Hearing of the Ad Hoc Subcommittee on Disaster Recovery of the Senate Homeland Security and Governmental Affairs Committee - "The Role of the Community Development Block Grant (CDBG) Program in Disaster Recovery"

Statement

By:  Roger Wicker Mary Landrieu Lindsey Graham Haley Barbour
Date: May 20, 2009
Location: Washington, DC

Chaired By: Senator Mary Landrieu (D-LA)

Witnesses: Panel I: Dominique Duval-Diop, Senior Associate, Policylink; Melanie Ehrlich, Founder, Citizens' Road Home Action Team; Karen Paup, Co-Director, Texas Low Income Housing Information Service; Reilly Morse, Senior Attorney, Mississippi Center for Justice; Panel II: Frederick Tombar III, Senior Advisor to the Secretary for Disaster and Recovery Programs, U.S. Department of Housing and Urban Development; Mississippi Governor Haley Barbour (R); Paul Rainwater, Executive Director, Louisiana Recovery Authority; Charlie Stone, Executive Director, Office of Rural Community Affairs

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SEN. LANDRIEU: Thank you all for joining me today. I'm going to call the hearing of our subcommittee to order. And hopefully we'll be rejoined by my ranking member, Senator Graham, who is currently attending an Armed Services hearing, but he hopes to be here shortly.

Let me begin by welcoming all of our witnesses. We're going to have two, I think, very good and informative panels this afternoon. But the purpose of today's hearing of the Subcommittee on Disaster Recovery is to really examine the role of Community Development Block Grant Programs in disaster recovery.

Since 1993, Congress has increasingly used the Community Development Block Grant Program to support short- and long-term recovery from natural and man-made disasters, starting really with Hurricane Andrew in 1992, the Midwest floods in 1993, again then an Oklahoma City bombing of 1995, Midwest floods in 1997, the terrorist attacks in New York, Virginia and Pennsylvania in 2001, Hurricanes Katrina, Rita, William in 2005, Hurricanes Gustav, Ike, Dolly, and the Midwest floods in 2008.

In the past four years alone, Congress has appropriated over $26 billion in community funds for disaster relief. That makes this source the principal means of financing recovery in the United States. And it should because of the numerous times it's been used, and the amount of money involved. It should signal a real interest on the part of Congress to determine, is this the best way to provide funding to states and local communities after a disaster. And if it is, why, and if it's not, is there a better approach. That is really what this program -- this hearing is about this afternoon.

As we all know, the Community Development Program Block Grant was created in 1974 basically at the request of mayors, of which my father was one at the time, indicating that the federal government should provide more direct aid to cities and areas that are struggling to rebuild with limited resources, the federal government should be a partner; the program was created. And it has operated generally that way ever since.

But these Community Development Block Grant formulas are allocated annually, as we might remember, to over 1,000 communities -- entitlement communities in 50 states, and five territories to support neighborhood revitalization, housing rehabilitation, and economic development. Before spending funds, states must submit action plans to HUD for approval. Eligible activities spanned across the range of 25 different categories, and I believe it was that versatility and flexibility that led Congress initially to think that this might be the best way to send relatively large sums down to states and local communities. Hopefully this committee -- this subcommittee will shed light if -- on whether that was a good decision or not.

More than $20 billion in emergency Community Development Block Grant appropriations have gone to five states along the Gulf Coast since 2005 to support recent hurricane relief. In addition to HUD, we have invited state officials here today from the three largest recipients of this funding to offer their perspectives on this program.

We've also asked housing advocates from the non-profit community in three states, from Texas, Mississippi, and Louisiana, to share their experiences using these funds, advocating on behalf of homeowners and renters alike, and their impressions of the state's management of these programs.

Community recovery depends more on -- than on housing. But approximately, as you can see from the charts up here both for Mississippi and Louisiana, and I'm sorry we don't have a chart made for Texas, but we will shortly, the bulk of the funding has gone to housing.

Katrina and Rita destroyed, as we will recall and I think it's important to frame for this hearing, destroyed over 250,000 homes in Louisiana, 61,000 in Mississippi, 75,000 in Texas; either completely destroyed or severely damaged, rendering uninhabitable the dwellings.

Mississippi dedicated 73 percent of its initial ($)5.5 billion for housing. Louisiana has subsequently dedicated 83 percent of its ($)13.4 billion which was received not in a onetime but over the course of, I think, two, two-and-a-half years. Texas dedicated 84 percent of its initial ($)503 million from Rita to housing, but has only allocated up to 48 percent of its ($)1.3 billion recent allocation for Ike and Dolly.

Louisiana and Mississippi had some similarities and some differences with Texas as well. Louisiana and Mississippi opted to use a state-managed program model. Texas, in the last three years, has actually tried all three different approaches; a local, a regional, and a state approach. We will hear from them about that.

Louisiana originally set up a rehabilitation program that incentivized applicants to rebuild within the state, thinking that as a public policy trying to set up a program that really encourage people to rebuild in the neighborhoods that were seriously destroyed would be a good way to begin. Ultimately the state decided to go a different route.

Mississippi had originally created a compensation program instead which provided grants to recipients regardless of whether they decided to rebuild in their area or leave the region or the area entirely. We will hear about the pros and cons of those two approaches.

Both states designated -- delegated funding to be administered through different statewide entities; in Louisiana's case, the Louisiana Office of Community Development, and in Mississippi the Mississippi Development Authority. Both states capped homeowner grants at ($)150,000, and launched homeowner assistance programs before launching programs to assist renters. Unfortunately Texas was forced to cap its homeowner grants for Rita at ($)65,000 due to inadequate funding. In their view, I'd like to hear more about that. Both states have also commissioned independent reviews of their housing programs to evaluate performance procedures and service delivery.

As you can see from the chart, Mississippi, because of its initial upfront and fairly immediate allocation of $5.5 billion, was able to meet, according to the state, their housing needs. There's some criticism of that we will hear today from our panel. But nonetheless, was able to also direct a considerable portion of their billion dollar -- billions of dollars of allocation from Congress to infrastructure, revitalization, economic development, ($)570 million going to the Port of -- Gulfport alone, and ($)641 million to overhaul the coastals region wastewater infrastructure.

Louisiana, because of the need was so much greater in terms of the destruction of the housing units, dedicated a much larger portion for homeowner assistance and some rental assistance as well, and then had much less money to be able to be used for infrastructure. Virtually none for economic or limited for economic development, as you can see.

So this is just a broad outline of how this money was generally used for the recovery. The questions are really important and are outstanding as to whether this is the right approach or not. How it could be improved? I would like to mention bringing us kind of up-to- date to where we are today that in the very last round of HUD money for Texas, primarily, and some of the Midwest states, based on our difficulty of moving some of that money out of Washington down to the state level, the members of Congress insisted that one-third of the money allocated to HUD be allocated to the states within 60 days. I'm happy to say that that was done.

The problem is that two-thirds of the money is still sitting in Washington, and now an additional, I think, 8 months has passed and that money is still sitting here because we were not able to get more than that directed out of the door in 60 days. So we're going to ask HUD what their plans are to get that money down to the states and communities that obviously need it.

HUD, according to their testimony today, has not developed yet a review process for groups of projects such as groups of homes in a single neighborhood, requiring many of these individual homeowners to go through their own individual environmental protection impact plan, which is required under the Community Development Block Grant for obvious reasons. But it comes questionable as to why you need an individual environmental impact statement for every individual home when it's clear that the entire neighborhood of 7,000 -- 8,000, in some instances, homes were destroyed in a particular neighborhood. We will be interested to see how that is coming along.

Nor has the agency developed a consolidated review process for multiple funding streams from different agencies. So when the communities receive FEMA money for hazard mitigation it's not always coordinated with the money that comes from HUD. Hopefully this hearing can shed some light on how that could be done better.

So in conclusion, our hearing objectives are, is the Community Development Block Grant fund the right federal program for recovery? If not, what is the right program? How can HUD improve the program's administration? How can states improve their own administration? Could Congress provide more legislative instructions to the agency about this situation? What have Louisiana, Mississippi, and Texas done alike, what have they done differently, what have they done well, what have they done poorly?

Our housing programs; have they been designed to affectively assist homeowners and renters alike? Have special populations of seniors, the disabled, other populations that have great difficulty, have they been included as they should have been in our efforts? Should states focus housing assistance on compensating homeowners or incentivizing the repopulation of an area? And there are any number of questions that we hope to get answers for today.

So without going any further, let me just add, particularly for Louisiana's Road Home program, which is a program I'm particularly interested in as a senator from Louisiana, we want to also find out today if the appeals process that is set up for Road Home has been independent, expedient, and fair. Are Road Home grants being awarded on an accurate and consistent basis? If there is going to be a surplus in Road Home, what will that surplus be and how is the state looking about allocating it?

In addition, we want to try to find these answers as quickly as possible because hurricane season is just literally a few weeks away. We'd like to believe if we have to go through this again that we would go forward in a much better, more focused way. And I'm not sure that three weeks is enough time to fix everything that is problematic. But at least this hearing will give us, and I think this new administration a chance to start trying to create, and fashion, and tailor a program that is -- really meets the needs more directly than I think this program has been able to do, despite the many good efforts of many people in this room.

So why don't we bring the witness panel forward? I think Dr. Dominique Duval-Diop, Ms. Melanie Ehrlich, Karen Paup, and Reilly Morse.

Our first witness today is Dr. Duval-Diop who is the senior associate for PolicyLink. In this role she directs research and informs policymaking about equitable distribution and use of hurricane recovery redevelopment resources. Prior to this, she assisted in the startup of Louisiana's Recovery Authority acting as its director of long-term planning. We look forward to hearing from you today.

Our second witness will be Dr. Melanie Ehrlich, the founder of CHAT, Citizens' Road Home Action Team. Dr. Ehrlich founded CHAT in September of 2006, and runs the all-volunteer effort with no budget; 895 members by e-mail, and biweekly meetings. She's also a professor at Hayward Human Genetics Center. We look forward to your comments today.

Two other panelists; Karen Paup is the co-director of the Texas Low-income Housing Information Service in Austin, Texas. Ms. Paup has worked for the last 25 years in solving affordable housing problems in Texas. She has testified before a previous committee, and I'm happy to invite her back to hear her testimony today.

And finally, Reilly Morse, senior attorney in Katrina Recovery Office at the Mississippi Center for Justice in Biloxi, Mississippi. Mr. Morse is a third-generation Mississippi lawyer, former municipal judge and prosecutor, a survivor of Hurricanes Katrina and Rita. And he's here to give his views about the efforts of Mississippi in terms of providing affordable housing for renters, particularly, but homeowners as well. So I think this panel will shed some light on some of the difficulties and challenges that still remain.

And then I'm very happy, on our second panel, we will be having Governor Haley Barbour himself; Paul Rainwater, representing the state of Louisiana; and Charlie Stone, executive director of the Office of the Rural Community Affairs, representing Texas. So we'll have all three states represented.

But let's first hear from our panel of advocates and your views about whether Community Development Block Grant is the right source of funding, how it's been used from your perspective; how well used or misused. And we're -- like to limit your comments of course to five minutes. And thank you.

MS. DUVAL-DIOP: Good afternoon, Madame Chair, Senator Landrieu, and members of the subcommittee, who have been working diligently over the years to monitor and provide guidance about disaster recovery. My name is Dominique Duval-Diop and I'm a senior associate of PolicyLink, as well as a board member of the Equity and Inclusion Campaign, which is a non-partisan policy advocacy campaign advocating for an equitable Gulf Coast recovery.

I want to begin by thanking you for your continued efforts to oversee and monitor the state-managed housing programs created in the aftermath of the hurricanes. And also for inviting me to testify on the role of the CDBG program in disaster recovery.

PolicyLink is a national research and action institute advancing economic and social equity. We have offices in Oakland, New York, New Orleans, and Los Angeles. And since 2007, we have invested significant resources in monitoring the development, implementation, progress, and impact of Louisiana's housing recovery programs. Throughout our analysis we have partnered with state agencies such as the Louisiana Recovery Authority and the Louisiana Housing Finance Agency. We've also convened or supported the convening efforts of hundreds of non-profits, faith-based, and community-based groups to inform our analysis and also help craft recommendations.

There's no objective measure for how fast such a massive recovery effort should move. But the challenges facing homeowners and renters who confront ever-changing program rules and who are left with insufficient resources to rebuild, coupled with the catch-22 of ending temporary help before rental replacements -- units are available, continues to place a significant burden on impacted residents and communities that they're struggling to rebuild.

So you'll hear in the testimonies today as well as read in the written testimonies many figures and statistics. But we have to keep our awareness and remain aware about the real human impact of how these funds have been spent, and what we can do to improve them.

In my testimony I want to highlight the following ongoing concerns, particularly the insufficient allocation of CDBG resources towards activities that support the core mission of the program which is to take care of the needs of the low income and the most vulnerable.

We've done a good job in Louisiana of allocating the lion's share of our resources towards housing recovery, but we've allocated much less to the recovery of affordable rental housing units. About 14 percent -- and I think our numbers are a little different -- but about 14 percent according to my calculations have been designated to repair or replace affordable rental units including public and assisted housing and also supportive housing and homeless supports.

The rental resources will only replace about two-fifths of the 82,000 rental homes that were damaged or destroyed. And furthermore, few, if any, of the CDBG resources have been targeted specifically at the needs of families who were forced to move out of the state after the storms and who seek to return home.

While as of April 2009, 43 percent of the Road Home applicants who closed were low-to-moderate income. And 53 percent of the disbursements went to those individuals. Whether or not they were able to rebuild is a different matter. And this is related to some of the program policies that were put in place related to how grants were calculated.

There's also a need to focus on neighborhood-level recovery by creating structural supports for non-profit organizations. We've seen a concentration of blight in certain neighborhoods and we're all well aware of problems that exist in areas such as the Lower Ninth Ward, and the connection between residents who face huge gaps are unable to repair as well as properties that were sold to the state -- to the Louisiana Land Thrust and the confluence of that factor is really serving to concentrate blight in certain areas.

We've worked with a mosaic of community organizations that have arisen or expanded in disaster-affected areas to help residents navigate the path to recovery, but until recently we haven't really as a state invested significant resources in that community infrastructure -- that non-profit infrastructure. And the lack of that substantial and sustained investment in community infrastructure from the outset of hurricane recovery has stifled rather than enhanced the organic recovery process and community ingenuity. We have really missed the opportunity to contribute to the creation of sustainable and resilient communities, communities that are able to initiate and invest in their own recovery and redevelopment.

Community participation in the crafting of CDBG programs has also been another missed opportunity. Community participation can play a critical role in shaping policies and programs that address community needs.

Since the state received funding for Gustav and Ike, they've required an extensive citizen input process for the local sub- grantees. But for its state-level action plans, they've been operating under an expedited citizen comment period which really doesn't provide the community a really good opportunity to influence the crafting of programs. And this is another missed opportunity.

I welcome your questions. I see I'm over time, I have a little bit more to say but we can --

SEN. LANDRIEU: We'll cover that in the questions. Thank you very, very much.

MS. DUVAL-DIOP: Sure, thank you.

SEN. LANDRIEU: Doctor?

MS. EHRLICH: Thank you. I'm Melanie Ehrlich and I'm the founder of the grassroots organization, Citizens' Road Home Action Team. Thank you, Senator Landrieu, for giving me this opportunity to testify.

I would like to start with the bottom line. Firstly, there are very large numbers of South Louisiana hurricane victims hurting badly because of broken promises from the Road Home program. I have letters here that -- I deposited a copy with you, Senator Landrieu, that were sent just within the last few days to you and several other congressmen urging for help about the Road Home program and the HUD investigation that I will mention later.

These letters attest to the unconscionable unfairness that is widespread in grant processing, I'm sorry to say. The considerable amount of remaining program funds should be spent first and foremost to fix Road Home's short-changing of applicants due to grant processing mistakes. This can only be done by serious reform of appeals.

The second point of our bottom line is that our complaint to the HUD inspector general's office about these problems should no longer be delayed. Nonetheless, thank goodness that Congress funded the Road Home program for South Louisiana for the tens of thousands of fortunate applicants. However for tens of thousands of unlucky applicants this has been an ordeal for two or three years.

Thousands of applicants have not received the promised help because this program often did not follow its own rules, withheld information about its rules, made the rules extraordinarily and unnecessarily complicated, and used ever-changing rules to downsize grants or to leave hurricane victims still waiting for grants.

From interactions with more than 1,400 applicants and many meetings and e-mails with top Road Home officials, I saw that the underlying policies and implementation of the program put the needs of the contractor, ICF International, and the state, above the desperate needs of the applicants.

Louisiana's recovery and its people have suffered because of gross unfairness, especially but not exclusively, for low-to-moderate income applicants whom CDBG is supposed to help. A lack of transparency concerning the program's rules and regulations, double standards and inconsistent treatment, systematic ignoring phone calls, faxes, certified letters from desperate applicants for many months or more than a year.

An appeals system that often rubberstamped the mistakes of the contractor, apparently with no written standards. An obligatory pre- appeals process that was fraudulent and kept applicants out of appeals, often permanently, and refusal to give applicants important notices in writing and date from their file to understand their grant and any errors.

Here are just two quotes from editors of the New Orleans Times- Picayune, in October and December of 2008. "The Road Home program has messed over so many people in so many ways, over such a long period of time that at this point it takes a particularly egregious error to attract attention. ICF International's incompetence was well established. There is public anger over its failures."

HUD should insist that LRA use the substantial amount of unallocated funds first and foremost to fix Road Home errors that are not due to the applicants' mistakes. There should be -- and this can only be done by having a new, fair appeals system to take care of these mistakes, and applicants unfairly left in limbo.

HUD should insist that applicants who made no intentional mistake not be asked to repay money resulting from program error that was not obvious to the applicants. Our 39-page complaint to the HUD Office of the Inspector General should be put back on the fast track, instead of being delayed for six months or longer, when almost all the money will probably be spent.

Our allegations of serious mismanagement, waste, and abuse, and evidence of contractor fraud, should be evaluated fairly, notwithstanding HUD's involvement in oversight of the program and the addition of a former Road Home contractor to HUD's disaster recovery staff recently.

I hope, Senator Landrieu that you will read my summary of pleas from applicants asking for justice and fairness. Thank you for your consideration. And we thank the American people for their generosity.

SEN. LANDRIEU: Thank you very much.

Ms. Paup?

MS. PAUP: Yes. Madame Chair Landrieu and members of the subcommittee, thank you for the opportunity to testify today on the effectiveness of CDBG in meeting post-hurricane housing needs in Texas. I would like to express my appreciation to you and the members of your staff who are working to create a better future for long-term disaster recovery.

I'm Karen Paup; I'm co-director of the Texas Low Income Housing Information Service. We're a non-profit organization that advocates affordable housing for low income Texans.

The two most serious problems with the administration of CDBG disaster recovery in Texas are the unconscionably slow pace of providing housing assistance, and with the Hurricane Ike and Dolly allocation, diversion of CDBG away from housing toward lower priority infrastructure and economic development activities.

Out of the 5,175 homes contracted to be rehabilitated or reconstructed with CDBG for Hurricane Rita, less than a thousand homes in Texas are complete or under construction. Much of the time was lost -- much time was lost due to Texas' reliance in round one on Rita funding of local government consortiums, known as Councils of Government.

The councils had little to no experience in carrying out housing programs, resulting in painfully slow implementation. Due to this poor performance the state housing agency undertook administration of round two funds. And as I explain in my written testimony, although this program has been slow to get up to speed, we believe that ultimately it will be successful.

In our view, tragically, in its plan for the latest round of CDBG disaster assistance -- the $1.3 billion for Hurricane Ike and Dolly survivors, Texas has returned the administration to the Councils of Government and individual local governments. We believe this will result in great delay of assistance to hundreds of thousands of families who need housing.

Also of great concern to us is the local councils' strong tendency to maximize the use of disaster funds for infrastructure, as has been demonstrated by their decision to devote only about half of the funds for Hurricane Ike and Dolly survivors to housing. And of those funds we expect little will go to help low-income renters, even though low-income renters were disproportionately displaced by Hurricane Ike. These decisions will leave many thousands of Texas hurricane survivors without any housing assistance.

To summarize from my written testimony, we make several recommendations for improving the CDBG disaster program. First, we recommend a clear mandate by Congress that our nation's first goal in disaster recovery is for survivors to quickly obtain a decent affordable home in a quality community.

Second, we recommend coordination between FEMA and HUD. FEMA needs to compile accurate damage estimates with income data on survivors, along with their housing needs, so that Congress can appropriate the right amount of housing.

And this goes to your question, Senator Landrieu, earlier about the funding for Texas. Part of that is due to the inaccurate estimates by FEMA of the needs in Texas. Once that funding is in place, FEMA and HUD need to work together so that-low income families have seamless case management as responsibility transfers from FEMA to HUD.

Third, in place of the single CDBG program, we recommend Congress establish two disaster recovery block grants; one, for housing, and the other for other needs. The housing grant should prioritize serving the most vulnerable members of the low-income population; that is, the elderly, persons with disabilities, and single parents with children.

Fourth, poorly housed and chronically impoverished families struck by disaster need a permanent, not just a temporary housing solution. We believe that the housing block grant should make available to renters and homeowners who choose to do so, to take a Section 8 voucher; and in some cases where it would be economically beneficial to them, to move to another community.

Fifth, we ask Congress to ensure that HUD monitors and enforces fair housing laws in federal disaster programs. And this goes back again to the idea that people need to be able to move to areas of greater economic opportunity if they choose to do so. We also recommend the establishment of a HUD Disaster Preparedness and Recovery Office, charged with working with local and state governments for rapid carrying out of housing programs.

In conclusion, the experience of low-income Gulf Coast hurricane survivors illustrates the need for carefully crafted programs. Texas has struggled for almost four years to come up with the correct approach to post-disaster housing. After a false start, we feel that Texas has at last a potentially successful program in place for Hurricane Rita survivors. Unfortunately, the state's new plan for Hurricane Ike and Dolly survivors is based on a model that has already proven too slow, and which directs funds away from critical individual housing recovery needs.

We urge the committee to work quickly to enact reforms that ensure future rounds of disaster funding avoid these problems and delays. Thank you.

SEN. LANDRIEU: Thank you, Karen.

Mr. Morse?

MR. MORSE: Thank you for inviting the Mississippi Center for Justice to testify about our state's use of Community Development Block Grant funds for disaster housing recovery.

Mississippi is capable of achieving impressive results in assisting homeowners, when it chooses to do so. The state's phase one program paid out over 18,000 grants to insured homeowners located outside the federal flood plain who were damaged by Hurricane Katrina's large storm surge. Phase one covered almost all households in this category. It moved quickly, was more generous; about $74,000 an average grant; it had a $150,000 cap.

The next homeowner grant program, know as phase two, targeted lower-income residents and covered homeowners with or without insurance, inside or outside the federal flood plain. It compensated 8,000 households, fewer than it should have, and paid less on average, about ($)47,000. And it had a lower cap, only ($)100,000.

Sadly, Mississippi's remaining housing programs continue the downward trend. Over 7,300 coastal homeowners whose dwellings were destroyed by Hurricane Katrina's category three winds, some merely blocks from the shore, were excluded by Mississippi's arbitrary choice to assist only homeowners damaged by flood waters. For this group Mississippi gets a zero.

Today, between 3,000 and 4,000 households face deadlines to leave FEMA trailers and Mississippi cottages. Several thousand others live in un-repaired homes and seek relief from charitable organizations.

Mississippi offered no assistance to homeowners like Joe Stevens, a fisherman who lost his leg to diabetes, his daughter to suicide, and his house eight miles north of the Mississippi Sound to a tornado spun from Katrina. Another is James Johnson who retired just before the storm after 50 years at a local lumber company. Mr. Johnson saw the home he had built and lived in for almost 60 years destroyed by Katrina's winds.

But he's ineligible for federal homeowner grant because Mississippi tells wind-damaged homeowners, "You're on your own."

If either of these men had lived in Louisiana, they would have been compensated under the Road Home program. Or if they were major employers like an electric utility, a state port, or a shipyard, Mississippi would reward them with grant funds. It would not matter if these businesses had gotten enough insurance or if their loss was caused by wind, they would be generously compensated.

Mississippi's housing programs wrongly deem folks like Jim Johnson as undeserving or irresponsible, but it's not irresponsible to be poor in a coastal region dominated by low-wage service industry jobs where 30 to 40 percent of the population earns too little to meet basic needs without federal assistance. And where thanks to a legacy of racial segregation and discrimination, African Americans have lower median incomes and homeownership rates, higher poverty rates than other -- than their white neighbors. It's certainly not irresponsible to be a renter if you can't afford to buy a house. And landlords are not responsible for the barriers to reconstruction that have crippled the real estate -- the rental recovery. They needed, and their tenants deserved, a quicker and more robust response than 10 percent of the rental funds having been spent after three years in Mississippi.

The disaster CDBG programs required the states to spend at least 50 percent of the funds to benefit lower income persons who lack their own economic safety net. By the end of 2008, Mississippi had spent only about 21 percent out of ($)2.6 billion in CDBG funds on its low- income residents while Louisiana easily met the 50 percent requirement. Mississippi chose to do less for its more vulnerable citizens, and the U.S. Department of Housing and Urban Development has rubberstamped this outcome with five waivers of the low-income requirement. The state's ability to restore balance is crippled by its diversion of $600 million away from more pressing housing needs to finance a non-hurricane related massive expansion of a state-owned port.

Now, the state has confidently predicted in its testimony that all segments of Katrina-affected housing stock will be assisted by programs at current funding levels, but its own numbers in Governor Barbour's testimony show that about 41,000 units will be restored. And as Senator Landrieu, you noted, we had 61,000 destroyed. So there was a big gap.

Mississippi's request for 5,000 additional Section 8 vouchers is, standing alone, an inadequate solution. More subsidized rentals must be built in the affected region to be matched with these vouchers and to meet other needs. And vouchers do not help Mr. Johnson who at age 74 should not be uprooted from his family property and put into an apartment complex five counties away just because a landlord has a vacancy there.

Mississippi should aim for as impressive results for lower-income renters and wind-damaged homeowners as it has for those lucky enough to be first in line for federal relief. With another hurricane season approaching, our state should immediately reallocate money to increase small rental, subsidized apartment comp, construction, and yes, help needy windstorm-damaged homeowners. This reallocation will create jobs and revitalize our tax base and our economy as readily as the economic development programs from which much of these housing funds were diverted. Thank you.

SEN. LANDRIEU: Thank you all very much. It's been really terrific testimony that you all have provided. Before I get into just my brief questions, I'd like to ask each of you to add anything that you want to, your testimony that perhaps you didn't cover or raise an issue, that someone else' comments, you know, spurred to your mind.

And I know that, Doctor, you did not get to cover everything. So is there something you want to add before I go to my questions?

MS. DUVAL-DIOP: Yes, thank you, Senator. I would like to talk a little bit more about the connection between policies that were developed and their impact. Particularly, the Road Home formula was crafted -- was changed in August 2006.

Previously, it would have a pegged the grant to the damage assessment of the house. The change instead changed the formula to rely on the pre-storm value of the house. And so that disfavored homes that were traditionally devalued, so homes in low-income African-American communities as well as more middle-class African- American communities.

And so we've seen that because of this change, about 47 percent of all applicants who chose to rebuild had a gap of -- a substantial gap. On average statewide the gap is about 35,000. And so -- and it's much larger in some of those neighborhoods such as New Orleans East and the Lower Ninth Ward.

The second example I would like to put forth is for the small rental repair program. Non-profit entities knew from the very beginning that it would be very difficult for homeowners -- owners of the small rental properties who were affected by the storms, not only for their own homes, but also their rental properties to garner credit to get loans to be able to rebuild their home if they didn't have sufficient insurance because of the impact that the storms had on their credit ratings.

And so -- but the program was set up in such a way that they had to go and get that financing. And we wasted a lot of time trying to get these small landlords to be able to take advantage of the program, which is incidentally targeted at really creating a lot of affordable housing if it could really get off the ground.

And so the state, three-and-a-half years later, made the change to allow for upfront financing for these small landlords. If we had done that in the past, two, three years ago, we wouldn't be in the situation. We'd see a lot of affordable rental housing redeveloped through this program.

So that's another example of the need to listen to the community voice and the wisdom of the community to be able to craft programs that really address the needs of those who are the most vulnerable. So I just wanted to highlight that.

And again for the Road Home surplus, I mean, we're very, very anxious about what's going to be done with those funds, how much those funds are projected to be, and really making sure that they stay in the program to address the needs of folks who have had errors through no fault of their own, who received lower grants than they were due. Those funds need to be continued to be targeted at those individuals. Thank you.

SEN. LANDRIEU: Thank you.

Doctor, anything you want to add?

MS. EHRLICH: Yes, two points. One from what Dr. Duval-Diop just said about low-income applicants to the Road Home program. One of the things that has just thrown so many of these low-income applicants for a loop is changes in determination of eligibility for the -- what's called the Additional Compensation Grant for those who had less than 80 percent of the area median income.

Those rules changed midstream. And so many applicants who expected, were told, yes, you're eligible -- I won't go into the details, but if you want to ask me about them, I can tell you what I know, those changes in the rules kicked so many people out of that program.

And related to that is that the letters, the award letters for the standard grant that went out, so many people -- we don't know the numbers, but there must be huge numbers from the feedback that we get from so many places. So many people who were told you'll get a grant for a certain amount of money, here it is on a gold piece of paper -- yellow piece of paper, it's called the Gold Award Notice.

So many of those people had their grants really strongly downsized because of changes in rules, recalculations that wasted contractor money, meaning wasting taxpayer money for no good reason reevaluation. And they show up at closing. And many of those people only found out at closing, you're getting $20,000 less, you're getting $30,000 less.

And then the last point I wanted to make about appeals is, that I didn't have a chance to say and it's a very important point, that this should be what -- the money that's not been spent yet -- this is the main thing it should go to is really well revamped appeals, which has been so flawed.

And it concerns so many of us that LRA recently, a few months ago, said that they would reopen appeals because of acknowledging that there were many applicants who had problems with the free appeal process and never had a chance to appeal fairly. And then that procedure, which is written at the LRA website that applicants who passed the deadline could still continue with an appeal or open up an appeal, that was withdrawn with no public notice and no explanation.

This is very troubling because the most important thing to be done with the remaining money is to fix the grants for people who were short-changed unfairly. It's made a tremendous difference. So many people are facing foreclosure, can't come back to our state, are in terrible duress because they've been short-changed. Thank you.

SEN. LANDRIEU: We most certainly are going to ask that question about -- for the Louisiana program representatives that are here.

Ms. Paup, anything else that you have to add?

MS. PAUP: The other witnesses have made a number of excellent points and I echo their concerns with rental housing. It's an issue that has not been fully addressed in Texas. My organization is the client for a University of Texas graduate school class that is researching particularly Galveston's rental housing needs.

And we will have more information over the summer on that. But the provision -- nobody is moving forward with recreating rental housing. And this situation of the rental housing stock is similar to what we've heard about from New Orleans. It's a lot of small -- and Mississippi, a lot of the small landlords and there is not a way for them to recover.

SEN. LANDRIEU: Well, I think that's very important for people to really grasp the challenge here, and being this is my hometown I know a little bit about the city of New Orleans. But if my memory serves me correctly, there were only about 40 percent of all the residents in the city were homeowners.

We had one of the highest rental rates in the United States. I think we had 60 percent of the residents were renters. But not renters in the traditional sense when you think of suburban America where people are renting in large apartment complexes. They are renters in doubles, where a family owns the home, but only lives in one side and rents out the other side or they live in a fourplex where they own the building. They may live in one unit, but they rent out three.

This is the way many older cities, I think, came to be. And I think along the Gulf Coast this was the similar where you get shotgun -- shotguns and shotgun doubles. We call them camelback doubles. Actually, interestingly, my family, my father ended up becoming mayor and secretary of HUD, but our family became homeowners in that way. Bought our own home when I was very young and couldn't afford to live in the whole home, the whole house.

So we lived in one side of it and rented out the other until my mother had her sixth child and we couldn't fit in one half and we had to knock the wall down to take the other part of the house. But I think that our family story is very similar to thousands and thousands and thousands.

So one of my questions is, and I could ask this of the Road Home group, how did the Road Home program treat this kind of homeownership in the Road Home program? Was the funding directed for single family detached homes?

And if you had a home that you only lived in one portion of, how were you treated in the Road Home program? Now, I can ask this question to the LRA folks that are here, but does anyone want to comment or testify to that?

MS. EHRLICH: It's my understanding that folks who are in that situation could have chosen to either benefit from the Small Rental Repair Program or from the homeowner program but --

SEN. LANDRIEU: Not both.

MS. EHRLICH: Not both.

SEN. LANDRIEU: Even though you lived in one part of the house as a homeowner and rented the other, you couldn't apply to both programs. Is that your understanding?

MS. EHRLICH: That's my understanding. But I am sure the LRA has a more specific response.

SEN. LANDRIEU: Okay. Go ahead.

MS. : To address that, we've heard from homeowners in that situation who applied for the homeowner program. And they went through the program and then they said, no, you should apply to the rental program, and they discontinued their homeowner application. And then the rental program said, no, you're not qualified for the rental program.

Even people who lived in duplexes, it took the state a huge amount of time before they developed rules for duplexes. So people in anything other than a traditional single family home had an especially hard time with the Road Home program.

SEN. LANDRIEU: Thank you all. I do have questions, but in light of time, and we want to give the second panel particularly an adequate amount of time to address some of the issues raised, I'd like to ask you all -- I am going to -- well, to let you all know that I would be submitting some questions to you all for the record.

The record will remain open. If you can be prompt in your response and we'll follow-up that way. But thank you very much for your testimony today.

MS. : Thank you.

SEN. LANDRIEU: Let's just take a brief one-minute recess as we change out our panels. Why don't we take about a five-minute recess? We're going to wait for Governor Barbour, who I understand is on his way. We will take a five-minute recess while we get some of these other things set up. And I will return in a moment.

(Recess.)

SEN. LANDRIEU: (Sounds gavel.) If the second panel will take their seats. Thank you all for joining us this afternoon. We're honored to have a distinguished panel for the response and explanation.

Let's begin. Of course, let me just briefly introduce our panel. And then we have Senator Roger Wicker who is here to give a special introduction to the governor of Mississippi. But we're going to have -- the panel will begin with comments from Governor Barbour who will be introduced in just a moment.

And then secondly, we will then turn to Mr. Paul Rainwater who is the executive director of Louisiana Recovery Authority. In his role, he serve as the Governor's authorized representative to FEMA and the state's chief hurricane recovery advisor providing direction and daily oversight of Louisiana's recoveries from Hurricanes Katrina, Rita, Gustav and Ike.

Mr. Rainwater is no -- is very familiar to the Senator having worked for our office for a while. He has done outstanding work with the Louisiana National Guard and is a very good leader for this effort. So we are happy to have him.

And then Charlie Stone. Mr. Stone is representing the executive director of the Office of Rural Community Affairs for the state of Texas. Mr. Stone has been with this office since 2002, and has assisted in the response to Hurricane Rita.

We thank you, Mr. Stone.

And then finally, we will hear from Fred Tombar III, our witness from HUD who will be speaking about HUD's view of this current situation, hopefully what they are doing to assist in improving this situation and we're looking forward to that testimony. But let me turn it to Senator Wicker to introduce Governor Barbour.

And then before you speak, Governor Barbour, I am going to ask our ranking member who has just joined us if he has any comments before the panel begins. But go ahead, Senator Wicker.

SEN. ROGER WICKER (R-MS): Well, I will be happy to defer to Senator Graham.

SEN. LANDRIEU: Okay, go right ahead.

SEN. LINDSEY GRAHAM (R-SC): I am ranking member, like most people, on three or four committees, and they are all meeting at 2:30. So we've got the Military Personnel Subcommittee, I'm going to have to leave.

But I did want to comment, one, just tell the Governor of Mississippi, you've done a heck of a job. We're really proud of you. I think you have been a model of what leadership is about under tough circumstances.

And to everyone else on the panel, you provide a lot of expertise.

And to our chairman, Madame Chairman, you have really informed the Congress in a very important way. You have relevant hearings. I've learned a lot and I look forward to working with you in the Community Development Block Grant Program. If we can make it better, if we need to replace it, let me know. But the more flexibility to the people in harm's way, the better as far as I am concerned.

And I just wanted to acknowledge, you know, Governor Barbour, the service you've provided to the people in Mississippi and really the country at large, and I look forward to helping you.

And thank you, Madame Chairman, for having this hearing. And I'll leave in a minute, but glad to be with you.

SEN. LANDRIEU: Well, thank you. I know everybody's schedule is particularly busy this week.

Senator Wicker?

SEN. WICKER: Thank you, Madame Chairman. And I am certainly delighted to be here today with Governor Haley Barbour. Let me say that Senator Thad Cochran would like to have been here also, but he's handling the supplemental bill on the floor. And so I'm standing in place of the senior senator.

I appreciate Governor Barbour's service and leadership to the state of Mississippi and to the nation. There is a great deal of insight that can be learned from Governor Haley Barbour's exemplary leadership during Hurricane Katrina. And I hope this subcommittee will find this testimony useful in moving forward in determining the role of Community Development Block Grant Program in disaster recovery.

I want to commend the chair and the subcommittee for having testimony from various viewpoints, and I am glad that another fellow Mississippian is here today. My schedule prevented from hearing Mr. Reilly Morse's testimony, but I was able to review his prepared statement.

Every Mississippian remembers where they were and what they were doing on August 29, 2005. Katrina came ashore as the worst natural disaster ever to hit North America, not just Mississippi, but the entire continent. Its 30-foot storm surge and winds of over 125 miles per hour changed the entire Gulf Coast forever. And in spite of the enormous challenges Hurricane Katrina placed on Mississippi, it gave us an opportunity to prove to the rest of the country the strength, perseverance, and pride of the people of our state.

After the storm hit, as a member of the House Appropriations Committee at the time, I worked closely with other members of the Mississippi congressional delegations, Senator Cochran and Governor Barbour, to craft a disaster recovery bill that adequately met the needs of all states impacted by the storm. As we worked to draft the bill, it became evident that the disaster recovery funds needed to be flexible, so the states could identify and respond to their most pressing needs.

Immediately after the storm, Mississippi faced the challenge of rebuilding communities from the ground up. When you're faced with that challenge, the priorities quickly change and the recovery process constantly evolves.

The congressional intent of the CDBG for Hurricane Katrina- related recovery is clear. It was designed to allow state leaders such as Governor Barbour to work with mayors, county supervisors, and other state officials in coordination with HUD administrators to allow flexibility in the rebuilding process.

State and local leaders understand the rebuilding needs more than a bureau official in Washington, D.C. And I believe this is a key reason why this CDBG program has been effective in Mississippi.

In the first wave of CDBG funds for Katrina-related recovery, the HUD secretary is specifically authorized to issue waivers from previously enacted CDBG regulations to allow the use of such funds for the -- and I, quote, "the necessary expenses related to disaster relief, long-term recovery and restoration of infrastructure," unquote, directly related to the consequences of Hurricane Katrina.

In general, the emergency supplemental act states that at least 50 percent of the funds must primarily benefit homeowners with low to moderate incomes. Indeed as Governor Barbour will testify that to- date Mississippi has used over 70 percent of its CDBG funds on housing related projects.

Recently, there's been some discussion about the State of Mississippi's use of CDBG funds for the rebuilding of the Port of Gulfport. It is indeed clear that the use of CDBG funds to rebuild the port of Gulfport is consistent with the intent of the law since the project is a necessary expenditure resulting from Hurricane Katrina and is needed to restore infrastructure in addition to addressing the long-term recovery needs of Mississippi.

Chairman Landrieu, I want to commend you for having this hearing today on the role of the CDBG Program and disaster recovery. Although the program was not initially envisioned as a disaster recovery program, it has turned out to be the best mechanism to move federal dollars to the state in circumstances such as Katrina.

The program is certainly not without its problems and flaws. As you will hear today, some of the waivers are problematic. And the use of the CDBG funds for disaster recovery purposes is far from perfect.

That's why I am glad the committee is holding this hearing today. I want to commend the chairman for your subcommittee's work and commitment to improving disaster recovery and response.

Much has been accomplished, but we still have more work to do. As the chair well knows, the media coverage may have diminished, but Hurricane Katrina is far from over. Thank you very much.

SEN. LANDRIEU: Thank you very much. I appreciate it.

Governor Barbour, why don't you go ahead and begin? And I appreciate if you contain your comments to about five minutes, and then we'll have lots of opportunities for questions and comments.

GOV. BARBOUR: Thank you, Madame Chairman. Madame Chairman and to the ranking member, thank you for allowing me to be here today.

Senator Wicker, I'm grateful for your very generous introduction.

When Katrina hit almost four years ago, it obliterated everything in its path in Mississippi. It was like the hand of God had wiped away the coast. And it was clear that in this utter destruction that this is not a standard disaster and the standard disaster laws weren't going to cover. The Stafford Act was not designed for mega disasters.

In November, in fact on November the 1st, 2005, Mississippi submitted its recovery plan to the administration, to the Congress, to our legislature, and to the public in Mississippi. And Madame Chairman, I believe that you have a copy of that plan.

We saw at the beginning we'd be asking for help from different federal agencies.

We weren't smart enough in our Mississippi government to realize that Chairman Cochran and Chairman Landrieu and some others would realize that this CDBG Program would give much more flexibility, so instead asking DOT to fund our port and asking this agency and that agency.

They all gave us $5.481 billion of CDBG money with maximum flexibility. And hundreds of times since then and I have praised Congress for allowing us the latitude to set Mississippi's priorities rather than to have to do with Washington's priorities. And that could never happen without the CDBG Program.

Senator Wicker just mentioned one of the very important things about this is we were focused on a comprehensive recovery. And that Congress recognized to do so. HUD had to be required to waive. There is a language in the bill, the law, that said the secretary shall waive various things. And that allows us to go forward with a comprehensive recovery.

We formed a Governor's Commission on Recovery, Rebuilding, and Renewal and much of our program stems from what that commission said that they thought we should do. We are about rebuilding communities as a whole, infrastructure, economy.

And yes, housing, housing has been and remains our remains our top priority. I realized that different people can cut the numbers up different ways. Our view is that 71 percent of our CDBG money is either gone directly or indirectly to housing.

I think the couple of differences is we have two major indirect programs -- two major programs that benefit housing indirectly. One is our regional wastewater and water. To allow people to move away from the coast, we had to spend an enormous amount of money to put in water or sewer because we just couldn't have thousands of new homes with septic tanks.

You know, all that water flows in the same direction. It goes south towards the Gulf. So we had to have regional water, wastewater sewage treatment in order to allow people to move inland. Secondly, we had a Ratepayer Mitigation Program that saved homeowners and others about $440 million because our utility rates would have gone up 35 percent had we not been able to treat our investor-owned utilities the same as the co-ops.

So a little bit different figures there, but just based on different categorization. We have recently completed a housing study. We've put a tremendous amount of money into housing that's in here, into our Homeowner Grant Program, which was our beginning program.

But we have learned in the last several months that the biggest issue for housing on the Mississippi Gulf Coast today is not lack of housing units. We have about 4,000 houses for sale in the bottom Syscans (ph) of Mississippi and we have hundreds and hundreds of empty apartment units.

The problem is that people that are left in FEMA housing and in Mississippi cottages cannot afford to pay market rent. They are people who must have deep subsidy HUD vouchers.

They were living, many of them, before the storm in 80-year-old houses that had no mortgage, no insurance, and they were paying $100 or $200 a month. You can't build to the building code and insure it and have any housing like that today. Our biggest -- one of our big requests before the Congress today is for us to receive 5,000 vouchers, deep subsidy vouchers.

Louisiana was ahead of us on this last year, but we waited frankly until the order came for people to evacuate the FEMA housing because now we've got more than 4,000 families that are going to have to find a place to stay. The flexibility of the CDBG money is enormous to us. We designed a program coming in, and I ask Congress to allow us to go forward with it.

And as you can see, Madame Chairman, virtually everything we have done in Mississippi was in the November 1 plan, whether it was the port, whether it was regional wastewater, whether it was Homeowner Grant Program, low-cost rental housing. And the CDBG program has made that possible.

Let me just make one point. The deeper we've gone into the recovery, the farther after the storm, the less HUD has been willing to waive the CDBG rules. We had five major waivers early on. Three of them were not renewed after their two-year period.

Now, the good news is HUD said they were not renewing them because we didn't need them. That is that we didn't need the low/mod waiver again because they were comfortable that we were serving low to moderate income at a level where that was not needed.

I'll close, Madame, by saying this. In addition to the 5,000 housing deep subsidy vouchers with which we've talked to the administration and they have been very positive about recognizing the need, we also, just as you had to get the levees rebuilt in and around the walls, we needed to get the barrier islands rebuilt.

The Corps of Engineers was ordered to conduct a study in the December 2005 first emergency supplemental for Katrina, Rita. And that study is now done. And we've very patiently waited and said we are not going to ask for the money until the Corps has done the study.

Well, the study is done now. And we particularly need the part of that study funded that rebuilds the barrier islands. They are the speed bumps that knocked down hurricanes. You all got levees to protect you. We got beach facing the ocean. But those speed bumps matter.

Remember, Katrina, before it crossed the mouth of the river and came up the edge of Louisiana, hit -- (inaudible) -- it was at one point a category five hurricane. It hit Mississippi as a category three hurricane. Unprecedented storm surge, but the wind was down to 155 miles an hour.

The other thing that we need is, we've talked about to this committee before is for FEMA to allow us to use some of our hazard mitigation money for survivable, interoperable communications. But that's not CDBG money, Madame, so I won't bore you with that subject.

SEN. LANDRIEU: Thank you, Governor. I appreciate it.

Mr. Rainwater?

MR. RAINWATER: Thank you, Madame Chairwoman, it's very good to see you.

Senator Graham and Senator Wicker, thank you.

And Senator Landrieu, thank you so much for the support that you've given the State of Louisiana as we recover now from four storms, Hurricanes Katrina, Rita, Ike, and Gustav. And you mentioned the numbers earlier and I won't go through them again, but 240,000 homes destroyed, 82,000 apartment units, small rental mom- and pop- renter's units destroyed.

Right now, four years after the storm, we've got 2,700 people in Louisiana who are still living in FEMA trailers and 26,000 people are still living in the Disaster Housing Assistance Program, a transitional closeout program, which -- by the way, thank you for your support in getting that extended. And we also thank Secretary Donovan for the hard work. And he heard very quickly what was happening with the Disaster Housing Assistance Program and helped us in Louisiana, and we are transferring people right now.

But in the aftermath of Katrina and Rita, obviously we received $13.6 billion in community development block grant money for disaster recovery. We broke that up into three different main programs. One was our Road Home program, two, was -- and some housing programs, which is Road Home, small rental, and what we call a piggy-back program, which is taking low-income housing tax credits and taking community development block grant money and laying that over the top.

And then last but not the least was our economic development program, which our state carved out a small pool of about several hundred million dollars to help with grant loan programs, technical assistance workforce development. But the business need, as you know, dwarfed the funding.

You know, half of the businesses, more than half of the businesses in New Orleans have been affected by this storm in some form or fashion. Either their actual facility damaged or obviously folks were closed down for months and months.

But we never got the money we needed for economic development. But our first priority in Louisiana was recovering -- and basically our cornerstone to recovery was the Road Home program, which has been mentioned here today.

To date we've closed a 124,000 grants in the Road Home program. Since the beginning of January 2008, we dispersed more than $2.2 billion to 28,400 applicants; $822 million of that was in a very creative elevation grant program that we started.

And I will tell you that we revamped the appeals process. You heard quite a bit, but in the old program there was what was called a dispute resolution program. We got rid of that. We set up a two-tier appeals process; one at the contractor level, then another one reviewed by the state itself. It's taking 60 to 90 days to run through that appeals process. We manage it everyday.

And we also went out and did more than 20 outreach sessions to the poorest of the poor, elderly. My staff -- well, I took entire staffs out, over 100 staff people to 20 different locations around the state, many of those in New Orleans and Saint Bernard, attorneys, policy folks, and just sat down and worked through Road Home issues.

Now, is it a perfect program? No, it's not. And I didn't write the rules. I thought it's cumbersome. There's been many conversations about what would have been the best way to do it. Should it have been a rehab program or a compensation program?

And we ran a compensation program. A rehab program might have taken a little bit longer, but people would have been paid what they were owed. What we did is we just filled a gap. That's what those dollars were meant for. And I think in many ways there was an over expectation about what Road Home could or couldn't do.

But nonetheless -- and very quickly, in our small rental program, last year when we took over this program there were only about five closings that have occurred or five units that had opened in the small rental. We are up to 1,400 now.

And we are getting ready to adjust the program to advance payments to those mom-and-pop renters who want to get back into the economy in New Orleans and live that American dream. And so that's what we are focused on.

In our piggyback program, which bears the CDBG money would go zone and low-income housing tax credits, which -- by the way, two of the Big Four are using piggyback programs. We worked very closely with HUD on that. We've created more than 7,548 rental units statewide, 2,364 of those in the city of New Orleans. We have another 5,230 units that we feel are going to open at the end of this year.

So there are some success stories. Is it a perfect program? No, it's not. But we have transitioned the Road Home program, and all our three programs, through a new contract. We have broken that contract up into three different pieces.

And I will tell you -- and that there were over 19 performance measures in that -- in the three contracts that require very tough measurements on behalf of the companies and performance standards at the beginning so that everyone knows what's expected at the beginning of the -- of their contract.

Thank you, Madame Chairwoman.

SEN. LANDRIEU: Thank you very much.

Mr. Stone?

MR. STONE: Madame Chairwoman, my name is Charlie Stone; I'm the executive director with the Office of Rural Community Affairs. And for clarification, I just want to say that my agency is responsible for the non-housing disaster recovery activities.

In the state of Texas we have two sister agencies that responded to disasters designated by the governor of the state. So we have the Texas Department of Housing and Community Affairs that handles the housing disaster recovery, and we do the non-housing.

So I want to get straight to the point since we are limited in time. I don't want to read the testimony, but you raised a very important point in your remarks earlier today, and I think it's already been addressed by several people. The question was is CDBG the right program for disaster recovery and response.

And I will agree with every testimony that we've heard so far. We do believe CDBG is the correct program. We know it is the most flexible, and we've had great success with it although we have also heard testimony that it is not a perfect program.

And so I want to talk about some things that we could do at the federal level to make changes to the program in order to make the CDBG Program one that would be more effective and more responsive, and keeping in mind who we really serve are the people who have been most devastated, the cities and the counties who've been devastated by disasters.

Now I have a Texas-size chart to my left. We had to bring one in.

SEN. LANDRIEU: I was noticing that. Everything is bigger in Texas.

MR. STONE: And what we want to prove, that's still true. So we brought this chart. And this top timeline that you see on the top, Madame Chair, you also have that in your handout. It's on four pages, but it's on this chart. This is a living time chart for our response to Hurricane Rita. And that timeline, in all honesty, is just too long.

What you're looking at represents all of the nuances that we have to go through to get CDBG funds out the door, and that is in effect for all 50 states. Basically, just to kind of give you an overview of that, it takes us about -- it took us about 360 days to complete all of our Davis-Bacon Act requirements in order to get contracts out and operational.

It took us 486 days to complete all of the environmental review contracts and get those done; 685 days after Hurricane Rita struck Texas is when our first expenditure of non-housing CDBG donors actually took place. 1,194 days, we had 88 percent of the funds, and if you look, we have -- this chart actually now it goes to May, and we didn't have time to put that on there, but we are at 95.6 percent expended for non-housing funds in the state of Texas. That is three years and seven months after Hurricane Rita hit the Texas coast. And that is entirely too long.

So the question then is what's with the lower chart or how do we get to the lower chart? Well, that lower chart represents what we think we could do with CDBG dollars for non-housing issues and recovery if we had some of the changes that I have recommended to you in my testimony.

And these changes are not things that we came up in a vacuum in the State of Texas. But I serve on the board of the Council of State Community Development Agencies. It's a nationwide organization made up of all 50 states. Under their leadership, we brought eight states together, including your state, as part of their CDBG staff who reviewed these proposals with us including Mississippi, Alabama, Florida, Ohio, Wisconsin, and California. All looked at this.

And we came up with a proposal, which we have as part of this testimony, that we believe we could have done the second chart right here, which means the 12 months before Hurricane Ike hit the Texas coast, we would have had been completely finished with disaster recovery on non-housing issues in Texas. And believe me, that would've been a dream come true. We could have done that.

What we are proposing are changes to Title I of the Housing and Community Development Act of 1974 as amended. And in the handout that I gave you, I'm not going to read all this because my time is rapidly going away, but I will say that two primary things that need to be done is we need to look at CDBG from the standpoint if it's going to handle a mega disaster, then changes needed to be made with that statute.

And basically we are asking for two primary key things that need to be done; one is to waive for disasters over $1 billion, waive Davis-Bacon requirements for 12 months. Just 12 months. Not eliminate them. We know those are -- that's a good law. It needs to be place for the regular CDBG program, but when we have a disaster, we do not need to be weighted down with Davis-Bacon Acts. We need to put people's lives back together.

The other thing that's most important is that the environmental review takes too long. We feel in the state of Texas and all these other states too, that disasters need to be exempt from environmental review when it's necessary to control or arrest or recover from the effects of disasters or imminent threats to public safety.

We're just asking for a 12-month window to get these program funds out quickly as possible. All of these others that are in here, a lot of these are codifications. I won't go through those. I can answer questions later on that. But there are a lot of things that need to be changed. We've made some good recommendations, Madame Chair, and I'd be happy to answer your questions.

SEN. LANDRIEU: Thank you, Mr. Stone. I'm very, very happy to hear that this proposal is going to come forward by you and several other states that have been involved in trying to help come up with a better, more expedited approach. I'm looking forward to learning more about that. Thank you.

Mr. Tombar?

MR. TOMBAR: Thank you, Chairwoman Landrieu.

SEN. LANDRIEU: Pull the mike to your -- if you could. There you go.

MR. TOMBAR: Thank you, Chairwoman Landrieu, for hearing my testimony today. I'm Fred Tombar, and I'm a senior advisor to Secretary Donovan at HUD. It's my honor to join you today to discuss the administration of the Community Development Block Grant funds for disaster recovery following Hurricanes Katrina, Rita, Gustav, and Ike.

On behalf of Secretary Donovan, I want to express HUD's commitment to seeing the Gulf Coast recovery through. That commitment began with our efforts to ensure that disaster survivors receiving assistance through rehab were able to make a smooth transition off of that program. We work with your staff, Madame Chairwoman, and FEMA to provide additional assistance to families thorough August the 31st.

Also on March the 5th, Secretary Donovan joined you and Secretary Napolitano on a trip to the Gulf Coast to see first hand the state of the recovery. I want to tell you that President Obama and Secretary Donovan are both committed to helping the Gulf Coast fully recover.

Since 1993, CDBG funds have been a tool for disaster recovery activities in states and communities. Once an appropriation has been made, HUD responds quickly to allocate the funds. As you pointed out, Chairwoman Landrieu, there have been three supplemental appropriations of CDBG funds to the Gulf Coast since Hurricane Katrina made its landfall on August 29, 2005.

The first appropriation was $11.5 billion. The next in December of -- the next in June of 2006 was $5.2 billion, and a final was $3 billion specifically to close gaps on a Road Home homeowner's assistance program. I'm pleased to report that to-date a total of $19.673 billion in CDBG funds has been appropriated for the five Gulf states, from -- to fund housing programs, totaling over $15.4 billion, 73 percent.

To date the states have expended $12.2 billion in CDBG recovery activities. Over $11 billion has been disbursed for housing assistance activities. That's nearly 89 percent of all funds expended towards housing activities.

The first two CDBG supplemental appropriations were clear in their intent and conferred flexibility upon the states. As Governor Barbour pointed out, the first CDBG supplemental stated that HUD must waive all regulations and statutes that would hinder implementation of states' plans. Only four areas were exempt from that mandate though. They are housing, environmental review, civil rights and labor standards.

The second supplemental bill modified the direction on waivers to state that HUD may approve waivers. As Congress intended, the eligible states have substantial flexibility in designing their programs, establishing funding levels, and carrying out activities to achieve their goals. This approach has allowed each state to tailor its recovery programs to best address the needs of its citizens.

HUD's primary role has been to provide technical assistance and to monitor the use of those funds. The secretary has pledged to work with states on a case-by-case basis to waive rules when possible. HUD is also working with the administration to analyze disaster response recovery tools nationwide to identify needs for improvement.

With respect to Hurricane Gustav and Hurricane Ike, these storms delivered a second blow to areas that have been struck by Hurricane Katrina, and Rita. Congress appropriated an additional $6.5 billion in CDBG disaster recovery funding in September of 2008. Of this amount, as you noted, $2.145 billion has been allocated to 14 states with the largest going to Texas, Louisiana, and Iowa. Secretary Donovan intends to allocate the remaining funds that you asked about in the very near future once we complete our allocation review process.

HUD's goal was to quickly get the money to the states so that they could begin using the funds for their recovery efforts while retaining our financial oversight role. Following an appropriation of CDBG funds for disaster recovery, HUD publishes a notice in the Federal Register that contains the allocation of funds and program requirements including waivers requested by the states in alternative requirements.

Subsequent notices are published as HUD grants additional waiver requests from states. Unless there has been a significant policy or legal issue, HUD has reviewed and responded to those additional waiver requests very quickly.

While not everyone agrees with every program choice that a state makes, HUD has found overall compliance with program and financial rules to be very good. A continuous improvement process regularly evaluates obstacles and seeks both short- and long-term solutions. In addition, fraud and abuse have been minimized, thanks to the collective diligence of federal, state, and local officials.

As I said in the beginning of my testimony, and others on this panel have attested, CDBG recovery funds have been critical as a tool for assisting states and communities. CDBG has an advantage of providing flexible funding with state and local decision-making and responsibility. The challenges are that the disaster recovery activities can be complex, require tough local decisions, and may require grantees to acquire additional capacity to carry them out.

Thank you for the opportunity to appear before this Subcommittee. This completes my testimony, and I look forward to your questions.

SEN. LANDRIEU: Thank you very much. And I really appreciate you all keeping what could literally be hours of testimony into five minutes. And I will continue to have as many hearings as it takes until we get this correct.

I think we all can agree that a lot of progress has been made, but I think I heard in all of your testimony that while the Community Development Block Grant program is the most flexible available, I think that I heard all of say that if you could suggest some changes, you would suggest some changes to the program. Is that a correct interpretation of what I've heard? Does anyone disagree with that?

So what I'm hearing is that while it may be the most flexible program, it could be changed to modify to even be more effective. That is what I hope the outcome of this hearing will be, to try to find some specific suggestions as to, along the lines of Mr. Stone -- and let me clarify for the record, we asked the governors of the states to testify.

Each governor made the decision. You were recommended by Governor Perry. I didn't know that you were not the housing person. So I'm sorry, but your testimony is still going to be very well received and hopefully we will have an opportunity for the housing person from Texas to testify.

Let me though ask this of HUD perhaps, and I'm on the Appropriations Committee as you know, I don't know and can't quite put my hands on any of the formula that is in place in the law that would drive the initial allocation to states after a disaster.

I don't know, as you may remember, there seemed to be -- those decisions were not necessarily driven by formula at the time.

So one of my questions to you, Mr. Tombar, and perhaps Governor Barbour, to you, would be how would you recommend the federal government distribute Community Development Block Grant fundings in the aftermath of a disaster? Should it be based on the number of housing units lost, single family homes, the number of units total lost?

Or should it be based on the number of houses lost plus the number of businesses lost? Should it be about -- based on the number of people displaced, because part of my struggle is going back to the beginning of this, how those funds were initially distributed.

And I'm not sure that we've come to any consensus about that yet. And it is something that HUD is going to have to quickly come to a consensus about in the event that we are faced with another catastrophic disaster, hopefully not in this hurricane season.

So I'm going to just throw this question out for your comments. I have got a document here that I'm going to submit to the record. We went through, after Katrina and Rita and estimated, and this is all from FEMA information, which I will submit to the record, number of lives lost, number of people displaced, number of homes destroyed, as between Louisiana and Mississippi and Texas, number of hospitals destroyed, number of school destroyed, number of flood insurance claims, number of SBA loan applications, total insured loss, total uninsured loss, total number of jobs lost.

So my first question would be, given that there is no real formula for distribution under the Disaster Community Development Block Grant. Now, under the regular community block grant, there is a pretty tight formula. I think that formula is based on population and some weight for need or income. If I'm correct, there is some vigorous formula applied that directs how much money goes to each state and city. Is that correct?

MR. : There is --

SEN. LANDRIEU: Under the regular program?

MR. : Yes, Madame.

SEN. LANDRIEU: But under the disaster program, is there such a formula?

MR. : No, there isn't, and part of the reason is just disasters vary so greatly. And the last appropriation, one that you mentioned, covered floods in Iowa and Indiana and as well as hurricanes that devastated Louisiana and Texas, and ice storms that hit other states.

So the type of damage caused by a disaster, a federally declared disaster, varies. And therefore, the type of assistance that maybe needed and how we go about calculating it equitably, how that assistance is distributed, varies.

SEN. LANDRIEU: And I can appreciate that disasters are very, very different in terms of their scope and nature; in terms of hurricanes versus tornadoes, versus ice storms versus earthquakes. But you are not testifying that you don't think that there is an equitable way to distribute the fundings. You are testifying that we don't yet have such a equitable way. Is that correct or --

MR. : What happens is, and this past allocation is indicative of it, the Congress has given the secretary direction as to what types of things it would like the secretary to prioritize when making a distribution. And so if I remember correctly, in this last 2008 allocation, it was appropriation. It was poor economic impact for housing loss and business, I think loss of business, some impact on business. Those are factors that are taken into consideration.

Part of the reason, you mentioned that we've been a little deliberate in getting out the balance of the 2008. But frankly, part of the reason is because Secretary Donovan is taking seriously this question, that -- it's the very question that you are asking, and that is how best to allocate the money.

Looking at the range of things that happen in a disaster, the range of disasters that happen, but importantly, how do we go about doing activities that would, in fact, prepare states and communities for the next disaster because what our experience has shown is that those states that are likely to get disaster funding are likely to get hit by a disaster again as is the case with, here talking about Ike and Gustav and Katrina and Rita.

And as I pointed out in my testimony that Ike and Gustav hit a second -- send a second blow to some of the same communities that were hit by Katrina and Rita. So preparing those communities for the next disasters is one of the things that the secretary is looking to do with CDBG funding.

SEN. LANDRIEU: Okay. Governor Barbour, let me ask you if you had any recommendations as to how Congress might in a catastrophe like Katrina or Rita that hit multiple states, multiple parishes, multiple counties, how would you suggest the Congress equitably allocate those funding -- that funding to make sure that Mississippi receives its fair share, Louisiana receives its fair share, Texas would receive its fair share. Do you have any recommendations based on the experience that you have been through the last four years?

GOV. BARBOUR: Yes, Madame. Madame Chairwoman, you may recall at the time some of the things that were done with CDBG money for Katrina and Rita have never been allowed before. Florida had had four hurricanes the year before. They had no housing grant program. They had no Home Again or Road Home program.

What we did in Mississippi, and what I really suggested at the time when I asked about others, we prepared a plan that we thought if you took what Mississippi was entitled to under the Stafford Act, what wasn't covered, in what magnitude, and what would it take to cover it? And we literally prepared a plan and presented it.

And I do think the best way for Congress and the administration to equitably do this is not to try to come up with some mathematical formula or some rigid guideline, but to force the states to say, this is what we need. And then to scrub it. And you know, states may be unreasonable or excessive or not know what they are talking about, but that to me is the best way to do it, to do it on a one-by-one basis.

Obviously, this is not going to be done for every disaster. It's only -- I assume it's only going to be done for the mega disaster, the giant disaster. So that was the way that I thought at the time, and nothing has made me think differently; make the state prepare a plan and let the federal government decide if they think that's reasonable how much of it should, if any, should be funded.

SEN. LANDRIEU: Well, that's very interesting. And this is a very critical question that HUD and the new president has to consider. The governor has just testified that in his view when a major catastrophic disaster hits -- he's qualified to say, maybe not in every disaster, but in a catastrophic disaster -- governors should be allowed to actually put a plan of recovery, presented to the federal government, have it looked at in a short but thorough amount of time, and then basically fund it.

And when Governor Barbour did that and he presented his plan to Congress in his plan, which I think you've given me a copy of, his was a $5.5 billion dollar plan. Congress actually did that and gave Governor Barbour $5.5 billion. And he's testified so far he thinks it's worked out pretty well. There are critics of the plan that testified earlier that have a different view, but nonetheless that's where we are.

But that did not happen in Louisiana or Mississippi for any number of different reasons. Neither state was told that they could submit a comprehensive plan and they have any chance of getting it funded, just for starters. Now, this is going back to a previous administration.

And I would think that if you asked all 50 sitting governors today, if their state was catastrophically damaged in some way, do they think they could just submit a plan to the federal government and expect it to be a 100 percent funded or 95 percent funded or 85 (percent), I don't think there's a governor other than Governor Barbour because this was his experience. So I can personally understand how you believe this.

But I don't know if there are 49 other governors that would think that they could just sent a request in for very flexible money to rebuild their homes, rebuild their ports, rebuild their sidewalks, their infrastructure, workforce development, rate reductions for electricity.

So that's the problem here.

I'm trying to figure out a way for our committee to recommend to the administration, and they are going to be figuring this out themselves, what happens the next time there is a catastrophic disaster, and how the governors come to understand what they may or may not be entitled to get their states, their counties, their parishes back up and running.

Mr. Rainwater, do you want to comment about how you all sort of -- how the state of Louisiana got kind of pushed into their position or maybe you pulled yourself. I'm not sure what you testified to?

MR. RAINWATER: Madame Chairwoman, from the perspective of -- and let's take, you are absolutely right, with Katrina and Rita -- I mean obviously the first and third largest disasters in American history, working with you to get the $3 billion dollars in the last tranche, if you look at the way we were funded, you know, very difficult to even put programs together.

You know, it was interesting because as I heard the first panel testify, folks talked about changing rules. The first rules were designed because of budget. I mean when you think about the concern that the state had -- and when it said is let's put together a compensation program, just try to fill gaps because we can't fix every home to the pre-storm values, it's going to be impossible.

I mean that's literally -- if you really shake out and you look at the policies and you look at you look what happened and what didn't happen in Louisiana, literally the first -- the primary concern was do we have enough money to fix all the homes in the levee protected areas and then those homes impacted by Rita.

SEN. LANDRIEU: And how much money did the state get in the first tranche? Mississippi got its ($)5.5 (billion) and you all got, Louisiana got --

MR. RAINWATER: ($)6.2 (billion) in the first.

SEN. LANDRIEU: ($)6.2 (billion).

MR. RAINWATER: And then we got ($)4 (billion) and then the $3 billion in 2009.

SEN. LANDRIEU: And you got the $4 billion in how many months after the first? Do we know?

MR. RAINWATER: Six months. About six months.

SEN. LANDRIEU: Six months?

MR. RAINWATER: Yes, Madame.

SEN. LANDRIEU: So the Mississippi money came in one tranche. Two? Two tranches. You got -- what was your first?

GOV. BARBOUR: I'm sorry, Madame. We got ($)5.2 (billion). Right at ($)6.2 (billion) out of the first pod, and a little less than 300,000 -- or ($)300 million out of the second.

SEN. LANDRIEU: Three hundred million.

GOV. BARBOUR: So about ($)5.481 (billion), about 95 percent of it was in the December 2005, the balance was in the second supplementary.

SEN. LANDRIEU: And then yours was really in three major --

MR. RAINWATER: Yes, Madame. And if you think about the way that the dollars came down and the way the recovery authority allocated those dollars, I mean, it wasn't until in 2007 when you were able to get the last $3 billion dollars to complete the Road Home program that the state was able to put together a $700 million for local communities to do a long term community recovery programs.

And so it's very difficult to put together a budget when you are -- in such a devastated area, when you are trying to take care of rental, you are trying to take care of, you know, the larger complexes, you are trying to take care of infrastructure.

Now, we will tell you for Gustav and Ike, kind of a different story, we felt very comfortable with the way -- and HUD communicated very well with us about what was going to happen. And that first round in which we got $435 million is based on housing damages.

So we were able to communicate with parishes because we made a very different decision on how to manage the Gustav-Ike dollars. We were going to push it down the local governments. And I will tell you that there are many public hearings happening throughout coastal Louisiana and throughout the 43 parishes that were impacted.

But -- so we were able to look at housing in that first round of dollars. The second round is based on infrastructure damage. And so we were able to plan a little bit better versus the Katrina-Rita allocations where you didn't really know what was going to be funded and what would or wouldn't funded, whether it was infrastructure where you could fund economic development, small rental, rental or complete a homeowners' program.

SEN. LANDRIEU: And what was the, Charlie == what was the experience, Mr. Stone, in Texas about your allocations? How much did you receive and how many different tranches over how long a period of time?

MR. STONE: Well, Hurricane Rita we had two tranches of money. The first one that came to us was only about $72 million, and that was way short of what we needed. And so 11 months later we ended up with $428 million, and 90 percent of that second one went to housing at that time. And then for Hurricane Ike we got $1.3 billion for the first tranche of that.

And I would like to also comment, we've heard, at least Texas has been told, that HUD will have a formula to distribute the rest of the disaster, Hurricane Ike and all the hurricane money for 2008. But we don't know what factors are going into that.

We will not have an opportunity to comment on that. It's just the money will show up and we will try to use it the best we can, and we will use it for the best we can. But it would be nice if the states had an opportunity -- just as you said, the governors I think would be very interested in being able to put a plan forward on what we need the money for.

SEN. LANDRIEU: Well, and I would second that, and really ask HUD to listen carefully to the Texas situation. I just want to call your attention to this chart, which is a little bit troubling. And maybe Mississippi would object to the way these numbers have been done, but we took the numbers just based on housing units damaged, which is FEMA documentation, not something that our office came up with and allocated the funding.

And you can see that on houses damaged, Louisiana had 67 percent of the housing units along the Gulf Coast, based on Katrina-Rita, we got 68 percent of the funding. Mississippi got 20 percent of the housing, but got 28 percent of the money. Texas and Alabama and Florida had 13 percent, but only got 0.4 percent funding.

Now, according to this, you could suggest that Mississippi got slightly more money than if you did by housing and Texas was substantially short changed. Now, this is only one way it could be calculated. It could be also calculated on numbers of business lost, number of uninsured damage relative to insured infrastructure or combination of the above.

But I am strongly suggesting that we come up with a way that we can equitably distribute this block grant to states that are hit sometimes simultaneously by the same storm or go to a Barbour approach, which is after the storm let the governors and the county commissioners calculate what they think they are owed and submit a program to the federal government, and it's understood that the federal government is going to fund 90 to 100 percent of it.

I mean that could be a plan. I think governors and local officials actually like the second one better than the first one I've outlined.

But there's got to be some decision made about that.

Then secondly, what is the, as the first panel testified, is the approach or the focus to repair as much housing as possible given that's a very important part of recovery? Or is it for infrastructure which you have to have infrastructure repaired, streets, roads, sewage systems in order for people to be rebuilt? Or is it for economic development which is also an important component of recovery?

So I'd like to maybe ask Fred, we only have a couple of more minutes, what are some of senator -- I mean, Secretary Donovan's thoughts about this or your own, about recovering from a storm, what is of higher priority; is housing, health care, schools, infrastructure or economic development? And if it is housing, is it your homeowners that serve as your primary tax base, or is it renters that perhaps need more help than home owners? Is it the lower income renters or the middle-income renters? Go ahead.

MR. TOMBAR: That's a very loaded question, but I will do my best with it. But if I could, I'd like to point out that the allocations that you point to have little to do with need. There was in the appropriation itself specific language that limited the amount that we -- that HUD was able to distribute to any given state, which caused a cap on the amounts that the state of Louisiana could get, which therefore did not make --

SEN. LANDRIEU: You are talking about the initial tranche, right?

MR. TOMBAR: Yes, Madame.

SEN. LANDRIEU: Oh, yeah.

MR. TOMBAR: Which was the largest tranche of all that that we're talking about. And so --

SEN. LANDRIEU: I am familiar with that arbitrary cap placed by Congress.

MR. TOMBAR: Okay. So that directed in large part how the department could go about distributing the money. But to your question about the better way to do it, as I mentioned already Secretary Donovan is taking seriously this question and is himself looking at it. We are the Department of Housing and Urban Development and so we do believe that -- and the CDBG program was set up to help with housing and development.

And so those are two of the things that we certainly want to focus on. There has been discussion even over this last allocation that came through in 2008 about making money -- more money available for infrastructure in some cases. That is a resource that typically is provided by the Federal Emergency Management Agency. And so while we see that HUD's money and CDBG could support those activities, we -- the secretary has and will continue, I think, to make a priority on housing and economic development.

There are different ways to look at it, which is part of the -- as you acknowledge yourself, there are different ways to look at it; business loss, the loss of jobs and other things that may drive it. And so we are trying to be as robust as we possibly can gathering as much data as we can. And that's the real challenge here, Senator, is that data, access to data that is conclusive, that is universal across all of the disasters is important if we are going to be equitable in the distributions that we make of this money.

SEN. LANDRIEU: Okay. Well, that's a very, very important point. I know our time is somewhat limited. Do any of you -- Mr. Rainwater, do you want to add something? And then I'm going to ask each of you for any kind of closing comments or something you'd like to put on the record before we close down.

MR. RAINWATER: Thank you, Madame Chairwoman. One of the challenges I think we -- and we've talked about this reform is catastrophic annex. And the reality of it is FEMA Public Assistance, although they are making good progress right now, the teams that are down in Louisiana and Mississippi and Texas I think are doing a decent job. But for a catastrophic disaster it's too painful.

There needs to be a catastrophic annex that allows us to -- obviously in Louisiana housing was the first priority, but for infrastructure, using Community Development Block Grant money, to be very frank with you, is much easier than trying to go through the FEMA Public Assistance Grant. And so there needs to be -- we need to look at this from a catastrophic perspective.

You know, how do you get dollars into a state quickly to help it because you have to. You can't just give up housing without infrastructure. You got to have both, and it got to be both at the same time. And I think that's the challenge, Madame.

SEN. LANDRIEU: Mr. Stone?

MR. STONE: Madame Chair, I think if the question really is, is Congress really interested in helping the states recover from a disaster and take them back to the state they were before the disaster hit. And I think if everybody thought like you, I think that the answer is yes, that would be the thought. I believe that the CDBG, whatever formula it could come up with for an initial tranche of money, we need a rapid initial response.

And irrespective whether it's housing, infrastructure, I think there is obviously a balance that needs to be there. But the goal would be to recover the housing and the infrastructure, and if the economic development is part of that -- but that could be something in a second tranche of money some months or maybe years down the road when we see how far we are able to recover from the disaster with the first tranche of money. And the second one the governors could come forth with a plan to make the state complete -- completely recovered from disaster.

At that time we would have better information available, we would have better damage assessed, we would have all the insurance information available. We could put together a very good plan to make the states whole again at that moment of time. And so I think it's a two-step process. And it's just too huge to try to get it all done at one time.

SEN. LANDRIEU: Governor Barbour?

GOV. BARBOUR: Thank you, Madame Chairwoman, for having this. Fred mentioned the idea about getting our people home. One year after the storm or July the 1st of 2006, less than a year after the storm, the population of the bottom Syscans of Mississippi was more than 90 percent of what it had been before the storm. Today it's about 98 percent of what it was before the storm. We are hoping to hit 100 percent this year.

We though getting people a place to stay, getting the schools open so the kids have a place to go school, and getting their jobs back, that you couldn't rebuild the communities unless people could go back home with a place to stay, the kids in school, and work. And so those were our priorities from September on. And some people did a fantastic job. Every public school in Mississippi was open in six weeks except one, and that's because their portable classrooms didn't arrive on time.

Most of our big industries were back open that year. Some of them were back open in 30 days. And then at one point we had 47,000 FEMA trailers with temporary housing for people. So I would just say that we thought what we needed was to get the community back. And we thought of it totally as a community, infrastructure, schools, everything.

And you can't leave -- while the federal government gets criticized by people, the federal government's been a great partner in this; FEMA has been a great partner in this. Yeah, they did some stuff wrong, so did we. But the federal government has been a great partner.

I'm glad you all are trying to figure out ways to improve it. But one thing I think everybody at this table agrees, maximum flexibility for the states to make the decision so that the state and local people's priority is put in place rather than Washington's priority, is the best thing for everybody whatever way you all determine to do it.

SEN. LANDRIEU: Well, Governor Barbour, and I really appreciate that. But as you know, and you've testified to this, and we have the report, the reason that you've been fairly I think favorable towards the plan is because the plan that you wrote was actually funded. And that may be a model for how we go forward.

I mean I'm not suggesting that that is not -- that may be a very good model for us to use, which is in the governor's case he wrote the plan, and here it is, he wrote it, and it was basically funded. And it was basically carried out according to the governor's wishes. And he's testified and others have testified that it's worked pretty well.

Now, again let me say there have been critics of the plan. Some of them have testified in your legislature, some of them have testified here. But the record needs to reflect that this was not done in any of the states. And it was not the case in Louisiana. It was not the case in Texas. It was not the case the in Alabama, and it was not the case in Florida.

So if it is going to stand as a model, then we really need to think about HUD being very flexible in the next catastrophic disaster. Let each governor write their own plan, submit the full cost to the federal government, and have the full -- the federal government write basically a check on the date and give it to them and then get out of their way and let them do it.

That is not what happened in the other states. That is what happened in Mississippi for the most part, you know. So this is what we have to come to, to figure out. Our subcommittee is going to recommend something to the new administration.

And then the other issue, which is not the subject of this, but I want to put this on the record. Not the subject of this hearing, but I'm going to be asking governors what is their responsibility to set aside a portion of their general fund dollars to meet the needs of a catastrophic disaster. Is it the opinion of the governors collectively that the federal government should pick up 100 percent of the plan, or should states be required to set aside some kind of rainy day fund, or some kind of catastrophic disaster fund so that the states can put up a share of what the cost is to restore the area? And are we trying to restore it to 100 percent or 95 percent or 90 percent?

These are very important big policy decisions that have to be made by the new president, by his administrators, and HUD, FEMA and Homeland Security. And then we have to, as a committee, decide. So I'm going to stay with it until we come up -- because right now it is just really -- it's just the hodgepodge of really conflicting rules and regulations and formulas. I don't think the governors have any confidence, or the mayors, or the county commissioners, about what they are even entitled to ask for in the event of a catastrophe.

I can tell you among senators there is a great deal of confusion. And we maybe as a group stay confused, but in the area we are confused about what our communities are entitled to, what we should ask for. So this has been a good hearing. I'll leave it at that. I think we've had some good testimony today.

Governor Barbour, thank you for taking your personal time to come and testify. All the governors were invited. We thank you for coming forward.

And we thank everyone else for representing their respective groups. But there is a lot more work that has to be done. The record will stay open for 15 days. I really encourage anybody to submit any documents they want to on this subject, and we will be having a follow-up hearing with HUD and perhaps some other members of the administration on this, okay. Meeting adjourned. Thank you. (Sounds gavel.)

END.