[Senate Hearing 113-435]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-435
 
                        HURRICANE SANDY: GETTING 
                       THE RECOVERY RIGHT AND THE 
                          VALUE OF MITIGATION 

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS


                             FIRST SESSION

                               __________

                             MARCH 20, 2013

                               __________

        Available via the World Wide Web: http://www.fdsys.gov/
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        Committee on Homeland Security and Governmental Affairs

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                          Washington, DC 20402-0001


        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota

                   Richard J. Kessler, Staff Director
               John P. Kilvington, Deputy Staff Director
         Mary Beth Schultz, Chief Counsel for Homeland Security
          Jason T. Barnosky, Senior Professional Staff Member
             Elyse F. Greenwald, Professional Staff Member
               Keith B. Ashdown, Minority Staff Director
         Christopher J. Barkley, Minority Deputy Staff Director
            Kathryn M. Edelman, Minority Senior Investigator
        Daniel P. Lips, Minority Director for Homeland Security
                     Trina D. Shiffman, Chief Clerk
                    Laura W. Kilbride, Hearing Clerk



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Coburn...............................................     3
    Senator Johnson..............................................    13
    Senator Begich...............................................    19
    Senator Levin................................................    24
    Senator Ayotte...............................................    39
Prepared statements:
    Senator Carper...............................................    45
    Senator Coburn...............................................    48

                               WITNESSES
                       Wednesday, March 20, 2013

Hon. W. Craig Fugate, Administrator, Federal Emergency Management 
  Agency, U.S. Department of Homeland Security...................     5
Hon. Shaun L.S. Donovan, Secretary, U.S. Department of Housing 
  and Urban Development..........................................     7
Hon. Jo-Ellen Darcy, Assistant Secretary for Civil Works, U.S. 
  Department of the Army.........................................     9

                     Alphabetical List of Witnesses

Darcy, Hon. Jo-Ellen:
    Testimony....................................................     9
    Prepared statement...........................................    67
Donovan, Hon. Shaun L.S.:
    Testimony....................................................     7
    Prepared statement...........................................    62
Fugate, Hon. W. Craig:
    Testimony....................................................     5
    Prepared statement...........................................    52

                                APPENDIX

Responses to post-hearing questions for the Record:
    Mr. Fugate...................................................    74
    Mr. Donovan..................................................   104
    Ms. Darcy....................................................   128


                            HURRICANE SANDY:

         GETTING THE RECOVERY RIGHT AND THE VALUE OF MITIGATION

                              ----------                              


                       WEDNESDAY, MARCH 20, 2013

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m., in room 
SD-342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 
Chairman of the Committee, presiding.
    Present: Senators Carper, Levin, Begich, Coburn, Johnson, 
and Ayotte.

              OPENING STATEMENT OF CHAIRMAN CARPER

    Chairman Carper. The hearing will come to order. Nice to 
see you all. Assistant Secretary Darcy, very nice to see you.
    Well, thanks to our witnesses for joining us today. This is 
an important hearing in our oversight of Hurricane Sandy, what 
we are doing right, what we are not doing right, and what we 
could do better.
    As you all know, on October 29, 2012, Hurricane Sandy made 
landfall in our country, and its impact, particularly on the 
Mid-Atlantic and the northeastern coast of our country, was 
devastating and heartbreaking. New Jersey, New York, and parts 
of New England were hit particularly hard. And on Staten Island 
we had, I think, about 21 people who were killed. In Breezy 
Point, Queens, a fire destroyed over 100 homes. In Hoboken, New 
Jersey, more than 1,700 homes were flooded. And I am sure we 
all saw pictures of the iconic Casino and Funtown Piers in New 
Jersey--where a lot of families have spent their summers--
broken down and literally pulled into the ocean.
    In Delaware, just to the south of there, we did not 
experience the level of devastation that was inflicted on our 
neighbors to the north. But our own State was hit hard. 
Widespread flooding caused severe damage to many of our homes 
and businesses. Roads and bridges were damaged or washed out, 
hurting commerce and transportation and cutting off access to 
hospitals, schools, and work.
    The human cost of this storm was severe. I mentioned the 
lives lost on Staten Island. In total, at least 162 people were 
killed as a result of Hurricane Sandy. Preliminary estimates of 
the financial damage the storm caused are approximately $50 
billion. When all is said and done, Hurricane Sandy is expected 
to rank as the second-costliest hurricane on record, right 
after Hurricane Katrina.
    It will take years to recover from devastation like this. 
It is important that we get that recovery right. In the 
aftermath of Hurricane Katrina, we saw many problems during the 
recovery phase that held communities back and created great 
suffering. Money was not always well spent or coordinated. The 
recovery moved slowly as a result.
    For instance, millions of dollars were spent providing 
temporary housing for survivors in travel trailers. People 
stayed in those trailers far too long because permanent housing 
solutions were not identified. Rebuilding permanent housing was 
also complicated because red tape prevented us from making the 
impact we could have made with the Department of Housing and 
Urban Development (HUD) and Federal Emergency Management Agency 
(FEMA) funding that was available.
    The Post-Katrina Emergency Management Reform Act of 2006, 
which was shepherded through this Committee and through 
Congress by Senators Collins and Lieberman, took steps to try 
to fix these problems. And to be honest with you, we have seen 
a lot of improvement as a result. The Act required FEMA to 
bolster their regional offices in order to build stronger 
relationships with State, local, and tribal governments. This 
has not only improved the Federal Government's ability to 
respond to disasters; it has also enhanced FEMA's capability to 
support State, local, and tribal governments as they rebuild.
    The law also required FEMA to coordinate with other Federal 
departments to write a national disaster recovery strategy, and 
this eventually led to the National Disaster Recovery Framework 
(NDRF), which has helped organize and coordinate recovery 
efforts to Hurricane Sandy. Although the recovery from 
Hurricane Sandy is just beginning, we fortunately have not seen 
the sort of problems that we did after Hurricane Katrina.
    This Committee now has a Subcommittee with responsibility 
for FEMA. It is headed by Chairman Mark Begich and Ranking 
Member Rand Paul, and I know they will do great work in 
overseeing FEMA in general and this recovery in particular.
    A key question we need to ask after a storm like this is 
whether it was an aberration or a harbinger of things to come. 
Just a few short years ago, hurricanes hitting areas along the 
northernmost half of the east coast were relatively uncommon. 
Hurricane Sandy is actually the third major hurricane to 
threaten or strike the northern east coast in the last 3 years. 
Hurricane Irene devastated parts of the east coast in 2011. The 
year before that, Hurricane Earl was a major threat. 
Unfortunately, the Northeast, the Mid-Atlantic, and other 
vulnerable areas are expected to see more frequent and larger 
storms like Hurricane Sandy in the future.
    Additionally, just this year, Government Accountability 
Office (GAO) added a new area to its recently updated High-Risk 
List--the impact of climate change on the Federal Government. 
GAO explained that, among other things, climate change `could 
threaten coastal areas with rising sea levels, alter 
agricultural productivity, and increase the intensity and 
frequency of severe weather events.' GAO also argued that the 
Federal Government is not prepared to deal with the impacts of 
climate change and recommended that we take a strategic look at 
them and start to prepare accordingly.
    I think this is a smart recommendation, and it is essential 
we put it on our to-do list as a Congress, along with the other 
items included in GAO's updated High Risk report. It is 
certainly on this Committee's to-do list. The costs associated 
with responding to and recovering from a hurricane such as 
Sandy--both the human and the financial costs--are so severe 
that we simply cannot afford to face this devastation over and 
over again.
    I will point out that, so far in this recovery, we have 
seen States take some promising steps toward addressing the 
issues GAO has identified. In particular, I am pleased to see 
that the States of New York and New Jersey have begun to make 
plans to mitigate against future disasters. We know all too 
well that an ounce of prevention is worth a pound of cure. My 
grandmother would be pleased to hear me repeat those words 
today.
    In fact, a few years ago, the National Institute of 
Building Sciences issued a report that concluded that for every 
dollar spent on various mitigation measures, we can save $4 in 
response and recovery costs. Through mitigation, then, we can 
get better results, save money, and save lives. We must ensure 
that sound and effective mitigation policies are thoroughly 
incorporated into this recovery effort.
    This is especially important as climate change drives the 
sea level to rise and increases the severity and frequency of 
coastal storms. By working together, we can rebuild and become 
stronger by better protecting ourselves from future storms. It 
is that simple.
    But in doing so, we cannot ignore what I believe and what 
many experts believe may be the underlying cause of storms like 
Hurricane Sandy. Finding a way to address climate change is not 
the topic of this hearing today, but as we recover from this 
most recent major storm and put into place the protections we 
need to reduce the impact of the next one, we would be making a 
mistake if we did not also think about what we need to do to 
address not just the symptoms of climate change, but the core 
problem itself.
    With that having been said, I look forward to working with 
all of you, the Obama Administration, and my colleagues on 
these crucial tasks we have before us.
    I am happy to turn to Dr. Coburn for any comments he wants 
to make.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Well, first of all, let me apologize. I 
have to go to the floor to object to the lack of amendments 
that are being allowed on the continuing resolution (CR), so I 
will not be able to hear your testimony. I have looked at it, 
my staff have thoroughly read it, and I have summaries of all 
of it. I will enter my statement into the record.
    I just have to make a comment. I love Tom Carper, but the 
tone of climate change and the reality of what we have actually 
seen and what the predictions have been, do not have any 
connection. As a scientist who has actually looked at the 
science, we still have a long way to go to prove what has been 
made as fact in Senator Carper's statements on climate change. 
This is not a hearing about climate change. This is a hearing 
about the response to Hurricane Sandy, and I look forward to 
coming back and offering questions. I would also say I am very 
proud of FEMA's response so far. They have done a great job. I 
also would say I am very thankful for the cooperation that you 
have offered the Committee as we have looked at the response 
and tried to oversee it in real time to see if we are actually 
making great improvements.
    So with that, I would ask that my statement be placed in 
the record, and I will return.
    Chairman Carper. Without objection.
    All right. And before he leaves, I just want to say I love 
Tom Coburn, too, so there we go.
    I think we are going to go right to our witnesses. Let me 
introduce them and then, Senator Johnson, we will get into some 
questions. OK?
    Senator Johnson. Sure.
    Chairman Carper. Our first witness is Craig Fugate, 
Administrator of the Federal Emergency Management Agency. I 
want to thank you and the folks that you lead for the really 
outstanding effort that you have made in response to Hurricane 
Sandy from our State and from the other States that were 
affected. Mr. Fugate began his career as in emergency 
management as a volunteer firefighter, emergency paramedic, 
and, finally, as a lieutenant with the Alachua County Fire 
Rescue. In 2001, he became Director of the Florida Division of 
Emergency Management and held that position until he was 
confirmed as Administrator of FEMA in May 2009.
    Mr. Fugate, again, we are glad to see you. Welcome to this 
hearing, and thanks for your testimony.
    The second witness is the Honorable Shaun Donovan, 
Secretary of the Department of Housing and Urban Development. 
Mr. Donovan became Secretary in January 2009. He is also 
currently serving as the Chair of the Hurricane Sandy 
Rebuilding Task Force, which is the topic we will discuss 
during this hearing. Before his appointment as Secretary, Mr. 
Donovan served as Deputy Assistant Secretary for Multifamily 
Housing at HUD during the Clinton Administration. He later 
served as Commissioner of New York City's Department of Housing 
Preservation and Development.
    We thank you, Mr. Secretary, for joining us, and we look 
forward to your testimony and our questions and answers.
    And no stranger to the U.S. Senate, where she once toiled 
and I think worked for--was it the Finance Committee?
    Ms. Darcy. In the Environment and Public Works Committee 
(EPW).
    Chairman Carper. In EPW, very good. Great to see you again. 
Ms. Darcy is Assistant Secretary for Civil Works at the U.S. 
Department of the Army. Ms. Darcy became Assistant Secretary in 
August 2009. Prior to her appointment, Ms. Darcy had a long and 
distinguished career in the Legislative Branch, which I have 
mentioned. From 1993 to 2000, she served as a professional 
staff member on the Senate Environment and Public Works 
Committee, which is in markup right now, and she then moved on 
to the Senate Finance Committee, where I have just come from, 
where she served as a senior environmental advisor. We thank 
you for joining us. We thank you very much for your work and 
the great work that is being done and the folks that you lead.
    I am going to ask you to go ahead and start your testimony. 
Try to keep it close to 5 minutes. If you go a little beyond 
that, it is OK. But if you go way beyond that, I will have to 
rein you in. We are going to start voting around 11:15, but we 
want to get as much done as we can.
    Mr. Fugate, please proceed.

 TESTIMONY OF HON. W. CRAIG FUGATE,\1\ ADMINISTRATOR, FEDERAL 
   EMERGENCY MANAGEMENT AGENCY, U.S. DEPARTMENT OF HOMELAND 
                            SECURITY

    Mr. Fugate. Well, thank you, Mr. Chairman, Senator Johnson.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Fugate appears in the Appendix on 
page 52.
---------------------------------------------------------------------------
    Hurricane Sandy was essentially two disasters in one, and 
it also covered a geographical area that today we know the 
heaviest impacts were in the Jersey shore, New York City harbor 
area, and into Connecticut with peripheral impacts. But before 
landfall, we were anticipating impacts from as far south as 
Cape Hatteras in the Carolinas, as far west as West Virginia, 
which was under a blizzard warning, all the way up through the 
central Ohio Valley and up to the New England States, including 
Maine.
    To prepare for that, we were able to utilize the 
authorities granted to FEMA, when FEMA was authorized in the 
Post-Katrina Emergency Management Reform Act, that clearly 
stated that in the anticipation of a major disaster, we would 
not have to wait until the States were overwhelmed before they 
were able to request assistance. We had pre-staged not only 
equipment and supplies, but we had sent teams into each State 
to link up with the Governors' teams to begin that crucial 
planning on what if the storm did hit and produced the impacts 
possible throughout that region.
    As the scale of the impact became more apparent that it was 
going to be focused on the landfall somewhere between New 
Jersey and Boston, it allowed us to concentrate our resources 
and teams on those impacts.
    But as Hurricane Sandy came ashore, we dealt with a storm 
that produced a very significant storm surge, probably greater 
than many people realized because of the nature of the storm 
and the fact that they had gone through Hurricane Irene and 
thought that was probably as bad as it was going to get. We saw 
Hurricane Sandy produce storm surge in areas that had not 
previously flooded, most notably in Manhattan, where the World 
Trade Center Memorial was being flooded, as well as nine of the 
hospitals in the lower boroughs, including New York University 
(NYU), Bellevue, and others that were taken out of service 
because of the damages.
    But that damage was also compounded by the power outages. 
It is estimated that 8.5 million customers were without power 
at some point during Hurricane Sandy, but I think that number 
underestimates the human impact in that those were actual 
connections, not people. When you looked at the region, there 
was in excess of 25 million people being impacted some way or 
another by the power outages, whether it was directly because 
they did not have power or because it was affecting 
communications, transit, fuel, and other issues.
    And so as we responded to this disaster using the tools 
that we had, we were able to focus on the life safety issues, 
much of this done by the local responders, augmented by 
Homeland Security grant dollars they had received since 9/11 to 
build more capability in search and rescue. We then supported 
the immediate needs response--sheltering, distribution of 
supplies--and began the process of starting the initial 
recovery, getting debris picked up, dealing with those 
immediate issues that were required to provide expedient and 
temporary housing.
    Some of the tools we learned from Hurricane Katrina is that 
in long-term housing impacts, you have to start planning from 
the very first day what the solutions were. Merely putting 
people up temporarily in hotels and motels was not an answer. 
So that is, again, why we engaged very quickly with the long-
term recovery type planning we do under the National Recovery 
Framework. We are engaging with our partners at HUD, the Small 
Business Administration (SBA), and others.
    But as the density of the population showed, this was going 
to be a very significant challenge to house people long term 
given the density of the population and the amount of impact 
that occurred.
    We implemented a variety of tools that we had been 
developing over the last couple of years, some very successful, 
some not as successful, and we continue to learn how to do that 
better. But, overall, the response was geared toward supporting 
the States divided into phases: life safety, life sustaining, 
and the immediate steps to set the stage for recovery.
    We are now seeing these communities begin to move into the 
long-term permanent work that will be required, and we also 
want to ensure that when we build back, we are not just 
building back to what was there. We are looking at how do we 
ensure that critical infrastructure is built back in a way that 
ensures its survivability and resilience in future storms.
    As the President has directed us, we are looking at the 
issue here as an adaptation to the hazards we face, and that 
for the future, we cannot just merely build back to previous 
standards. Again, if Hurricane Sandy was a record-setting 
storm, but is not the storm potential that could occur and we 
only build back to Hurricane Sandy, the next stronger storm may 
undo all of our work.
    We have seen where we have applied mitigation after 
Hurricane Katrina, and then the impact of Hurricane Isaac 
earlier this year, parts of the community that had mitigated 
against Hurricane Katrina actually saw storm surge greater than 
what they saw in that storm. But because of the mitigation, 
fire stations, schools, and emergency operations centers were 
up and running during the storm and able to continue to provide 
essential services during the life safety phase of the 
disaster, resulting in FEMA and the Federal agencies being able 
to focus on recovery.
    So we know mitigation works, but we also need to make sure 
we are mitigating against the future threats, not just past 
history, because every time we go out, it seems that the term 
``100-year storm'' is being used several times a year to 
describe events that are occurring with even greater frequency.
    Thank you, Mr. Chairman.
    Chairman Carper. Thank you very much.
    Mr. Secretary, please proceed. Your entire statement and 
all of your entire statements will be made part of the record. 
Feel free to summarize. That was a nice summary, I thought.
    Please proceed.

   TESTIMONY OF HON. SHAUN L.S. DONOVAN,\1\ SECRETARY, U.S. 
          DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Secretary Donovan. Chairman Carper, Members of the 
Committee, thank you for the opportunity to testify today 
regarding the ongoing effort to rebuild in the region 
devastated by Hurricane Sandy.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Donovan appears in the Appendix 
on page 62.
---------------------------------------------------------------------------
    I chair the Hurricane Sandy Rebuilding Task Force 
established by President Obama. Hurricane Sandy had immense 
impacts in New York, New Jersey, Connecticut, Rhode Island, 
Maryland, and a number of other States, as you know, Senator.
    Based on the lessons learned from previous disasters, the 
President asked Secretary Napolitano and me to develop a new 
approach to disaster-related recovery and rebuilding challenges 
from a national perspective. That led to the creation of the 
National Disaster Recovery Framework, which we released in 
2011. Administrator Fugate just mentioned its importance in 
allowing us to bring a coordinated, governmentwide approach to 
recovery and rebuilding.
    As a result of the NDRF, for the very first time, we are 
fully implementing the long-term recovery strategies that were 
part of the NDRF, and today we have 150 Federal staff on the 
ground in New York, New Jersey, and Connecticut who are working 
on long-term rebuilding, because we know from past disasters 
that planning for long-term rebuilding must begin even as 
response activities are underway.
    We also know that the unusual scale of the devastation 
caused by Hurricane Sandy meant communities would face greater 
rebuilding challenges than usual and that many of those 
challenges would cut across agency and State lines.
    For example, an issue like hardening our energy 
infrastructure will require involvement from Federal, State, 
and local government in addition to the private sector across 
the region. In recognition of this, President Obama created the 
Hurricane Sandy Task Force to ensure there was Cabinet-level, 
governmentwide, and region-wide coordination to help 
communities as they are making decisions about long-term 
rebuilding.
    The task force is a short-term entity. The President's 
Executive Order (EO) calls for us to produce a comprehensive 
rebuilding strategy by August 2. Following the completion of 
this strategy, the task force will wind down and implementation 
will be carried out by the relevant regional support functions 
that are already in place under the NDRF.
    One goal of the task force and the strategy is to identify 
and share best practices adopted by other communities in the 
wake of disasters and to help communities apply those lessons 
to their own rebuilding efforts. A perfect example of this work 
is an announcement we made last week to help communities get 
the Community Development Block Grant (CDBG) disaster funding 
into homeowners' and business owners' hands more quickly. We 
released several model programs based on best practices from 
other areas that local governments can modify and adapt to 
launch their own programs to repair homes and small businesses 
and offer their citizens housing counseling or, where 
appropriate, buyouts.
    Giving communities these model programs means they do not 
have to reinvent the wheel and design new programs from 
scratch, which ultimately means homeowners and businesses get 
more help quickly and at a lower cost to taxpayers.
    In addition to identifying opportunities for this type of 
coordination, supporting local rebuilding efforts with the 
financial resources that only the Federal Government can 
provide is a key part of the Federal role. Federal agencies and 
departments have already begun making money from the Disaster 
Relief Appropriations Act available to State and local 
governments in the region. In addition to what Administrator 
Fugate mentioned, the Administration has allocated the first 
tranche of CDBG disaster funds totaling $5.4 billion, and I 
would add that HUD allocated this funding within 8 days of the 
President's signing the supplemental, the fastest it has ever 
been done in history.
    We have also announced $2 billion in Federal Transit 
Administration (FTA) emergency funding, and FEMA has released 
more than $5.9 billion in National Flood Insurance payments.
    The task force's role is to help supplement individual 
agencies' efforts to get money where it is needed by sharing 
lessons learned about how to use it most effectively and 
efficiently. Our role is also to facilitate the monitoring of 
those programs to ensure accountability and to take additional 
measures to prevent waste, fraud, and abuse. We are working 
with the Recovery Accountability and Transparency Board (RATB) 
and with the relevant Inspectors General (IG) in support of 
their critical oversight mission and are also working with 
agencies and the Office of Management and Budget (OMB) to 
coordinate the delivery of enhanced agency internal control 
plans.
    In addition, we will monitor and share data about how the 
dollars are being spent on a public website similar to 
Recovery.gov to give the public confidence their dollars are 
being spent as intended.
    The task force will also help impacted communities use this 
funding to mitigate future risk from storms--storms that 
science tells us will have greater intensity and severity in 
the future. Mitigation is sensible and cost-effective, offering 
a $4 return on each dollar invested by preventing future 
damage, as you have recognized, Senator. And while each agency 
is focused on mitigation, the role of the task force is to 
ensure coordination and prioritization of projects across the 
region so that we can ensure that benefits are not being 
duplicated and that those efforts and investments are the most 
cost-effective options.
    We want to thank Congress and Members of this Committee, in 
particular Senator Landrieu, for your leadership that cut red 
tape and gave us new flexibility to build back stronger, and we 
are working to combine CDBG and other funds so that the 
opportunity to build back stronger is not an opportunity lost. 
We know mitigation works. As Craig Fugate just described, we 
saw it on the Gulf Coast, and we have seen it in Hurricane 
Sandy as well.
    We look forward to continuing our work with this Committee, 
others in Congress, and our Federal, State, and local partners 
to support communities' rebuilding efforts in a way that makes 
them stronger, more economically sustainable, and better 
prepared to withstand future storms.
    Thank you again for the opportunity to testify today. I 
look forward to answering any questions you may have.
    Chairman Carper. Thank you, Secretary Donovan. Assistant 
Secretary Darcy, please.

 TESTIMONY OF HON. JO-ELLEN DARCY,\1\ ASSISTANT SECRETARY FOR 
            CIVIL WORKS, U.S. DEPARTMENT OF THE ARMY

    Ms. Darcy. Thank you, Chairman Carper.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Darcy appears in the Appendix on 
page 67.
---------------------------------------------------------------------------
    Everyone has talked about Superstorm Sandy, as we now call 
it, with the 80-mile-per-hour winds and a 13.7 foot storm 
surge; all of this caused a great deal of devastation. Flooding 
has occurred causing damage to public infrastructure, causing 
extensive power outages, affecting mass transit systems, and 
causing damage to public housing and private residences.
    It is clear that existing Corps of Engineers projects 
helped to mitigate some of the flood damages to the residents. 
However, degraded coastal features have resulted in increased 
risks and vulnerability from future storm events. In addition, 
expected changes in sea level rise, extreme weather events, and 
other impacts of climate change are likely to further increase 
those risks.
    The Corps has authority under Public Law 84-99, the Flood 
Control and Coastal Emergencies Act (FCCE), to perform 
emergency management activities in response to natural 
disasters. These include preparation for natural disaster 
preparedness, advanced measures, emergency operations both 
before and after a flood, and rehabilitation and repair of 
damaged projects.
    The Corps also responds to disasters at the direction of 
FEMA under the Stafford Act. Under FEMA's National Response 
Framework, the Corps is the coordinator for Emergency Support 
Function (ESF) #3, which is ``Public Works and Engineering.'' 
FEMA missions assigned to the Corps are funded entirely from 
FEMA's Disaster Relief Fund.
    During and after Hurricane Sandy, the Corps responded to 68 
missions assigned by FEMA, provided more than 1,000 highly 
trained technical personnel and deployed the 249th Prime Power 
Battalion. To date, FEMA mission assignments exceed $350 
million in New York, New Jersey, Massachusetts, Delaware, Ohio, 
Pennsylvania, Connecticut, West Virginia, and Rhode Island.
    As of March 1, 2013, completed Corps response efforts under 
both its own Public Law 84-99 and FEMA's Stafford Act include:
    Completion of 567 power assessments and installation of 211 
generators that at one time were generating 55 million 
kilowatts of power;
    Installation and operation of 162 pumps to un-water 14 
strategic sites identified by State and local authorities, 
including the New York City subway system's tunnels and the 
Passaic Waste Water Treatment Plant, resulting in the removal 
of over 475 million gallons of water. We restored operation of 
the Hoboken Ferry Terminal and delivered 512 truckloads of 
drinking water to New York, New Jersey, Pennsylvania, and West 
Virginia. We refurbished 115 transitional housing units.
    Completed an assessment of damages of Federal coastal 
protection projects, and closed breaches in three coastal 
barriers in New York and New Jersey.
    Another major FEMA mission assignment that continues today 
is the removal of debris left by Hurricane Sandy. I have an 
update on the debris removal information that was included in 
my complete statement for the hearing. I would like to do that 
now so we can update those numbers.
    As of this week, in the city of New York, more than 734,000 
cubic yards of debris have been removed from public sites by 
the Corps of Engineers.
    On Fire Island, both the number of private property debris 
removal assessments that were assigned to the Corps and the 
number that have been completed has risen. The new total number 
of assessments that were assigned to the Corps is 1,814, of 
which 1,779 have been completed.
    The success of these efforts was due to a dedicated and 
determined team that included the Corps, the Navy, the Coast 
Guard, the Department of Transportation (DOT), New York City's 
Transit System, and many, many more.
    Damage sufficient to warrant repair under Public Law 84-99 
was reported for 19 Federal hurricane and shore protection 
projects within the Corps' North Atlantic Division footprint. 
The Corps has approved project information reports for these 19 
projects, and engineering and design has begun on each of the 
projects.
    There were damages to projects outside our North Atlantic 
Division for which we are continuing to prepare project 
reports.
    Finally, we also sustained damages to some of our Corps 
navigation projects.
    The Disaster Appropriations Act of 2013 provided $5.35 
billion for the Civil Works program. This amount included 
$3.461 billion of construction funding, of which more than 80 
percent was to reduce future flood risks in a way that will 
support the long-term sustainability of the coastal ecosystem 
and the communities, and reduce the economic costs and risks 
associated with large-scale flood and storm events.
    The Act requires that all Corps projects funded for 
construction, incorporate our current science and engineering 
standards. The Army is in the process of developing its 
implementation plan for the funding under the Act, with 
project-specific measures. The Corps will perform an expedited, 
limited re-evaluation that will address resiliency, economics, 
risks, environmental compliance, as well as long-term 
sustainability. Also, the Corps will enter into project 
partnership agreements that will be executed with the non-
Federal project sponsor that, among other things, will ensure 
an updated floodplain management plan is developed by the 
responsible non-Federal authorities. The Corps will take a 
broad, long-term approach to reducing future vulnerability in a 
manner that is sustainable for the natural ecosystem, for the 
individuals, as well as the communities in which they live.
    Thank you, Mr. Chairman, and I look forward to your 
questions.
    Chairman Carper. Thanks. Thank you all for your 
testimonies.
    Our Committee jurisdiction includes border security, and 
last month, I was down along the border of U.S. and Mexico in 
Arizona with Senator McCain and Congressman Michael McCaul from 
Texas, who chairs the Homeland Security Committee over in the 
House. I was joined on another day by Secretary Janet 
Napolitano.
    One of the things we have wrestled with on border security 
is: How do we measure success? Is it the number of folks we 
apprehend trying to get into the country illegally? Are there 
other measures of success? And I think we are making great 
progress in border security in that part of our country. We 
still wrestle a bit with how do we measure success.
    Let me just start right there. Administrator Fugate, how do 
we measure success? And given that measure, how are we doing?
    Mr. Fugate. We looked at disasters and response that--and 
responding to disasters, there was never a criteria of 
timeframe. So we looked at the first 72 hours that oftentimes 
is the most critical for life saving and immediate 
stabilization and said that, as a Nation, do we have enough 
resources to get to people quickly, to do rescues? Do we have 
enough law enforcement and security to make it safe? Do we have 
the emergency communications to allow the first responders to 
rebuild and get their systems back up, as well as provide the 
most essential, basic needs to a community in that short 
timeframe?
    Now, that cannot just be done with the Federal agencies, 
but we look at this through the whole community, what the 
private sector can do, what we do with our other partners.
    So the measures we look at very specifically are: Can we 
physically get back into the area? Can we make sure it is safe 
to operate in? Generally, law enforcement and security 
concerns. Can we get to the injured in 24 to 48 hours while we 
still have an opportunity to change the outcome? And do we have 
enough supplies and capabilities to meet the most immediate 
needs so that future loss from that disaster is not occurring 
because of lack of response? And we could then begin the 
process of setting the stage for the next immediate thing, such 
as sheltering, picking up debris to set the stage for recovery.
    And looking at our last responses, most notably Hurricane 
Sandy, we are achieving that by and large but not uniformly 
throughout the heavily impacted areas. And particularly in 
Hurricane Sandy, a challenge there is the dense population, and 
I think that is something we have to continue to look at, that 
you just cannot look at geography. You have to look at where 
the people are and make sure you have the resources there.
    But in using that as a standard, we are now going back and 
cataloguing our investments in homeland security, those grants, 
and looking at how much capacity have we built, what does that 
response look like? And one example we had, the Urban Search 
and Rescue Teams which Congress funds that we sponsor--there 
are 28 of them--had never been funded to do any type of water 
rescue even though they had deployed most recently, from 
Hurricane Katrina forward, to numerous hurricanes which 
involved water rescues. So we began equipping them through 
their grants with water rescue equipment. Six of those teams 
were able to deploy and augment State and local responders.
    Chairman Carper. Good. Thanks.
    Secretary Donovan, how do we measure success, and how are 
we doing?
    Secretary Donovan. To complement Craig's focus on the 
immediate response, we are also very focused on how do we 
measure success in the longer-term recovery.
    Chairman Carper. Good.
    Secretary Donovan. And there is a set of, I think, more 
obvious measures, and then there is a set of measures that are 
perhaps less obvious and longer term.
    Clearly, how quickly are homeowners getting back into their 
homes, how quickly are small businesses getting up and running. 
More broadly, will the shore be open for business this summer 
in New Jersey and Long Island? Those are all critical measures, 
and I would like to thank Congress for giving us in this 
supplemental, for the first time, the ability to set clearer 
deadlines, a 24-month timeline for what we would expect to be 
most of the CDBG and other investments.
    One of the roles the task force is playing is to go through 
right now with OMB and try to set a consistent policy on how we 
will implement those timelines from obligation.
    We are also working with the agencies to get data-sharing 
agreements. Frankly, sometimes just setting up the pipes, if 
you will, to share that data in a single source so that we can 
track it, make it available to the American public, to all of 
you, and to the IGs to know whether we, in fact, are making 
speedier progress than we did, say, in Hurricane Katrina in 
helping businesses and homeowners get back.
    The last thing I would point to goes to your focus on 
mitigation. In the long run, one of the most important measures 
of the recovery is: do we save money the next time we have a 
storm? FEMA's analysis has showed, as you quoted, Senator, that 
we save $4 for every dollar of investment in mitigation where 
it is done wisely, and that is something we are going to be 
gathering the data to be able to track going forward as well to 
make sure we understand where those mitigation investments have 
actually paid for themselves and where they have not.
    Chairman Carper. Thank you.
    Assistant Secretary Darcy, how do we measure success? How 
are we doing?
    Ms. Darcy. Well, we can measure success in two ways:
    One is how we were able to respond to the orders and the 
missions that were given to us by FEMA, and that success is 
shown in the fact that we were able to un-water the Battery 
Tunnel, that we were able to call on the resources that we have 
not only within the Army but within the Defense Department to 
help with that mission. That is one way we can measure success.
    Another way for our agency to measure success is to be able 
to look at the projects that we have built, especially our 
storm risk reduction projects along the coastline that provided 
storm damage reduction. And if you flew the coast of New Jersey 
after Hurricane Sandy, you could see where there had been a 
Corps of Engineers project and where there had not. The houses 
behind the housing projects, those sand dunes were still 
standing. And I think for us not only did we learn from that, 
but we have to learn what did not work as well. Part of that is 
working with the task force and looking at what kind of 
sustainability we need to make sure is part of any project that 
we plan to build.
    Chairman Carper. Thank you.
    Before I yield to Senator Johnson for his questions, I just 
want to telegraph my next pitch. When he is finished and others 
have had a chance to ask questions, I am going to be asking you 
whether you think that State, local, and Federal Governments 
involved in this recovery have the authority and the resources 
that are necessary to make the recovery successful. And I will 
be asking are there any other tools that you need for your 
respective tool boxes or for other tool boxes to help make this 
recovery successful.
    All right. Thanks. Senator Johnson.

              OPENING STATEMENT OF SENATOR JOHNSON

    Senator Johnson. Thank you, Mr. Chairman, and thank all of 
you for coming in and testifying.
    I have not been along the coastline, I have not seen the 
devastation, so I just would like to ask some basic questions 
about that. How much of the damage was within what proximity to 
the shoreline? Can you kind of give me some indication?
    Mr. Fugate. Senator, most of the damages that occurred fell 
within the 100-year floodplain area, so in some cases the 
damage were within blocks. In some cases, it was almost half a 
mile to a mile, depending upon where you were at.
    Again, you have got to remember in this coastline you have 
barrier islands and you have inlets and then you have rivers 
that flooded upstream. So most of the damage occurred within 
the first half-mile, is generally where you saw the 
concentrated damage. But because of the coastline and the 
shore, some of the water was going into places that may have 
bypassed higher ground and impacted further upstream. 
Particularly on the Hudson River, there was flooding well away 
from the shore area on the river banks where it had moved up 
the river.
    Senator Johnson. But would it be safe to say that 80, 90 
percent of the damage occurred within the 100-year floodplain?
    Mr. Fugate. The bulk of it did, although we did identify 
that in particular New Jersey, which had not had updated maps, 
there was flooding outside of that. This is part of the updated 
maps showing us better resolution of what could happen. But it 
is also important to note that the 100-year floodplain only 
shows the risk as 1 percent. In many areas, the flooding was 
greater than that based upon localized impacts of the storm, 
and in a stronger hurricane, the 100-year floodplain would not 
identify all of the risk, and that is one of the things 
Secretary Donovan and I and others are working on with the 
Corps of Engineers, is to make good decisions on critical 
infrastructure, not just based upon the 100-year flood events 
but also what the potential storm impacts can be.
    Secretary Donovan. Senator, if I could.
    Senator Johnson. Sure.
    Secretary Donovan. Just to clarify one point there and to 
give Craig and his team some real credit, one of the most 
important steps that we have taken--and the task force has 
worked closely with Craig's team on this--is to update those 
flood maps with new advisory maps. And so just to be clear, 
there are places where the 100-year floodplain has gone up by 
more than 10 feet in places within the region. So I think when 
you described the 100-year floodplain, it is within that newer 
version of it. Compared to the old maps, it was substantially 
outside in many places, that original.
    And I think one of the most important things that Craig has 
done is to accelerate that process of getting those new flood 
maps out so that now as towns, particularly along the shore, 
are rebuilding they are using more accurate measures of what 
that 100-year floodplain is, which in some cases is 
dramatically different from what it was.
    Senator Johnson. Which leads me to my next question. Give 
me the effect of having a 100-year floodplain map, in terms of 
the laws, in terms of insurance rules. I mean, tell me what the 
100-year floodplain actually does in terms of mitigation, in 
terms of insurance costs, in terms of what responsible 
individuals should do in response to 100-year flood maps.
    Mr. Fugate. Where we have the updated maps and the 
community adopts them, the requirements to participate in the 
Flood Insurance Program is they have to adopt the maps as 
ordinances, and then they have to drive all of their 
construction based upon those maps as far as elevation 
requirements in areas where they are prohibited to build 
certain types of structures or use certain construction 
techniques.
    The most common one for residential areas is the 
requirement to build one foot above base flood elevation. We 
saw numerous homes where I was at in Connecticut that had 
flooding during Irene, that in rebuilding had been elevated. 
Those homes are standing. Homes next to them that were not 
elevated to the new data were destroyed. It oftentimes means 
the difference between communities being able to rapidly 
recover and people come home after cleanup and restoration of 
power versus losing everything, including the community's tax 
base.
    So while it does not factor into the worst possible 
scenarios that there could still be damages, by and large 
across the gulf coast and now across the Northeast where these 
standards have been applied, storms that have hit show that, by 
and large, the elevation requirements preserve housing, the tax 
base, and homes for people to return to after the storm. Those 
that are not built to that level oftentimes are those that are 
destroyed, causing not only the loss of the home but the loss 
of the tax base.
    Senator Johnson. OK. So that really applies to the building 
codes. What about in terms of the insurance markets, the 
ability to access insurance, the cost of insurance?
    Mr. Fugate. Well, the cost of insurance, for flood 
insurance, again, is provided by the Flood Insurance Program, 
and if you are not elevated above that base flood, based upon 
the latest reauthorization of the National Flood Insurance 
Program (NFIP), going to an actuarially based rate is going to 
be a very expensive proposition to people. If they will build 
one foot above that base flood elevation, they will get a 
discounted rate showing the reduced risk.
    But moving toward a more actuarially sound basis is going 
to price many people to the point where they will have to make 
hard decisions about either elevation or not being able to 
rebuild based upon their insurance rates.
    Senator Johnson. Do you have any estimates so far of how 
much of the cost of the disaster is going to be borne by 
private insurance versus State governments versus the Federal 
Government? Do you have some sort of breakdown on that?
    Mr. Fugate. No, sir. Given that almost all of the flood 
damage will be covered by the Flood Insurance Program as the 
Federal and commercial industry has not chosen to write flood 
insurance for homeowners, I think the preponderance of the 
costs will be borne by the taxpayer and through the ratepayers 
in the Flood Insurance Program. Those damages outside of that, 
primarily wind damage, for those commercial entities that had 
insurance, those would be the numbers that would be done by the 
private sector.
    Secretary Donovan. If I could add, Senator, one of the 
critical things about what Craig has said, historically we have 
not had a coordinated response across the Federal Government 
where we are using the same standards. And so typically what 
you have is that the official flood maps--in this case, this 
would be the old flood maps for New Jersey and New York--would 
govern the investments that we would make post-disaster.
    What we are doing is trying to use these new maps--the task 
force is working on this--to ensure not just FEMA is using the 
latest information on the maps, but that across the Federal 
Government we are doing that.
    So, for example, in our first Community Development Block 
Grant notice, we required that anytime, as FEMA does, you are 
rebuilding more than 50 percent of the cost of the home, you 
have to use these new maps, even if they are not going to be 
official for the Flood Program within 2 years.
    We also, for example, are looking at--you mentioned 
insurance. The Federal Housing Administration (FHA) provides 
insurance on lending. That is another area that we are looking 
at to try to set a consistent standard so that even though we 
have this new information, we are not rebuilding to an old 
standard that will ultimately cost us more, particularly where 
there are major investments being made by either private 
entities, private insurers, or by the Federal or local 
government.
    Senator Johnson. OK. Well, I am out of time, but I will 
give you a hint in terms of my followup, because I am going to 
want to be talking about the moral hazard of insurance pricing 
and how we basically just incentivize people to continue to 
build in areas that are going to get wiped out once again, and 
then the American taxpayer is on the hook for that. So that 
will be my next line of questioning. Thanks.
    Chairman Carper. Dr. Coburn.
    Senator Coburn. Well, thank you all again for being here, 
and I apologize once again for being absent during your 
testimony.
    I want to just make a few comments. We have had 
investigators up there, and it has been bipartisan in terms of 
what we examined. Overall, the initial response of FEMA has 
been very positive, but some of the criticisms that we heard 
from people on the ground, local mayors and other people, was 
that when FEMA staff changed out, there was not a good transfer 
or hand-off of what was done.
    The other thing is that it seems to be too many questions 
cannot be answered by your people on the ground; or people have 
to wait for an answer.
    And then the third thing is getting funds. Most of them are 
having to hire consultants to be able to access funds.
    Even though we have done a good, initial response, the 
criticisms by the people that are actually impacted, I think, 
are real and justifiable. I would love to hear your response to 
the hand-off process as you move people in and out and why 
people on the ground cannot give people who have been impacted 
answers to their questions.
    Mr. Fugate. The short answer is historically FEMA has never 
staffed where we had the luxury of being able to deploy people 
for long periods of time from the initial outset of a disaster. 
We just do not have a workforce that is that scalable with that 
many people ready to go to that many impacted communities early 
in a disaster. So we used a lot of our permanent workforce from 
our regions to do the initial staff, and then as we were able 
to bring in our reservists and bring them in, we were able to 
backfill. That resulted in the first change-out, and that has 
never been a good change-out. We continue to work on that.
    But you get to the second point, which is even more of a 
problem, is the complexity of our programs have reached a point 
where part of what we were looking forward to in the Sandy 
Recovery and Improvement Act was better flexibility and tools 
to get more consistent answers quicker. Our goal was to get the 
right answer the first time, whether it was yes or no, and if 
it was maybe, get the answer so local officials know what to 
do.
    Part of this will come back to looking at how we staff 
disasters. What we have come to the conclusion with Hurricane 
Sandy is we have been using a lot of our reservists which are 
itinerant--brought on when we have disasters--workforce who, 
for a lot of the programs work very well. But as you get into 
the complexity of recovery, particularly as we have been 
updating and changing the program, it often delayed responses 
because they were not current and had to go to the next level 
to get answers.
    Based upon our analysis of Hurricane Sandy, we recognized 
we were going to have to put more emphasis on a full-time, non-
permanent workforce to get the consistency in public 
assistance. I think there are areas where the people that we 
bring in as we need them work very well in disasters, but as 
you point out, Senator, when it comes to public assistance, 
getting the right answer the first time and the consistency in 
that answer has been an issue since I have been a State 
director and a local official. We feel the only way to address 
that, as the programs have increasing complexity, is to have 
the subject matter experts working full-time as a temporary not 
permanent workforce, but having that full-time exposure and 
expertise to answer those questions.
    So we are in the process of reshaping that workforce in the 
aftermath of Hurricane Sandy to address that issue.
    Senator Coburn. So when they have to hire a consultant to 
work through the maze of bureaucratic red tape, does the 
American taxpayer end up paying for that consultant?
    Mr. Fugate. They would get from us management costs. They 
may be using that to pay for the consultant, and that could be 
included in the bill. So the answer is yes.
    Secretary Donovan. Senator, if I could just add on one 
point related to this, some of this confusion comes out of 
public programs, but there is also a lot of confusion that 
homeowners have around the conflicting requirements or efforts 
of different servicers with different types of loans.
    So, for example, certain servicers may have a policy that 
your insurance proceeds will only be released under this 
condition; another might have that they would release insurance 
proceeds under a different condition.
    One of the efforts that the task force has undertaken, FHA 
is part of HUD, an important part of the mortgage market. 
Fannie and Freddie are overseen by a different agency. We have 
brought together the private servicers, Fannie, Freddie, and 
FHA to try to reach consistent standards for Hurricane Sandy, 
for example, on how long forbearance will be of foreclosures, 
what type of forbearance we will be offering, so that there is 
consistent information. The more we can standardize those 
things--we made a lot of progress on this--the more somebody 
who is in the field, whether it is a HUD person or a private 
sector person, can say, ``Here is the rule. It applies across 
the board,'' as opposed to, well, depending on what side of the 
street you are on or what lender you have, you are going to get 
different answers.
    So this is not just a question for sort of standardization 
across government. It is also one that we are working on 
through the task force to try to get consistency in the 
private----
    Senator Coburn. But the eligibility requirements have not 
changed. They did not change. The last disaster we had, the 
eligibility requirements are the same. So why is it so hard to 
get an answer if the eligibility requirements have not changed?
    Mr. Fugate. Well, Senator, I would like to talk 
specifically about what those issues are. I think there are two 
times when local officials have hired contractors, and based 
upon my conversations, they have hired contractors because of 
the workload issue, that they need additional staff because 
they are having to process literally hundreds of thousands, if 
not millions of dollars, and they just are not staffed for 
that. So they hire consultants to provide the staffing for 
that. It is when they have to hire consultants because of the 
complexity of the program. So it is a balance between 
simplifying the program without undoing or necessarily 
incurring increasing risk of waste and fraud. It is to maintain 
the consistency and the answers, but also the eligibility.
    And I think it also comes back to those communities that 
had gone through previous disasters have greater experience. 
Oftentimes they are hiring the consultants to provide staffing. 
So the issue is: What are the specifics that are requiring the 
contractors to come in to answer questions on program 
eligibility? And is it because they are not familiar with the 
program and are looking for assistance or because the program 
has become so complex it requires that?
    I think the answer is a blend of that, and I am not going 
to deny that it is complex.
    Senator Coburn. All right.
    Mr. Fugate. But I want to work toward that solution.
    Senator Coburn. I am just about out of time. I want to 
followup on one thing that Senator Johnson talked about. If you 
are in the Hurricane Sandy disaster area and you are not going 
to find out until July of this year what the floodplain map is, 
what are you supposed to do for your home?
    Mr. Fugate. Senator, except in a couple of cases, most of 
the advisory based flood elevation maps are being published. 
They are being updated as the traditional data. Probably the 
biggest change will be in some of the tidal backwater areas 
where it may reduce the vulnerability zone, which would change 
construction, but the elevation requirements are not 
significantly changing. The question is: Would we see these go 
higher? And the answer is: Based upon our data, no. At best, 
what the updated maps will show is maybe less area. But in any 
case, building to those levels would ensure that you would not 
risk the preferred rate for your insurance premium and would 
also mitigate future storm damage.
    Senator Coburn. So could a homeowner in one of those flood-
prone areas take away from this hearing today that, based on 
the maps we have today, if they built to that, they are not 
going to have their premium adjusted upward because they did 
not follow a new flood zone map?
    Mr. Fugate. As long as it is areas where we have the most 
current advisory maps. There are some areas----
    Senator Coburn. Do all these people know that? I mean, do 
they know what is the most current versus what is not? In other 
words, how do we get it going faster based on this real 
limitation of not knowing what the requirements are?
    Secretary Donovan. Senator, if I could just--one of the 
things the task force has been doing, working with FEMA, is 
exactly what you are describing. I think it is one of the real 
successes of this, that FEMA was able to accelerate the process 
of those new maps being created, put them out publicly. They 
are now available across all of the State of New Jersey. 
Governor Christie has adopted those new maps, plus a foot, for 
the entire State for rebuilding. And there are meetings going 
on across the State with the task force and FEMA personnel to 
inform citizens about what those new standards are.
    Is it perfect? Can we say that there are not going to be 
some revisions in the months to come? No, because, obviously, 
if there is feedback from local communities that we have gotten 
it wrong or that things have changed, we ought to incorporate 
that. But this is a vast improvement to what we have had before 
where these new maps are out very quickly----
    Senator Coburn. Yes, but it is highly unlikely that they 
are going to ask you to raise it. They are going to ask you to 
lower it, the local communities, if they think you have gotten 
it wrong. So my question to both of you is: Can anybody in New 
Jersey and New York and all the rest of the areas that were 
affected, based on what is out there now, start rebuilding 
based on what is out there now? And, can you assure them that, 
following what is out there now, they are not going to get 
dinged in their insurance?
    Mr. Fugate. Senator, do you want me to say that for every 
household or for----
    Senator Coburn. Yes, sir I do.
    Mr. Fugate. The answer is you cannot say that for every 
household.
    Senator Coburn. OK, and that is an important thing, because 
that creates a slowdown in the rebuilding and response to 
Hurricane Sandy, because people are not going to put themselves 
at risk if they do not know what the requirements are. What we 
ought to do is have a flat-out statement from you all that says 
if you are doing it based on what is out there now, we are not 
going to come back and ding you in the future. If we have to 
readjust rates again and then we have another storm, then we 
will. You ought to give them some certainty as to what the 
rules are. Do you understand my point? I think there are a lot 
of people waiting, from what we have heard, there are a lot of 
people waiting to do things based on floodplain maps.
    Secretary Donovan. I will----
    Senator Coburn. Do you disagree that is not happening?
    Secretary Donovan. I do not believe that is what is holding 
people up from rebuilding. The more significant issues that we 
have heard have been in making sure that payments are getting 
to families and, frankly, being able to get the supplemental 
funding, once it was passed by Congress. We are now moving very 
quickly to get that out. But I have not heard that uncertainty 
about the flood maps being the issue holding folks back. And, 
again, this may not be----
    Senator Coburn. Well, the investigators have heard exactly 
that over, and over, and over again. So maybe we need to direct 
those people to you so you all can hear it. But we have heard 
it over, and over, and over again.
    And I am way past my time. I am sorry.
    Chairman Carper. That is OK. I think that is a very good 
idea, to make sure we followup and do that. OK. Thanks.
    Dr. Coburn and I, in restructuring the Subcommittees of 
this Committee, have created a famous Subcommittee that focuses 
on FEMA and emergency response. We are fortunate to have a 
former mayor of Anchorage, the Senator from Alaska, to chair 
that Subcommittee, and his Ranking Republican Member of that 
Subcommittee will be Rand Paul from Kentucky. We are delighted 
you are willing to take this on, and in the future, I think 
hearings of this nature will be done at the Subcommittee level, 
but this one for the lead-off, we wanted to do it at the full 
Committee level.
    So, Senator Begich, you are recognized. Thanks.

              OPENING STATEMENT OF SENATOR BEGICH

    Senator Begich. Thank you very much, Mr. Chairman, and I do 
look forward to the opportunity to continue to work on these 
issues around emergency preparedness, and my experience as a 
former mayor gives me some on-the-ground experience dealing 
with FEMA and emergency preparedness and other issues.
    First I want to say, Administrator Fugate, thank you very 
much for one provision that was in the Hurricane Sandy 
appropriation package that allows now federally recognized 
Native American/Alaska Native tribes to actually directly 
request from the President in an emergency disaster. We think 
this is a huge plus, and we are hearing positive things from 
folks back in Alaska about how this gives them some opportunity 
to recognize and not wait for State bureaucracy. To be frank 
with you, in a couple disasters it has taken the State too darn 
long to get an answer, and the people on the ground were 
feeling the pain. So, first, thank you for having that in the 
package.
    But I would ask, I know you are working through the 
regulatory process now. What is your timetable to get that into 
play? And the reason I say this is we are moving into our 
disaster time. This is when, if there is going to be a 
disaster, between now and October is when we kind of see these 
things occurring. So what is your timetable on putting those 
regulations in place and giving some consultation to the tribes 
to know how this will work?
    Mr. Fugate. Well, thanks to the Senate and to the House for 
providing that provision. We have already implemented it. Based 
upon the statutory change, we are currently using the 
provisions we use for States to determine that. There have been 
two requests and two Presidential disaster declarations already 
issued, one for the Eastern Band of the Cherokee Indians in 
North Carolina and one for the Navajo Nation.
    We are right now entering into a consultation process to 
begin rule development, but we did not want to deny tribal 
governments the opportunity to make their requests.
    Senator Begich. So you are doing it simultaneously, 
basically?
    Mr. Fugate. Yes, sir.
    Senator Begich. That is fantastic.
    Mr. Fugate. We are doing this as a pilot. The consideration 
is, though, many tribal governments based upon the current 
rules, would not have the resources to manage that. So we 
recognize self-determination. The tribal governments may elect 
to request directly from the President if they have the 
capability to manage a disaster. If not, they can still go with 
the State and they will still receive disaster assistance. It 
is not predetermined, but it is self-determination for a 
sovereign nation to determine how they would like to request 
and receive disaster assistance.
    Senator Begich. Fantastic. Thank you for that.
    Second--and this is my experience, again, as mayor--one of 
the things we did, we recognized--and no disrespect to FEMA. We 
did not want to do the programs where we had maybe Homeland 
Security, FEMA, or whatever agency would assist us in this and 
storing food and products and so forth. I think it might have 
been one of the first. It was after Hurricane Katrina. We did 
an agreement with companies like Home Depot, Sam's, and others 
where they are our stock house. We have an agreement where for 
the first 72 hours, certain stock keeping units (SKUs) that we 
have listed out with the products are not able to be purchased 
by the general public so we can determine if--for example, 
plywood is a great example where people will come in, buy 
everything, and then resell at a very high price. So what we 
did is we created a system that the types of emergency products 
that we needed in a case of emergency would be locked out from 
purchase for 72 hours until we gave an OK to move it.
    We think this has been very successful. It costs us 
nothing. It was just civic responsibility. We did not have to 
put a fee on it or anything. I will say this because our school 
district decided to get big old vans and load them up with 
stuff and put them at every school site, which to me is a total 
waste. A lot of money, then you have got to rotate that 
inventory, and it just does not make sense when we have got 
huge warehouses that have a better understanding of logistics 
than any Federal agency will ever have.
    So tell me how you partner with the private sector about 
ideas like this, are you exploring them?
    Mr. Fugate. Yes, sir, Senator, this was actually something 
I experienced in Florida under the leadership of Governor Bush. 
We found ourselves competing with the private sector at 
something they do better than us.
    Senator Begich. That is right.
    Mr. Fugate. So the goal was to quit competing with the 
private sector and look at how we bring them onto the team and 
complement where there are gaps. We currently have a Business 
Emergency Operations Center where we work with the major 
corporations. Part of what we track is where stores are open. 
If we know stores are open, we know those are areas that most 
likely do not need bulk supplies. They may need some tailored 
equipment, but bulk distribution would be counterproductive. We 
focus on the areas where the stores would not be open, and we 
work with the industries on what supply chain issues are going 
to occur.
    Our experience tells us there are some things that make 
sense to store, certain durable goods and certain consumable 
items that oftentimes in the first 24 to 48 hours are the 
hardest things to get into an area. But we also recognize that 
the private sector needs to have a seat at the table. Much of 
the planning has always been what I call ``government 
centric.''
    Senator Begich. Right.
    Mr. Fugate. And ignored what the private sector was already 
doing.
    Senator Begich. Can you on that point--and you do not have 
to do it now, and maybe we can have a further discussion later. 
But I would like to get some additional information from you on 
those relationships and how they are doing.
    I give the Anchorage example, the school district, because 
we have three Sam's, we have four Home Depots, and we have more 
concentration of bulk supply in Anchorage, but yet now we are 
doing these things that they had to get a grant from somebody, 
and I just want to understand a little more of this. So if you 
could prepare something or at least whatever you have that you 
can share with us.
    Mr. Fugate. I would be more than willing to, Senator.
    Senator Begich. Let me jump, only because of time 
limitations here, to Secretary Donovan. Thank you very much for 
being here. Always good to see you.
    Secretary Donovan. Thank you.
    Senator Begich. When you visited Alaska some time ago, we 
appreciated it. Let me ask you, you are doing the task force on 
Hurricane Sandy. Out of that, will you derive ideas that will 
say here is the list of structural changes we need, maybe in 
FEMA or whatever other agency? Is that part of the goal of that 
task force other than just making sure it all works well?
    Secretary Donovan. Absolutely. So we are required to 
deliver a report to the President by August 2. One of the 
pieces of that report would include recommendations for how to 
improve not response, but longer-term recovery going forward. 
And that might include structural changes to the Federal 
Government. It also will likely include a set of other types of 
recommendations. Just to give one example, the inability to get 
gasoline in the region was a major problem after the storm.
    Are there things that we could do at the Federal level, but 
also are there sort of model programs that States or localities 
could adopt to deal with situations like that? So that would be 
an example in addition to the structural changes internal to 
the Federal Government that we would be looking at.
    Senator Begich. Will you also look at--and I think Senator 
Coburn was talking a little bit about it, but to expand on 
this--one of the issues you always hear is how long it takes 
from one point of entry into the system for an individual and 
then how they can get their resources delivered to them, 
whether they be monetary or otherwise. Are you going to look at 
logistics and system issues, gas was one example, but 
throughout the whole system?
    Secretary Donovan. Absolutely. Let me give you one example 
that we have already done. The Small Business Administration 
has the authority after a storm to provide loans to small 
businesses.
    Senator Begich. Right.
    Secretary Donovan. But what we have typically found in 
Mississippi and a range of other places is that there are a set 
of businesses where a loan does not work for them because of 
the loss of income for some temporary period of time. So CDBG 
typically provides grants to local governments, to States and 
locals, that they then set up to help small businesses.
    One of the things that we have done as the task force is to 
take all the data that we get from SBA of folks who applied, 
businesses that applied but were not eligible for loans. We 
have provided that information to the States and the locals so 
that they do not have to go back out and find these businesses 
and do not have to re-underwrite--go through the paperwork 
again that they have done the first time. So that is a benefit 
to small businesses, it is a benefit to the agencies, and it 
will get money to those businesses faster and at lower cost.
    Senator Begich. Very good. Let me end on this question. I 
am not sure who mentioned it in their opening statement, but 
the issue we always hear about FEMA dollars replacing in the 
current location after something is destroyed, but the Corps--
and I feel so bad, Ms. Darcy. No one is asking you questions, 
at least, but maybe that is good.
    Ms. Darcy. Do not feel badly. [Laughter.]
    Senator Begich. Maybe that is good. I do not know. But, on 
the one hand, the Corps might say, if you keep rebuilding in 
the same location, you are going to have the same problem. But 
FEMA has limitations. It just seems our goal in this big 
picture is disaster relief, do not repeat the mistake, maybe 
systematically or structurally.
    Will you be, in your work through Hurricane Sandy, looking 
at that broader picture? Because I tell you, it is the most 
frustrating thing to hear. I hate hearing it, actually.
    Secretary Donovan. Yes, and this drove us crazy in the 
longer-term rebuilding in Hurricane Katrina and a range of 
other areas. So let me just take an example of exactly what you 
are talking about.
    One of the things that Congress did in this supplemental 
that was terrific was give FEMA more authority to say do not 
just rebuild exactly what was there before----
    Senator Begich. Right, mitigate.
    Secretary Donovan. Mitigate. But the funding that FEMA has 
will not necessarily pay for more than the cost to just 
rebuild.
    Senator Begich. Right.
    Secretary Donovan. And so what we are going to see with 
FEMA projects and with Army Corps projects is that CDBG will 
supplement those other funding sources where local governments 
are making a choice, no, we should build back stronger, it is 
going to cost a little more money, it will pay for itself 
through mitigation; but we are going to have to blend those 
funding sources in ways that has been a real problem in the 
past.
    So you gave us authority not to require a duplicate 
environmental. It makes perfect sense.
    Senator Begich. Right.
    Secretary Donovan. We are now implementing that. We are 
looking at other ways that we can basically streamline using 
different pots of money for the same project to make it as 
efficient and quick as possible, and those models will be 
useful in Hurricane Sandy, but also for future disasters, we 
will have a sort of template for the way to bring those funds 
together in as seamless a way as possible.
    Senator Begich. Very good. Let me end on that to say, Ms. 
Darcy, see that, you did not have to answer the question. That 
is not bad.
    Mr. Secretary, thank you. I will be very anxious--and 
maybe, Mr. Chairman, as we move forward on these issues, as you 
finish your work there, at least start preparing some of these 
recommendations, maybe within our Subcommittee we will have 
some further discussions about what is the next step to make 
sure it is more seamless and less complicated for the agencies, 
but also the recipients who are coming in on the front end.
    Secretary Donovan. Amen.
    Senator Begich. Thank you all very much.
    Chairman Carper. Before I recognize Senator Levin, let me 
just say, Senator Begich, and you are the Chair of the FEMA 
Subcommittee and have Rand Paul as Ranking Member. Dr. Coburn's 
staff has done some good investigative work up there northwards 
of where I live, and I would just urge that there be a good 
exchange of information between your staff as you staff up and 
the work that has been done by his investigators.
    Senator Begich. I look forward to it.
    Chairman Carper. Good. Thank you.
    Senator Levin, welcome.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you very much, Mr. Chairman, and let 
me welcome our witnesses as well.
    Hurricane Sandy, incredibly enough, did some damage not 
only where it was the most visible on the east coast but in the 
Great Lakes as well. The destructive forces were so huge that 
they caused damage to breakwaters and created a silting problem 
in harbors on the Great Lakes. Prior, to Hurricane Sandy we had 
already seen massive damage on the Great Lakes. We are in a 
disaster situation because of drought and low water levels. 
Lakes Michigan and Huron set new record lows, hitting more than 
2 feet below their average. This was before Hurricane Sandy's 
problem with the silt in the harbors. This was a drought 
problem that Hurricane Sandy came on top of. Lake Superior is a 
foot below its long-term average. The Army Corps is predicting 
that all of the Great Lakes water levels are going to remain 
below average. This is a huge problem for our freighters that 
are getting stuck in channels and harbors threatened with 
closures, and for boats that are unable now to sail. We have 
apparently seven of our Great Lakes ships, these so-called 
lakers, which are 1,000 feet long, that are not going to be 
able to sail this summer.
    So the damage of Hurricane Sandy is relevant to us. 
Compared to the other damage that Hurricane Sandy created, this 
seems small. But, if you are trying to do commerce in our Great 
Lakes harbors and those harbors cannot function, it is a big 
deal for you.
    Assistant Secretary Darcy, we got an e-mail this morning 
saying that of the $18 million estimated damage from Hurricane 
Sandy, $5 million is going to be directed to Great Lakes 
projects which were damaged as a result of Hurricane Sandy. Did 
I read that e-mail correctly?
    Ms. Darcy. Senator, my staff informs me that today we will 
be providing $19 million of supplemental money for----
    Senator Levin. OK, because I know it was 18 to 19 all 
together, so that is very good news, and we thank you for that.
    The other questions that I have, if I have--yes, I guess I 
have at least another minute or two--got to the question of 
whether or not the Stafford Act allows for support where 
drought is the cause of the problem. So I guess, Mr. Fugate, I 
would ask you that question.
    Mr. Fugate. Senator, having been in a State that dealt with 
droughts and looked at the Stafford Act at that time, and now 
being the Administrator of FEMA, drought in itself would not 
necessarily warrant a Stafford Act declaration. You would have 
to look at the consequences. Since most of the drought 
consequences are economic, the Stafford Act does not address 
economic losses. It addresses uninsured losses that are the 
responsibility of State and local governments to pay for.
    So when we have looked at this, it really comes back to 
whether or not there is an emergency to this that is not 
economic, such as a failure of a major water system that may 
require emergency supplemental assistance for drinking water. 
Or is this causing physical damage or other types of loss that 
are not economic in nature but are damaged due to the drought 
that would warrant a declaration based upon the State's 
impacts?
    In looking at this, we think the thing we see most often 
with droughts, is the symptom of droughts which is wildfires. 
We worked with the U.S. Department of Agriculture on this 
looking at drought last year. We provide elements of the 
National Recovery Framework to support drought recovery. But 
the Stafford Act itself does not address what is usually the 
underlying issue, which is the economic impacts of drought 
versus physical damages that are uninsured and may require 
additional taxpayer support.
    Senator Levin. And presumably that now is within the 
jurisdiction of the Department of Agriculture? Is that where it 
comes?
    Mr. Fugate. The jurisdiction would be based upon the 
programs. Agriculture, because of the agricultural droughts, 
has had a big lead, but there are other Federal programs that 
have support roles, such as Interior and others for Federal 
lands and water management, and the Corps of Engineers. So, 
again, using that National Recovery Framework, we knew States 
were having to weave through all of the acronym soup of the 
Federal Government looking at drought-related issues. But when 
it came back to the Stafford Act, unless we have physical 
losses that were uninsured, we think that the primary role of 
the Stafford Act may be an emergency declaration if you had a 
critical water system failure, but that the economic losses are 
not addressed in the Stafford Act.
    Senator Levin. Thank you. Thank you all.
    Thank you, Mr. Chairman.
    Chairman Carper. You bet.
    I am going to ask a couple of questions for the whole panel 
and start with you, Assistant Secretary Darcy, if you would. We 
talked a little bit earlier about whether or not there are 
sufficient resources at the Federal, State, and local 
government level in order to make the recovery successful. We 
talked about how do we measure success, and I want to just ask 
you to think about what other tools you need in your tool box, 
each of you; it could be money, it could be people, it could be 
regulatory relief, it could be regulations. What other tools do 
you need in your tool box to enable us to get closer to the 
success we want?
    Ms. Darcy. We have a pretty good tool box; however, 
oftentimes in a recovery, there needs to be additional 
flexibility. In the response, as opposed to the recovery, we 
often have certain situations where we can use what we have 
planned for a recovery response, to prepare us to do some 
things a little quicker than we would ordinarily. But in 
recovery, we need some additional flexibility.
    One of the things that we are finding in response to this 
Superstorm Sandy, through the work of the task force, we see 
the more that we can coordinate our efforts, such as a CDBG 
grant going to a community where there is a storm damage 
reduction project that needs to be rebuilt. I think the 
mechanisms that Secretary Donovan is talking about are being 
developed through the work of this task force. These mechanisms 
are the kinds of things that would help us to be able to 
recover more quickly.
    Chairman Carper. All right. Thank you. Secretary Donovan.
    Secretary Donovan. Yes, I will just build on that, and I 
want to recognize that we are still very much in the middle of 
this and, really for the first time ever, fully implementing 
the National Disaster Recovery Framework. So I want to make 
sure we come back to you this summer when we are issuing the 
report with a fuller answer to that. There are lots of things, 
costs and other things, we do not yet know.
    Having said that, I think one of the most important things 
that Congress did is to make improvements in the Community 
Development Block Grant program with this supplemental, 
flexibility--for example, I talked earlier about not to having 
to do duplicate environmentals, or a range of other things, 
will make it easier to use with other funds.
    However, I do think that going beyond that to create a kind 
of permanent program for a disaster block grant would make 
sense. There are still problems and issues with using kind of 
disaster by disaster, creating supplementals using CDBG that do 
not have a consistent structure that is set up to deal with 
disasters. And we would be happy to provide you more specifics 
on what exactly those are.
    Again, a number of those, particularly led by Senator 
Landrieu, were included this time. But I think there are others 
that we could continue to work on to improve the CDBG program 
for these cases.
    Chairman Carper. All right. Thanks.
    Administrator Fugate, but just very briefly, if you could 
respond.
    Mr. Fugate. There are a couple things. One, getting back to 
Senator Coburn. Unless I am prohibited by legislation, I want 
to look at what you recommended about what we can provide, if 
you used the advisory-based flood map, best available data, 
there would not be future penalties. I am not sure if I can do 
that with the reauthorization, but I will review that.
    Chairman Carper. Let us know what you find out.
    Mr. Fugate. The second thing is that probably the biggest 
tool that I am still wrestling with, which goes back to Senator 
Johnson and Senator Coburn, has raised this issue with me about 
threshold of disaster declarations, do we have the right 
balance point for the risk that the Nation accepts? And is that 
transfer to the Federal taxpayer disproportionate to what local 
and State officials should be responsible for? And I think, 
again, in the Flood Insurance Program, the key piece of that is 
becoming that we want to make sure new growth and new 
construction is not subsidized. But in doing that, we have 
created a second situation where there is no affordability 
built into that for pre-existing residents. My fear is the 
backlash there may thwart our efforts to continue to build in 
the future, an unsubsidized risk beyond which the taxpayer 
benefits. And so affordability I think may be an issue that 
thwarts our attempts in trying to make sure we do not transfer 
risk to the taxpayer without benefit for future development, 
given the enormous amount of homes that currently exist in 
floodplains. As the rates go up, we are going to see a lot of 
pressure to do something about that.
    But, again, I think that we have to build better 
incentives. This is a shared responsibility. It is not solely 
the burden of the Federal Government to provide all assistance 
in disasters, local and State governments have roles and 
responsibilities as well as the private sector and individuals. 
And if the thresholds for disasters are too low, there is not 
much incentive for States to build that capability to reduce 
future losses.
    You directed us in the Sandy Recovery Improvement Act to 
review the General Accountability Office reports on thresholds 
for disaster declarations. We have undertaken that. We have 
looked at some of the things we would do that would not require 
legislation, Senator Coburn. There are some things I think may 
actually increase a better understanding of States as to what 
their threshold responsibilities will be versus the current 
system, which in many cases we are seeing a lot of disasters 
declared that you raise questions about whether the State could 
manage it.
    I want to make sure that in the rulemaking and consultation 
process we are moving that, so States understand better what 
their responsibilities are and when is it appropriate for the 
Federal taxpayer to support those recoveries. Hurricane Sandy 
is obviously one of those shared responsibilities. But it is 
getting that right so that we do not continue to transfer risk 
to the taxpayer without understanding the benefits and the 
impetus to reduce that risk through mitigation.
    Flood insurance, building codes, and land use management 
are probably the three biggest tools in our arsenal, but only 
one of those do we have direct control over, and that is flood 
insurance and the regulations. Building codes and land use 
management is often a local decision that has even greater 
influence on the survivability and resiliency of our 
communities.
    Chairman Carper. Let me just followup on this notion of 
shared responsibility. It is something I talk about a lot. I am 
pleased to hear that this panel is doing the same thing.
    Just an anecdote. I went to the high school basketball 
tournament in our State this last weekend at the University of 
Delaware. I was talking with a really good high school 
basketball coach, and we were talking about who were the best 
players--the best shooter, the best passer, the best rebounder, 
the best dribbler--who were the best players. And he said 
something to me that I think is really relevant here. He said, 
``The best player is not necessarily the one that passes best, 
shoots best, rebounds best. The best player is the one who 
makes everybody else on the team better.''
    What can we be doing at the Federal level to make the rest 
of this team, including State and local governments, including 
emergency responders, including insurers, what can we do, what 
should we be doing in addition to what we have already done to 
make everybody else better so we can be more successful?
    Jo-Ellen, do you want to go first, please?
    Ms. Darcy. Having the support from the Congress for us to 
be able to, in recovery, move out quickly as well as provide 
the support of what is needed for the long term. Oftentimes 
what we are looking for in a recovery response is to get 
everything back exactly the way it was today. We need the 
support to be able to take a long-term view on what we should 
be doing, we especially want to make a Federal investment that 
is smart; to make a smart expenditure of the dollars that the 
Congress is going to give us. So I think, to have your support 
and to look long-term at how we can be better at storm damage 
reduction, recovery, and need less recovery and disaster 
response.
    Chairman Carper. Thank you. Mr. Secretary.
    Secretary Donovan. It is a great question, and I would just 
go back to--I do think on CDBG, and in a range of other areas, 
permanently authorizing programs that are more flexible, that 
really do get this balance right, as Craig has said, between 
private responsibilities and public responsibilities is 
important.
    The other thing I think I would say from our experience, 
not just here but over the last 4 years across the country, is 
that planning matters. And we spend an enormous amount of time 
and effort and public cost recuperating from these disasters, 
where smaller investments up front, both in mitigation--and I 
mean the infrastructure there--but also in getting localities 
and States ready for these kinds of events.
    I happen to have been involved in planning for exactly this 
kind of disaster in New York City when I was Housing 
Commissioner there, and I will tell you, not just the 
evacuation plans but a lot of the other longer-term mitigation 
work that was put in place has made a difference. There is lots 
more that could have been done, but I think we could do more as 
a Nation to help localities and States prepare for these kind 
of disasters and to do smart things in advance.
    Chairman Carper. OK. Good.
    Craig, if you could respond just briefly, I want to yield 
to Senator Johnson and then back to Dr. Coburn. Please, go 
ahead.
    Mr. Fugate. Ask the hard questions, Mr. Chairman. I think 
as Federal agencies we dread hearings, but I think the reality 
is that it is in the process of exercising the healthy debate 
of how we get better that forces us to do the things that 
oftentimes may not be easy, but it pushes us to make those 
changes.
    Chairman Carper. Good. Dr. Coburn and I, as I said, had a 
conversation when we assumed our new responsibilities in 
leading this Committee that we were going to focus a lot on 
oversight. And it is interesting to me how often that oversight 
is welcomed. But there is that old adage, ``Be careful what you 
ask for.'' You are going to get it. Thank you. [Laughter.]
    Thank you. Mr. Johnson.
    Senator Johnson. I hope you think we have been pretty kind 
and gentle on you. I think these are some pretty legitimate 
questions.
    I would like to go back to the public-private and the 
pricing of risk. I realize it is too early on Hurricane Sandy, 
but do we have the final figures on Hurricane Katrina in terms 
of how much was the total cost of that disaster, how much was 
borne by the Federal Government, State governments, and private 
insurance?
    Mr. Fugate. Off the top of my head, Senator, I think it may 
be there, but I do not have it at my fingertips. We will 
provide that. I will put that together and get you that. And I 
am not sure it is a complete story because what I keep finding 
is, since FEMA only looks at what were the FEMA assistance 
provided, we can look at what other Federal agencies provided. 
But the hard number to get is what the private sector went 
through.
    Senator Johnson. Yes.
    Mr. Fugate. Because if it was not insured, it is not always 
easy to get what that number was. But I think on the Federal 
dollars spent, we have that. I do not know if I am comfortable 
with what the private sector has.
    Senator Johnson. I would be interested in just private 
insurance. I mean, forget uninsured, but, we will submit that 
for the record.
    Mr. Fugate. And part of that is still contested; 
particularly in the wind insurance arena, that was heavily 
contested and is still being litigated over the differences 
between flood damage, wind damage, when the homes were impacted 
by both hazards.
    Senator Johnson. You administer the Flood Program, so, 
again, if you do not have these figures at your fingertips, I 
understand. But to what extent has the Flood Program been 
underfunded year after year? Can you kind of go back, starting 
with this year versus last year versus as far as you can go 
back?
    Mr. Fugate. Well, again, we sought an additional borrowing 
authority of $9 billion to cover potential losses for Hurricane 
Sandy as well as provide a cap going into the rest of this 
year. We still owed a little under $18 billion that we had 
borrowed from the Treasury from payouts from Hurricane Katrina. 
Those are outliers, and generally the program, on what you see 
as a typical year, provides enough revenue to pay those out.
    Senator Johnson. Now, is that through premiums, or is that 
also from Federal funding?
    Mr. Fugate. That is from premiums.
    Senator Johnson. Just from premiums.
    Mr. Fugate. But the problem is it has undervalued the risk, 
and that is why, again, in moving toward more actuarially 
based, particularly new growth and new construction, we were 
subsidizing risk below the actual cost of those impacts. And so 
our exposure is far greater than the typical year-to-year 
impacts. So outliers such as Hurricanes Katrina and Sandy 
produced tremendous impacts that result in us having to borrow 
additional funds. But those funds and the premiums themselves 
are what drives the payments and the borrowing authority.
    Senator Johnson. If it was a private insurance program, to 
what extent do you think it is underfunded? What do you think a 
private insurer would actually have in terms of reserves for 
potential losses?
    Mr. Fugate. Private insurance refuses to write flood 
insurance because they cannot capitalize the risk.
    Senator Johnson. And I guess that is somewhat the problem 
there, isn't it? Do you have any feel for what that amount 
would be? Would it be $50 billion? Would it be $150 billion?
    Mr. Fugate. You are probably talking levels that are in 
excess of half a billion or greater, depending upon the 
exposure and what risk they will write. But in looking at----
    Senator Johnson. Half a billion or half a trillion?
    Mr. Fugate. Half a trillion. Sorry, sir.
    Senator Johnson. OK.
    Mr. Fugate. Just knowing the exposure in certain areas, it 
really comes back to if they were able to write policies in 
less risky areas where there were strong building codes and 
mitigation, they may be getting to that point now where there 
may be opportunities where it would make sense to offer 
commercial insurance. But in far too many areas, their concern 
is that they cannot leverage borrowing authority, reinsurance, 
and apply this nationally on a State-by-State basis given the 
risk.
    So, I mean, one of my earlier stated goals was: could we 
privatize or privatize elements of the Flood Insurance Program, 
create the incentive that the commercial industry would write 
that so you would not have bifurcated policies, you would have 
all-hazard policies, instead of one for wind, one for flood, 
one for whatever.
    Those conversations, although they have taken place, have 
not resulted in industry seeing this as an opportunity to 
return a sufficient return on their investments. And as I tell 
people, it should be a sign when the commercial industry cannot 
figure out how to manage this risk and make money, the Federal 
Government--that we are probably undervaluing that risk and 
have a greater exposure. And so part of the reauthorization of 
the Stafford Act is to start moving toward more actuarially 
sound.
    But the true test when we are actuarially sound is when 
people realize they can write flood insurance and make money 
from that and begin writing it and offering it commercially 
rather than just as a federally backed program.
    Senator Johnson. I understand your point that if you start 
writing policies that are more actuarially sound, how do you 
grandfather the neighbor right next door that did not--so how 
do you start moving that direction then? What is the process?
    Mr. Fugate. Well, the rulemaking will take place--we have 
already taken all of the secondary homes. They went to full 
actuarially rate this year, so they are getting their renewal 
policies, they are getting their initial bills. For the other 
policies that are not secondary homes, we are going into 
rulemaking. We are looking at the rulemaking process and we 
expect to start those comments in the next couple of months. 
Those rules would go in effect by fall and it would start the 
next iteration of those policies as they move to full 
actuarially.
    If we were able to look at affordability, we would very 
much want to limit that to only those that are existing or 
primary homeowners, not new construction, and look at a means 
test versus what we have done before, which was giving entire 
communities a phased-in, a preferred rate as their risk had 
changed. We want to make sure that it is means tested so that 
we are not continuing to subsidize risk except where it makes 
sense for affordability. But the hard part here is you do not 
want to create an incentive that says: if I build something new 
or I sell my home, I am giving that affordability to the next 
buyer without them accepting that risk.
    Senator Johnson. That is the problem. When you bring in the 
concept of affordability, you are basically subsidizing the 
risk, and you are incentivizing people to build where, 
truthfully, unless they can afford to do it, they probably 
should not be building, and you are just putting the American 
taxpayer on the hook again in the same situation.
    Secretary Donovan. I do think it is a very important 
distinction Craig has made between existing homeowners until 
you have a transaction on that versus new construction. And 
this is where--flood insurance is a critical lever, and I do 
think that these new maps, as I said before, are a huge step 
forward. The problem is, if they are not adopted, not just for 
flood insurance but in a range of other areas, we will not make 
as much progress.
    So one of the critical things I think we are trying to do 
in the CDBG, in other investments we are going to be making in 
the region for rebuilding, anytime you have a substantial 
enough level of damage, we should be requiring that they move 
to those new maps, including where we are issuing a new 
mortgage in those areas. And so those are all, in addition to 
the Flood Insurance Program, other levers that we have in the 
Hurricane Sandy rebuilding process that can go to the exact 
same goal that you are talking about.
    Senator Johnson. Just one quick question. As you are trying 
to make that distinction between new and recovered 
construction, are we doing that across the board, all coastal 
areas, all floodplains, or just strictly in the Hurricane Sandy 
area or each particular disaster area?
    Mr. Fugate. Senator Johnson, as the NFIP was reauthorized, 
there is no affordability. So as we go through the rules, what 
will happen over the next several years is we adjust the rules 
to reflect actuarially based for all. We did it for the 
secondary homes. That was a clear direction. For the other 
policies, we are having to do that through rules. We are going 
to look at about a 3-year phase-in. So after 3 years, no matter 
where you are, you are going to be paying the full cost of that 
insurance. Our concern is, there is going to be tremendous 
pushback on low-income people that live in floodplains that are 
not coastal, that are going to be faced with tremendous bills, 
which potentially could force them out of their homes. Knowing 
that there will be pushback, how do we mitigate that--if that 
is even possible, because currently we do not have that 
authority. But, more importantly, how do we ensure whatever we 
do for that does not translate into subsidizing future risk 
when a transaction takes place or somebody builds new?
    But my concern is if the affordability piece is not 
addressed in this timeframe, there will be tremendous pressure 
to reduce those costs, and, unfortunately, historically we have 
done that in a way that did not keep future growth at an 
actuarially sound rate.
    Senator Johnson. Thanks a lot.
    Secretary Donovan. And I would echo Craig's point here. As 
the lead Federal official now dealing with the Governors, the 
Mayors, the pressure is building on this affordability 
question, and there is some, I think, political risk that it 
gets reversed or that localities would not adopt the maps 
there. There are other things that can happen that could set us 
back.
    I would also say, unlike flood insurance, we do not have 
Federal standards at this point that would take the same things 
we are trying to do for Hurricane Sandy and apply them 
nationally. That is one of the things that in our report to the 
President we will be making recommendations about. I see this 
as a testing ground outside of the Flood Insurance Program for 
how we can put these measures in place nationally that will 
avoid this kind of incentive that you have talked about to 
build in the wrong places.
    Senator Johnson. Thanks.
    Chairman Carper. Dr. Coburn.
    Senator Coburn. I hope you will send us a copy of those 
recommendations.
    Secretary Donovan. Absolutely. In fact, we would love to 
come talk to you about them before we finalize them.
    Senator Coburn. You bet. So far your task force has spent a 
couple million dollars. Has any of the CDBG money authorized in 
the supplemental been granted?
    Secretary Donovan. We have allocated $5.4----
    Senator Coburn. Has any of it been granted?
    Secretary Donovan. The States have not submitted their 
plans to us yet, and we expect that within the new few weeks, 
we will start seeing allocations.
    Senator Coburn. Let me ask you one question about----
    Secretary Donovan. Senator, there has been about $170 
million that has already been obligated, about $50 million from 
the supplemental that has been disbursed already. So there is 
spending that is happening.
    Senator Coburn. It is starting.
    Secretary Donovan. Yes.
    Senator Coburn. OK. Is the New York City Housing Authority 
likely to receive significant CDBG funding?
    Secretary Donovan. We expect that in the plan we will get 
from New York City, they will propose funding, particularly for 
mitigation measures in the housing authority there.
    Senator Coburn. According to the New York City Comptroller, 
the New York City Housing Authority operation is like an 
onion--I am quoting--``the more you peel back, the more you 
want to cry.''
    I have also read that the New York City Housing Authority 
is sitting on $1 billion right now. I would hope that you would 
take that into consideration. That $1 billion--as well as some 
of the other problems with the New York City Housing Authority. 
That $1 billion should be applied first to these issues before 
we give more CDBG money for the disaster up there.
    Are you at all concerned with how they will spend the 
money--I am talking about the New York City Housing Authority--
given their track record?
    Secretary Donovan. We have actually been looking at this 
issue of the $1 billion that you are talking about. The vast 
majority of that is committed to particular projects that are 
underway. So just to be clear, it is not that there is $1 
billion that is not slated to go to particular projects. I will 
say, however, that we do have some concerns about the speed of 
that spending and the effectiveness, and we will be looking 
very carefully at how they are spending this money.
    Senator Coburn. So they should take note that we are going 
to keep our eye on it.
    The $16 billion for the CDBG block grants, they are not 
just for the Hurricane Sandy area, right? They could be used in 
any of the disaster areas. Do you have any idea what proportion 
of that will be spent in other areas? Kind of like what Senator 
Levin was talking about, the port areas on the Great Lakes and 
some of the other disasters that we have noted.
    Secretary Donovan. So you did give us authority to use it 
for 2011, 2012, and any remaining disasters in 2013.
    Senator Coburn. Right.
    Secretary Donovan. So we will not be fully allocating that 
until we have a better sense of what is happening. But I do 
expect that this week we will send the Appropriations 
Committees allocations for non-Sandy storms and that next week 
we will be announcing those.
    I will tell you that the vast majority of the $16 billion 
will go to the Hurricane Sandy-affected areas, but there will 
be a substantial allocation, I would expect less than $1 
billion, toward those other places.
    Senator Coburn. Good. Director Fugate, if I remember 
correctly--and you can correct me; I may not be right--I think 
there is still $4 billion from Hurricane Katrina that is 
unspent. Do you know the percentage of what has been obligated?
    Mr. Fugate. That would be----
    Senator Coburn. And how many years, 9 years, 8 years?
    Mr. Fugate. Yes, sir. Senator, there are still projects 
that have not been completed. We have been working, as we have 
with the State, to try to get all remaining projects finalized. 
And where there is still dispute, we have an arbitration 
process, but we are trying to get those finished.
    So I would have to get back to you with an exact number, 
but that is something----
    Senator Coburn. If you would, I would appreciate it very 
much.
    Assistant Secretary Darcy, I want to thank you for the 
cooperation of the Corps. We got a load of information last 
night and this morning, so I am going to be submitting multiple 
questions for the record. We see two different ways to handle 
debris cleanup, one going on in New Jersey and one going on in 
New York, and there are a lot of questions about that. I would 
just give you my general note.
    The reason I am so interested in this is I saw the wasted 
money in Hurricane Katrina on debris cleanup, and it was 
atrocious. During Hurricane Katrina, the Corps contracted at 
about $70 a cubic yard, but the guys that were actually doing 
it and hauling it to the dump were making about anywhere from 
$6, $9 to $15 a cubic yard. In other words, the people actually 
doing the work were consuming about 25 percent of what actually 
was allocated, and subcontractors all through that took that 
money and actually did not do anything except organize.
    So we are going to be very interested in following up on 
that. I hope you will take it in good faith. It is not to be 
critical of the Corps, but we think wise spending of that money 
and in a way that is efficient and yet accomplishes the 
purposes is important. So I have a lot of questions. Why do we 
have a dump site for New York 300 miles away from the facility? 
And what are the rules that make us have to go 300 miles when, 
in fact, there are other areas in other States that it could 
have been transferred to?
    In other words, there are a lot of costs based on either 
State rules or city rules or other factors. We want to help you 
figure that out for the next time so that we are not spending 
too much. I think so far we are averaging about $62 a cubic 
yard, and we are 7 or 8 years later on debris cleanup. There is 
a contrast between New York and New Jersey and how it is done. 
We also have the pre-positioned contracts, and the requirement 
to use local contractors and, there is a question of whether or 
not that is efficient for the taxpayer--because basically we 
are paying for it. The Federal Government is paying for debris 
cleanup. We need to look at the controls on it, because we are 
going to pay what they submit. Yet, we have very little 
influence on how they spend that money and whether or not it is 
a clean transaction, and the most efficient and the most 
effective way to get it done. So I hope you will take our 
questions in that light, and we are just going to be good 
stewards with taxpayer money asking these questions.
    Ms. Darcy. I look forward to the questions.
    Senator Coburn. All right. I want to go back to you, 
Administrator Fugate. The Stafford Act says that the Federal 
Government should get involved in disasters when State and 
local capacity is overwhelmed. Right?
    Mr. Fugate. Yes, sir.
    Senator Coburn. And there is no question in Hurricane Sandy 
that happened. Do you believe the per capita damage indicator 
is a good measure to determine whether or not State and local 
capacity is overwhelmed?
    Mr. Fugate. It is a factor that has been accepted, but I do 
not think it is the best tool.
    Senator Coburn. I want to pin you down. Is this per capita 
damage indicator a good measure to determine State and local 
capacity to handle disasters?
    Mr. Fugate. No, sir. It only looks at, on a numeric basis, 
the population of the State and total damages. It looks at 
nothing such as the State's reserves, financing, taxing 
authority. It does not look at the impacts of that disaster. It 
is also clear that the Stafford Act does not require a 
declaration merely because you reached your per capita 
threshold. In fact, there have been recent declarations that 
were denied. Even though they made a numerical mark, it did not 
demonstrate it had exceeded the State capability because no 
life, critical infrastructure, or other issues were involved 
other than economic impacts.
    Senator Coburn. Right. You and I visited in the office 
about the political problems with changing that, and I 
understand that. But we have got to figure out a way to have a 
better assessment. The per capita indicator is $1.37 today, yet 
it has not been changed to account for inflation. There is 
nothing to it. So we have to work together, both with Secretary 
Donovan and you, to figure out how do we really know when to 
apply Federal funding. When are our States overwhelmed? In 
Oklahoma, we are the highest State in the country as far as 
disasters in the last year, but some of those certainly did not 
overwhelm Oklahoma's capability.
    And so we need to figure out together, how we do this more 
effectively to really help States when they are overwhelmed 
versus not helping them when they are not, especially when 
States have a surplus--like Oklahoma has a surplus. We put $600 
million in the bank last year.
    Mr. Fugate. Senator Coburn, as we go through this, again, 
in the Sandy Recovery Improvement Act, you have directed us to 
look at this. We do find a lot of agreement with the general 
accounting. I think we have to really look at what is the 
outcome we are trying to achieve. If it is merely reduce the 
number of disasters being declared, that is one route. I would 
rather take an approach that says we give States some more 
predictable level of a support so they are driven to build that 
capacity.
    Senator Coburn. Right.
    Mr. Fugate. Because ultimately a disaster occurs, somebody 
is paying for it, whether it is a local, State, or Federal 
taxpayer. I think that should be a shared responsibility. But I 
think it should be done in such a way that it incentivizes 
building more capability at the State and local level and 
reducing the cost of disaster response and use that to drive 
that process. But as you point out, the minute you start 
talking about raising the threshold, States are going to be 
very concerned about how that adversely impacts them.
    Senator Coburn. Right.
    Mr. Fugate. But I do not think it is a reason not to look 
at it. But we are going to have to work to look at this as the 
end game of how do we build capacity and a better understanding 
of what the expectations are for State and local response to 
when it becomes a Federal shared----
    Senator Coburn. That is much better said than I did.
    Let me make one other----
    Secretary Donovan. Senator, if I could just add quickly on 
that, I would love to be part of that conversation because CDBG 
by definition is only authorized and appropriated when there is 
a major disaster. We have done a lot of work over the last few 
years to try to focus on a formula--because you give me 
flexibility to determine the formula--that is not just a per 
capita formula. We do use only severe damage. We use 
concentration measures and a range of other things in how we 
determine the formula that could be useful in this----
    Senator Coburn. Did I hear you say that you only get CDBG 
funds based on disasters? We allocated CDBG funds every year.
    Secretary Donovan. The CDBG disaster funds are not 
available in every disaster. Really, typically they only come 
when you have something that overwhelms the State and local 
capacity by definition.
    Senator Coburn. Right. One last question, if I might. We 
authorize I think $9.7 billion into the NFIP, and according to 
my staff--and you correct me if this is not correct--85 percent 
of the claims have been closed to date. Is that correct?
    Mr. Fugate. It has been going up, sir. I think as of 
yesterday we were at 90, 91 percent of all claims----
    Senator Coburn. So we are worried about $6.2 billion or so 
that has been spent?
    Mr. Fugate. Yes, sir.
    Senator Coburn. So if you take that, we overshot a couple 
billion dollars, right? Does it look like that to you?
    Mr. Fugate. It gave us the borrowing authority going into 
the rest of the year.
    Senator Coburn. Right.
    Mr. Fugate. Again, these were borrowed dollars. This was 
not an appropriation.
    Senator Coburn. Right.
    Mr. Fugate. So what this gave us was, we were getting up 
close to our borrowing authority, and with Hurricane Sandy we 
would have reached that and possibly exceeded it and would not 
have been able to service claims.
    Senator Coburn. Got you.
    Mr. Fugate. So we will pay out approximately two-thirds of 
that loan. That will leave us about $3 billion----
    Senator Coburn. About $3 to $5 billion.
    Mr. Fugate. $3 to $5 billion depending upon final payments 
for future disasters. And that is borrowing authority.
    Senator Coburn. Yes. It is not borrowed.
    Mr. Fugate. The way that it is structured is it has to be 
serviced by the claims, and that, again, is a second issue. But 
it is that potential that it raised the borrowing authority for 
the future flooding, knowing that Hurricane Sandy was going to 
take us to our caps that we already had.
    Senator Coburn. Got you. Well, I want to again thank you 
all. This is the way to do oversight. We actually learned a lot 
here today from all of you.
    I would love some promptness in response to these questions 
that we are going to have. My questions for you, Assistant 
Secretary Darcy, may take a little longer because you gave us a 
lot to chew on.
    Ms. Darcy. I gave you a lot of information last night.
    Senator Coburn. You sure did, and they are still going 
through it right now. But a prompt response to the questions 
for the record would really be appreciated so we can continue 
to work on this.
    Ms. Darcy. Thank you.
    Senator Coburn. Mr. Chairman, I thank you.
    Secretary Donovan. Thank you.
    Chairman Carper. You bet. I am going to ask one more 
question, and then I am going to ask Senator Johnson if he 
would like to ask one, and that will probably wrap it up at 
that point. But we expect to be out of here by noon.
    Senator Coburn alluded to how much money was spent down in 
the southeastern part of our country on debris removal, whether 
or not that money was spent effectively. I think most of us 
agree not. Sometimes people ask me, well, why do you talk so 
much about waste, fraud, and abuse? I say it is because there 
is a fair amount of that, and part of our responsibility and 
one of the reasons why we do oversight is to try to reduce that 
wherever we can.
    The Hurricane Sandy supplemental legislation, as you know, 
required the Recovery Accountability and Transparency Board, a 
body that was created to oversee stimulus spending, to develop 
oversight mechanisms that can detect waste, fraud, and abuse 
with regards to Hurricane Sandy funds.
    I wonder if each of you would just very briefly explain how 
you are working with the Oversight Board to try to ensure that 
your program funds, which are limited, are well spent. 
Assistant Secretary Darcy.
    Ms. Darcy. The funding that we are receiving under the 
supplemental? Is that what you are referring to, Senator?
    Chairman Carper. Yes.
    Ms. Darcy. We provide monthly expenditure reports to the 
Appropriations Committees on both sides in order to keep you 
informed as to how funds are being spent. We were very involved 
in Hurricane Katrina and have many lessons learned from what we 
did there and are using that, not only in our engineering, but 
also in our contracting. So I think in each disaster, we 
learned something new, and from this one we are going to find 
out how we can be more expeditious and efficient in our 
contracting response to disasters. We are looking at any other 
improvements we can make, not only through contracting but also 
through re-looking at design criteria we use for the rebuilds 
of some projects.
    Chairman Carper. Good. Thank you. Secretary.
    Secretary Donovan. Senator, the task force has a primary 
role in working with the Recovery Accountability and 
Transparency Board and the IGs of the individual agencies.
    First, we are creating a centralized data system to collect 
all the information on spending, locations, other things for 
the projects, to provide that to--we call them the ``RAT 
Board,'' the Recovery Accountability and Transparency Board--
and also to make sure that we are working with them on the 
internal control plans.
    OMB has essentially designated in advance that this is 
potential high-risk spending. Every agency is required by the 
end of this month, by March 31, to create an enhanced internal 
control plan. We are coordinating with all the agencies on 
producing those plans by the end of the month, and then we will 
be helping to implement those.
    We are also having a regular ongoing meeting with each of 
the IGs and the Recovery Accountability and Transparency Board 
to make sure that there is ongoing communication.
    So those are three ways that the task force is working with 
them regularly.
    Chairman Carper. Good.
    Administrator Fugate, same question. How are you working 
with the Oversight Board to ensure that your program funds are 
well spent?
    Mr. Fugate. The short answer, Mr. Chairman, is we are doing 
it through the Sandy Recovery and Rebuilding Task Force that 
Secretary Donovan is leading. We have an additional requirement 
that you had in the Sandy Recovery Improvement Act for us to 
post our transactions within 24 hours on the website, at 
FEMA.gov. That is being done already. But we are also working 
with Secretary Donovan and the other members of the task force, 
as you said, because many of our programs are touching similar 
projects. We wanted to make sure that all of those projects and 
all the funding that goes to those projects is visible, and we 
are going to use this process to seam it, bring it together.
    The first step was to make sure we had the data fees that 
would support that, so each agency that was funding and 
receiving dollars in the supplemental can show where those 
dollars are being expended, and then we can use this tool to 
display it to you and the public.
    Chairman Carper. OK, thanks.
    Senator Johnson. I got a quick one.
    Chairman Carper. Senator Johnson.
    Senator Johnson. Plus I guess Senator Ayotte is coming 
here, so I will do a little place holding.
    First of all, I do want to say I agree with Senator Coburn. 
I really appreciate your testimony here, and it has really been 
very instructive. And I truly appreciate the fact that you 
really are looking at the Flood Insurance Program and working 
through those very difficult issues of how do we design that 
program so we are not incentivizing uneconomic behavior. Let us 
put it that way.
    But going back to one of the points that Senator Coburn was 
talking about, just in terms of claims processing, answering 
questions, coming from the private sector I am big into 
benchmarking, taking a look at what are the best practices, 
taking a look at my competitors and going, well, if they are 
doing it better than I am, how am I doing then?
    Now, I am not sure it is always true, but you certainly 
hear in the private insurance market, disaster strikes and that 
claim check is issued that next day. Are you looking at the 
private insurance model? Are there things that we can do 
legislatively to make--the bottom line is I think the solution 
here is reduce the complexity. I do not doubt that you are 
dealing with a great deal of complexity. So is there a 
legislative solution looking at a kind of benchmarked approach 
that obviously private insurance companies are pretty concerned 
about the efficiency, the lack of fraud in terms of making the 
payments, in terms of reimbursements. Are you looking at that 
type of model?
    Mr. Fugate. Yes, sir, Senator, and that probably explains 
some of the delays. We use write-your-own companies. We use 
major companies who, although it is a national flood insurance 
policy, they write it, they service it, they adjust it. They 
want to do their due diligence because they know that if they 
have made excessive payments or fraud or waste, we are not 
going to reimburse them. So they do a lot of accounting to make 
sure their adjusters, as that information comes in, they make 
those payouts.
    The second thing is the Flood Insurance Program is not what 
you would normally find as a commercial model in that it is not 
designed to do replacement costs. It is designed primarily to 
make sure that the mortgage is protected and to provide limited 
consumer benefits. So where it is easy for an adjuster to come 
in and say, ``Your home is destroyed. I am going to give you 
replacement value,'' we look at depreciated value. We look at 
servicing the mortgage, and we look at your contents' 
depreciated value.
    Again, the Flood Insurance Program was never designed by 
Congress to be what I would call consumer friendly. It was to 
be a tool to provide insurance that nobody else would provide, 
providing what was essential to protect, essentially the 
mortgage, the lender, and provide some limited benefits to 
content and household for those people that own their homes 
outright. But unlike a traditional policy, we use depreciated 
value. The third parties that write those have to be very 
diligent in making sure as they adjust those, they do the 
depreciated values, because, again, they are subject to audits 
by our IGs if they make excessive payments, and we would seek 
to get reimbursement from them.
    So the process is using the insurance model. However, the 
tool itself is really focused on first-party payee, which is 
generally the lender, depreciated value, not full replacement 
value. And that is part of what has driven to make it as 
affordable while making sure the exposure to the taxpayer is 
not excessive.
    Secretary Donovan. And, Senator, I did host this past 
Friday my second lender roundtable in the region with the four 
largest lenders in the region. We are working with them, as I 
said earlier, to streamline and make consistent the policies 
around disbursements of the flood insurance. What evidence do 
you have to have that the work is done? How much do you hold 
back with the concern that the money may get used for other 
purposes--all of those policies, we are working with them to 
try to get the best practices from the private sector to make 
them consistent.
    Senator Johnson. OK. And based on the fact that this is way 
underfunded, I am not encouraging you to change it to 
replacement value. I understand that. I appreciate the fact 
that this is insurance of last resort, and that is the way it 
should be handled, and I would obviously encourage you to keep 
working on the pricing model so that we reduce the risk.
    Mr. Fugate. The biggest lesson there, sir, is that the pool 
of the adjusters--which are not standard adjusters, they have 
to be specifically trained to do the flood insurance--was a 
limited pool. We were able to work and expand that with the 
private insurers, and that was one of the initial bottlenecks, 
was to get the adjusters out there. So the lesson learned there 
is that pool is not sufficient given the large, dense 
population areas. We are continuing to work with the private 
sector to see how we continue to maintain a larger pool of 
trained adjusters for flood insurance.
    Senator Johnson. OK. Again, thanks for your testimony.
    Thank you, Mr. Chairman.
    Chairman Carper. You bet. And then there was one. Saving 
the best for last, Senator Ayotte, happy you are here. Good to 
see you.

              OPENING STATEMENT OF SENATOR AYOTTE

    Senator Ayotte. Thank you, Mr. Chairman, and I thank the 
witnesses for being here today.
    I wanted to ask Assistant Secretary Darcy, you in your 
testimony had said that the Corps will undertake a broad and 
conceptual examination of the best ideas and approaches to 
reducing the vulnerability of major storms over time. And I 
certainly think that it is very important that we take a long 
view. And in my view, the budgeting for mitigation and disaster 
preparedness, we often do ourselves a disservice by lumping 
them together and not looking at a longer-term view. We end up 
in this concept, whenever there is an emergency, of putting it 
all together in the immediate aftermath of that disaster, and I 
would like to see us think about planning ahead.
    Part of planning ahead is coordination, and New Hampshire 
homeland security and emergency management officials have said 
that they are working to identify and prioritize mitigation 
projects. In developing the mitigation approach, how much 
coordination will there be between the Corps and local and 
State officials?
    Ms. Darcy. Senator, through the supplemental appropriations 
bill, we received direction to do a comprehensive study. We are 
beginning to scope out that study. It is due to the Congress 2 
years after the initial appropriations act was funded. We are 
already beginning to scope that out with local and State 
officials as well as other Federal agencies. We are looking at 
long-term sustainability for our coastline within the North 
Atlantic Division, which begins in Norfolk and goes all the way 
to Maine.
    So we are coordinating that and looking for input from 
State and local officials when we put that study together.
    Senator Ayotte. And the study will be 2 years from the 
passage of the appropriations bill?
    Ms. Darcy. Yes, due to Congress. Yes.
    Senator Ayotte. OK. Have we done anything like this in the 
past?
    Ms. Darcy. We have done comprehensive studies, but not to 
the degree that this is directed toward a specific geographic 
area of the country, which is our North Atlantic Division. That 
is the boundary. It is as a result of Hurricane Sandy and 
looking at what we have done and what we need to look to in the 
future, especially in planning for any additional projects that 
are focused on reducing flood risk.
    Secretary Donovan. Senator, I would just add that there is 
going to be a significant amount of investment in mitigation 
beyond the Army Corps' investment--from the CDBG program, from 
the Department of Transportation, from FEMA, a hazard 
mitigation program.
    One of the jobs of the task force is going to be, on a 
shorter-term basis than the 2 years, coordinating a mitigation 
strategy for the region more directly affected by Hurricane 
Sandy. So we will have in our report to the President a 
strategy to coordinate and effectively pick the most cost-
effective strategies across the various programs and types of 
infrastructure and other investments.
    Senator Ayotte. When we look at this report that we will be 
receiving, will it contain--for example, we find ourselves 
providing emergency disaster funding, but if we look at a more 
long-term plan, there are probably financial investments we 
could make along the way that would actually save us, in the 
event of a disaster, taxpayer dollars. Will this plan also--
when you said it would take a long-term view, will that be part 
of the analysis? I mean, I think that is the goal. Obviously, 
we want to make sure that people are prepared for emergencies, 
but then when we are in an emergency situation, if there are 
things we could have done in advance that would have saved 
lives, property, and taxpayer dollars, we want to look ahead 
instead of, like we do a lot around here, moving from crisis to 
crisis. Is that part of what we are hoping to get from this?
    Ms. Darcy. It will be part of the study, but I also believe 
it will be part of the plan that the task force is looking into 
in the short term, in the August timeframe.
    Senator Ayotte. Good. I appreciate that. I think that is 
really important.
    And I also want to say I appreciate that there is going to 
be a lot of coordination with the State and local officials. 
They are really obviously the front lines, and they are 
directly dealing with these issues. And they, I think, have a 
lot of terrific advice to offer, all of the Federal agencies 
interacting with them, not only on how we can best address 
disasters and emergencies, but on the mitigation piece and how 
we can more effectively do that.
    In my prior position, I had a chance to work with many of 
these officials, and I was always really impressed with their 
depth of knowledge. So I am glad that there is going to be--and 
I will hope and continue to press to make sure that there is 
maximum amount of coordination.
    Secretary Donovan. We convened the first meeting of the 
advisory group for the task force last Friday. It includes 
almost 50 State and local officials from across the five States 
that were most directly impacted.
    What I would like to do is get the contact information of 
the folks that you are thinking of----
    Senator Ayotte. Terrific.
    Secretary Donovan [continuing]. To make sure that the 
advisory group can reach out to them and try to get their 
input.
    Senator Ayotte. That would be terrific. We appreciate it. 
Thank you all for being here today.
    Secretary Donovan. Thank you.
    Chairman Carper. Senator Ayotte, I know you have a lot 
going on today. Thank you for making the time to be here.
    Senator Ayotte. This is an important hearing. Thank you for 
holding it, Chairman.
    Chairman Carper. You bet. Thanks for joining us.
    A lot of times when we have time--and we have a minute or 
two, and I am going to just do this. We appreciate your coming. 
We appreciate the preparation that goes into your testimony. We 
appreciate all the hard work for the last couple of months that 
really back it up.
    We appreciate your willingness to respond to our questions 
here, and before I forget, let me just note that the hearing 
record will remain open for 15 days, until April 4, for 
submission of statements and questions for the record. We 
appreciate your willingness to respond to those questions, even 
all those questions, Assistant Secretary Darcy, that you are 
getting from Senator Coburn.
    What I would like to do is ask--you gave an opening 
statement, I would like you to give a closing statement. Just 
take maybe a minute. Over in the House of Representatives, they 
give these 1-minute statements. Maybe give us 1 minute, just a 
good takeaway, kind of thinking about what has been said here; 
what you said, what you have heard your colleagues say at the 
table there, some of the questions asked and some of the 
dialogue that we have had back and forth. Just give us a good 
1-minute close, please. Craig.
    Mr. Fugate. Well, I think, I want to come back to flood 
insurance in that the way it is designed, the way it operates, 
oftentimes the public believes it is one tool, we think it is 
another tool, and we have not communicated well what it can and 
cannot do.
    I think it is a good tool to help reduce the risk to people 
to the financial ruin that a flood can cause by providing that 
tool. But it is also important to understand it cannot continue 
in a way that subsidizes risk below which the Nation can 
afford. And I think this is really the tool we have to look at 
across our programs. Are we building and investing not just to 
the disaster we responded to, but will this reduce our 
vulnerabilities and drive down costs and provide more stable 
tax bases to government? And I think too often we make 
decisions about the immediate and do not always make sure that 
we are planning for the future as well. And I think this is one 
reason why with this task force structure of bringing together 
all the Federal agencies in implementing this large recovery, 
we want to avoid what we saw in Hurricane Katrina, knowing that 
we have to get better, because we cannot continue to afford 
disaster after disaster after disaster and see the same things 
occur over and over again. The lessons have to be learned.
    Chairman Carper. Thank you.
    Secretary Donovan, a takeaway, please?
    Secretary Donovan. Senator, first of all, just thank you 
for hosting this hearing in the spirit that you and your 
colleagues have. In my 4 years in this role, there is no moment 
where a family or a community recognizes the need for Federal 
help more than in a disaster like this, and there is also no 
moment when we have more risk of disappointing the citizens if 
we do not respond effectively.
    There is no Democratic or Republican way to respond to a 
disaster. There is simply effectiveness and speed as well as 
excellence. And I just want to commend you on the spirit of the 
way you have carried on your duties, you and your colleagues, 
in this hearing. And I do think this is in the spirit of how do 
we get better. We are getting better, but there is much more 
that we can continue to do.
    The only other thing I would say is that one of the 
consistent themes we heard today was how do we make the 
investments that will lower the loss of lives, the devastation 
to communities, and the costs to the taxpayer going forward. 
And I think if we can learn out of Hurricane Sandy--and, 
clearly, the task force has this--I see this as a major goal. 
The President has asked us to make it a major goal. How do we 
do a better job of investing--whether you call it mitigation, 
whether you call it being smart, rebuilding better and 
stronger, we have to find ways to invest in those kind of 
important measures, and this is a testing ground in my mind for 
doing that.
    Chairman Carper. Good. Thank you. That was excellent. That 
was very helpful. Thank you. Assistant Secretary Darcy, please?
    Ms. Darcy. When you hear the word ``disaster,'' you do not 
usually think of the word ``opportunity,'' but I think as a 
result of this disaster, we have an opportunity to look long 
term at the way we are going to not only plan for future 
disasters but rebuild as a result of what has happened.
    Craig mentioned earlier that one of the things that we 
cannot control is land use planning and zoning, which happens 
at the local level. I think it is an opportunity for us not 
only to help with, but also educate those people in the local 
floodplains. Educate those who are living in the floodplains 
about their risks. We build storm risk reduction projects, but 
we call them ``reduction projects.'' We do not call them 
``protection projects,'' because you are not totally protected. 
I think it is an opportunity for us to not only educate people, 
but also look into our own internal programs as to what it is 
we should be looking to for the future. We are looking at our 
planning process within the Army Corps of Engineers, looking 
toward incorporating sea level rise into what we are looking to 
in future projects because that is a reality. We need to be 
able to adapt now to what we can anticipate in the future. Our 
planning to do that is a way for us to anticipate and also 
hopefully have some risk reduction in future disasters.
    Chairman Carper. Thank you very much for that.
    I am going to give a very short closing statement of my 
own, just kind of looking back on the last couple of hours and 
what we have heard and said here.
    Something you just said, oh, gosh, 10, 15 minutes ago, 
Assistant Secretary Darcy, I wrote it down. You said, ``In each 
disaster we learn something new.'' And I used to say to my 
sons, who are now 23 and 24, I used to say to them, ``There is 
nothing wrong with making mistakes. We all make mistakes.''
    I like to quote Richard Nixon. I think I am the only 
Democrat around who quotes Richard Nixon. But Richard Nixon 
used to say, ``The only people that do not make mistakes are 
the people that do not do anything.''
    Well, as it turns out, there are plenty of opportunities 
for making mistakes. And you said, again, ``In each disaster we 
learn something new.''
    The key here is when we respond to these disasters--and, 
unfortunately, we are going to be seeing more of them. The 
scientists tell us we are going to be seeing more of these 
along our east coast. How do we learn from each one? And it is 
very clear that we have learned a lot since Hurricane Katrina. 
And we continue to learn literally each week that has passed 
since Hurricane Sandy struck the east coast.
    Among the takeaways for me today was the emphasis on shared 
responsibility. This is not just about the Federal Government. 
This is not just about State or local governments. This is not 
just about the private sector. We are in this together, and we 
need to be able to work together, and part of our 
responsibility, as I said earlier, is like that basketball 
coach saying, ``The best player is the one who makes sure that 
everybody else on the team plays to their capability.'' And 
that is part of our responsibility.
    In order to do that, we hold these oversight hearings, and 
for the most part, they are welcome by agencies and folks who 
come before us. But I think--and thanks for what you said, 
Secretary Donovan, because the nature of our oversight--we do 
not do ``gotcha'' hearings. We try to be constructive. Where 
there is good behavior, exemplary behavior, we try to put a 
spotlight on that and applaud it, reinforce it. And when there 
is not, we try to shame people sometimes, other times just make 
it clear we expect better, and they know that.
    But one of the things that I take away from here is, again, 
the reinforcement. When there has been a disaster, let us 
respond to it swiftly, let us respond to it cost-effectively, 
and so that when the next one comes, we will have learned and 
will be able to do that even better.
    The issue of--I did not count the number of times 
``mitigation'' was said here today. It has been said a lot. And 
there is huge value in mitigation and preparing for the worst. 
So we have this shared responsibility. We know the need to 
respond swiftly and effectively when there has been a disaster, 
the idea that we mitigate against future disasters to reduce 
our exposure and reduce the loss of life and the harm to 
people.
    But I am going to go back to something I said earlier, and 
I will not dwell on this, but I want to say it earlier. All my 
adult life I have been taught and reinforced to focus not just 
on symptoms of problems but on underlying causes. And today we 
are talking about symptoms. How do we treat the symptoms? How 
do we do that in a cost-effective, smart way? How do we 
mitigate against those symptoms in the future? But there are 
some underlying causes out here that it is not the purview of 
this hearing to go into. We need to be mindful of those, and we 
need to be guided by good science.
    And with that, I am going to say again thank you all, and 
we look forward to seeing you again soon and working with you 
for a long, long time. Thank you.
    With that having been said, this hearing is concluded. 
Thank you.
    [Whereupon, at 12:07 p.m., the Committee was adjourned.]



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