Flooding heaps new financial woes on Louisiana
MELINDA DESLATTE, Associated Press 7:37 a.m. CDT August 22, 2016
(Photo: Ted Jackson, AP)
BATON ROUGE — “How’s your house?” That’s the new greeting for many across south Louisiana as a 20-parish area digs out of catastrophic flooding and its aftermath. The logical next question often remains unspoken: “How do you pay to fix this?”
That’s the question facing a Louisiana state government that has been staggering from one budget crisis to the next. The misery that the storms heaped on residents of wide stretches surrounding Baton Rouge and Lafayette delivers yet another blow just as the state seemed to be on track to getting its financial bearings.
State agencies estimate they have poured at least $13 million and counting into flood response work, with the Louisiana National Guard alone spending about $800,000 a day, according to the governor’s chief budget adviser, Commissioner of Administration Jay Dardenne.
Those costs are only going to balloon higher in the recovery effort.
“Somebody asked me, ‘What do you anticipate the price tag to be?’ I said, ‘God, I haven’t even gotten to that, the total,’” said House Speaker Taylor Barras, R-New Iberia, whose district received flood damage.
While FEMA will reimburse much of the cost of rescue and recovery work, the price tag for the state’s share could still be sizable — tens of millions, possibly hundreds of millions of dollars — because the flood damage is so extensive.
Gov. John Bel Edwards said the state’s financial woes won’t hamper the response, that the money will have to work itself out later.
Republican presidential candidate Donald Trump, center, and his running mate, Indiana Gov. Gov. Mike Pence, right, meet with flood victims during a tour of flood damaged homes in Denham Springs, La., Friday, Aug. 19, 2016. (AP Photo/Max Becherer) Max Becherer, AP
“We’re not pinching our pennies in this disaster. We’re spending whatever it takes,” Dardenne said. But he acknowledged the costs for the state are “going to be huge.”
Under federal law, FEMA picks up 75 percent of the costs associated with responding to the disaster, debris removal and repair of disaster-damaged public facilities, like roads. State and local government agencies pay the remaining 25 percent.
And those agencies must spend their own money first. FEMA provides reimbursement after collecting documentation.
FEMA says it pays 100 percent of the housing assistance that it provides to storm victims — grants to help with costs for rental assistance and some home repairs. But that federal cost share drops back down to 75 percent for other types of individual assistance, like grants for disaster-related medical expenses or money to replace furniture and appliances.
The Edwards administration hopes to move to a better match rate that the state has received after some hurricanes, in which the federal government pays 90 percent. That higher match rate, however, requires action from the president, according to FEMA.
The flooding’s devastation is yet another financial hit to a state that just worked its way through closing the worst budget shortfall seen in 30 years — a state that still has lingering projects from hurricanes Katrina and Rita in 2005 and hurricanes Gustav and Ike in 2008.
Only a few days ago, Treasurer John Kennedy had been optimistic after seeing the July tax collection numbers. That encouragement may have been washed away in the flood.
“We may cry after August,” Kennedy told state officials.
In the short-term, new financial gaps will be added to an expected deficit left from the last budget year whose size remains unclear. The catastrophic flooding also has made it more likely the state will need a short-term bank loan to keep paying for government operations.
“We’re burning cash right now and we’re not taking in revenue in a lot of these areas because offices have been closed,” Dardenne said.
Tax extensions have been granted in the flood-ravaged region, delaying money the state needs to pay its bills and making the state less certain of what money it will receive.
In the long-term, the damaging impact on the state treasury could be deepened by lost economic activity caused by the flooding, or it could be boosted by an influx of spending on construction supplies, replaced cars and new furniture.
The question marks are large.
Remembering the financial see-saw caused by Katrina and Rita, Senate President John Alario, R-Westwego, told colleagues: “We have to be very, very careful with any money we spend at this point.”
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Louisiana floods slam struggling state economy
by Chris Isidore @CNNMoney August 19, 2016: 4:34 PM ET
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The floods that devastated Louisiana this week will make a bad state economy even worse.
The recent drop in oil prices has already led to the loss of about 2,000 oil and gas drilling jobs in the state over the last two years. That's pushed Louisiana's unemployment rate to 6.3%, the fourth-highest of any state in the nation.
Low oil prices also cut deeply into state government revenues, slashing projected taxes from the sector by $450 million in the most recent fiscal year. As a result, the legislature hiked the state sales tax and slashed spending. Louisiana has also made the maximum allowed withdrawal of $128 million from the state's emergency fund.
And even before the floods, the state expected to have another $200 million budget gap by January, said Jan Moller, director of the Louisiana Budget Project, a public interest group.
The flooding, which has affected at least 40,000 homes and stretched emergency resources, is yet another devastating blow to a struggling economy.
"It could make a big problem even worse," said Mark Zandi, chief economist for Moody's Analytics.
The total cost of the flood has yet to be calculated, but a comparable flood in Louisiana in May 1995 did about $3 billion in damages, according to the National Weather Service. That equates to about $4.7 billion in today's dollars.
Most of the funds required for cleanup and rebuilding will come from federal agencies, such as FEMA, and its National Flood Insurance Program. But part of the problem is that most of the homes affected by the flooding probably don't have flood insurance, according to statistics from FEMA. And private homeowners' insurance rarely covers the cost of flood damage.
And given Louisiana's financial woes, the state will have a hard time helping local governments recover from the flood.
"Community centers, schools, even emergency responders and hospitals, those are under tremendous strains," Zandi said. "There will be much less state help forthcoming."
Louisiana's economy could be permanently damaged if displaced residents decide not to return once the flood waters recede. The state's population plunged 6% in the year after Hurricane Katrina hit in 2005, and it took about six years for the population to return to pre-storm levels.
A weak labor market and two major natural disasters in 11 years might convince some victims to move elsewhere said Zandi. "A lot of these folks may decide that this is the time to leave, to find opportunity elsewhere."
And a sharp population decline would be another blow to the economy.
The Budget Project's Jan Moller says a lot will depend on how much federal aid Louisiana gets.
"In the long-term who knows will happen with the economy. We don't have enough college graduates. We're too energy reliant. We don't know how many people are going to stick around," he said. "But generally Louisiana people stay."
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Catastrophic Floods In Louisiana Have Caused Massive Housing Crisis
August 19, 20169:49 AM ET
Camila Domonoske
Leslie Andermann Gallagher surveys the flood damage to her home in Sorrento, La., on Wednesday. Joe Raedle/Getty Images
Devastating floods in Louisiana have left an estimated 40,000 houses damaged; some 86,000 people have applied for federal disaster aid in the wake of the disaster.
It's a crisis some people are comparing to the aftermath of Hurricane Katrina.
The disaster area stretches over 20 parishes, Eileen Fleming of member station WWNO reports, and officials are working to determine how to provide temporary housing to meet the extreme need.
FEMA Chief Craig Fugate Tours Louisiana Flooding
One challenge, as FEMA Administrator Craig Fugate told NPR, is that the Federal Emergency Management Agency can't rely on one of its normal strategies for rehousing those pushed out by flooding: rental assistance.
There simply aren't habitable homes available for rent.
"There's not that much that wasn't damaged in some of these parishes," Fugate says, adding that FEMA is working on helping homeowners clean out and repair their homes as quickly as possible.
A "no wake" sign is seen along side a street in a residential neighborhood inundated with floodwaters this week in Sorrento, La. Joe Raedle/Getty Images
The impact of the flood is ongoing; floodwaters are draining south and still rising in some areas.
But as water begins to recede in some regions, Fleming reports, the state is beginning a new push to look for flooding victims.
"Gov. John Bel Edwards says initial search and rescue operations were focused on responding to people who reported they were in trouble," she says.
Now, Edwards says, it's time to "go back and do a comprehensive search, house by house, whether or not there was a call for assistance, to make sure there isn't someone in that house who was unable to call for assistance."
Louisiana Flood Victims Aided By Members Of The 'Cajun Navy' Aug. 16, 2016
At least 13 people are known to have died in the flooding.
Some 30,000 people were rescued — not just by the National Guard and official search and rescue teams, but by neighbors equipped with personal boats. The volunteer rescuers are known as the "Cajun Navy," as Ryan Kailath of WWNO has reported.
Now, as southern Louisiana tries to move forward, the challenge of recovering from this flood is daunting, in part, because the disaster caught so many people off guard.
While the [National] Weather Service had predicted a high risk of serious flooding, "nobody, I think, was prepared for that much rain in that short of a time," FEMA chief Fugate said.
Elsie Lazarus is overcome with emotion Thursday as she sits in her flooded living room while retrieving what she can from her home in St. Amant, La. Joe Raedle/Getty Images
And as NPR's Debbie Elliott reports, waters rose astonishingly high in places that historically have not experienced flooding.
"Even for a state accustomed to natural disasters, this flood is like nothing they've ever seen before," Debbie says.
She spoke to Wayne Norwood, who, with his wife, Debbie, owns an antiques museum that was destroyed in the flooding. The couple, both retired police officers, also had four rental homes damaged in the disaster.
"We have fire insurance, but we don't have flood insurance because we're not in the flood zone," Wayne Norwood tells Debbie. "And that's what happened to thousands of people."
For homeowners in parishes that have been declared disaster areas by the federal government, FEMA will be offering grants of up to $33,000 to help with repairs.
Meanwhile, there are questions about whether the U.S. has been paying enough attention to the disaster. Some people have compared the response to the historic flooding to the often wall-to-wall coverage given to named hurricanes and tropical storms.
For several days after the flooding began, President Obama hadn't made a public statement about the flooding or planned a visit. He has now announced plans to visit Baton Rouge on Tuesday, and says he has been updated on the situation by DHS Secretary Jeh Johnson. Press secretary Josh Earnest said in a statement that the president "wants to ensure that his presence does not interfere with ongoing recovery efforts"; the governor had previously said he wasn't upset that the president hadn't announced plans to visit, for precisely that reason.
And national media outlets have been criticized for their coverage; The New York Times' public editor wrote a piece several days ago concluding that the newspaper had been slow in paying adequate attention to the crisis.
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