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S. HRG. 109–789

HURRICANE KATRINA: COMMUNITY REBUILDING

NEEDS AND EFFECTIVENESS OF PAST PROPOSALS

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

SEPTEMBER 28, 2005

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

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(III)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 1

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 3

WITNESSES

Blanco, Hon. Kathleen, Governor, State of Louisiana .......................................... 4

Barbour, Hon. Haley, Governor, State of Mississippi ........................................... 6

Riley, Hon. Bob, Governor, State of Alabama ....................................................... 8

Yin, George K., Chief of Staff, Joint Committee on Taxation, Washington,

DC .......................................................................................................................... 33

Aviv, Diana, president and CEO, Independent Sector, Washington, DC ........... 35

Doctoroff, Daniel L., Deputy Mayor, Economic Development and Rebuilding

for the City of New York, New York, NY ........................................................... 37

LaGrange, Gary P., president and CEO, Port of New Orleans, New Orleans,

LA, and chairman, American Association of Port Authorities, Alexandria,

VA .......................................................................................................................... 39

Peltier, Jean-Mari, president and CEO, National Council of Farmer Cooperatives, Washington, DC ......................................................................................... 41

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Aviv, Diana:

Testimony .......................................................................................................... 35

Prepared statement .......................................................................................... 51

Responses to questions from committee members ......................................... 60

Barbour, Hon. Haley:

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 69

Responses to questions from committee members ......................................... 73

Baucus, Hon. Max:

Opening statement ........................................................................................... 3

Blanco, Hon. Kathleen:

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 77

Responses to questions from committee members ......................................... 92

Doctoroff, Daniel L.:

Testimony .......................................................................................................... 37

Prepared statement .......................................................................................... 99

Responses to questions from committee members ......................................... 106

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 1

Hatch, Hon. Orrin G.:

Prepared statement .......................................................................................... 110

LaGrange, Gary P.:

Testimony .......................................................................................................... 39

Prepared statement .......................................................................................... 111

Responses to questions from committee members ......................................... 116

Peltier, Jean-Mari:

Testimony .......................................................................................................... 41

Prepared statement .......................................................................................... 120

Responses to questions from committee members ......................................... 123

Page

IV

Riley, Hon. Bob:

Testimony .......................................................................................................... 8

Prepared statement .......................................................................................... 126

Snowe, Hon. Olympia:

Prepared statement .......................................................................................... 129

Yin, George K.:

Testimony .......................................................................................................... 33

Prepared statement .......................................................................................... 131

Responses to questions from committee members ......................................... 142

COMMUNICATIONS

Affordable Housing Tax Credit Coalition .............................................................. 145

Dortch, Rev. A.L. ..................................................................................................... 150

EZ/RC Coalition ....................................................................................................... 152

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HURRICANE KATRINA: COMMUNITY REBUILDING NEEDS AND EFFECTIVENESS OF PAST

PROPOSALS

WEDNESDAY, SEPTEMBER 28, 2005

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

The hearing was convened, pursuant to notice, at 10:09 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Also present: Senators Lott, Snowe, Thomas, Baucus, Conrad,

Jeffords, Bingaman, Kerry, Lincoln, and Schumer.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Good morning, everybody. The Senate Finance

Committee is going to focus on our efforts to deal with the aftermath of Hurricanes Katrina and Rita. Hurricane Katrina wreaked

havoc on an important area of our country, especially devastating

Louisiana, Mississippi, and parts of Alabama. Unfortunately, people living in southwest Louisiana also took a second tough blow

with Hurricane Rita.

The damage, as everybody can see on television, is profound, and

some of my colleagues have been down there to view it firsthand.

But so too is the good will that has been shown by so many who

responded to those hurt by the hurricane. While many mistakes

were made by some, I am heartened by the stories that I have seen

of first responders and volunteers. These folks often, often at risk

of life and limb, took every piece of equipment, including boats, into

the flooded areas and helped to pull stranded people to safety.

The American people have been generous in our charities’ response to the needs of the people of the Gulf States region. The Finance Committee has responded quickly and decisively to this tragedy, because last Friday the President signed into law the immediate task relief package worked out by the House and Senate. I

thank the senators from those States who have worked very closely

with us on that, and also the members of the committee who have

as well.

We hope to pass the needed health care and income security

package as well. Senator Baucus and I have been working together

on these packages and will continue to do so with the product that

comes out as a result of this hearing. And, Senator Baucus, I want

to say that I appreciate your cooperation and leadership as well.

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Today, then, we are moving to that next stage. We are moving

beyond the immediate needs of individuals and into the area of rebuilding the region. With respect to this committee’s jurisdiction,

the Federal policy initiatives are in the areas of taxation, international trade, health care, and income security. As we move into

this next stage, we need to marry up our compassion for the displaced persons and damaged communities with our attention to fiscal discipline. We need to find the most efficient and effective ways

to use Federal resources under this committee’s jurisdiction to

carry out the overall policy of rebuilding.

As I see it, we need to keep in mind several principles as we

move forward. There are four that I would like to briefly lay before

the committee.

First and foremost, market forces are going to have to be the

prime mover of getting the region back on its feet. Everyone knows

that the ports of the Gulf Coast region are a critical part of our national economy. Even in the case of my own State of Iowa, farm

products go down the Mississippi and out to the foreign markets

through those ports.

Oil and gas reserves still sit in the affected States. Exploring

more and developing energy is a vital activity in the region. Most

importantly, the can-do attitude of the hard-working people there,

like the volunteers I referred to, is still there, and they need to

have that opportunity to go back to work and help revitalize.

The work ethic and special technical know-how of the working

people in this region is surely the greatest asset. I know these people, like people everywhere, want to rebuild their communities and

return to their way of life as they have known it for a long time.

So whatever policy initiatives we look at, they should be designed

to speed up market forces that are already in place.

The second principle is to ascertain and deal only with uninsured

losses. The taxpayers should not be bailing out insurance companies or underwriters. This is very much a corollary to the first principle of having market forces work, that is, that market forces

ought to work their will, and losses are to be borne by those who

undertook the risk. That is the capitalist system principle at work.

The third one—within the category of uninsured losses—we

should focus limited Federal resources on those who are most in

need. We should focus on small businesses, because, in the Gulf region, like most of the rest of America, small businesses create most

of the new jobs. It does not mean the large, multinational corporations should not be considered in our proposals. It does mean that

the incentives and loss recoveries should not be designed to duplicate what multinational businesses or otherwise are predisposed to

do.

The fourth principle. The incentives in loss recoveries should be

front-loaded and time-sensitive. That is, we should send signals to

business and others to move aggressively and quickly back to the

region. There should be a distinct beginning and end to the policy

that the Finance Committee is considering. This principle is important to help us also with the fiscal discipline that is being brought

more to our attention all the time and not meant to distract from

the immediate needs of the people.

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I want to share these principles with committee members, as

they know how I will be working with Senator Baucus to accomplish the recovery that is so much needed.

Senator Baucus?

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you, Mr. Chairman. Especially thank

you for calling this additional hearing. We have discussed several

times, as you know, the need for these hearings to address the

needs of the people in the region, both personal as well as business,

and the infrastructure needs. I very much look forward to these

hearings and asking the witnesses lots of questions, so we can determine the best responses possible.

I traveled down to the Gulf Coast earlier this month along with

several other senators, and I saw firsthand the destruction left in

the path of Katrina. It was truly stunning.

I stopped at what was once a library in Pass Christian, MS.

Muck and ruin covered everything. I saw one thing. Just out of curiosity, I reached over to pick it up. Having it in my hand, coincidentally it was a DVD of the film ‘‘A Perfect Storm.’’

Governors, I pledge to you, all of you—Governor Blanco, Governor Riley, Governor Barbour, and other Governors affected—we

will do all we can to make sure that you recover from this storm.

The victims of Katrina have many needs, some of which we addressed in the tax legislation we passed last week. That bill addressed some of the immediate needs of Katrina victims—cash,

jobs, housing, and help for charities—and I was pleased that Congress could come together, all of us unanimously, all members of

Congress, working with the President to enact and sign emergency

tax relief to the victims of Hurricane Katrina.

But we must go further. The Senate must pass the package that

you and I put together, Mr. Chairman. We need to enact that package to help people like Tina Edgarton, who fled Louisiana when

she was 7 months pregnant, and could not find a Florida doctor

who would accept a Louisiana Medicaid card.

We need to enact legislation to help Rosalyn Breaux, who has

colon cancer, and was scheduled for a third round of chemotherapy

on August 31st, the day after the flooding began. Her husband had

lost his insurance. We need to ensure that people like Rosalyn

Breaux and Tina Edgarton will have health care coverage, and that

is the least that we can do.

Now our job turns to the difficult task of rebuilding the region

and rebuilding millions of lives. This means not only roads, bridges,

schools and libraries, but also means rebuilding lives, businesses,

history, culture. We can easily rebuild a house; it is much harder

to rebuild a home. We can easily help with a job—we did that in

our first bill—but how do we give people back their lives and their

dignity? For the children who lived for days in sports stadiums and

weeks in shelters, how do we give back to them hope and confidence? How do we give back to them their smiles? This next bill

is not just about business expensing or bond authority. It is about

helping people to reestablish their lives.

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So, Mr. Chairman, our next bill will take a bit more time. As we

will hear today from our Governors, we may not be able to truly

assess the needs of the Gulf Coast region for some time, as Hurricane Rita has prevented many from reentering the disaster zone.

We are so fortunate today to have the Governors of the affected

States to share with us their personal experiences. We will also

hear from experts about their experiences from prior disasters,

which will help guide us in crafting this important legislation.

After this series of hearings, Mr. Chairman, we must pass legislation. We must move. We have delayed too much on the health bill.

Let us move now on that one, as well as this legislation when we

get it written. We must pass legislation that makes a difference in

the lives of people affected. This is what we came here to do. Thank

you.

The CHAIRMAN. We have a distinguished first panel with us. The

Governors of Louisiana, Mississippi, and Alabama will provide us

with an updated perspective on the evolving needs of those devastated areas. We appreciate how hard each of you are working in

your respective States under very difficult circumstances. We particularly appreciate each of you taking valuable time to come before

this committee, particularly when you are responding to crisis after

crisis. Nonetheless, you are doing us and the country a great service. Not only your people, but we are pulling together as a Nation,

so you serve the Nation by coming here to address us on the many

needs of your respective areas.

First, we will hear the testimony of Hon. Kathleen Blanco, Governor of the State of Louisiana. Next, we will hear from Hon. Haley

Barbour, the Governor of the State of Mississippi. And finally, we

welcome the testimony of Hon. Bob Riley, the Governor of Alabama.

We will start with you, Governor Blanco.

STATEMENT OF HON. KATHLEEN BLANCO,

GOVERNOR, STATE OF LOUISIANA

Governor BLANCO. Mr. Chairman, Mr. Ranking Member, and

members of the committee, thank you for your very kind and generous welcome. You and many of your constituents have been incredibly gracious and welcoming to so many Louisiana citizens displaced by Katrina and Rita. Your constituents have welcomed our

people into their homes and communities. You have contributed

millions to various charities to support our families as well, as our

communities. On behalf of my citizens, thank you for all you have

done and for all that you will do for us.

Our people have endured one of the most challenging months in

our history. I know you have heard it said before, but it bears repeating. Katrina will be remembered as the worst national disaster

in our Nation’s history. As we know, Hurricane Rita has only

added to the destruction and misery of our people.

Before Katrina, Louisiana’s economy was coming on strong. I

took office in January of 2004, and I focused my efforts on creating

jobs, and we were enjoying great successes. Just a year and a half

ago we had announced almost $3 billion in capital investment that

is creating thousands of new quality jobs. But now, hundreds of

thousands of our citizens are scattered across the country. AccordVerDate 11-MAY-2000 17:29 Feb 12, 2007 Jkt 095484 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 32691.000 SFIN1 PsN: SFIN1
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ing to the Congressional Budget Office, 375,000 Louisiana citizens

are out of work and fearful of an uncertain future. Thousands of

Louisiana businesses have been destroyed or displaced, creating a

potential tsunami of unemployment and suffering.

This is my first visit to Washington since Hurricane Katrina. I

am here because the proposals you are considering are about creating jobs, and that is what we need. That is exactly what we need

in the face of this massive suffering and heart break; jobs. We need

jobs to bring our people home and restore our economy.

Katrina and Rita brought our people and our economy to its

knees. These storms knocked us down, but they did not knock us

out. With your help and support, we will come back stronger and

more prosperous than before.

How do we do it? With good jobs, with high-quality housing, and

with stronger communities. Those are the ingredients that will

make everything work, but first you must make our cities safe and

secure. And that means the rebirth of New Orleans and South Louisiana will be on a foundation of stronger and more secure levees,

and one of the country’s most progressive building codes. We will

not restore our communities or our economy until we secure the

city from the ravages of another hurricane and assure our businesses and homeowners that they can be insured. That is ultimately what I am here to talk about; restoring the economy of New

Orleans and South Louisiana.

Mr. Chairman, details of our proposals are in the written testimony that I have submitted. Allow me to use the remainder of my

time to touch on a few of the most important points.

Katrina and Rita have shuttered or displaced 81,000 firms, almost 41 percent of Louisiana’s businesses. Most of them are small

businesses, they are family businesses without deep pockets. The

package we are discussing today gives our businesses quick access

to the short-term capital they desperately need.

I support President Bush’s call for a Gulf Opportunity Zone that

will recruit our people back into New Orleans and South Louisiana,

and encourage private investment in reconstruction.

We propose up to $30 billion in tax-exempt hurricane recovery

bonds. This will dramatically lower the cost of capital to companies

of all sizes. A job creation tax credit will motivate large companies

with significant payrolls to remain in the region. I am asking Congress to consider a $10-billion Louisiana business development

fund to provide grants to small businesses that return to the affected areas of our State.

Just in case it is not apparent to you, this country and its economy must have a vibrant commercial center at the mouth of the

Mississippi River, its most important waterway. Just as the Nation

knew that we must recreate the economic greatness of New York

City after 9/11, the Nation and the world need New Orleans. They

need South Louisiana. We need that region not only for our rich

culture, but also for its unparalleled and unique contribution to

America’s economy. In that sense, I am not only asking you to approve this legislation because it is critically important to Louisiana;

I seek your support because New Orleans and South Louisiana’s

economic rebirth are vital to our Nation.

6

The hurricanes have also created an enormous health care crisis,

both in Louisiana and in States where many of our evacuee families have relocated. The financial strain of this health care crisis

threatens our families and will hamper our economic recovery.

That is why I support your effort, Mr. Chairman, and that of Senator Baucus, to provide full Federal financing for Medicaid services

provided to evacuees. Regions of Louisiana and other States where

our evacuees have gone should not be financially punished for providing the health care our families need.

To help families who cannot pay for their private health insurance, I support Federal legislation to fund hurricane survivors’ private health insurance premiums for 3 months. I also support the

efforts of Louisiana senators to expand mental health coverage for

our citizens who have seen so much trauma. This will expand community health centers and federally qualified health centers. It will

also provide hospitals with the critical resources they need to survive and retain their workforce.

We are looking forward, not backward. The President and I, and

Governors Barbour, Riley, and now Governor Perry, who will be

joining us, with the help of the Congress, are committed to rebuilding our devastated States. That is where our attention needs to be.

I thank you for your time, and we look forward to your questions.

The CHAIRMAN. Thank you very much.

[The prepared statement of Governor Blanco appears in the appendix.]

The CHAIRMAN. Now I go to Governor Barbour for your remarks,

and then we will have some questions when we have completed all

the testimony from the Governors. Then Governor Riley after Governor Barbour.

Governor RILEY. Thank you, Senator.

STATEMENT OF HON. HALEY BARBOUR,

GOVERNOR, STATE OF MISSISSIPPI

Governor BARBOUR. Thank you, Chairman Grassley and Senator

Baucus. First, let me say that we in Mississippi, and I know in

every affected State, appreciate what the Federal Government is

doing to help. We are definitely into the recovery phase here. We

have cleaned up millions of cubic yards of debris. Many, many businesses have reopened and people are going back to work.

As you mentioned, Senator Grassley, the crucial thing is to get

people back to work, and you have already helped. We appreciate

you, Chairman, and Senator Baucus, and particularly Senator Lott,

from my home State, for the efforts to do such things you have already done like the Worker Opportunity Tax Credit and the Employee Retention Tax Credit. Both of these things really matter,

and we appreciate them.

I agree with you, Chairman Grassley. You have put out some

principles that are the right principles, and those two, the Worker

Opportunity and Employee Retention Tax Credits support those

principles. The first thing is to get our people back to work. As Senator Baucus says, we need to be talking about now.

We have in Mississippi nearly 80 percent of the people in households who have signed up for FEMA disaster relief. Nearly 80 percent of them are still in the zip code boundary where the storm hit;

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88 percent of those people are still in Mississippi. So getting them

back to work now so that they can continue to stay and help rebuild our State is crucial.

Senator Grassley, you said that the key to rebuilding the coast

and South Mississippi will be the private sector. We are with you

100 percent. I might add, something just mentioned by Senator

Baucus, that Federal support for the rebuilding of our infrastructure is crucial for the private sector to be able to succeed. As many

have told me on the coast, if customers cannot get to us, it does

not matter whether we are open or not. So the Federal infrastructure is very important.

I would like to focus on how entrepreneurs, small businesses,

and, yes, large employers will be crucial to rebuilding my State,

and what you have said and by what the administration has done,

the President’s Gulf Opportunity Zone gives us a great place to

start.

The things that will help us rebuild bigger and better, or things

that can be added to that, are in this order: to provide the 50-

percent bonus depreciation for all businesses in the affected area,

as proposed by the President, will get people back in rebuilding, investing, and reinvesting.

The President’s Gulf Opportunity Zone doubles the small business expensing provision from $100,000 to $200,000 for investments in new equipment. I have appointed a commission on recovery and rebuilding the Gulf Coast. The chairman is Jim Barksdale,

the former chairman of Netscape, a Mississippian. When the business expensing for the technology industries was expanded, investment expanded. He recommends that you not cap this at $200,000,

particularly in the near term, because this will cause investment

and job creation. We all know that in a down economy, innovation

is necessary to stay competitive, and that usually revives ripe technology and allows our businesses more capacity to acquire the technology that is crucial.

We would like to ask you to authorize the issuance of $15 billion

of tax-exempt, private activity bonds, and to expand the categories

of allowable projects; consider zeroing out capital gains on investments in the GO Zone or the Gulf Opportunity Zone. There is a lot

of agreement that we should increase the carryback period for net

operating losses from 2 years to 5.

Something that you may not be considering may be a little bit

out of the ordinary, but it is related to something Senator Grassley

said. There are going to be a lot of people in my State who lost

their homes who have no insurance coverage. The reason they have

no insurance coverage is that the Federal Government told them

they are outside the flood zone. We are going to have tens of thousands of houses that are not covered by insurance because they are

outside the flood zone.

One idea that we have considered is to help by creating a

$50,000 tax credit where people can rebuild or buy in the affected

area. Whether it is that way or some other way, it is crucial that

we find ways to help all the people who did not have flood insurance but were flooded, and they did not have it because they had

relied, to their detriment, on the Federal Government.

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A separate major issue for us in your domain is that we had 1.2

million acres of timber destroyed in this storm. For many people

in my State, particularly families, investing in timber is kind of

their life savings, what they are going to pass along to their grandchildren or use to send their kids to college.

We would ask you to look at the normal provisions and recognize

that the cost of timber planting is small, so casualty losses ought

to be based on the value of the timber destroyed, not the cost of

planting it. Timber losses could be absorbed against income over 7

years going forward and 3 years going backward to help these people. We should have a reforestation tax credit.

To help local governments, I think it is very important that we

change the law that only allows one advanced refunding of debt by

local and State governments. So people are going to need to refund

their debt because of what happened here.

Let me close by talking about something that both of you mentioned, and that is the health package. There are many provisions

in the Grassley-Baucus Emergency Health Care Relief Act of 2005.

The most important provision to us is that the Federal Government

will pay 100 percent for Medicaid in the affected areas of our State

until the end of the year 2006. For me and for others, this is a

huge way to cover our fiscal hole by allowing us these savings.

Let me say, we have been trying to get Medicaid spending under

control in Mississippi ever since I have been Governor. So if the

Congress and the administration decides it is necessary to expand

eligibility, any expansions in eligibility should be very narrow, very

targeted, and very temporary. I particularly appreciate Senator

Lott’s work on this.

I would close by saying that our ports in our State need crucial

help in infrastructure. Our refining industry, our oil and gas industry, will need infrastructure help too, or incentives, to increase capacity as we see needs to be done. Thank you for letting me share

these ideas with you.

The CHAIRMAN. Thank you, Governor Barbour.

[The prepared statement of Governor Barbour appears in the appendix.]

The CHAIRMAN. Now we go to Governor Riley.

STATEMENT OF HON. BOB RILEY,

GOVERNOR, STATE OF ALABAMA

Governor RILEY. Thank you, Mr. Chairman. It is good to be with

you. Senator Baucus, it is good to see you again. Thank you for

coming down to Alabama to visit.

As both of you know, gentlemen, what we have been through

over the last few weeks has changed almost the culture of the Gulf

Coast, and it is going to take a tremendous forward response in

helping those three areas.

One of the things that I want to mention to you today is we had

our Katrina last year. We have had three major hurricanes in the

State of Alabama that we have had to contend with within the past

11 or 12 months. As we talk about Gulf opportunity zones, one of

the things that I do want to encourage you to do is look at the

whole area as a total or as a whole. If you had come 11 months

ago to Gulf Shores, to Dolphin Island and Orange Beach, AL, we

9

had the same level of devastation then that Governor Barbour and

Governor Blanco are looking at today. So when we talk about expanding opportunities, we need to talk about the region as a whole.

I know Governor Bush had a tremendous amount of damage in

Pensacola.

These are areas that we are still trying to work through. One of

the biggest things that we have to deal with today is how do we

keep these small businesses in place through the rebuilding cycle.

If you go into Orange Beach or Gulf Shores today, and this is a

year later, you are seeing a lot of new construction. But so many

of these small businesses are literally just teetering on the edge

today from going out of business because they have not been able

to sustain the level of their business over the last few years.

First, let me say thank you for everything that you have already

done. Thank you for the relief package that we had. Alabama today

continues to take evacuees. A little over 3 weeks ago, we had about

3,000 students that had moved into our school systems from Mississippi and Louisiana. It went from 3,000 to 4,000. Last week it

was at 5,000. Now it is up to almost 6,000.

One of the things that we are beginning to see here is that these

numbers continue to expand in the surrounding areas as more people go back to Mississippi and Louisiana and say, we are not going

to be able to move back immediately. So we have to start talking

about how we are going to assimilate these evacuees into our culture, into our school systems, and into our Medicaid programs.

I want to say I fully support the Grassley-Baucus bill. In a time

of crisis, we have no options, in a place like Alabama or Mississippi, to expand programs not only for the evacuees, but for so

many people that are disadvantaged and would not have qualified

for Medicaid a year ago, but are qualified today.

If we could get the 100 percent that Governor Barbour said a moment ago, it is going to make a tremendous difference. I hope that

you will look at the Gulf region. I hope you will seriously consider

freezing the FMAP reductions this year. That is about a $50-million hit to the State of Alabama. At least whether you do it nationwide or not—this is something that you can determine through

your debate—but at least in the affected areas, this is going to be

critical I think for all of the States.

The chairman said a moment ago that private industry is going

to have to rebuild this area, and I think that is absolutely right.

We are going to need infrastructure help from the Federal Government, but ultimately it is going to take a type of incentive package

to attract people back in. If we are going to be able to make these

infrastructure improvements, if we are going to get people back in

their homes, if we are going to get small businesses up and running again, it is going to take a variety of different tax incentives,

tax credits, tax-exempt bonds that attract people into this area.

I am sitting here looking now at probably 15 or 16 different options, tax proposals, that we would like to share. I am sorry we did

not get them to you in time for today’s hearing. We will get those,

and hopefully they will become a part of the record. But I think all

of us are committed to doing whatever it takes to reestablish the

economic vitality of this whole region.

10

I also want to say one other thing, and it does not deal with

taxes. I do hope, as you continue these debates about what do we

do going forward, you still understand that immediate response is

always going to have to remain with the States.

There is a lot of talk today, and I keep hearing about a bigger

Federal response early on. Gentlemen, I can tell you from experience, that is almost an impossibility. The Federal Government

brings a lot to the table in a lot of different ways, but the immediate 24–48 hour response period is going to have to be handled

here.

I hope at some time you consider allowing us to have the assets

necessary before the storm hits one of these areas, rather than

coming in and helping pick up the pieces later. There is not a Governor, I think, on the coast who would not agree that we have the

resources and the capabilities. What we need is some preparedness

help in trying to meet some of these challenges.

We have a lot of policies that are available. The people of this

area, I think, are some of the most resilient people in the United

States. Given the proper incentives to rebuild this area, I think we

can. I think we can do so not only effectively, but very quickly.

The CHAIRMAN. Thank you, Governors.

[The prepared statement of Governor Riley appears in the appendix.]

The CHAIRMAN. Senator Lott has asked to be recognized first,

and I will defer to Senator Lott.

Senator LOTT. Thank you, Mr. Chairman. I ask your indulgence

of my colleagues. Being one of the States that has been affected by

all this, I feel the need just to make some brief comments. I would

ask that my statement that I have up here be made a part of the

record.

The CHAIRMAN. It will be made part of the record.

Senator LOTT. I too want to thank the three Governors of the

States affected by Katrina, and now Rita; and, of course, Texas will

be joining in the effort to make sure that we get the assistance we

need to these States.

I want to thank you, Chairman Grassley, and also our ranking

member, Senator Baucus, for moving out aggressively to provide

some of the basic things we need. The first package, which was

small but urgent, immediate and helpful, was very positive. I appreciate the fact we were able to get it moved through quickly. I

also appreciate your effort with regard to Medicaid and the healthrelated issues. I, frankly, have been involved in that. I thank you

for the opportunity to have the input.

I am not interested in a huge expansion of the programs to benefit people that are not affected by the hurricane, and I do not

want to put people on this program who then will expect to stay

on. The Governors are here today by videoconference and in person.

The Governor of Louisiana will have to then deal with how do you

get them off, and it is not easy.

So I want to make sure we do these things responsibly. But I

also think we have people that need help, they need it now, and

we need to move forward with this legislation. I want the record

to reflect that we can do it in the Finance Committee with the help

11

of our colleagues in a bipartisan way, and with the help of the administration or without them.

I do not want to waste money, but I want compassion and I want

action now. Our people are hurting. They need help. We are asking

you for it, but to do it in a responsible way. I want to urge my colleagues and the Leadership Committee to see if we can work out

some agreement with regard to the package you brought to the

floor. There may be some legitimate concerns which we can address, but I hope we will do that quickly. I would like to be a part

of that and try to be a positive force.

I do hope we will go forward with some of these innovative ideas

these Governors have come up with in regard to the zone, the Gulf

Opportunity Zone, and the tax considerations, and the ideas that

have been mentioned. There is a lot of common support among

these Governors and the people affected that we can use some innovative tax policies that will really make a difference in terms of

getting businesses back in operation. The tax credits for continuing

to keep employees should be applicable not only to small business,

but to big business, because they are the ones who get the most

people back to work the quickest.

I noted that when Governor Barbour referred to the advanced refunding of these bonds, I think this is a really good way to help

those counties and cities, because they are not going to be able to

pay their debt, be able to basically re-do them, and not have to pay

for 2 years while they get back on their feet, but pick up on their

obligations. The impact on the budget is negligible, if anything.

That is a very simple, brilliant way to solve a major problem.

Now, my three greatest concerns right now are, one, getting immediate relief to people that have to have it to exist; two, how do

we deal with the indebtedness of these cities and counties, some of

them that do not even exist anymore; and three, how do we deal

with the insurance problem that I hope can be resolved in a responsible way quickly.

I do not want to filibuster here. I want to thank my colleagues,

the leadership and my colleagues on both sides of the aisle, for

your expressions of concerns, and for your willingness to help us

to get through this. We do not want an empty pit; we want fiscal

responsibility. We do not want fraud. We are going to do everything we can on behalf of the local officials and the Governors—

Governor Barbour, Governor Riley and Governor Blanco—to do this

in the right way. But we are going to need to have some additional

tax legislation and some additional revisions of the law in a variety

of places, which will allow us to do more without a cost factor, and

we are going to have to take a look at what the reconstruction’s

costs are going to be.

Thank you for allowing me to go out of order. There was at least

one zinger in my comments, and that is we can work with everybody, including the administration, or against them, and I am prepared to go either way. But I am going to look after our people

first. I know that is the intent of the committee, and I thank you

for that.

The CHAIRMAN. If the Governors will bear with me, let me follow

on your most recent comment. That is in regard to the bill that

Senator Baucus and I have put before the Senate, S. 1716. You

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have been very helpful, Senator Lott, in helping us move that

along.

There is no reason why we cannot get that bill done on unanimous consent before we go to bed tonight, as it should have been

last Thursday. I would like to engage you, and as many other people as we can, in pushing that to get that job done. There is just

no reason. It is a temporary piece of legislation affecting the health

needs of the people of these States, and where the residents of

these States are temporarily relocated, to take care of their health

care needs through Medicaid for 5 months.

It is just ludicrous that this bill cannot move. Any activity you

can give in helping Senator Baucus and I, as you have, engage

many members, particularly your communicating with the four or

five senators that have some questions about this on the need to

move ahead and the temporariness of it, I would appreciate it very

much, and I know Senator Baucus would as well.

Senator LOTT. If I could just respond briefly. As you know, I have

tried to do that. They have identified a couple places where we can

do some provisions in there a little differently and maybe save

some money. I would like for us to try to do that if it is possible.

I would be glad to work with you.

The CHAIRMAN. I will let Senator Baucus correct me if I am going

too far. If they would give us our bottom line, and we can sit down

and work these things out, we will attempt our best to do that.

Would that be fair to say, Senator Baucus?

Senator BAUCUS. Yes, Mr. Chairman. But I must say, based on

my conversations with some who are opposed, their bottom line is

so far down at the bottom that it is fiercely non-negotiable. They

are going to have to back off dramatically from their so-called bottom line if we are going to make any progress. I agree with the

basic import of Senator Lott’s point; that is, we are going to move

this one way or another.

The CHAIRMAN. I would suggest that people at the White House

need to know the chances of our getting a reconciliation bill moving

out of my committee are very difficult if we do not get this behind

us. I think that there are many more costly ways of doing this that

had been suggested, and those costly ways will have a dramatic

majority in the United States Senate.

I think that people are not looking at this very realistically. As

the former leader, there is nobody better than you in the position

to wake people up to this.

Senator LOTT. Well, let me just say, we have people who are

going to be affected by this, so we need to get it resolved. I know

from past experience, if we make up our mind we are going to get

it done, we are going to find a way to come together. It may take

a little give on both sides. But if we go about it with that frame

of mind, we can get this done.

Certainly, I want to help, and I am prepared to be hard-nosed

too at some point. At some point you have to tell them, okay, ante

up and kick in or get out of the game. But I am not looking for

a fight; I am looking for help for people who are desperate. So,

please, let us move quickly, let us have some meetings, let us do

whatever is necessary, and you know I want to be involved.

13

The CHAIRMAN. Let me add to what you just said, that you are

not looking for a fight. Nobody is looking for a fight. First of all,

you would not have Senator Baucus and I agreeing to this legislation in a bipartisan way. You would not have Senator Lincoln backing off from her amendment on the floor of the United States Senate if she wanted to fight. This thing has been moved through very

cooperatively.

Senator LOTT. I agree.

The CHAIRMAN. We will go to our first round of questions, 5 minutes for each member. The first four people who have come in, the

order would be Grassley, Baucus, Thomas, Bingaman.

Before I go to my first question, I would just like to point out,

to the Governor of Louisiana and the Governor of Mississippi, a

couple of things that were in the papers of last week in my State,

so that you know that my State is trying to help. Maybe not very

significant things compared to the problems that your people face,

but on the front page of the Des Moines Register was a picture of

Louisianians having a marriage in Des Moines because they could

not have it in Louisiana. They had lost everything in Louisiana,

and the people in Des Moines helped them get the proper dress and

everything that you need for a wedding in a church. It looked like

just the typical wedding they would have had in Louisiana.

In the case of the Governor of Mississippi, the church that I have

been a member of for 51 years in Cedar Falls, IA 3 weeks ago sent

a team of 17 people to Brookhaven, MS to work with evacuees

down there and help you in a small way to rebuild in that area.

The second team went down the second week, and the third team

of college students this week are gone from our church to Brookhaven again to help out.

Now, in regard to questions that we have, I only have two. To

some extent, they are repetitive of your testimony, particularly in

the case of Governor Barbour. In each case where you have given

us several tax proposals you think would be helpful, I would like

to have you, if you could, stress three or four in an order of priority

that you think would be very helpful for your respective States.

I would begin with you, Governor Blanco, and then go to Governor Barbour. I know you went through this before, but you gave

much more than three or four, so I would like to have you concentrate on three or four, and then Governor Riley.

Governor Blanco?

Governor BLANCO. Thank you, Senator, for that heart-warming

story about our people and their weddings. This is happening all

over the country from coast to coast. People are taking such good

care of our people. Again, I just have to say a very special thank

you to the citizens of the United States who have reached out so

warmly.

We do believe that for our recovery, certain things are important.

I just want to put these figures in your head. In Hurricane

Katrina, we lost 25 percent of Louisiana’s business economy, onefourth of our total economy. After Rita, we are estimating that

number will jump to 33 percent, from one-fourth to one-third of our

entire economy.

We think that it is very important to have incentives for our

workers to return. In order to do that, you have to have incentives

14

for business to return. Accelerated depreciation on capital investment, I think, will play a big role as well. That bond program, giving businesses the opportunity to borrow money at very reasonable

rates and emergency business grants are probably the key ingredients that will put our business package back together.

The CHAIRMAN. Governor Barbour?

Governor BARBOUR. Mr. Chairman, I tried to list the items in the

order of priority for us. Number one would be the 50-percent bonus

depreciation for all businesses in the affected area; the doubling of

the small business expensing, from $100,000 to $200,000. But as

I said earlier, we think that cap should be eliminated for the first

couple of years to authorize the issuance of $15 billion of taxexempt private activity bonds in Mississippi to expand the categories of allowable projects. Then fourth—and this is very important; just because it is fourth does not mean it is not important—

is zeroing out capital gains for capital investment in the GO Zone.

Governor RILEY. Well, I think all of us are going to agree on the

ones that they mentioned right now. To me, again, if the private

industry is going to take up the challenge here, I think that having

hurricane recovery bonds would be one of the primary things that

I would like to see.

In addition to what has already been said, I hope that we can

carry back the net operating losses for some of these small businesses that have been affected, as I was speaking about a moment

ago. This would be huge for them. Accelerated depreciation, as a

business person I found, is probably one of the greatest stimulants

you can have if we can do that.

This is maybe not tax policy. What Governor Barbour said a moment ago is absolutely true in Alabama too. We have to get some

type of resolution to this flood issue because we have literally thousands of people who were affected for the last year who were not

in a flood plain. We are going to have to be able to resolve that,

and I think it is going to take a Federal response to make it happen.

The CHAIRMAN. Thank you very much. I am going to, instead of

asking a second question, go to Senator Baucus.

Senator BAUCUS. I thank the Chairman.

Governors, unlike your views on the Medicaid legislation that we

have just discussed, your view that it needed to pass, we have not

yet discussed the administration’s role. But I did briefly allude to

several senators who have problems with passage of the Medicaid

health legislation.

However, as you know, the administration has great, deep reservations about this legislation. In fact, Senator Lott received a letter, and a copy to the chairman and myself, yesterday, basically

stating their opposition to the legislation, claiming that their waiver policy will accommodate the needs in your States.

I ask your views on that because, as you well know, our legisla- tion provided for about $800 million for uncompensated care for

providers, and many hospitals are giving so much uncompensated

care and need to be reimbursed somehow. The waiver that has

been suggested and semi-negotiated in some of these States does

not indicate where this uncompensated care is going to come from.

It is very nebulous, and it is very big.

15

There is also a question as to the degree that, under law, the administration, because it is bound by budget-neutral principles, can

provide corporations additional money for your States, which they

vaguely allude to in the waiver policy. You might also know that

we provided health care, Medicaid coverage, for childless adults,

and the waiver does not. Waivers are contemplated, and, again,

those waivers are just so complex and they are not finalized in any

way.

So I am just asking your views of the degree to which you think

it is important to get this legislation passed to address the health

care needs in your States in view of the alternative—the administration’s policy of waivers. I just might say that I think it is accurate that the health care provided for in the legislation is certain,

immediate, and it is now. It is greater and it is more comprehensive, whereas the health care assistance suggestion—the waivers—

is vague, unknown, and it is less comprehensive. We do not even

know what the rules are yet.

Your views, please? Governor Blanco?

Governor BLANCO. Well, we would certainly like to see something

put in place today. We have people who have needs today. Again,

we have a large number of people who never would have ever

imagined themselves needing Medicaid, and they have been working all of their lives and taking care of themselves and their families. We have this period of time right now where there is an urgency. We certainly do like the bill, Senators Baucus and Grassley,

that you have put together because it feels like immediate aid.

The other thing that we recognize is that so many of our citizens,

many of whom were Medicaid eligible, are now in other States. In

a sense, that is imposing on the States and putting another level

of obligation on them that they did not bargain for when they put

their budgets together and their packages for health care together.

They did not plan for this extra load to be carried, and we did not

plan for it either.

We know, and we regret, that our citizens are now imposing on

the States’ fiscal situation. We have a fiscal problem ourselves, but

we did not ever dream that our problems would shift to other

States. So if the Katrina victims—the first wave, the evacuees of

Katrina—are there hurting other States, then we would like to ask

you to help them. We do not want our neighboring States, our sister States across this Nation, to be impeded by this hurricane. But

now we have a situation where the whole Nation is engaged and

working under a difficult situation.

Senator BAUCUS. I am going to ask Governors Riley and Barbour

your views on the need for this legislation.

Governor BARBOUR. Senator Baucus, as I said in my opening

statement, the critical or single most important thing in the Grassley-Baucus health care package is that the Federal Government

would take over paying 100 percent of Medicaid in the disaster

area. That is enormously important to us who have taken an enormous hit in our fiscal situation. That is just very, very important.

I do not know all the provisions that are in there. There was a

time, Senator, when I used to know a lot about what was going on

in Washington, but that has not been the case in the last month

or so.

16

As far as the administration’s waiver provision, I am just pretty

well ignorant of it. I do want to say to you, we in Mississippi, our

Medicaid program got out of control, and we have been trying to

get it back under control and have worked hard to do that. So to

the degree that you all decide that it is necessary to expand eligibility—and we are going to have more people become eligible under

the existing rules anyway—we just hope that any expansion in eligibility will be very narrow, very targeted, and very temporary, so

that we do not find ourselves turning around and having to start

over. This 100 percent payment that Governor Blanco mentioned

about evacuees from other States, those two things are just crucial.

Senator BAUCUS. My time is up. I better go on to Governor Riley.

Governor RILEY. Senator, when you use the words ‘‘immediate,’’

‘‘now,’’ ‘‘before tonight,’’ I totally agree. There are probably 20,000

to 30,000 evacuees in Alabama today who are going to be Medicaideligible because they have lost everything that they had. Does this

mean it is going to be permanent? Does this mean it is going to

be long-term? Absolutely not. But during this critical time right

now, I think we have to do exactly what you said a moment ago.

We have to take care of some of the people suffering, and the only

way we are going to be able to do it is with some piece of legislation.

Like Governor Barbour, there are so many things in this I probably do not understand as well as I should. The only thing that I

think all of the States are asking is for nothing more than you

should normally expect.

When the President came out and said, we are not going to ask

anyone to take a heavier burden because they reached out and

opened their arms and their hearts to these evacuees. I think that

should be the position of the Senate, and that should be the position of the administration. No one should be penalized because they

tried to help.

Senator BAUCUS. Thank you.

The CHAIRMAN. Thank you.

Senator Bingaman?

Senator BINGAMAN. Thank you very much, Mr. Chairman.

Let me first start by congratulating each of the Governors for the

heroic effort they have made to respond appropriately to this situation. I think our job now is to try to find ways to help, and that

is certainly what this committee is committed to. I also want to

thank Senator Grassley and Senator Baucus for their leadership on

this legislation, S. 1716.

Let me talk about this Federal matching rate for Medicaid. That

is an issue that is part of the legislation, and I think it is important. When you look back at what the Congress did after 9/11, we

provided $10 billion to States through an increase in Medicaid

matching rate. That is FMAP. We also gave another $10 billion to

provide States with fiscal relief through a flexible grant. Now, that

$10 billion included $313 million additional for Louisiana, $213

million additional for Mississippi, and $270 million additional for

Alabama. Now, that was right after 9/11.

In fairly sharp contrast to that, on Saturday, the Federal Medicaid matching rate, FMAP, is going to drop in 29 States. It is

going to drop in Louisiana, it is going to drop in Mississippi, it is

17

going to drop in Alabama. So, for this next fiscal year, because of

this so-called re-benchmarking that is occurring, you are going to

see significant cuts. I think Governor Riley referred to the cut in

Alabama. It is over $50 million; $55 million is the estimate I have

seen; in Louisiana, it is $71 million; in Mississippi it is $40 million.

Now, part of this legislation is to essentially say, let us hold

these States harmless from those cuts. I mean, we are not asking

to expand eligibility for Medicaid; we are saying the States should

not get less of a Federal match in the next year than they have

had in the current year, and particularly they should not as a result of the catastrophes that have afflicted them here.

To my mind, it just does not make sense for your States, or for

a lot of States that are affected, that instead of increasing FMAP

as we did after 9/11, that here we have 29 States, I guess, that are

facing a reduction in Federal support for Medicaid, including your

States—I just wanted to ask each of you if you have a view as to

the appropriateness of this provision that is in the bill. I think it

is an important provision. It is one that both the chairman and the

ranking member have advocated for, and I hope we can keep it in

the bill.

Governor Blanco, did you have thoughts about this cut in FMAP

that is going to start on Saturday?

Governor BLANCO. If I am understanding you correctly, a cut in

FMAP means that we would not have to take a cut or have an increase in our percentage?

Senator BINGAMAN. Well, it means that the percentage of your

Medicaid costs that the Federal Government will pay for is going

to drop for the next fiscal year.

Governor BLANCO. We have been concerned about that.

Senator Bingaman, Louisiana, in our most recent legislative session, had to come up with $400 million new dollars, clean dollars,

in order to get our normal match in place. We did it. It was not

pain-free. We did it by cutting a lot of government services. Any

additional costs to us in Medicaid will certainly hamper our ability,

under normal times, to function properly.

We are so far beyond normal times, that any kind of increased

cost—it is unfathomable. How we could handle that, we would not

be able to calculate right now. We have been concerned, and we

knew that there would be increased costs possibly under the original regime. That is why I am here joining these other Governors,

saying that these are not normal times for our States. These are

some of the most difficult challenges, certainly, that we have faced

in many, many years. So we would ask for consideration that any

new policies be carefully crafted. Again, we are imposing a lot on

other States as well, so there are probably some other States who

find themselves in the same kind of jeopardy that we are in.

Senator BINGAMAN. Thank you.

Governor Barbour, did you have a view on this issue? I would be

interested in hearing it if you did.

Governor BARBOUR. Senator, we in Mississippi bit the bullet and

budgeted for this in our regular legislative session that this was

going to happen on October 1st. It was a burden when we did it

back in the spring. It is a heck of a lot different now.

18

I will say there is a provision in here about the FMAP that is

even more important. In fact, I think Governor Riley has mentioned too how important it is, the provision that you all included

that in the disaster areas themselves, for a period of time to the

end of next year, that the States would not have to pay their

match, and that the Federal Government would absorb that. That

is the biggest fiscal consequence for us because it essentially would

help us make up the enormous fiscal hole we are going to have because of the destruction of a huge part of our economy.

Senator BINGAMAN. Governor Riley, did you have a point of view

on this?

Governor RILEY. Absolutely. There are very few reasons I can

think that anyone would want to reduce that FMAP percentage at

this point after what each one of these States has had to endure.

We are not asking for a raise the way you did after 9/11. We are

just asking, do not reduce that FMAP.

I think it is going to be critical. We are going to be offering services to people whom we did not know we would be offering services

to just a few months ago. Again, this is the third one of these that

we have had to deal with this year.

If you look at the demographics—that is what the reduction of

the FMAP was built on, a demographic profile—that profile has

changed dramatically in the last few months for every one of these

States. To ask us to go ahead and use the profile that was used

to assess these States, it no longer exists. Again, we are not asking

for a raise; we are just asking to keep it where it is right now.

Senator BINGAMAN. Thanks very much, Mr. Chairman.

The CHAIRMAN. Thank you.

We now go to Senator Conrad.

Senator CONRAD. Thank you, Mr. Chairman.

I would say to each of the Governors, our hearts go out to you.

The prayers of the people of my State go out to you. We remember

well what it is like to be in the center of a storm. In 1997, in Fargo

and East Grand Forks, we had the worst winter storm in 50 years,

followed by the worst flood in 500 years. Ninety-eight percent of

the cities of Grand Forks and East Grand Forks were evacuated.

We were given enormous help by the Federal Government. We

could not have recovered without that assistance. FEMA performed

splendidly. I must say I feel like James Lee Witt is almost a brother. He just did a spectacular job.

So we have some sense of what you are going through, although

we were very fortunate. We did not have a fatality. But we do have

some sense of the trauma and the amount of work that has to be

done to recover. We want you to know that up in North Dakota,

we are going to do everything we can to help you. Who would have

thought? North Dakota would be helping out Alabama, Mississippi,

and Louisiana, but we are glad to do that.

I serve on the Budget Committee as well. There are a number

of things I wanted to just express to you based on our own experience. In 1997, after this devastating flooding, we had to make a decision about where to rebuild. We made a decision collectively to

back off the river. There are a number of low-lying areas. We had

hundreds of homes. We just did not rebuild in those areas, to give

us a better defense line for protecting for the future.

19

Throughout the cities of East Grand Forks and Grand Forks, we

left a greenway instead of rebuilding right up to the river. Now, if

you go there, it is a lovely area where you can jog, you can bike,

and you can hike. We have given the river some room in the process of completing a massive dike to protect those cities so this does

not happen again.

I hope very much as you plan, that you will be thinking about

some of these issues as well. Certainly, we want to rebuild, but

where we rebuild I think ought to be carefully thought through.

Where can we build that we have a better line of defense?

Also, I want to mention something that I do not think has received the appropriate amount of attention. Back in 1992, the thenhead of the Corps of Engineers, Mr. Parker, came before the Budget Committee with General Flowers, who was the uniform head of

the Corps. I asked General Flowers at the time. ‘‘Last year there was $4.6 billion in Army Corps funding. The president cut that by $600 million on a fair-comparison basis to $4 billion. What are the implications of those reductions? What will it mean?’’

General Flowers responded, ‘‘With the budget as it stands, we

would, in fact, have to terminate projects.’’

Senator CONRAD. So you would have had no choice but to terminate contracts.

General FLOWERS. Yes, sir, that is correct.

Senator CONRAD. It does not sound like it makes much sense to

me. Does it make sense to you, General Flowers, knowing what

these projects are? Would it make any sense to you to terminate

these projects?

General FLOWERS. Sir, it does not.

At the same hearing, Secretary Parker, who was the civilian

head of the Corps, said, ‘‘The figure we came up with was around

$6.4 billion that was needed for Army Corps funding.’’

Senator CONRAD. That is what you requested?

Secretary PARKER. Yes.

Senator CONRAD. $6.4 billion?

Secretary PARKER. Right.

Senator CONRAD. And you got, on a fair-comparison basis, $4 bil- lion. Well, did you think $4 billion was the right number to come

to?

Secretary PARKER. No. I would have offered that number if I

thought it was the right number.

One week later, Secretary Parker was fired for giving those answers to the Budget Committee.

Frankly, there is responsibility by this administration because

they failed to respond to the needs for our Army Corps projects.

They fired this man because he answered honestly and openly

what was required.

I was very struck with the testimony yesterday of Mr. Brown,

when he said, ‘‘FEMA’s operating funds were cut 14.5 percent by

the Department of Homeland Security over the last 3 years,’’ and

that he probably should have resigned and protested. He talked

yesterday about the emaciation of FEMA.

This is not a budget committee hearing, but when we get to the

question of what has occurred here, there is a very strong link to

20

budget priorities, and there has been a failure, I believe, to meet

the funding requirements to fully protect those areas and be prepared to respond in the case of a disaster.

Governor Blanco, you were criticized yesterday heavily by Mr.

Brown. I would just give you a chance here, if you would like, to

respond to that.

Governor BLANCO. Senator Conrad, I appreciate that, but today

I came really to talk about job creation. I think there will be plenty

of time to talk about other issues.

Senator BAUCUS. Good for you, Governor Blanco. This is not

about blame; this is about how we get this job done here. I appreciate your response.

Governor BLANCO. We have a huge mission of rebuilding.

Senator CONRAD. I appreciate your answer as well. I think that

is exactly the right course, but I thought you should be given, in

fairness, a chance.

Let me just say, in these disasters I think all of us know mistakes get made. Mistakes get made at every level. The question

really before us is, what do we do now; how do we proceed? I think

one part of the response has to be a recognition that FEMA has

to be rebuilt and restored. One part of this also has to be that I

think we are going to have to very seriously think about what are

the best lines of defense for these communities and these regions,

so we do not just go back to the same footprint.

We would offer our example. We decided to back off the river,

give it more room, have a better defense line, and the response was

very strongly supported by the people of our State and of our region.

The CHAIRMAN. Senator Jeffords?

Senator JEFFORDS. Let me begin by saying that our hearts go out

to the thousands of people who have lost family and friends and

all those who have been uprooted by the storm. Like every member

of the committee, I want to do everything I can to help rebuild

their lives. Vermont was far away, but they did send people down

there and did do what they could to help reduce the damage.

As part of the tax assistance this committee will be considering

as we look to the future, our first focus will be on next year or two

when we get the people back on their feet. But looking ahead for

the next decade or two, we have to assume that there will be more

storm activity such as we have, and what steps can we take to ensure that losses, lives and dollars, are as low as possible when future hurricanes strike.

In summary, what did we learn?

Governor BLANCO. There are a lot of lessons to be learned, Senator Jeffords. I think that an independent commission should take

a hard look at all of that. I believe that there are some very clear

issues that need to be decided. We can all work harder.

Senator JEFFORDS. Since hurricanes are a fact of life for the Gulf

Coast, how do we ensure fairness for the victims of these storms

and for other disasters for that matter? Obviously, a storm the size

of Katrina has an impact on State treasuries, unlike that of recent

storms. But the impact on a family or a business may be just as

great from a smaller storm.

21

If we pass a series of tax changes to respond to Katrina, should

they remain in place for future storms, or, if not, how do we differentiate between Katrina and lesser storms, like Ivan last year,

for those that will come in the future?

Governor BLANCO. I think that will be a decision for the Congress to make, sir. You probably need to think about some longterm or blanket emergency measures that could help communities.

Senator JEFFORDS. Thank you. Thank you, Mr. Chairman.

The CHAIRMAN. Did Governor Barbour or Governor Riley want to

respond to anything that Senator Jeffords asked?

Governor BARBOUR. Thank you, Mr. Chairman.

When Senator Jeffords asked what did we learn, a point that we

want to make in Mississippi is we have appointed a commission on

recovery and rebuilding that is working with the local governments

to illuminate all our options. Senator Conrad talked about backing

away from the river at Fargo. Zoning, building codes, things like

that, are going to be very much at the top of the agenda, working

with the local officials and with the commission about where the

rebuilding should be and how much stronger the building codes

should be. Governor Blanco mentioned that in her opening statement.

One thing I think we know, and Governor Riley has already said

it, is that the decisions have to be made by the local people. Just

as the people of North Dakota made the decision about how far

back from the river development should be, we in Jackson, MS are

not going to try to impose on the people on the coast my ideas. We

do not think Congress should try to say this is what your building

code should be on the coast, this is what your zoning should be

like. I feel like my job is to make sure that the local leaders should

have all the information, all the choices, know what the costs are,

know how you go about doing it, and I am convinced that we will

come back and rebuild bigger and better than ever before.

The CHAIRMAN. Governor Riley?

Governor RILEY. Let me respond to that if I can.

Someone asked me yesterday, ‘‘Governor, can Alabama stand another hurricane?’’ I told them, it is not optional. When 50 percent

of the population of the United States lives within 50 to 70 miles

of an ocean or the Gulf, this is something we are going to have to

contend with. A lot of these hurricanes have run in cycles over the

last hundred years. They run in 10-year cycles. We need a response

plan that allows us to go out and protect our citizens. We need a

response plan that allows us to have all the goods that are going

to be necessary to protect life early on.

I have to say this. During this last storm, the administration, the

President, Secretary Chertoff, and most of the FEMA reps that we

talked to were as responsive as they have been at any time with

our last three hurricanes. But saying that, there are still lessons

that we learned and we can do better in.

If we had the ability here, and if Congress in its wisdom would

see fit to allow us to have pre-positioned materials and personnel

in place so we can respond in those first 24 hours—that is when

it is critical—if we had the assistance then, and not have to pick

up the pieces later, I think all of us would do a much better job.

The CHAIRMAN. Thank you all.

22

Now, to Senator Lincoln, and then to Senator Snowe.

Senator LINCOLN. Thank you, Chairman Grassley. Again, a very

special thanks to you and Senator Baucus for bringing us here

today, but also for your hard work in the efforts of trying to make

whole not only those individuals who have suffered such an incredible natural disaster, but also those of us as neighbors who have

so desperately wanted to be there as a good neighbor for our

friends and our family members.

Governor Barbour knows my grandfather was from Yazoo City,

MS, so I have a lot of relatives in Mississippi. Louisiana was always one of the first places we went for family vacations. My

mom’s best friend has a home out on Dolphin Island, or had a

home out on Dolphin Island. The Governor of Alabama knows what

happened to Dolphin Island.

The CHAIRMAN. Can I interrupt you, Senator Lincoln?

Governor Barbour, it is my understanding you have to go because your legislature is meeting right now, or whenever you have

to go, we understand that, and let us leave it that way.

Senator Lincoln, proceed.

Governor BARBOUR. Thank you, Senator Grassley, because I do

have a special session.

Senator Lincoln, we still appreciate you in Yazoo City.

Senator LINCOLN. Well, I just want to say that our thoughts and

prayers have gone out to you; they continue to go out to you, and

we want to be the good neighbor. We know how important it is to

have good neighbors, and to have good neighbors, you must be a

good neighbor. Those of us in Arkansas want to do that. I have

been so proud of my State and the response that they have offered

to our neighbors in the Gulf Coast region and in the mid-south. I

think that they have done a tremendous job.

We are here today to discuss Hurricane Katrina, the devastation

that we have seen, and how we move forward from here. I do want

to speak a little bit about the more immediate things, but I do not

want to disregard the important factors that you have brought up

in terms of rebuilding: the bond programs, the depreciation, and

the importance of that, particularly getting private industry and,

most importantly, our small businesses back into operation.

In States like Arkansas, Louisiana, Mississippi and Alabama, our

small businesses often times are our largest employers, and, unfortunately, they have greater challenges because they are local, because they do not have the liquidity of major corporations publicly

traded, and they do need the kind of immediate help to get them

back on their feet, to get all of our citizens back working, and bring

this region back to productivity. So I hope you do know that we are

very focused on many of those things that you have brought up,

and we want to work with you to make those a big success.

I also have to express my frustration. I am so disappointed that

we as a Senate have allowed ourselves to become paralyzed over

the red tape, the web of red tape that this administration is spinning over our ability to provide the basic needs of health care to

people who have been devastated, people who have lost their

homes, their jobs. Some of them have lost their family members.

They have been displaced. They have no earthly idea when they

are going to be able to go home. And here they find themselves in

23

different places, being hosted by their American family, and we up

here cannot get our act together quick enough to provide those who

are providing the health care needs the peace of mind to know that

the Federal Government is going to maintain a safety net for a limited amount of time.

What we have proposed has been limited, it is temporary, but it

is unbelievable the response we are getting. As Senator Lott said,

nobody wants to fight. Nobody wants to pick a fight. But sometimes

you do have to fight for people who cannot fight for themselves

right now. We have a tremendous number in Arkansas per capita.

We probably have more evacuees than any other State. We have

open arms and open hearts, and we are going to take care of our

fellow Americans.

But it is inexcusable to me that we cannot provide peace of mind

to the medical providers. I have been to these evacuee camps. I

have seen the doctors, and the nurses, and the county health individuals, the Social Security Administration workers who worked

24–7, particularly in the first week, to make sure that these evacuees not only were being embraced and held in the arms of their

fellow Americans, but were being done so with dignity, with the

dignity that all Americans deserve. And here we are fretting and

arguing over some of the unbelievable details of providing the safety net that they need on a temporary basis.

Mr. Chairman, I am grateful to you. You have stood up time and

time again, along with Senator Baucus, to try to express the concern that we have in being able to make sure that people who have

been affected by these devastating circumstances know that our

hearts go out to them, and we are going to be working hard. But

when you look at what is being proposed or what is being questioned—looking to try to work through these waiver programs.

Does anybody realize that through these waivers there is no funding? There is no funding that is assured. The administration is saying to these States, well, you just sign on the dotted line in this

memorandum of understanding, and we will get there eventually,

but there is no money to follow that up.

Not to mention the fact that if we go into these waivers, we, the

neighboring States, who have tried so desperately to give of ourselves and of our services to make these people feel loved and

whole again, are now going to have to go back to those States—

Alabama, Louisiana, and Mississippi—and say, well, we want to be

there to help you, but you are going to have to cough it up, and

you are going to have to cough it up now because we are going to

be in jeopardy of being able to offer services to the people of our

State.

That is just not what the American people are about. We have

greater values than that, Mr. Chairman; we really do. I just plead

with my colleagues.

We talk time and time again, Mr. Chairman, about trying to

eliminate the red tape and work through these details. I just cannot believe that out of 100 of us up here, we cannot put ourselves

in the shoes of these devastated people who have been torn from

their homes and their families, and provide some kind of a safety

net for them.

24

I just want to point out one thing, Mr. Chairman. A lot has been

talked about in terms of the FMAP and the extension or making

whole. Instead of causing these 26 States to have to see a decrease

in their FMAP, we hold them harmless for that increase that they

are going to have to pay for just 1 year, just 1 year. Again, it is

temporary.

Well, out of those 26, three of them are the affected States, but

the other four are the States that hold and have hosted the most

evacuees coming into their States. But of the others that are left,

the 19, who is going to go tell the providers in those States? I visited with my colleagues yesterday from Utah, New Mexico, Arizona

and others, North Carolina, who had accepted evacuees as well,

who were living with cousins, uncles, sisters and brothers. Are we

going to tell them they do not deserve health care and that the

State has to pay for it?

The CHAIRMAN. Senator Lincoln, your time has expired.

Senator LINCOLN. Can I make one more point, Mr. Chairman,

please?

The CHAIRMAN. If you can do it in 30 seconds. Ms. Snowe has

been waiting patiently.

Senator LINCOLN. Okay. Well, I just want to also make the point

about the categorical restrictions the secretary of HHS is balking

at. There was a woman from New Orleans who floated on a refrigerator for 3 days. She finally made it to Baton Rouge. She got there

thinking that her Nation would provide her a safety net of health

care. She was diabetic. She needed immediate care. Do you know

what she was told? As a childless woman, she was a categorical restriction and could not get the health care she needed. I know that

the members of this body do not believe that that is the way that

America should respond to its citizens. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Snowe?

Senator SNOWE. Thank you, Mr. Chairman. I also want to thank

you and Senator Baucus for your leadership on this mighty question and the tremendous impact that it has had on your State, Governor Blanco, Governor Riley, and I know, Governor Barbour.

I saw the devastation firsthand. I traveled to the region a couple

of weeks ago with the commandant of the Coast Guard, which I

also oversee. I am sorry for the tremendous hardship that this has

posed to the people of your States. We truly do want to help you

move forward to rebuild and to restore your communities, your

States, the lives and the neighborhoods of so many people that

have been devastated. We are truly sorry for the difficulties and

the profound impact that it has had.

I also chair the Small Business Committee. Last week I held a

hearing, and I had a cross-section of panelists representing your respective States to speak firsthand about the needs of small business owners. The fact that they were even able to come and travel

to the capital to talk about their needs was moving in and of itself,

frankly, because they lost so much. They not only lost their businesses, but they also lost their homes. But they thought it was important enough to come here and to talk about what would help

them to begin to restore the economic livelihoods for themselves

and for their communities.

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That is what I wanted to talk to you about. Both Senator Vitter

and Senator Landrieu, Governor Blanco, serve on my committee on

small business, so I have certainly been working with them, and

Senator Kerry, who has just arrived.

I introduced a package last week, which received unanimous sup- port in the Senate, of approximately $600 million in small business

relief assistance. That will probably be the beginning of this process. We happen to think that small business is a lifeline to the economic restoration of your respective States.

I would like to have any of your input on this legislation. We are

going to try to get this bill through on a unanimous-consent basis,

so it can pass the House as well, and move to the President to be

signed. Some of the proposals included in our package would defer

repayments on disaster loans, or any kind of small business loans,

your small businesses have in the area, and expand the size of disaster loan assistance.

We also heard from small business owners from your States who

said that they really needed bridge loans and bridge grants. In fact,

we do include $400 million worth of assistance to your three States

to help begin that process, immediate grants so they can start the

rebuilding process as soon as possible.

We created a HUBZone so that the small businesses in the area

could be eligible for contracting. One of the concerns that I have

is making sure that small businesses are eligible for the contracting that is going to be done by the Federal Government because, obviously, the Federal Government is going to be a major

purchaser. We want to make sure that small businesses are on the

front lines of those Federal contracts. That is one of the major concerns I have at this point.

Those are a number of the issues. I would also like to have your

input on what you think we could do to assist in helping small

business above and beyond what we will be doing. We will share

with your staffs, in fact, what we have in this package.

One of the ideas that was brought to my attention that I thought

would be interesting from the standpoint of this committee regards

the low-income housing tax credit. But perhaps we could do an

emergency housing tax credit to build upon that idea for immediate

assistance to developers, so they can begin the process of rebuilding

in your regions. But if you have any thoughts on the small business

dimension, because I really do want to be useful in making sure

that whatever we are doing is going to provide the assistance at

the time in which you would need it, I’d be interested in hearing

your ideas.

Governor BLANCO. Senator Snowe, thank you for visiting, and

the other senators who did make a trip to our disaster area. You

are singing our song. You are right on target with what we think

needs to happen. Louisiana has put out a quick $10 million to do

those bridge loans to small businesses also, but we know that is

just a fraction of what our need will be. It will disappear in probably a week or less.

Everything that you have cited appears to us to be critical in

order to try to pick up the small business community across our

State, particularly in this region. We are a State made up primarily of small businesses, and it is those very businesses that are

26

in a very fragile state right now. If we can help them with bridge

loans, deferred loan payments, and controlling who gets contracts,

that is something extremely important. A lot of contracts are being

given out right now, and there are some concerns at the local level

about who is actually doing the work. Many of our businesses are

engaged in getting the work done, but there is a feeling that maybe

not enough.

We want to work with you, and we will take a look at your comprehensive package. We also want to emphasize the need for the

emergency housing credit. I know this may be a legal dispute that

would be settled, but it will not be settled quickly, and it will not

help those families who are faced right now with losing every single thing. If we can help them with housing tax credits, those

things we see are the way to allow people to help themselves.

This is something our government can do. We are proud to be a

part of this great Nation. Never in our history have we had so

many of our citizens so beautifully embraced by people across this

Nation, and now we come today to look at our government to say,

give us the lift we need. We can help ourselves if you can help put

us on a platform from which we can work. We know that we have

people of great capacity who have been injured right now. So as we

go through this time, give us those platforms to work from, and we

will do the rest.

The CHAIRMAN. Governor Riley, did you want to address the last

question of Senator Snowe?

Governor RILEY. Yes, just to say this. I cannot think of a more

key component to the recovery effort than the SBA. SBA reaches

out to so many different people out there.

Let me say this. I am looking at the State of Alabama today, a

year after Ivan came through, and I look at all of these small businesses out there that did not sustain damage themselves. But because their customer base was destroyed, they really have had a

lot of financial challenges. As the customer base is increased, they

will be able to come back and they will be able to have successful

businesses and continue.

That is what is going to happen to Mississippi; that is what is

going to happen to Louisiana over the next year. It is going to take

someone like SBA to come in and give them a bridge loan, give

them a deferral of a few months until you can get them to structure the place back. Even though they sustained no physical damage, when their customer base was destroyed, it put an undue burden on them. The only way we are going to be able to accomplish

any kind of assistance for them is through agencies like the SBA.

Senator SNOWE. Well, I appreciate that, Governor Riley and Governor Blanco. You reminded me that another issue on the SBA

front is making sure the resources are there on the ground, on the

front lines. We certainly want to hear from you if that is not the

case, because I urged the SBA administrator last week to make

sure that we have adequate resources on the ground, to set up the

centers wherever possible, and to make sure there are enough people there to answer all the questions in working through this process for small business people. That is going to be critically important. I need to hear from you all if that is not happening or if there

27

are not enough resources, or if the resources aren’t where they

should be located in your respective States and cities.

Second is the fact that many of the small business owners indicated that what they have lost is their employees. I know Senator

Vitter said he was going to propose a tax credit, along with Senator

Landrieu, for people to be employed in the region. So there is another incentive so small businesses can get employees back and get

people to work, because that is one of the other dimensions to this

problem.

I appreciate your input, and I would like to follow up with your

respective staffs on these questions to make sure things are working the way they should, and so we can learn about what else we

can be doing in addition to what we are already going to be doing.

Governor RILEY. Thank you so much. That is going to be critical

for each one of these States as we try to reestablish that employee

base.

Senator SNOWE. Thank you. Thank you, Governor Riley.

The CHAIRMAN. In regard to the last point that Senator Snowe

made: Senator, the bill that the President signed Saturday, that

Senator Baucus and I got passed on unanimous consent last week,

deals with those incentives.

Senator Kerry?

Senator KERRY. Thank you very much, Mr. Chairman.

Governor Blanco, welcome, and thanks so much for taking time

to meet with me when I was down there a few days ago—I appreciate it—in the middle of all you had to do.

Governor Riley, thanks for hanging in here with us.

Senator Snowe, who is chairman of the committee—I am the

ranking member of the Small Business Committee—has mentioned

this hearing that we had last week, which was really instructive.

Today in your testimony, Governor, you have talked about some

81,000 small businesses, many of them I think with sales of less

than $3 million, many of them family-owned businesses, that are

hurt.

My concern is that a lot of what we have been talking about in

our response—and I think the chairman and ranking member of

this committee moved swiftly and appropriately to try to get some

incentives in place—and what we are focused on is capital incentive. The problem that we face here in this breadth of devastation

that has occurred is the destruction of an entire employee/consumer base, so that you have a very different equation than we

have had previously.

I am concerned that none of these capital incentives, particularly

a tax incentive—you do not file your return until next year; you are

sitting there, it does not help your cash flow, it does nothing to put

an employee back to work immediately—is an insufficient band-aid

in my judgment.

I also look at the fact that as of yesterday, only six business

loans have been processed; four in Alabama, two in Mississippi,

none in Louisiana, from the Small Business Administration. So

many of the small businesses are just sitting there concerned. They

do not know how they are going to make it, period. I am told that

when a whole bunch of these businesses go out of business, they

28

are not coming back, or they are certainly not coming back where

they were.

I think we have to really think differently. We have to get out

of the box here a little bit. I am not even sure that loans are adequate in some cases, because how you pay back with an uncertain

future stream of revenues is a major question.

So maybe both of you, Governor Riley and Governor Blanco, will

address this question of are we properly focused and adequately focused with emergency relief to the consumer and employee base,

and are we in fact designing a response that is adequate to this

particular challenge, in your judgment.

Governor BLANCO. Well, certainly, our small businesses have depended on the SBA for a very long time, but what we are experiencing right now is that the normal process takes some time, and

time is of the essence in our circumstances now. I think that you

are right, Senator Kerry. Loans may not be the appropriate vehicle;

$10 billion in cash grants will provide immediate help. Those are

the kinds of things that will have a payoff in the long run. If we

can get our businesses back and running in a reasonable amount

of time, and keep them from just going under in every single direction, we can repay this by building a stronger economy. Everything

that you can do and any ideas that you think are feasible are important to all of the employers and the employees of the affected

areas.

Governor Barbour, Governor Riley, and I, our three States were

hit by Katrina, but then Hurricane Rita just left Louisiana and

Texas impaired. We have places now on the coast of Louisiana that

look like the coast of Mississippi looked. Everything is gone, so the

need has increased even more. Anything that is possible to restore

business activity will begin the restoration of these communities. It

will allow families to come back. It will put money in the pockets

of our citizens to be able to rebuild their homes, to be able to reestablish themselves in the communities that they so dearly love.

Senator KERRY. But some of those businesses that could function

are simply not going to function for the next 6 months or a year

because they are not going to have any base. I mean, there is nobody there to buy and nobody to sell to.

Governor BLANCO. Some businesses can relocate easily and get

back up in a temporary location. Others are there by virtue of having the population that they serve around them. What we would

hope to do is to strengthen these individuals who have been the

backbone of the small business community in our respective States

so that they can come back to play another day. You take all kinds

of businesses that were there to serve people and the people are

dispersed temporarily. We hope they will come back sooner than

later.

Senator KERRY. Governor Riley, do you want to add anything to

that?

Governor RILEY. Senator Kerry, it is all about jobs. It is all about

being able to get jobs restored to these areas as quickly as we possibly can, and make the type of tax policy changes that allow us

to create the incentives for people to get back in there rapidly. I

think a business loan, a bridge loan, is exactly what we are going

to need. Grants open up a whole new area of concern for me. We

29

have to at some time contain our desire to go out and continue to

run up deficits. We need to keep this as contained as we can.

You give most small businesses a 6-month deferral on their payments. You give them a bridge loan to get through. Go in and put

the incentives that are necessary in place so we can start rebuilding that area. When you start rebuilding to the extent that we will

across the Gulf Coast, just the enormity of the size, I think, is

going to allow us to get back to the point that we can support that

customer base.

Senator KERRY. Well, I do not have a question about that. I think

the amount of money and the amount of rebuilding that will take

place certainly holds out the promise of a boom at some point in

time, and that is going to be pretty significant. Most construction

companies, most electricians, plumbers, pipe fitters, you name it,

they are going to be working down there, and a lot are going to be

coming from elsewhere to work there, ultimately.

The question is, sort of, how do you get from this moment to

then, and not lose that base, and how do you keep those people interested in being there, because they have to put food on the table,

pay the mortgage, and do the other things? This question of sustaining that core is critical.

Governor RILEY. That is exactly what I said a moment ago. When

we went through Ivan last year, if you look at the response we had

in Baldwin County, over in Pensacola, that is exactly what happened. There were so many small restaurants that lost their customer base. They needed something to sustain them for 6 or 8

months until the investments came back in. I think the same thing

is going to apply in this instance.

Senator KERRY. Governor, is there any timetable that is even

tentative as to when in New Orleans basic infrastructure might be

in a position that people could, in fact, begin that process of rebuilding?

Governor BLANCO. Senator Kerry, all of our front-line people are

working feverishly to bring up the electric system, but we are a

fraction of the way. As you know, we have a bit of a different situation. Louisiana is very familiar with what we might call normal

hurricane damage. What we are dealing with right now is no such

thing. We have been through many, many hurricanes. We are not

dealing at that level. We are dealing at a far more disastrous level

for Louisiana.

We do suggest that grants to businesses would be important because this is the very vehicle that was used in the aftermath of

9/11 to help New York businesses get back in, to sustain them over

a period of time. Yet, those businesses that were in the Twin Towers do have a certain kind of flexibility that some of our small businesses do not. You can establish a financial business in a lot of different locations, but you cannot put your little restaurant just anywhere, as you have said. So we are not asking for anything that

has not already been done by this Congress. We are asking that

each of our respective experiences be looked upon as they are. They

are unique in some fashion.

When will we restore the city, the region, in the southeast part

of Louisiana or the southwest part of Louisiana will depend on how

quickly Congress can help us and how quickly they can restore the

30

infrastructure. You are talking about a water system where they

worked on the main water distribution plant, but they had leaks

that were in the flooded areas, and you could not go in until the

water was removed. Then Rita came back and put more water in,

so it delayed everything one more time.

The citizens of the New Orleans region have been out of there

for a month now, and it is going to take yet some more time before

we can get the basic infrastructure up. When I say basic infrastructure, I am talking about electricity and potable water. We are talking about health care facilities because you cannot bring people in

without an appropriate system, and a communication system that

totally went down the tubes. Those are big systems that have to

be redesigned, and now we have a housing crisis.

So it is going to take some time before we actually see some

progress. I hate to put a time frame on it.

Senator KERRY. No, I understand that. I was just trying to get

a sense of what might be involved in sort of the bridge component

of this. Senator Snowe and I, at the hearing we held, I think they

had some 80,000 applications already on loans.

Senator SNOWE. Actually more than a million had been submitted last week, and as Senator Kerry indicated, only 80 have

been approved, so that is the difficulty.

Governor BLANCO. Right.

Senator KERRY. So I think this question of the interim really is

very, very significant for us. It is hard to do it through tax policy,

but we are going to have to think creatively and move very swiftly.

I think the signal that we send is so important. This is all tax benefit, all back-ended. I think you are going to lose a lot of the population, and it is going to be harder, ultimately, to bring people

back. But if you send a message of certainty and speed to restore

those things, and people can begin to see a date and have a planning, then you can plan a business; then you can make a family

decision. I think it is really incumbent on us to get those.

The CHAIRMAN. Thank you very much.

Senator Baucus wants to say something before the Governors

leave, and then I will close.

Senator BAUCUS. Just briefly. In this very unprecedented situation we are all facing, everybody wants to do right by everybody.

There are a multitude of ideas, particularly with respect to helping

people personally or reconstruction, and where there are tax credits, work opportunity zones, cap gains suspension, and suspension

of all other kinds of liabilities.

We need some help to know what the priorities really are, and

which of all the various suggestions really work better than perhaps some others, and which are more efficient to get the job done

compared to some others, and do not overlap improperly compared

with some others. We have to set a priority short-term and longterm. There are some immediate needs, clearly. Some other needs

can be addressed maybe tomorrow or the next day, not too long but

very quickly. Perhaps it should be regional in its presentation; Louisiana, Mississippi, Alabama, et cetera. I wonder if we even need

some kind of an inventory here of the problems, the damage, to

quantify it, kind of a baseline assessment that is transparent, cenVerDate 11-MAY-2000 17:29 Feb 12, 2007 Jkt 095484 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 32691.000 SFIN1 PsN: SFIN1
31

trally located somehow, so all decision makers and all policy makers have some idea of what the real facts are.

We all want to do right. We all want to help, but this is unprecedented. Business as usual is not going to work too well. Business

as usual is sort of fragmented, to throw a tax credit here, some policy there at this or that because somebody’s squeaking the loudest

or whatnot. We are going to run into resistance, frankly, pretty

quickly, if it is not done really well, which creates a need for a lot

of creative thinking. We are already feeling the resistance on the

Medicaid bill.

There are senators who already say, well, that is too much. We have incorporated $62 billion, basically, in disaster assistance.

Much of that is wasted, senators are privately telling me. That is

one of the main reasons why we are having a hard time getting

this Medicaid bill passed, frankly. So when the President says we have $250 billion in additional

needs, I feel to work this out, we have to work together. We are

being tested as a people. It means creativity, it means trust, it

means working together and nobody taking advantage of anybody

here, and so forth. We are being tested on how well we can do all

this.

So I am asking you and those in the region to help us—we want

to help each other here—by just kind of going the extra mile to get

that assessment, inventory, what works maybe a little bit better

than something else, and to help get all of these ideas.

Governor BLANCO. Certainly. Thank you, Senator. We are in the

process of taking those inventories and trying to prioritize our

needs. When your whole world is turned upside down, you have a

lot of needs all at one time. You are working on the health care

piece of it. We have housing needs; we have public infrastructure

needs. We are trying to keep our law enforcement agencies intact

just to keep them functioning, so that we can rebuild, so that our

governmental agencies can stay together to begin that rebuilding

process. People at the local level are working feverishly.

I know that this Congress was extremely generous in its first response. That money is, for the first response, for the emergency

needs. It does not touch the rebuilding needs yet. I am sorry that

we all find ourselves in such a difficult place. It was certainly not

our wishes; it was certainly not our doing. The forces of nature will

have their way with all of us. But I continue to remind our people

that what we have built that has been destroyed can be rebuilt.

But when we tackle that issue, we need the help of our great Nation and the help of the wonderful spirit that I have heard here

today expressed by every member of this United States Senate.

We know that your hearts are where they need to be. We know

that you work through your processes in special ways that the

American citizens do not always understand. So we know we are

going to put our trust in your hands, and in your heads and your

hearts. We believe that in the end—and we hope sooner rather

than later—that everything will come out all right.

Senator BAUCUS. Thank you very much.

The CHAIRMAN. I thank Governor Blanco, Governor Barbour,

Governor Riley, and all of you. We want you to stay in touch with

us as we develop this legislation, and we thank you very much for

32

being here today and respect you for the trying times you are going

through. Thank you, Governor Riley and Governor Blanco.

Governor BLANCO. Thank you, Senator Grassley.

Governor RILEY. Thank you.

The CHAIRMAN. I am going to introduce our second panel, focusing on recent disasters in our country, including the attack of 9/11,

prior to storms, floods and everything we have had affecting even

the Midwest portion of our country.

This group of witnesses is here to provide their views about what

has worked well and what has not worked well, as Congress has

attempted to provide tax relief in the past in similar disasters. We

have a responsibility to use the taxpayers’ resources judiciously,

and I hope that this group can assist us in doing that. So will you

come as I introduce you? Senator Schumer is going to speak about

one of our witnesses from his State.

We first have George Yin, Chief of Staff, Joint Committee on

Taxation, to discuss effectiveness in administration of previous disaster tax proposals; then Diana Aviv, president and CEO of Independent Sector, to give that sector’s response to past disasters and

how they work; and then Mr. Daniel Doctoroff, Deputy Mayor of

Economic Development in New York City that Senator Schumer

will speak about; Mr. Gary LaGrange, president and CEO of the

New Orleans Port Authority and chairman of the American Association of Port Authorities, to discuss how ports have been affected

in prior disasters; and finally, Ms. Jean-Mari Peltier, president and

CEO of the National Council of Farmer Cooperatives.

Senator Schumer?

Senator SCHUMER. Thank you, Mr. Chairman. I appreciate the

opportunity to welcome all of our witnesses; to thank Governor

Blanco and the other Governors who were here by television, and

to thank you, Mr. Chairman, for allowing me to do this; I have to

be on my way.

I want to welcome Dan Doctoroff in particular. He is our deputy

mayor for economic development, and has been with the city of

New York since Mayor Bloomberg was elected. He has done an outstanding job, and did right after 9/11.

The question is this: Why did recovery go so much better in New

York City after a terrible and unexpected attack than it did in the

Gulf? We all know that there are problems and blame to go around

in the Gulf galore and all the finger-pointing. The feds blame the

locals; the locals blame the feds. It does not really answer anything.

In New York, we have a model. Things went right. The Federal

Government stepped up to the plate quickly and fully. I praise

President Bush. He was there the day after, and he never wavered

in his commitment. This Congress, Democrats and Republicans

alike, came to New York’s rescue.

I want to tell the people of New Orleans and of the Gulf, the Federal Government’s involvement did not just fade after a month or

two. We are still working on things. I am going to ask Dan

Doctoroff to talk a little bit about the final $2 billion of the $20 billion which could not be used for one purpose, and we would like

to put it for another purpose, hopefully in this bill, because that

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ments can be used for our connection from Lower Manhattan to the

airport, it will symbolize to the people in the Gulf that 4 years

later, the Federal Government is still involved and still helping,

and that desire will not fade. This is not new money; this is part

of the $20 billion. But we have found that not everything worked.

What I want to say, Mr. Chairman, is some tax breaks worked

and some did not. We spent a lot of time trying to figure out what

would work, and in some areas we were all right, and in some

areas we were not. I think it behooves us in this committee to

spend some time figuring out what worked in New York and what

did not—obviously, the situation is different; our whole city was

not destroyed, although part of its heart was ripped out—and

maybe even to slow down a little bit.

The tax relief provisions are important. We were worried right

after 9/11 that people would never come back. On the one hand, it

was important to have things in place to say we care, please come

back, and we will give you some tax incentives to do it. But at the

same time, some of them might have been crafted too hastily and

were not used, and that is why we need to transfer some of the

money, even 4 years later. I would ask when Deputy Mayor

Doctoroff speaks, we talk about that.

I would also say, Mr. Chairman, that in good part, the Federal

response to New York was—in large, large part—excellent. Why

did it go right here and so wrong there is a question I think all

of us answer, and it is very wise to have——

The CHAIRMAN. You cannot judge that it has gone wrong yet, because we have only been trying to help them for 3 weeks.

Senator SCHUMER. Well, that is true, Mr. Chairman. But, so far,

I would say there was never a feeling among New Yorkers or the

American people that the Federal Government was not there, from

the day after, and that is an example that is already a little bit

different.

So I want to thank Mr. Doctoroff for being here. I asked him to

talk about what worked and what did not, so we can learn in terms

of the tax incentives, and to comment on the $2 billion transfer and

why it is necessary, when he gets his turn. I appreciate your letting

me introduce him, Mr. Chairman.

The CHAIRMAN. We are going to go as I introduced you, so, Mr.

Yin?

STATEMENT OF GEORGE K. YIN, CHIEF OF STAFF, JOINT

COMMITTEE ON TAXATION, WASHINGTON, DC

Mr. YIN. Thank you, Mr. Chairman, Senator Baucus, members of

the committee. Thank you for inviting me to testify today. You

have asked me to discuss the effectiveness of prior tax legislative

responses to recent disasters affecting the United States. In this

testimony, I am going to provide some general observations about

this type of legislation and briefly describe the specific tax provisions that were enacted.

The effectiveness of prior disaster-related tax provisions is very

difficult to evaluate. The provisions are all of fairly recent vintage,

and there has not been sufficient time and data for research to

emerge that specifically evaluates them. Furthermore, the problems presented by Hurricane Katrina are different in both nature

34

and scope than those presented by, for example, the terrorist attack on 9/11. Thus, what may or may not have proven effective in

New York City in 2001 may not be particularly useful in determining the appropriate approach to take for the Gulf region in

2005. In deciding whether to adopt any tax provisions in connection

with Hurricane Katrina, the committee might want to consider the

following general observations.

Disasters by their nature are location-specific, and, thus, any tax

measures to be considered as relief for these disasters will, in general, be location-specific. Present law provides a model for locationspecific tax benefits, namely the provisions known as enterprise

zones, which offer certain investment and employment incentives

for geographically targeted areas that are chronically, economically

depressed.

As a general matter, economists are skeptical about attempts to

alter the market’s decision as to the location of investment, although in the case of enterprise zones, rationales have been offered

that they help potentially to overcome mismatches between the

available labor supply and employment opportunities, or simply to

help chronically depressed areas. In general, academic research has

been inconclusive as to whether enterprise zones have significantly

encouraged employment or investment. An important issue concerns whether any benefit to the targeted area merely comes at the

expense of diminished investment or employment outside of the

zone.

Because of the temporary nature of the shock, any relief for a

disaster should presumably be short-lived, as the chairman indicated in his opening statement. But short-lived tax relief may be

problematic due to both the lack of awareness of the relief on the

part of taxpayers and limited enforcement incentives on the part

of the IRS. As a result, we might expect above-average non-compliance, both intentional and inadvertent, with such provisions, as

well as below-average utilization. Tax provisions, especially shortlived ones, are also not well-suited to providing benefits to lowincome beneficiaries if that is the committee’s objective.

Among the possible investment incentives for the Gulf region are

accelerated cost-recovery deductions, such as bonus depreciation or

expensing. Such incentives reduce the after-tax cost of investing in

eligible property, and, therefore, encourage such investment. Moreover, such incentives may be attractive because they are relatively

easy to tailor to specific geographic areas or to specific investment

periods. This may not be true, however, for certain movable or

mixed-used property, and a general difficulty is knowing the appropriate level of incentive to spur the desired amount of investment.

Proposals to provide additional tax-exempt bond authority raise

two separate questions. The first is whether the amount of a

State’s volume cap, which limits the aggregate issuance of taxexempt private activity bonds, should be raised in view of increased

government financing needs. A second and separate question is

whether there should be an expansion of the permitted purposes

for which tax-exempt financing may be provided.

Congress has identified specific private activities that may be financed with tax-exempt bonds generally because such activities

provide a degree of public benefit. Proposals to expand tax-exempt

35

bond authority for broad, undefined purposes may permit financing

for private activities that provide little or no public benefit.

A tax incentive that is something of a hybrid between a tax and

a grant program is the New Markets Tax Credit. This provision

permits taxpayers to receive a tax credit over a 7-year period, equal

to 39 percent of the cost of qualified investments in designated

community development entities or CDEs. Substantially all of the

qualified investment must in turn be used by the CDE to provide

investments in low-income communities.

Because the designation of qualifying CDEs is determined annually by the Treasury Department under a competitive application

process, the program has both tax and grant characteristics. The

tax program, therefore, has both the advantages, such as greater

oversight and control, and disadvantages, such as a slower response and insufficient reliance upon the market, of grant programs.

Finally, careful targeting of any tax incentives will ensure that

they are available only to intended beneficiaries. In addition, if the

committee decides to adopt a package of proposals, it should consider the potential overlap of benefits as well as the effect multiple

provisions may have on both participation and compliance.

Mr. Chairman, that concludes my oral testimony. As always, the

Joint Committee staff stands ready to assist the committee in developing an appropriate tax legislative package. I will be happy to

answer any questions you may have.

The CHAIRMAN. Thank you, Mr. Yin.

[The prepared statement of Mr. Yin appears in the appendix.]

STATEMENT OF DIANA AVIV, PRESIDENT AND CEO,

INDEPENDENT SECTOR, WASHINGTON, DC

Ms. AVIV. Mr. Chairman and distinguished members of the committee, Independent Sector is a national organization with more

than 500 member charities, foundations, and corporate philanthropy programs, and I appreciate this opportunity to speak to you

today.

As you know, our sector has been on the front lines of the relief

efforts since Katrina tore through the three Gulf Coast States. Two

days ago, Independent Sector brought together 65 leaders from the

non-profit sector from business and government to talk about what

needs to be done. I will share with you seven recommendations

that emerged from these discussions and from others who have

contributed to recovery programs from Katrina or learned from previous disaster-relief efforts.

Number one. Successful disaster recovery depends in large part

on getting services to people quickly and efficiently. Too often, survivors face a bureaucratic nightmare of confusing forms and requirements for information that may have been destroyed. People

displaced to other States cannot meet residency requirements and

may not have the required documentation.

One of the most critical needs is access to health care. Reports

from the Louisiana Department of Health and Hospitals indicate

that 20 percent of hurricane survivors seeking Medicaid coverage

have been screened out by State workers primarily because they do

not meet categorical requirements.

36

The legislation that you talked about already and introduced by

you, Mr. Chairman, and Senator Baucus, and passed by this committee is among the most important actions that we think that

Congress can take right now, because it would remove temporary

restrictions that have caused many low-income survivors to be denied Medicaid coverage. States hosting evacuees need additional resources to provide medical care for these people. We hope that you

will talk with your colleagues in the Senate and the White House

and encourage them to pass this legislation without delay. We

heard all about this this morning.

To ensure that people get help now, there are other programs as

well, such as TANF, Earned Income Tax Credit, and Section 8

housing vouchers that ought to be expanded and eligibility requirements temporarily suspended.

Number two. The suffering of the people along the Gulf Coast

has been exacerbated by inadequate coordination among Federal,

State and local government agencies. It is crucial that all government and non-government assistance organizations coordinate

their efforts, recovery and rebuilding, in dealing with this disaster.

Number three. Past disaster recovery work has shown that rebuilding efforts are most effective when control is in the hand of

local officials and community leaders. While national experts

should contribute, the primary decision makers about deployment

of resources should be those whose lives will be affected by the decisions for decades to come. As this committee considers how to establish procedures for distributing assistance, we urge you to put

the authority for utilizing those funds in the hands of local government and community leaders.

Fourthly. In difficult times, people turn to charitable organizations and religious groups they trust most to help them. Unfortunately, many such organizations have experienced tremendous

losses from the hurricanes and will need to rebuild facilities in

order to continue to serve their communities. Federal relief programs need to be designed to give charities in affected areas access

to government loan and government grant programs that will enable them to rebuild quickly and remain a vital partner with government in renewing their communities.

Fifthly. Americans give generously in response to devastating

events, but their donations can come at the expense of other programs. Since this past year has already seen record donations for

Tsunami relief, many charities are bracing for a decline in donations to their programs. Congress took an important step to encourage greater giving by passing the Katrina Emergency Tax Relief

Act of 2005. This legislation recognizes the importance of increased

charitable giving and provides additional encouragement to corporations to make donations of food and books. The Care Act of

2005, sponsored by Senators Santorum and Lieberman, includes

additional, valuable incentives and reforms needed by the charitable community. We urge the committee to support the charitable

giving incentives of this legislation.

Sixthly. The FBI reports that most of the roughly 2,300 Internet

sites on Hurricane Katrina relief services are presumed to be

fraudulent. It will require concerted Federal, State and local efforts

37

by oversight officials, civic organizations, and the media to identify

and prosecute these scandalous opportunists.

One provision dropped from the recently passed legislation would

have permitted the IRS to share information of fraudulent charitable operations with States’ charity officials. That provision is

strongly supported by State regulators and many others in the

charitable community. Now is not the time to shrink from passing

this and other measures designed to protect the charitable sector

from those who are not committed to transparency and accountability.

Finally, we recognize that repairing the damage done by hurricanes will require spending significant amounts of Federal dollars.

However, the charitable sector urges that you not pay for the reconstruction by reducing support for low-income people elsewhere

in the United States. Currently, programs for low-income people already cannot meet all the needs of those in other States. Further

cuts to these programs would be devastating not only to current recipients, but also to thousands of disaster victims whose needs will

endure beyond the short-term emergency assistance programs.

Mr. Chairman, Independent Sector and my colleagues in the

charitable sector and philanthropic community are committed to do

everything we possibly can to assist in the recovery and rebuilding

efforts. Thank you.

The CHAIRMAN. Thank you, Ms. Aviv.

[The prepared statement of Ms. Aviv appears in the appendix.]

The CHAIRMAN. Now, Mr. Doctoroff.

STATEMENT OF DANIEL L. DOCTOROFF, DEPUTY MAYOR, ECONOMIC DEVELOPMENT AND REBUILDING FOR THE CITY OF

NEW YORK, NEW YORK, NY

Mr. DOCTOROFF. Mr. Chairman, New Yorkers remember how the

country helped us in our darkest hours. The people of Louisiana

even paid for a new fire engine for the New York City Fire Department. The truck, The Spirit of Louisiana, became Engine 283 in

Brooklyn. In a sad twist of fate, it is now our turn to repay the generosity of the Gulf Coast. The mayor deployed nearly a thousand

emergency personnel to the area, and, among the convoy of trucks

and buses, was Brooklyn’s Engine 283, The Spirit of Louisiana,

sent to help the same people whose generosity helped save New

York.

In recent weeks, we have spoken at length with Congressional

staff to discuss what we have learned about the creation of a relief

package. Let me, frankly, share some of that advice.

In the months following the September 11th attack, the Federal

Government quickly committed over $20 billion to New York. That

included $15 billion in appropriations, which we have put to work,

as Senator Schumer said, with extraordinary cooperation from the

Federal Government. All of it has been accounted for and spent.

The remaining $5 billion came in the form of tax provisions.

Here, to be honest, the results have been disappointing. The simple

fact is that the tax code is a crude vehicle for delivering aid and

spurring rebuilding, especially compared to cash or other easily valued aid. That is particularly true where you are trying to design

programs quickly to respond to a disaster whose effects will last for

38

years. The value assigned to tax benefits is an estimate, based on

projections of how businesses will respond. For New York, those

projections were overly optimistic. As a result, about half of the estimated value of $5 billion or more than $2 billion in aid has not

bee delivered.

Some of the provisions were useful. For example, the Liberty

Bond Program directed aid to key projects. But the program was

due to sunset at the end of 2004, with substantial unused capacity

due to the slow economic recovery. Fortunately, last year this committee recognized the need for flexibility and extended the sunset

date.

There have been bigger problems with the business-related tax

provisions, including accelerated depreciation and employment

credits. The value of these incentives has been much, much less

than expected for a variety of reasons, including, again, slower economic recovery than Congress predicted.

As a result, the President, as Senator Schumer indicated, has

proposed to repeal some of the tax benefits and replace them with

an expiring tax credit to help meet the infrastructure needs of

Lower Manhattan. It is another example of how follow-up action is

needed to provide the flexibility that the original legislation did not

offer.

Let me summarize with five lessons from our experience.

First, Federal tax benefits can be a valuable part of a package

to rebuild the Gulf Coast, as we found with provisions for taxexempt financing. At the same time, the second lesson is not to

overestimate the impacts of tax incentives in such a difficult and

uncertain environment. Tax incentives can be inflexible. If a business has no income, a tax benefit will not offer much help, and it

is a challenge to educate businesses, especially small businesses.

Third. Remember that economic recovery along the Gulf Coast

will not be quick. The optimistic assumptions made for New York’s

recovery resulted in the loss of over $2 billion in promised benefits.

That is why the fourth lesson is so important. Allow for maximum flexibility in the design of any tax benefits or programs. This

could include soft sunset dates tied to recovery benchmarks, or provisions for allowing trading in of unused incentives through reusable credits. Where you cannot predict the future, you need flexibility.

The fifth lesson is not about taxes, but rather the broader rebuilding challenge. After the devastation of a terrorist attack or a

natural disaster, you cannot simply replace what was lost. There

is a fear or loss of confidence that emerges. In our case, the loss

of confidence was in the future of one of the Nation’s most important central business districts. You cannot fight that fear with tax

incentives. You have to define not how the area will be like what

it was before, but rather how it will re-emerge better than ever. In

New York, that view came in the mayor’s vision for Lower Manhattan, which reimagined downtown as a vibrant, mixed-use community, a global hub of culture and commerce.

So our fifth lesson for the Gulf Coast is to encourage a collective

vision, a vision that creates excitement in the future, a vision that

captures the imagination of employers and residents, a vision

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hattan, the Gulf Coast will never be the same again. Like Lower

Manhattan, with your help, the Gulf Coast can be better than ever

before.

Thank you very much. New York City stands ready to help any

way possible.

The CHAIRMAN. Thank you, Mr. Doctoroff.

[The prepared statement of Mr. Doctoroff appears in the appendix.]

STATEMENT OF GARY P. LaGRANGE, PRESIDENT AND CEO,

PORT OF NEW ORLEANS, NEW ORLEANS, LA, AND CHAIRMAN, AMERICAN ASSOCIATION OF PORT AUTHORITIES, ALEXANDRIA, VA

Mr. LAGRANGE. Thank you, Mr. Chairman. It is indeed a pleasure to be here. By the way, I think I donated to that fire engine,

so thank you again.

Mr. DOCTOROFF. Thank you.

Mr. LAGRANGE. It is a real pleasure to be here, Mr. Chairman

and members of the committee. For those of you who made the

extra special effort to go down to New Orleans and to Louisiana to

visit just recently, we really thank you for that. We know that that

was certainly very demanding on your schedules and on your time.

We are very appreciative of that.

I am serving as chairman of the American Association of Port

Authorities, which are, basically, all of the ports in the western

hemisphere, some 150 strong, 85 representatives from the United

States. Of those 85 representatives from the United States, over 20

ports were affected between Katrina and Rita on the Gulf Coast

over the last 30 days.

I am also serving as the president and CEO of the Port of New

Orleans, the fourth or fifth largest port in the United States, depending on whom you speak with. I am also the former president

of the Port of Gulf Port, part of the Mississippi State port authority, and also, the Port of South Louisiana, Mr. Chairman, which exports over 60 percent of all of the grain from the Midwest and from

your fair State, 17 States of the Midwest.

So it is with a heavy heart that we are here today, but, on the

other hand, we do have some relatively good news. We think that

the initial phase of the hurricane, particularly Katrina, from a

maritime standpoint and from a Federal Government standpoint,

the reactionary mode that the Federal Government went into was

quite commendable as far as we were concerned. It was an excellent reaction, beginning with the day after the hurricane, beginning

with Secretary Mineta and John Jamian of the Maritime Administration, who dispatched immediately, within less than 2 days,

roughly a half dozen Maritime Administration ready-deployment

vessels, which we identified as support vessels for workers to come

back, port-related workers, to work in the port itself.

Similar instances, by the way, were seen in previous incidents:

the earthquake in Oakland, with the Port of Oakland, Jack London

Square incident; the hurricanes last year in Florida; and notwithstanding 9/11 in New York, and the effects on the Port of New

York/New Jersey, which was only closed for 36 hours; a commendable effort.

40

The other things that we note that are quite significant were the

efforts of the Coast Guard, the National Oceanic and Atmospheric

Administration, and the Army Corps of Engineers in attempting to

shore up saturated levies that were far inferior to begin with, but

trying to make due with whatever was made available to them.

The Coast Guard got day markers in in quick order in the channels, and I am happy to say that, the day after the storm hit, grain

ships were running out of the Port of South Louisiana, and petroleum ships into the refinery at the Port of Baton Rouge.

There was one big issue we did not have quite as much success

with, and that is the restoration of communications. There was absolutely no way for not only a day, but a week and 2 weeks, in the

aftermath of the storm, to communicate. With the power source,

the same thing holds true. Most of the city of New Orleans is still

without power, and we are into the fifth week following the storm.

We were able to power up one or two of our port terminals to the

point of beginning to receive some commercial traffic within 8 days

following the storm, but that still only has us at roughly 15 percent

of our total capacity.

Manpower was the other issue. Seventy-eight percent of all

homes in New Orleans were destroyed or flooded, and will either

be totaled or massive repairs will have to take place. In order to

bring the workforce back in and manpower in to work a port such

as the size of New Orleans, there has to be immediate housing.

Again, that is where the Maritime Administration vessels came

into play. The six ships are capable of housing up to 1,000 workers.

We currently have 600 or 700 workers occupying them.

The other story is not a good story. It is one that we all look for,

and that is facilities, repair of those facilities and intermodal

connectivity. That is sort of where we are now. If we cannot put

the whole chain together, if there is a break in any one link of the

chain, then nothing is going to work. No ships, no cargo; no cargo,

no jobs.

The position we are in is one that we really do not care to be

in right now, but now we have ships coming back into the port, to

the two terminals of our 14 terminals. Thirty percent of those terminals were totally annihilated and devastated, and will never return to deep draft navigation. Seventy percent of those terminals

were not flooded and sustained moderate to heavy wind damage.

We are able to work some of them.

Now, that is important because the Port of New Orleans, at the

mouth of the Mississippi River, over a 15,000-mile distance of the

Mississippi River and all of its tributaries, serves 62 percent of the

consumer-spending public of America and supplies goods to Lowes,

Home Depot, Wal-Mart and Costco up in the Midwest and as far

up into the northeast as Pittsburgh. That is significant.

U.S. ports handle over 2 billion tons of cargo in a given year. The

Port of New Orleans generated $37 billion in economic benefits last

year; $2.8 billion in Federal taxes paid as a result of activities at

the Port of New Orleans alone last year. Those are significant

numbers, and numbers worth mentioning, I certainly believe.

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ment was excellent. As I said, ships were in the river within the

next day.

The area that we are going into now, or ones that were mentioned earlier by the Governors in all of their testimony, I am deeply concerned about. In order to bring a worker back to the dock,

in order to move cargo up and to the Midwest and to the northeast,

a worker has to have a place to lay his head. He has to have at

least one square meal a day. And moreover, he has to have a home.

That stop-gap measure will not last forever. It is going to be several months. Sooner or later, the ships will have to return to their

home ports. Sooner or later, housing has to be put into place for

those people to begin bringing their families back home, and rebuilding their lives, and starting all over again.

At this moment, the city of New Orleans is still not taking people

back in unless we start it today. If so, that is only in certain zip

codes that were not affected by the flood waters, so that is only a

handful of subdivisions and neighborhoods in the uptown garden

district sector of New Orleans.

Again, on behalf of all of our fellow ports, the Gulf Coast—there

are 29 member ports; 21 were affected by the last two storms. All

of the things that were talked about earlier—the tax incentives, the

accelerated depreciation, anything that can be put into perspective

in terms of helping us to rehabilitate specifically—we have an

inner harbor lock that was authorized before I was playing Little

League baseball, before I was shaving in 1954. It has just begun

construction.

When I was a young port director of 30, I testified for Olmstead

Lock and Dam. All of the inland river systems are interconnected.

We have to complete the inner harbor lock in New Orleans. The

sooner the better. That will allow us to do other things that would,

perhaps, prevent some of the flooding in the future from the Mississippi River Gulf outlet.

Thank you for all of your efforts, your time, and your consideration, and keep sending that grain south, sir.

The CHAIRMAN. We will.

[The prepared statement of Mr. LaGrange appears in the appendix.]

The CHAIRMAN. Ms. Peltier.

STATEMENT OF JEAN-MARI PELTIER, PRESIDENT AND CEO,

NATIONAL COUNCIL OF FARMER COOPERATIVES, WASHINGTON, DC

Ms. PELTIER. Thank you, Senator Grassley, Senator Baucus.

Let me just say, Mr. LaGrange, representing the National Council of Farmer Cooperatives, we certainly do want to start moving

that grain south.

I appreciate this opportunity to speak at your hearing today and

commend you for taking a look at the rebuilding efforts in the wake

of Hurricane Katrina, the effectiveness of past programs that have

been designed for agricultural relief under such circumstances, and

give you the perspective of America’s farmer-owned cooperatives on

this issue.

The National Council of Farmer Co-ops represents farmer cooperatives across the United States. There are 3,000 farmer-owned

42

businesses, such as cooperatives, across the United States, which

represent approximately 2 million farmers nationwide. They contribute about 250,000 jobs for a combined payroll of $8 billion.

Many of these jobs are in rural areas, including rural areas impacted by hurricanes Katrina and Rita.

Of course, we join with you and all Americans in concern and

support for the people of the Gulf and for their families. At the National Council of Farmer Cooperatives, we started a nationwide

campaign to try to provide relief for those impacted in the Gulf region, and I am pleased to say that Farmer Co-ops, and their employees, and their farmer members have directly contributed $1.2

million in hurricane relief to people in the Gulf, everything from

donated food stuffs, livestock feed, importantly, immediately after

the storm, generators, fuel supplies, transportation, and even temporary housing, particularly temporary housing for port workers.

U.S. agriculture is one of our largest single industries, accounting for as much as 16 percent of GDP and about one out of every

six jobs. Within the Gulf Coast region, it is nearly a billion-dollar

industry. Many segments of agriculture were particularly hard-hit,

and I would like to say that the USDA is still in the process of assessing all of the agricultural damage. But initial reports indicate

that production losses, including losses to crops and livestock, could

be as high as a billion dollars or more. Another report produced by

the American Farm Bureau Federation estimates that, in addition

to the billion dollars in direct losses, there may be as much as another billion dollars that is assessed to the agriculture industry in

terms of added costs, added costs fort transportation and energy.

I think in particular, Katrina pointed to some problems that

have been brewing in the Gulf Coast, even before the hurricanes

hit. In that, I mean, in particular, concerns about the escalating

cost of liquid natural gas. We were concerned last spring when the

costs topped $6. Immediately before Katrina, the rate was $10. In

the aftermath of Katrina, the price went up by an additional 30

percent to approximately $13. Right now, the Henry Hub is closed.

We do not fully understand what the cost for liquid natural gas is

going to be.

Let me point out that this has a huge impact on the cost of fertilizer. The estimated costs at this point are in excess of $500 a ton

for fertilizer. Let me point out that that has ripple effects across

the agriculture community, but the industry that is going to be

very directly impacted is, of course, the production of grain, corn

in particular. Our ability to sustain a renewable fuel policy with

these escalating costs of fertilizer is very much of concern to us.

As Mr. LaGrange noted, the Port of New Orleans is a major

interchange port for river and ocean-going agricultural cargoes in

excess of 50 to 60 percent of grain exports and a substantial volume of other agriculture as well brought along that system along

the Mississippi River.

Farmer cooperatives’ employees and farmer members are committed to working with Congress and the administration in these

efforts to provide needed assistance, and encourage the redevelopment and rebuilding of the area affected by the hurricanes.

I would like to take a minute and talk about some of our experience in working with disaster assistance in previous circumstances.

43

Following the Midwest floods of the 1990s, for example, Congress

responded by enacting several tax provisions, including extension

of tax-filing deadlines, allowing States to waive certain requirements to help home builders, and making it easier to determine

disaster loans. But there were other provisions that related directly

to agriculture that I would like to highlight.

One of those included allowing livestock producers to defer capital gains on the sale of livestock that they had to dispose of on account of floods or other weather-related conditions. In response to

other disasters, Congress also approved development of special development zones and additional tax incentives to encourage business investment. Clearly, previous experiences demonstrated the

importance of providing tax relief to promote investment and longterm economic recovery and job creation in local communities.

We would like to commend you, Mr. Chairman, as well as you,

Mr. Baucus, and members of this committee, for your leadership

and efforts relating to the enactment of tax legislation in response

to Hurricane Katrina. But as you consider what additional tax relief would be appropriate and the incentives that would be needed,

we would like to work with you to meet the needs of agriculture,

especially that of farmer-owned cooperatives. We have worked with

several of our members to develop a number of recommendations

to you.

First, in looking at the possibility of creating enterprise zones, or

any other proposal, we want to be sure that such provisions also

apply to agriculture, and that farmer cooperatives are eligible to

qualify for the benefits by passing those on to our farmer members.

We would like to encourage extension of previous tax provisions,

such as allowing for greater deductions under section 179 and accelerated depreciation to assist farmers, cooperatives, and other

business with needed repairs and reconstruction efforts.

The recently enacted Katrina Emergency Relief Act contains several provisions we were pleased to see, particularly those provisions

for charitable contributions and food donations. However, we believe that additional clarification may be needed to enable farmer

cooperatives to fully qualify for such deductions and to pass these

benefits on to our farmer members.

On a related issue, the suggestion has been made that consideration be given to providing similar deductions for donations made

directly to individual farmers and others in the disaster region,

such as I mentioned before, including those donations of livestock

feed, generators, fuel, and equipment that were made immediately

in the aftermath of Katrina. Authorizing a one-time deduction for

such donations would certainly be an aid to such companies that

responded immediately and directly to the disaster.

Finally, it has been recommended that Congress consider extending the general net operating loss carryback period to 5 years from

2 years, for the years 2005 and 2006, similar to what was done in

the Job Creation and Worker Assistance Act of 2002. To the extent

that this is done, it should also include a pass-through provision for

farmer cooperatives.

Thank you very much, and we appreciate this opportunity to provide input and also to continue to work with you and the comVerDate 11-MAY-2000 17:29 Feb 12, 2007 Jkt 095484 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 32691.000 SFIN1 PsN: SFIN1
44

mittee to meet the needs of those impacted in the hurricane region

and other areas of American agriculture.

Senator BAUCUS. Thank you very much, Ms. Peltier.

[The prepared statement of Ms. Peltier appears in the appendix.]

Senator BAUCUS. Mr. Yin, you have been around a little while

here. Everybody has been pounding you with one kind of tax provision or another over the last couple years. You have seen New York

and a little sense of what is happening in the Gulf region.

Which of these various tax provisions do you think tend to be a

little more effective compared with some others, in terms of, first,

with people, with the immediate needs of Katrina? The second category would be with the rebuilding, as was the case in New York.

Mr. YIN. Senator Baucus, as I indicated in my testimony, the determination of how effective provisions are in connection with

emergency type legislation is really still pretty much an open question. The New York experience is too recent, really, to have any reliable data or information on that.

I would suggest, Senator, that in deciding which, if any, provisions, to move ahead with, certainly an initial question that you

would want to resolve is what your objective is. For example, if the

principal objective, or a principal objective, is to assist very lowincome people, or indeed, as Mr. Doctoroff said, smaller businesses

that are down on their times and do not have much income and

so forth, the tax system is really not very well-suited to provide assistance. As you know, for example, for lower-income people we

have refundable credits, like the earned income tax credit and refundable child credit.

If you were to, for example, try to expand either one or both of

those programs, and in some way target it to lower-income people

who are affected by Hurricane Katrina on a short-term basis, my

suspicion is that that would be a very difficult and cumbersome

provision to try to carry out. My suspicion is the participation levels in that would be somewhat less than you might think desirable.

My suspicion is the compliance, or noncompliance, with respect to

that provision, might be somewhat higher than you would think desirable. I think that if you were to, say, have a brand new provision, a new refundable credit of some sort to assist Hurricane

Katrina victims on a short-term basis, then I think that all of those

statements would continue to be true as well.

So it really depends on what your principal objectives are. Obviously, if your objectives are other than that, then there may be, in

fact, useful tax provisions that could be helpful.

Senator BAUCUS. I appreciate that.

Mr. Doctoroff, I saw you nodding your head in agreement when

Mr. Yin was suggesting perhaps that expansion of the EITC might

not work as well as some might hope.

Why were you nodding your head?

Mr. DOCTOROFF. I think, as Mr. Yin indicated, it is just very

cumbersome. I mean, you are talking about a period of time in

which people are desperate for help. In New York, we have embarked on very ambitious efforts to expand awareness of the ITC

program. It takes an awful lot of work. That was, candidly, some

of the problem we had with a lot of the small business tax incenVerDate 11-MAY-2000 17:29 Feb 12, 2007 Jkt 095484 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 32691.000 SFIN1 PsN: SFIN1
45

tives, things like accelerated depreciation. People just were not

aware of them.

The one thing I would disagree with him on is I do think we

have enough experience to have a sense for how the tax provisions

actually worked in New York; not that we can in every way quantify the impact. But one of the things that we actually did—and

this is one of the things that I would certainly recommend that you

put into anything you do—was have the IRS or some other independent entity monitor the usage of these provisions.

We went out and asked. We did enormous surveys of companies

in New York City to see not only what the usage was of some of

the tax benefits that were provided, but also what their feelings

were about whether they in fact affected their decision making

process.

Senator BAUCUS. Some senators are concerned that these are

flood-gate dollars, and they would like to insist that these tax provisions be limited in duration, so it is not open-ended.

Apparently, some of you were saying that it takes a while for

people to get to know that they are there, and if they are limited

in duration, people are a little bit uncertain. There is some predictability of how long it is going to last and what effect it is going to

have.

Mr. DOCTOROFF. It is not only limited in terms of their ability to

become aware; it is the predictability of actually putting the equipment or the leasehold improvements, or whatever it is, into place

in order to capitalize on them.

As I indicated in my remarks, certainty as to timing and the

amount of the benefit is very valuable to people. The problem with

most of these tax provisions is that you get neither.

Senator BAUCUS. Right. So what do we do? We want to do something.

Mr. DOCTOROFF. If you said to me, in New York, I have $5 billion

in scored tax benefits versus $5 billion in cash, I would take the

$5 billion in cash every single day of the week.

Senator BAUCUS. Let us handicap that a little bit, $5 billion in tax incentives versus $1 billion cash.

Mr. DOCTOROFF. I would probably take the $5 billion in tax credits, but it would not be obvious in every case. I will give you our

example.

In New York—if you exclude the Liberty bonds and the advance

refunding—in terms of the advance refunding, it is essentially a

cash equivalent from public sector entities; in terms of the Liberty

bonds, which proved effective in financing both residential and

commercial projects—I think there is an interesting question as to

how they would be applicable here.

Senator BAUCUS. Mr. Yin, you were smiling. You want to jump

in here?

Mr. YIN. Just two quick comments. First, on the point of shortlived, I do not want to leave the wrong impression. I do think that

the provisions, if any are done in the tax area in response to Hurricane Katrina, should be short-lived. My only point was that shortlived tax provisions are not necessarily effective and administrable.

I also just wanted to comment on Mr. Doctoroff’s point about the

New York experience. There are a couple of things. One is that the

46

experience in New York does not necessarily dictate what the experience would be in New Orleans or in the Gulf region. More importantly, I think there is kind of a disagreement, perhaps, as to the

nature of what a tax subsidy is trying to do as opposed to a direct

expenditure.

A tax subsidy is trying to induce certain forms of activity that,

presumably, would not otherwise occur. The success of the tax subsidy would be whether, in fact, it does induce such activity and

whether the cost to the government of the loss of revenues is justified by that additional activity.

The fact that in New York a particular provision may or may not

have been used as much as anticipated—I should say at the outset

I do not know whether the information is correct. The provision at

issue has not even expired yet, so it is a little premature to know.

That information, of course, would be tax return information in any

event. But the fact that a particular provision has not been utilized

as much as might have been initially expected in New York does

not suggest that the provision was not successful.

Really, the measurement should be, has the recovery that was

hoped for by Congress taken place? And if the recovery has taken

place, the fact that it ended up costing the Federal Government

some billions of dollars less than had originally been projected

should be a cause for happiness on the part of everybody and not

a cause for concern as to the ineffectiveness of the tax provision.

Senator BAUCUS. It gets to the point of hope and whether people

care, and whether they are working together to get something accomplished here, and what the people in the region think of the degree to which Congress really cares.

I am impressed with your point, Mr. Doctoroff, about vision. I

think that is a powerful motivator here. At some point it might be

helpful for New Orleans. I am sure Mr. LaGrange can answer that.

Mr. LAGRANGE. Well, Senator Baucus, coincidentally, it is going

to take a billion dollars to replace and repair the Port of New Orleans. We will take the cash.

Senator BAUCUS. All right. Thank you all very much.

The CHAIRMAN. Thank you.

I will ask Mr. Yin a question. Senator Baucus asked one of the

questions I was going to ask you. Could you comment, then, on another point, on proposals to expand private activity bonds to increase access to financing in the area? Secondly, would you comment on the proposals to expand the low-income housing credit to

promote the construction of low-income housing in the region?

Mr. YIN. Mr. Chairman, I would be happy to. In terms of bonds,

as I indicated, I think that there are two separate questions. One

is whether there is justification for raising the State volume cap,

which currently restricts the amount of tax-exempt issues that may

occur to finance certain private activities.

My understanding is that for three of the principal States involved—Louisiana, Mississippi and Alabama—currently, the full

extent of the volume cap is not being utilized by any one of those

three States. Now, that is not to say that as a result of, obviously,

the events relating to the hurricane, that, in fact, their future

needs will be greater and might, indeed, justify some temporary increase.

47

That is one issue. A separate issue is whether there should be

some expansion as to the purposes for which such financing can be

utilized. As I indicated, Congress has very carefully tried to craft

limited purposes, based on a general notion of some public benefit

for this type of activity. If those restrictions were lifted, then, potentially, Congress would be allowing financing activities for which

there would be little or no public benefit. So it is an issue that certainly the committee would want to look at very carefully.

On low-income housing, it is really much the same. That is to

say, there is a cap on the amount of low-income housing credits

that can be utilized. It may be that, because of the exigencies of

the circumstance that has arisen from the hurricane, it might be

worthwhile to consider a temporary increase in that cap.

But there are two other issues for low-income housing credits

that, again, the committee would want to consider very carefully.

One is the definition of what is a qualifying, low-income unit to

quality for this form of subsidy. It is not clear that, as a result of

the hurricane, there necessarily needs to be a revision or a revisiting of that definition.

Second is the amount of the subsidy that is provided. As the

chairman knows, under current law, the subsidy provided through

the low-income housing program is really quite rich. If you were to

expand the amount of the subsidy, it would be quite easy to get to

a point where the Congress would be committing more than a dollar’s worth of Federal funds to encourage merely a dollar’s worth

of investment. Obviously, at some point the Congress and your

committee would need to think about to what extent that would be

a worthwhile proposition to expand the program to that extent.

The CHAIRMAN. Thank you.

Mr. Doctoroff, to what do you attribute the delay in the issuing

of Liberty bonds, and what factors would you suggest the committee consider in evaluating the appropriate level for an increased

cap on the bonds in the Katrina area?

Secondly, although advance refunding was particularly useful in

New York, to what extent is it likely to be less useful for the

Katrina region, given our current rising interest rate environment

that we are in?

Mr. DOCTOROFF. With respect to the use of the Liberty bonds, the

only delay has really been because the market was not there for

the kinds of projects that would have enabled us to use them. Of

the $8 billion, $1.6 billion that was permitted to be used for housing, all of that has been used. The market for the housing in Lower

Manhattan is extremely robust. Of the remaining $6.4 billion, we

have used just over half, including most recently committing $1.65

billion to encourage Goldman Sachs to relocate its headquarters to

directly across the street from the World Trade Center site. But

there have not been enough projects proposed in Lower Manhattan

to take advantage of them.

Here, obviously, you are talking about a much broader area. You

are also talking about not using them in the kinds of big chunks

that we have, for the most part, in Lower Manhattan and New

York City in general. I would guess that the administrative costs

relative to the benefits probably will not be as great just because

the transaction sizes are going to be smaller in the Gulf Coast. As

48

I said, I think it is a worthwhile program. It has certainly encouraged activity in investment that I do not think we otherwise would

have seen in Lower Manhattan.

With respect to the advance refunding, it is really a mathematical calculation as to how much value State and local governments and their instrumentalities would derive from the refunding

provision, and that is a function of where their existing debt is

priced at today.

I happened to look this morning at the 10-year Treasury rate on

September 10, 2001 compared to today. It is virtually identical.

Whether that is any sort of indication of the relative value of what

people would be experiencing going forward from Katrina and what

we did in New York, I do not know. It still is an easily quantifiable

value.

The CHAIRMAN. Thank you.

Mr. LaGrange, given the risk of future hurricanes, would it be

reasonable to expect that any facilities that utilize the proceeds of

tax-exempt bonds in the area would be insured and that the bonds

themselves would have insurance should another disaster disrupt

operations?

Mr. LAGRANGE. A real short answer; yes, sir, absolutely; no question about it.

The CHAIRMAN. Okay.

My last question is to Ms. Aviv.

Just as we did after September 11th, there is great outpouring

by charities to these victims. Unfortunately, we are also seeing the

same concerns raised about ensuring that when donors give money

for disaster relief that it is used as intended. In fact, CBS interviewed me on that over the weekend.

What lessons do you think charities have learned from 9/11

about honoring the intentions of donors? I would also like to talk

about some of the proposals of the nonprofit panel regarding transparency and openness that will strengthen public confidence in this

area.

Ms. AVIV. Mr. Chairman, there is no way we are going to be able

to stop dishonest people from trying to scam a system. The question is whether we have in place the kind of enforcement that

would allow those people to be rooted out quickly.

For those charities who made mistakes in the way in which they

did things with 9/11, we have seen some substantial changes, both

with Tsunami relief fundraising efforts and with these disasterrelief efforts. That is that on their websites, if one goes on to the

major charities, they specifically have put in place very focused

questions of do you want to provide support and funding for this

Hurricane Katrina relief, or hurricane relief, or other general support and rebuilding, so that the donor has the opportunity to designate in a very specific way or in a general way how they want

their funds to be used. Thereby, the charity avoids the situation

where they get more funding than they need for a particular cause

and cannot transfer it to another one without betraying the public

trust and the intention of the donors. I think in that regard, charities have become much more sophisticated in the way in which

they ask the questions.

49

Mr. Chairman, as you know, because of previous testimony that

I have offered, the panel has over 120 recommendations. I would

say that the ones that are very relevant and worth reiterating now

relate to areas of transparency and also the ability of both Federal

and State enforcement agencies to be able to enforce the law.

You had in the legislation that was passed earlier on, before it

was dropped from it, a provision that would have enabled greater

cooperation between State oversight officials and Federal oversight

officials. That was dropped, and we think that was a missed opportunity. We hope as you go forward that you put it back in, because

the more we get officials to collaborate and to share information,

the more we are able to use our resources in a more expeditious

way.

But we also think that transparency is the name of the game

here; that if donors know more about the charity and what the purpose is for which they intend to use the funding, that the donors

will be in a better position to make a judgment about what is a

worthy cause or a worthy organization to service that cause. So

electronic filing, and mandatory electronic filing, was one of those

120 recommendations that we had.

A third area that I think is extremely important is to strengthen

the rules that prohibit individual donors from receiving improper

benefits. We have a range of recommendations in that regard. We

do not think that current law adequately covers those areas. But

this is an area that is extremely important to us, because the spotlight is on charities and how we are doing the work, and we do not

want those bad actors to violate the good work of the vast majority

of charities because of their particular actions.

The CHAIRMAN. I thank all of you for your participation. That is

the end of our hearing. We have our work ahead of us, but you

have helped us with that effort. Thank you all very much.

[Whereupon, at 1:12 p.m., the hearing was concluded.]

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