President and Congress Return to Washington Early to Support Recovery Efforts
Congress and the President have scrambled over the last two weeks to respond to Hurricane Katrina and the devastation it has wrought on the Gulf Coast. First, Congress reconvened early on September 2 to pass a $10.5 billion supplemental appropriation ( PL 109-61 ) which was followed by a $51.8 billion supplemental ( PL 109-62 ) enacted on September 8. Both were mainly to fund the Federal Emergency Management Agency (FEMA), with some funds going to the Defense Department and the Army Corps of Engineers.

The FEMA funds are intended to support ongoing recovery efforts as well as the $2,000 grants to affected households announced by the President on September 8, to be distributed by FEMA and the Red Cross.

In addition, the President on September 8 granted the hurricane victims “evacuee status,” making them entitled to federal benefits administered by the states and streamlined enrollment process. These benefits include Medicaid, TANF, childcare, food stamps and others.

Democrats and Republicans disagreed over the extent to which amendments to appropriations bills were practical vehicles to aid the Gulf Coast. On September 15, the Senate passed the Commerce-Justice-Science appropriation bill (H.R. 2862 ) after rejecting certain Katrina-related amendments offered by Democrats but including $4.3 billion in emergency spending for the Gulf Coast as well as $595 million for loans and assistance to small businesses affected by the disaster. It is not clear yet how much of this will survive conference since the House bill was passed in July and thus does not contain Katrina-related spending.

Efforts to Provide Short-Term Benefits to Hurricane Victims

The House and Senate passed a series of short-term assistance measures over the past two weeks. On September 7, the House passed H.R. 3169 , allowing the Department of Education to waive repayment requirement for Pell grant recipients, and the next day passed H.R. 3668 allowing the Department to waive repayment requirements for Student Financial Aid for those college students evacuated from campuses. Both were passed by the Senate on September 15.

The House and Senate also passed legislation ( H.R. 3672 ) to encourage states to provide hurricane victims short-term grants under TANF (defined as four months or less under current regulations) that are not subject to the work requirements and time limits of the regular welfare benefits. The bill reimburses states for grants to families evacuated from other states, advances TANF funds that are otherwise due to the states at the start of the next fiscal year, extends the program through December, and also increases funding by 20 percent in Louisiana, Mississippi, and Alabama. It is likely that additional changes to TANF will be enacted beyond this emergency bill.

The bipartisan Grassley (R-IA) – Baucus (D-MT) emergency package (S. 1716, see below) would expand upon the legislation just passed to allow victims of Katrina to qualify for the full range of TANF aid, still without triggering the time limit, child support or work requirements. Advocates are attempting to add aid for immigrants affected by the disaster to the Grassley-Baucus package.

The Senate has also addressed the additional housing crisis left in Katrina’s wake. The Senate on September 14 adopted an amendment proposed by Paul Sarbanes (R-MD) to the Commerce-Justice-Science appropriation bill ( H.R. 2862 ) to provide $3.5 billion in housing assistance to survivors that would cover utilities and relocations costs as well as rent.

More Legislation Proposed

Members of both chambers are currently working to pass more legislation that would aid people displaced physically and economically by the hurricane. Some of the proposals include measures to address health care and nutrition needs.

To address nutrition needs of those affected, Senators Leahy (D-VT) and Harkin (D-IA) have proposed legislation that would, among other steps, increase the maximum Food Stamp benefit for affected households by 10 percent, increase the gross income limit from 130 percent of the poverty line to 150 percent, and exempt for one year bank accounts and other assets from the resource limits under Food Stamps.

One of the greatest concerns for the state and local authorities is how Medicaid can be provided and funded for the disaster victims. After several proposals were put forth by Senators of both parties, by September 15 most attention had settled upon a compromise crafted by Senators Grassley and Baucus (S. 1716) that would provide emergency Medicaid coverage to survivors in whatever state they are now residing for five months (with a possible 5-month extension) under a streamlined application process without the normal documentation required. States would not be required to apply for a waiver and rules would be waived to allow more mental health and home health care. Louisiana and Mississippi would receive a 100 federal funding match. Hurricane survivors who are below 100 percent of the poverty line (200 percent for children and pregnant women) would be eligible.

Also, the late enrollment penalty under Medicare Part B would be suspended and Medicaid recipients who are eligible to transition to the Medicare prescription drug benefit are to be notified of the new benefit.

The administration has indicated that it would rather act by offering Medicaid waivers to states similar to the one negotiated recently with Texas. The waivers would create a new category for evacuees in Medicaid and SCHIP and include a streamlined enrollment process. The administration’s waiver plan is generally not as broad as the Grassley-Baucus proposal. Able-bodied adults without children, for example, would not be eligible no matter how poor, and low-income children could receive the more limited benefits under SCHIP rather than Medicaid. The administration plan also would not change the federal matching rate for Medicaid and SCHIP.

The Grassley-Baucus package also includes assistance for paying premiums to continue job-based health insurance and 13 weeks of Unemployment Insurance payments, funded fully from the Federal Unemployment Trust Fund, for hurricane victims who have exhausted their normal UI benefits.

In the House, Financial Services Chairman Michael Oxley (R-OH) and Richard Baker (R-LA) proposed a manager’s amendment to provisions creating a National Housing Trust in legislation ( H.R. 1461 ) regulating GSEs (Freddie Mac and Fannie Mae). The National Housing Trust provisions, which were approved by the committee in May, would be amended so that the disaster areas and the evacuees would have priority in accessing the fund. Passage of the bill in the House is uncertain, and the version of the GSE bill approved by the Senate Banking, Housing and Urban Affairs Committee does not include Housing Trust provisions.

Tax Legislation

The House and Senate, under a suspension of the rules, each passed bipartisan tax legislation September 15 geared towards helping the Gulf Coast. The House bill ( H.R. 3768 ) is slightly different from the Senate bill ( S. 1696 ), which was crafted by Senators Grassley and Baucus.

The measures would allow hurricane victims (or anyone in disaster zones, in the Senate bill) to borrow tax-free from retirement savings for three years; expand work opportunity tax credits (for employers of TANF/FS recipients) to employers of hurricane victims; provide an extra personal exemption of $500 for each victim a taxpayer houses for 60 days or more and increase tax breaks for charitable donations. Both bills would make people living in the affected areas eligible for mortgage revenue bonds that are usually only available to first-time homeowners.

The Senate bill would also provide a tax credit for displaced businesses to continue paying workers, 40 percent credit for wages up to $6,000.

The Senate and House versions allow hurricane survivors to use their 2004 income in calculating eligibility for EITC if necessary to avoid losing the benefit.

Administration Actions and Proposals

Last week, President Bush used a provision in the 1931 Davis-Bacon Act allowing him, during a “national emergency” to waive the requirement that construction workers on a federal contract be paid a prevailing wage. The White House signaled that it was working to waive a similar prevailing wage requirement for service workers under the McNamara-O’Hara Service Contract Act. The White House claimed that without such a move, many of the disaster workers might argue that the prevailing wage applies to them because their work is partly service work in addition to construction. But the McNamara-O’Hara Act does not have a provision allowing the rule to be waived, and Secretary of Labor Chao stated September 14 that the administration was not planning such a change.

The President announced additional proposals to address the disaster in a speech to the nation on Thursday night. Many were ideas recycled from previous Administration budget proposals that Congress has not so far acted upon. The President proposed $5,000 Worker Recovery Accounts for unemployed Katrina survivors. These could pay for job training, or supports such as child care or transportation. While much is not yet known about the plan, the dollars proposed fall far short of the actual costs of training under the existing Workforce Investment Act (WIA vouchers in 2003 were typically worth about $10,000), and child care costs could easily take up the whole amount. The President also proposed funding school vouchers that could be used in private and parochial schools as part of an education aid package, and the creation of a Gulf Opportunity Zone for communities in the affected states, including various business tax breaks intended to encourage redevelopment. Low-income advocates will be monitoring these and other proposals to see whether they result in survivors being trained and hired for the recovery activities.