A $15.25 Billion First Step

BY DALE OAK

In response to the damage inflicted by Hurricanes Harvey and Irma on Texas, Florida and the Gulf Coast, Congress approved a $15.25 billion emergency supplemental on September 8th. This payment is the first step in the long-term federal recovery effort.

The Administration has acted quickly to move money out the door and provide relief to hard-hit communities. With a CR in effect, another cash infusion may be required in October to support recovery activities. In December, expect another tranche of disaster funding that includes repairs to storm-damaged federal facilities in Texas, Florida, and elsewhere when Congress hopes to wrap up the FY18 appropriations process.

“When you look at the number of homes and businesses affected by this, I think this will cost… probably $150 to $180 billion.” —— Governor Abbott (R-TX)

Based on NOAA data compiled through June 2017, “The U.S. has sustained 212 weather and climate disasters since 1980 where overall damages/costs reached or exceeded $1 billion…. The total cost of these 212 events exceeds $1.2 trillion.” Early damage estimates for Hurricanes Harvey and Irma reach up to 20 percent of that total.

Given the scope and breadth of these storms, it will take several weeks for the Administration to develop reliable damage estimates for the work needed to rebuild (and hopefully harden) damaged areas. After that assessment, Congress will work with the Governors and state legislatures in the impacted states and weigh in with its own rebuilding priorities.

FORECAST
90% — Additional FY18 disaster relief approved by the end of December

Members from damaged areas will seek to maximize federal aid for their states. Since disaster relief funding is exempt from the Budget Control Act spending caps, final disaster relief totals may exceed the Trump Administration’s funding requests.

The federal response to recent storms offers clues on what to expect in the coming weeks.

In 2013, the Hurricane Sandy disaster relief bill provided $50.5 billion with four federal agencies — Housing and Urban Development, Homeland Security, Transportation, and the Corps of Engineers — receiving over 90 percent of the funding. The Defense Department received $112.6 million to repair facilities and equipment. NOAA got $326 million to, among other things, strengthen weather forecasting, repair facilities, and upgrade equipment. NASA received $15 million for construction and restoration activities. We expect Congress to approve funds for NASA to restore the flooded Johnson Space Center in Houston and repair damages to Florida’s Kennedy Space Center.

With projected claims exceeding federal flood insurance program cash reserves, Congress may consider both a cash infusion and a borrowing authority increase for the program. After Hurricane Sandy, Congress raised the program’s borrowing limit $9.7 billion.

House Ways & Means Committee Chairman Brady (R-TX) announced that the committee was preparing a tax relief package for those affected by the storms. Congress approved a combination of tax relief and reinvestment incentives following Hurricane Katrina.

The current CR expires December 8th. As that deadline approaches and prospects for a budget cap deal increase, the Appropriations Committees will be tasked with adjusting final FY18 funding levels to the new caps and reviewing additional FY18 disaster supplemental funding requests.

If a FY18 spending agreement hasn’t been finalized by then, additional short-term CRs are possible. Strong bipartisan support for President Trump’s “handshake” deal combining the initial FY18 CR, a debt limit increase, and $15.25 billion in disaster relief, is a reminder: disasters create incentives for politicians to compromise.

FORECAST
25% — Prospects for a December government shutdown

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