To respond to the Gulf Coast devastation, the federal government has committed an historically high level of resources—over $110 billion— through an array of grants, loan subsidies, and tax relief and incentives. The bulk of this assistance was provided between September 2005 and June 2006 through four emergency supplemental appropriations. A substantial portion of this assistance was directed to emergency assistance and meeting short-term needs arising from these hurricanes, such as relocation assistance, emergency housing, immediate levee repair, and debris removal efforts. Consequently, a relatively small portion of federal assistance is available for longer-term rebuilding activities such as the restoration of the region’s housing and infrastructure. Later in this statement, I will discuss in greater detail the two programs that the federal government has used so far to provide assistance to the Gulf Coast for longer-term rebuilding. It is useful to view the federal assistance provided to the Gulf Coast within the context of the overall costs of the damages incurred by the region and the resources necessary to rebuild. Although there are no definitive or authoritative estimates of these costs, the various estimates of aspects of these costs offer a sense of their magnitude. For example, early damage estimates from the Congressional Budget Office (CBO) put capital losses from Hurricanes Katrina and Rita at a range of $70 billion to $130 billion while another estimate put losses solely from Hurricane Katrina— including capital losses—at over $150 billion. Further, the state of Louisiana has estimated that the economic impact on its state alone could reach $200 billion. While the exact costs of damages and rebuilding the Gulf Coast may never be known, they will likely surpass those from the three other costliest disasters in recent history—Hurricane Andrew, the September 2001 terrorist attacks, and the 1994 Northridge earthquake. These estimates raise important questions regarding additional assistance that will be needed to help the Gulf Coast rebuild in the future—including how the assistance will be provided and by whom. The federal government has so far used two key programs—FEMA’s Public Assistance and the Department of Housing and Urban Development’s (HUD) CDBG programs—to provide long-term rebuilding assistance to the Gulf Coast states. These two programs follow different funding models. Public Assistance provides funding on a project-by- project basis—involving an assessment of specific proposals to determine eligibility, while CDBG—a block grant—affords broad discretion and flexibility to states and localities. FEMA’s Disaster Relief Fund (DRF) supports a range of grant programs in providing federal assistance to state and local governments, nongovernment organizations, and individuals when a disaster occurs. One of its largest programs—Public Assistance—provides assistance primarily to state and local governments to repair and rebuild damaged public infrastructure and includes activities such as removing debris, repairing roads, and reconstructing government buildings, and utilities. Pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), this assistance is limited to either a fixed-dollar amount or a percentage of costs for restoring damaged facilities. Specifically, applicants submit requests for work which is considered for eligibility and subsequent funding. FEMA obligates funds for approved projects, providing specific amounts to complete discrete work segments on projects, while state and local governments pay the remainder based on the state’s cost share agreement with FEMA. As of March 16, 2007, FEMA has obligated about $4.6 billion to Louisiana and about $2 billion to Mississippi through its Public Assistance program. HUD’s Community Development Block Grant program—so far, the largest federal provider of long-term rebuilding assistance—received $16.7 billion in supplemental appropriations to help the Gulf Coast states rebuild damaged housing and other infrastructure. As shown in figure 1, Louisiana and Mississippi were allocated the largest shares of the CDBG appropriations, with $10.4 billion allocated to Louisiana, and another $5.5 billion allocated to Mississippi. Florida, Alabama, and Texas received the remaining share of CDBG funds. These formula-based grants afford states and local governments a great deal of discretion in designing directed neighborhood revitalization, housing rehabilitation, and economic development activities. In some instances, Congress has provided even greater flexibility when allocating additional CDBG funds to affected communities and states to help them recover from presidentially declared disasters, such as the Gulf Coast hurricanes. The Federal Coordinator for Gulf Coast Rebuilding has said that the CDBG program allows state leaders “who are closest to the issues” to make decisions regarding how the money should be spent. To receive CDBG funds, HUD required that each state submit an action plan describing how the funds would be used, including how the funds would address long-term “recovery and restoration of infrastructure.” This process afforded the states broad discretion in deciding how to allocate their funding and for what purposes. To coordinate and oversee the state’s rebuilding efforts, Louisiana created the Louisiana Recovery Authority (LRA) within the state’s executive branch. As part of its responsibility, the LRA was also charged with establishing spending priorities and plans for the state’s share of CDBG funds, subject to the approval of Louisiana’s state legislature. Mississippi developed its spending plans through the Mississippi Development Authority (MDA)—the state’s lead economic and community development agency within its executive branch—and the Governor’s Office of Recovery and Renewal. In contrast to Louisiana, Mississippi’s state legislature was not involved in the approval process for these state funding decisions. Consistent with HUD requirements, both Louisiana and Mississippi published their action plans to solicit public input within their state regarding the planned use of CDBG funds. As shown in figure 2, each state allocated the majority of its share of CDBG funding to housing priorities. The remaining funds were allocated primarily to economic development and infrastructure priorities. With the vast number of homes that sustained damage in Louisiana and Mississippi, each state had opted to direct the vast majority of their housing allocations to homeowners, although each state tailored its program to address the particular conditions in its state. A portion of these allocations also was directed to other housing programs such as rental housing and public housing, as well as to projects that will alleviate costs associated with housing, such as utility and insurance costs. Louisiana and Mississippi homeowner assistance programs are similar in that each is designed to compensate homeowners whose homes were damaged or destroyed by the storms. In each program, the amount of compensation that homeowners receive depends on the value of their homes before the storms and the amount of damage that was not covered by insurance or other forms of assistance. However, these programs differ in their premise and eligibility requirements. Louisiana witnessed a significant population loss in the wake of the Gulf Coast hurricanes, with many residents living in other states and debating whether to return to Louisiana. The LRA, in consultation with state and federal agencies, developed a program to restore the housing infrastructure in Louisiana, using CDBG funds from supplemental appropriations, as described earlier. Referred to as the Road Home, this program is designed to encourage homeowners to return to Louisiana and begin rebuilding. Under the program, homeowners who decide to stay in the state and rebuild in Louisiana are eligible for the full amount of grant assistance—up to $150,000—while those leaving the state will receive a lesser share. Accordingly, aside from the elderly, residents who choose to sell their homes and leave the state will have their grant awards reduced by 40 percent. Residents who do not have insurance will have their grant awards reduced by 30 percent. Further, to receive compensation, homeowners must comply with applicable code and zoning requirements and FEMA advisory base flood elevations when rebuilding and agree to use their home as a primary residence at some point during a 3-year period after closing. As of March 28, 2007, the Road Home program had received 119,945 applications, of which 60,675 had been verified and an award amount had been calculated. Applicants were then asked to decide how they wanted to proceed (for example, whether to rebuild or sell). As of that date, 25,597 applicants notified the program of their decision. Of those, the program awarded payments to 4,808 homeowners with an average award amount of $74,250. In Mississippi, Katrina’s storm surge destroyed tens of thousands of homes, many of which were located outside FEMA’s designated flood plain and not covered by flood insurance. Mississippi developed a two- phase program to target homeowners who suffered losses due to the storm surge. Accordingly, Phase I of the program is designed to compensate homeowners whose properties were located outside the floodplain and were otherwise fully insured. Eligible for up to $150,000 in compensation, these homeowners are not subject to a requirement to rebuild. Phase II of the program, on the other hand, is designed to award grants to uninsured and underinsured homeowners with incomes at or below 120 percent of the Area Median Income (AMI). Eligible for up to $100,000 in grant awards, these homeowners must demonstrate that they meet current building codes and standards as a condition to receiving their grants. While they are required to rebuild in south Mississippi, they are not required to stay in their homes once they have been rebuilt. In addition, homeowners who do not have insurance will have their grant reduced by 30 percent, although this penalty does not apply to the “special needs” populations as defined by the state (i.e., elderly, disabled, and low income). As of March 28, 2007, Mississippi had received 18,465 applications for Phase I of its program, of which 14,974 were determined eligible for consideration. Of those, Mississippi awarded payments to 11,894 homeowners with an average award amount of $69,669. Mississippi has yet to complete processing applications for any of the more than 10,000 uninsured and underinsured homeowners in Phase II of the program. It is clear that Louisiana’s and Mississippi’s homeowner assistance programs are proceeding at different paces.