Governor Barbour $5.5 billion. And he has testified so 
far he thinks it has worked out pretty well. There are critics 
of the plan that testified earlier that have a different view, 
but nonetheless, that is where we are.
    But that did not happen in Louisiana or Texas for any 
number of different reasons. Neither State was told that they 
could submit a comprehensive plan and they would have any 
chance of getting it funded, just for starters. Now, this is 
going back to a previous Administration. And I would think that 
if you asked all 50 sitting governors today if their State was 
catastrophically damaged in some way, do they think they could 
just submit a plan to the Federal Government and expect it to 
be 100 percent funded, or 95 percent funded, or 85 percent.
    I do not think there is a governor, other than Governor 
Barbour--because this was his experience, so I can personally 
understand how you believe this. But I do not know if there are 
49 other governors that would think that they could just send a 
request in for very flexible money to rebuild their homes, 
rebuild their ports, rebuild their sidewalks, their 
infrastructure, workforce development, and rate reductions for 
electricity.
    So that is the problem here. I am trying to figure out a 
way for our Subcommittee to recommend to the Administration, 
and they are going to be figuring this out themselves, what 
happens the next time there is a catastrophic disaster, and how 
do governors come to understand what they may or may not be 
entitled to, to get their States, their counties, and their 
parishes back up and running.
    Mr. Rainwater, do you want to comment about how the State 
of Louisiana got kind of pushed into its position? And then 
maybe tried to pull yourself out?
    Mr. Rainwater. Madam Chairman, from the perspective of--and 
you are absolutely right. With Hurricanes Katrina and Rita, I 
mean, obviously the first and third largest disasters in 
American history. Working with you to get the $3 billion in the 
last tranche, if you look at the way we were funded, very 
difficult to even put programs together.
    It was interesting because as I heard the first panel 
testify, folks talked about changing rules, the first rules 
were designed because of budget. And then when you think about 
the concern that the State had, and what it said is let's put 
together a compensation program and just try to fill gaps 
because we cannot fix every home to the pre-storm value. It is 
going to be impossible.
    If you really shake out and you look at the policies, and 
you look at what happened and what did not happen in Louisiana, 
literally, the primary concern was do we have enough money to 
fix all the homes in the levee-protected areas, and then those 
homes impacted by Hurricane Rita.
    Senator Landrieu. And how much money did the State get in 
the first tranche? Mississippi got its $5.5 billion and how 
much did Louisiana got?
    Mr. Rainwater. Six-point-two billion in the first----
    And then we got $4 billion, and then the $3 billion in----
    Senator Landrieu. And you got the $4 billion how many 
months after the first? Do you know?
    Mr. Rainwater. About 6 months.
    Senator Landrieu. Six months.
    Mr. Rainwater. Yes, ma'am.
    Senator Landrieu. So the Mississippi money came in one 
tranche. Two tranches? What was your first?
    Governor Barbour. We got right at $5.2 billion, out of the 
first pot, and a little less than $300 million----
    Senator Landrieu. Three hundred million.
    Governor Barbour. Yes, ma'am.
    Senator Landrieu. Out of the second pot.
    Governor Barbour. Out of the second. So of our $5.481 
billion, about 95 percent of it was in December 2005. The 
balance was in the second supplement.
    Senator Landrieu. And then yours was really in three 
major----
    Mr. Rainwater. Yes, ma'am. And if you think about the way 
that the dollars came down and the way the recovery authority 
allocated those dollars, I mean, it was not until 2007 when you 
were able to get the last $3 billion to complete the Road Home 
program that the State was able to put together $700 million 
for local communities to do long-term community recovery 
programs. And so it is very difficult to put together a budget 
in such a devastated area when you are trying to take care of 
rentals, you are trying to take care of the larger complexes, 
you are trying to take care of infrastructure.
    Now, I will tell you for Hurricanes Gustav and Ike kind of 
a different story. We felt very comfortable with the way--and 
HUD communicated very well with us about what was going to 
happen in that first round, which we got $435 million. It was 
based off of housing damages. So we were able to communicate 
with parishes because we made a very different decision on how 
to manage the Hurricanes Gustav and Ike dollars; we are going 
to push it down to local governments. And I will tell you that 
there are many public hearings happening throughout coastal 
Louisiana and throughout the 43 parishes that were impacted.
    So we were able to look at housing in that first round of 
dollars. The second round is based off of infrastructure 
damage. And so we are able to plan a little bit better versus 
the Hurricanes Katrina and Rita allocations, where you did not 
really know what was going to be funded and what would or would 
not be funded, whether it was infrastructure where you could 
fund economic development, small rental, or complete a 
homeowners program.
    Senator Landrieu. What was the experience, Mr. Stone, in 
Texas with your allocations? How much did you receive, in how 
many different tranches, over how long a period of time?
    Mr. Stone. Well, Hurricane Rita, we had two tranches of 
money. The first one that came to us was only about $72 
million, and that was way short of what we needed. And so, 11 
months later, we received $428 million which 90 percent went to 
housing at that time. Then, for Hurricane Ike, we received $1.3 
billion for the first tranche.
    I would like to also comment, we have heard, at least Texas 
has been told, that HUD will have a formula to distribute the 
rest of the Hurricanes Ike and Dolly hurricane funding for 
2008, but we do not know what factors are being considered. We 
will not have an opportunity to comment so it is money that 
will show up and we will try to use it the best we can. It 
would be nice if the States had an opportunity to comment. The 
governors would be very interested in being able to put a plan 
forward to utilize the money.
    Senator Landrieu. And I would second that and really ask 
HUD to listen carefully to the Texas situation.
    I just want to call your attention to this chart,\1\ which 
is a little bit troubling. And maybe Mississippi would object 
to the way these numbers have been done. But we took the 
numbers of housing units damaged, based on FEMA documentation, 
not something that our office came up with, and compared that 
to allocated funding. And you can see that on houses damaged, 
Louisiana had 67 percent of the damaged housing units along the 
Gulf Coast that resulted from Hurricanes Katrina, Rita, and 
Wilma. We got 68 percent of the funding. Mississippi had 20 
percent of the damaged housing, but got 28 percent of the 
money. Texas, Alabama, and Florida had 13 percent of the 
damaged housing but only got .4 percent of the funding.
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 145.
---------------------------------------------------------------------------
    Now, according to this, you could suggest that Mississippi 
got slightly more money if you did it by housing, and Texas was 
substantially short-changed.
    Now, this is only one way it could be calculated. It could 
be also calculated on numbers of businesses lost, amount of 
uninsured damage relative to insured damage, infrastructure 
damage, or a combination of the above. But I am strongly 
suggesting that we come up with a way that we can equitably 
distribute this block grant to States that are hit, sometimes 
simultaneously, by the same storm, or go to a Governor Barbour 
approach, which is after the storm, let the governors and the 
county commissioners calculate what they think they are owed, 
and submit a proposal to the Federal Government, and it is 
understood that the Federal Government is going to fund 90 to 
100 percent of it. I mean, that could be a plan. I think 
governors and local officials actually like the second one 
better than the first one I have outlined. But there has got to 
be some decision made about that.
    Then, second, as the first panel testified, what, is the 
approach or the focus to repair as much housing as possible, 
given that is a very important part of recovery, or is it for 
infrastructure, since you have to have infrastructure repaired, 
streets, roads, and sewer systems, in order for people to 
rebuild, or is it for economic development, which is also an 
important component of recovery?
    So I would like to maybe ask Mr. Tombar--we only have a 
couple more minutes--what are some of Secretary Donovan's 
thoughts about this, or your own, about recovering from a 
storm? What is the higher priority? Is it housing, health care, 
schools, infrastructure, or economic development? And if it is 
housing, is it your homeowners that serve as your primary tax 
base, or is it renters that perhaps need more help than 
homeowners? Is it the lower-income renters or the middle income 
renters?
    Mr. Tombar. That is a very loaded question, but I will do 
my best with it. But, if I could, I would like to point out 
that the allocations that you point to there have little to do 
with need. There was in the appropriation itself specific 
language that limited the amount that HUD was able to 
distribute to any given State, which caused a cap on the amount 
that the State of Louisiana could get, which, therefore, did 
not make their----
    Senator Landrieu. You are talking about the initial 
tranche, right?
    Mr. Tombar. Yes, ma'am, which was the largest tranche of 
all that you are talking about here.
    Senator Landrieu. I am familiar with that arbitrary cap 
placed on allocations to States by Congress.
    Mr. Tombar. So that directed, in large part, is how the 
Department could go about distributing the money.
    But to your question about the better way to do it, as I 
have mentioned already, Secretary Donovan is taking seriously 
this question, himself looking at it. We are the Department of 
Housing and Urban Development, and so we do believe that--and 
the CDBG program was set up to help with housing and 
development. And so, those are two of the things that we 
certainly want to focus on.
    There has been discussion, even over this last allocation 
that came through in 2008, about making more money available 
for infrastructure in some of the cases. That is a resource 
that typically is provided by the Federal Emergency Management 
Agency. And so, while we see that HUD's money and CDBG could 
support those activities, the Secretary has and will continue, 
I think, to make a priority on housing and economic 
development.
    As you acknowledge yourself, there are different ways to 
look at it--business loss, the loss of jobs and other things 
that may drive it. And so, we are trying to be as robust as we 
possibly can, gathering as much data as we can. And that is the 
real challenge here, Senator, is that data, access to data that 
is conclusive, that is universal across all of the disasters, 
is important if we are going to be equitable in the 
distributions that we make of this money.
    Senator Landrieu. OK. Well, that is a very important point.
    I know our time is somewhat limited.
    Mr. Rainwater, you want to add something? And then I am 
going to ask each of you for any kind of closing comments or 
something you would like to include in the record before we 
adjourn.
    Mr. Rainwater. Thank you, Madam Chairman. One of the 
challenges I think--and we have talked about this before in 
this catastrophic annex. And the reality of it is, FEMA public 
assistance, although they are making good progress right now--
the teams that are down in Louisiana, Mississippi, and Texas, I 
think, are doing a decent job. But for a catastrophic disaster 
it is too painful. And there needs to be a catastrophic annex 
that allows us to--obviously, in Louisiana, housing was the 
first priority, but for infrastructure, using Community 
Development Block Grant money, to be very frank with you, is 
much easier than trying to go through the FEMA public 
assistance route.
    So we need to look at this from a catastrophic perspective, 
how do you get dollars into a State quickly to help it? You 
cannot just put up housing without infrastructure. You have got 
to have both, and you have got to do both at the same time. And 
I think that is the challenge, ma'am.
    Senator Landrieu. Mr. Stone.
    Mr. Stone. Madam Chairman, I think the question really is 
this, is Congress really interested in helping the States 
recover from a disaster and take them back to the State they 
were before the disaster hit? I think if everybody thought like 
you, I think the answer is yes.
    I believe that CDBG needs a formula for an initial tranche 
of money for rapid initial response. And irrespective, whether 
it is housing or infrastructure, I think there is obviously a 
balance that needs to be there. The goal should be to recover 
housing and infrastructure, and also economic development is 
part of that.
    But that could be something in a second tranche of money 
some months or maybe a year down the road when we see how far 
we are able to recover from the disaster with the first tranche 
of money. Then the second tranche, the governors could come 
forth with a plan to help the State completely recover from the 
disaster. At that time, we would have better information 
available such as better damage assessment, and all the 
insurance information available. We could put together a very 
good plan to make the States whole again at that moment and 
time.
    So I think it is a two-step process. The task is just too 
large to try to get it all done at one time.
    Senator Landrieu. Governor Barbour.
    Governor Barbour. Thank you, Madam Chairman, for having 
this hearing. Mr. Tombar mentioned the idea about getting our 
people home. One year after the storm, or July 1, 2006, less 
than a year after the storm, the population of the bottom six 
counties in Mississippi was more than 90 percent of what it had 
been before the storm. Today, it is about 98 percent of what it 
was before the storm. We are hoping to hit 100 percent this 
year.
    We thought giving people a place to stay, getting the 
schools open so the kids had a place to go to school, and 
getting their jobs back, that you could not rebuild the 
communities unless people could go back home with a place to 
stay, their kids in school, and work. And so, those were our 
priorities from September on. So people did a fantastic job. 
Every public school in Mississippi was opened in 6 weeks, 
except one, and that is because their portable classrooms did 
not arrive on time.
    Most of our big industries were back open that year. Some 
of them were back open in 30 days. And then at one point, we 
had 47,000 FEMA trailers with temporary housing for people. So 
I would just say that we thought what we needed was to get the 
community back, and we thought of it totally as a community, 
infrastructure, schools, everything.
    While the Federal Government gets criticized by people, the 
Federal Government has been a great partner in this. FEMA's 
been a great partner in this. Yes, they did some stuff wrong; 
so did we. But the Federal Government has been a great partner. 
I am glad you all are trying to figure out ways to improve it. 
But one thing I think everybody at this table agrees, maximum 
flexibility for the States to make the decision so that the 
State and local people's priority is put in place, rather than 
Washington's priority, is the best thing for everybody whatever 
way you determine to do it.
    Senator Landrieu. Governor Barbour, I really appreciate 
that. But as you know, and you have testified to this, and we 
have the report, the reason that you have been fairly favorable 
towards the plan is because the plan that you wrote was 
actually funded. And that may be a model for how we go forward. 
I mean, I am not suggesting that may be a very good model for 
us to use, which is, in the governor's case, he wrote the plan, 
and here it is. He wrote it, and it was basically funded. And 
it was basically carried out according to the governor's 
wishes. And he has testified, and others have testified, that 
it has worked pretty well.
    Now, again, let me say there have been critics of the plan. 
Some of them have testified in your legislature; some of them 
have testified here. But the record needs to reflect that this 
was not done in any other State. It was not the case in 
Louisiana. It was not the case in Texas. It was not the case in 
Alabama, and it was not the case in Florida.
    So if it is going to stand as a model, then we really need 
to think about HUD being very flexible in the next catastrophic 
disaster. Let each governor write their own plan, submit the 
full cost to the Federal Government, have the Federal 
Government write, basically, a check on that date and give it 
to them, and then get out of their way and let them do it. That 
is not what happened in the other States. That is what happened 
in Mississippi, for the most part.
    So this is what we have to figure out. Our Subcommittee is 
going to recommend something to the new Administration.
    Then the other issue, which is not the subject of this, but 
I want to put this on the record, not the subject of this 
hearing--but I am going to be asking governors what is their 
responsibility to set aside a portion of their general fund 
dollars to meet the needs of the catastrophic disaster. Is it 
the opinion of the governors, collectively, that the Federal 
Government should pick up 100 percent of the plan or should 
States be required to set aside some kind of rainy-day fund, or 
some kind of catastrophic disaster fund, so that the States can 
put up a share of what the cost is to restore the area? And are 
we trying to restore to 100 percent or 95 percent or 90 
percent? These are very important big policy decisions that 
have to be made by the new President, by his administrators in 
HUD, FEMA and Homeland Security, and then we have to, as a 
Subcommittee, decide.
    So I am going to stay with it until we come up--because 
right now, it is just really--it is just a hodge podge of 
really conflicting rules and regulations and formulas. I do not 
think the governors have any confidence, or the mayors or the 
county commissioners, about what they are even entitled to ask 
for in the event of a catastrophe. I can tell you among 
senators, there is a great deal of confusion. And we, maybe as 
a group, stay confused, but in this area we are confused about 
what our communities are entitled to, what we should ask for.
    So this has been a good hearing. I will leave it at that. I 
think we have had some good testimony today.
    Governor Barbour, thank you for taking your personal time 
to come and testify. All the governors were invited. We thank 
you for coming forward, and we thank everyone else for 
representing their respective groups. But there is a lot more 
work that has to be done. The record will stay open for 15 
days. I really encourage anybody to submit any documents they 
want to on this subject, and we will be having a follow-up 
hearing with HUD and perhaps some other members of the 
Administration on this.
    The hearing is adjourned. Thank you.
    [Whereupon, at 4:38 p.m., the Subcommittee was adjourned.]













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