Irene costs mounting, but will feds pay?

The U.S. Capitol. VTD/Josh Larkin.

The U.S. Capitol. VTD/Josh Larkin.

First, the good news. Vermont has the skilled workers, the capable contractors, the competent government it needs to restore the roads, bridges and culverts demolished by Tropical Storm Irene.

But then comes the bad news. The state also needs money to do the job, an estimated $700 million, or slightly more than $1,100 smackeroos per Vermonter (625,741 people, according to the 2010 Census estimate).

Do not despair, for here’s more good news. For decades, state and local governments have not been expected to bear the financial brunt of recovering from natural disasters. Instead, that burden falls on the federal government, the one that can print and borrow money.

Alas – more bad news here – under current law the feds pick up only 90 percent of the total. In a typical natural disaster, the kind that causes a few million or even a few tens of millions of dollars in damages, that state share is often a manageable problem. Irene was not a typical disaster. In this case, Vermont’s share would be $70 million. That’s about $112 per Vermonter. Still a pretty hefty tax hike for a family of four, or alternatively, a cutback in state services that would be broadly unpopular as well as very poor macroeconomic policy in a limping economy.

But here’s the good news. Next week, the U.S. Senate is likely to pass three appropriations bills that would not only funnel more money to all the disaster-hit states, including Vermont, but also create a formula (details below) under which the federal government would pay the entire cost of most road and bridge reconstruction.

Furthermore, the Senate Appropriations Committee is in the process of “marking up” (Capitol Hill jargon for painstakingly if not painfully going through the measure section by section) the bill (S. 15960) appropriating the money Vermont (and other states) will need in Fiscal Year 2012.

That doesn’t mean Irene will end up being no drain at all on the state treasury. There are other costs in addition to rebuilding roads and bridges. Furthermore, not every unpaved town road is covered by the federal program (though state highways are). Recovering from the storm will cost Montpelier something, which helps explain why top officials, including Gov. Peter Shumlin, have not ruled out the possibility of raising the gasoline tax.

But the big bucks are for the highway repairs, which is why, for Vermonters, next week’s likely Senate vote is very good news indeed.

Except for one last piece of bad news. There is also a House of Representatives. It may not go along.

Even if it does, it may not go along for months, which is going to make it hard for state officials to plan a storm restoration budget. In fact, it’s already hard. The 2012 legislative session begins in less than 90 days. Governors usually present their proposed state budget a week or so later. Work on it has already begun. If Congress does not pass the Fiscal Year 2012 Transportation Department Budget until, say, next March, state officials are going to find themselves in quite a pickle

That’s what S. 1596 is. It’s the “Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2012,” (and, yes, in Washington, they call it “THUD.”). Its passage would be noteworthy because it would be the actual final approval – if only by one house – of one of the 13 budget bills that make up the entire Fiscal Year 2012 budget.

Fiscal Year 2012 began the Saturday before last.

Congress was never a model of decorum, enlightenment and efficiency. But there was a time – and not that long ago –when it typically adopted fiscal year budgets on time. That time is not now. For instance, there really was no Fiscal Year 2011 budget, just a series of continuing resolutions culminating in a “final agreement” which was in effect just another continuing resolution.

Senators Sanders and Leahy. VTD/Anne Galloway

Senators Sanders and Leahy. VTD/Anne Galloway


Congress does not fail to pass its budgets on time these days because it is less able to count. It fails to pass them because of politics, which further complicates the already complicated legislative budget process.

Vermonters need not master all the intricacies of that process to understand their stake in how Congress handles the Irene restoration money. There are too many budgetary terms and too many different departmental budgets involved –the Federal Emergency Management Administration (FEMA), the Army Corps of Engineers (not that relevant to Vermont), Community Development Block Grants, the Small Business Administration, and more.

The following information, though, obtained from sources on and off Capitol Hill, should come in handy:

  • Until now, almost all the federal funds coming into Vermont has been FEMA money. FEMA was just about out of money even before Irene hit, and almost nobody (including in the Obama administration) was paying much attention to the shortfall. After Irene, the administration asked for an additional $5 billion for FEMA;
  • But most of the money to repair and replace highways and bridges will come from the Federal Highway Emergency Relief Fund, run by the Department of Transportation (FEMA is part of the Department of Homeland Security). Vermont’s Sen. Patrick Leahy, among others, has already added $1.9 billion to the Highway Relief Fund’s FY 2012 appropriation.;
  • As important to Vermont as the money are the waivers. For instance, there is a $100 million cap on how much any one state can get for any one disaster. Vermont will blow way past that for Irene. The state’s congressional delegation is working on getting a waiver to that cap.
  • The delegation is also working on a plan under which the federal government will pay for 100 percent of highway construction if a state’s costs exceed twice its average allocation over the previous 10 years.

But, as mentioned, none of this will be adopted and none of the money will be appropriated unless congressional leaders can work out the politics, which are essentially the politics of the Republican majority in the House. A substantial minority of that majority – essentially, those closest to the Tea Party movement – are opposed to borrowing any more money for anything, and so want any additional appropriation “offset” by cuts elsewhere (but not, significantly, by any revenue increase at all.)

They are firm in this position even though there was – or at least Democrats believed there was – an agreement last summer that disaster funds would be exempt from any offset requirement if the cost of recovery exceeded a certain historical average. It did, but some Republicans, led by Majority Leader Eric Cantor, insisted on offsets anyway.

For Vermont, that could be bad news. Except that Cantor and the Tea partiers just lost a similar fight over disaster recovery funds, which some in both parties see as a possible model for dealing with the next fight,

Right after Irene, Democrats passed what they called a “free-standing” disaster relief bill after getting enough Republican votes to overcome a filibuster. The House then defeated that bill, but then passed a slightly adjusted version after enough Republicans – including Speaker John Boehner – worried that their party was looking stingy. These Republicans sided with most of the Democrats to pass another continuing resolution, which lasts until mid-November.

Now the word around Capitol Hill is that something similar might happen soon, and not just with the transportation budget. The term “omnibus bill” has re-emerged after being all but banned for a few years. That’s an actual comprehensive budget bill covering all federal agencies for the entire fiscal year. As with the “free-standing bill,” it might pass with most Democrats and enough Republicans who are not Tea Party devotees.

More good news?

With Congress, though, one can never be sure, least of all now. That’s the bad news.

Jon MargolisJon Margolis

Comments

  1. dave greene :

    “A cut back in state services…would be… very poor macroeconomic policy in a limping economy.”

    Would higher taxes be very good macroeconomic policy in a limping economy?

    Would a higher debt to production ratio be very good macroeconomic policy?

    I’m very confused.

  2. Bruce Post :

    In 1974, Congress passed the Congressional Budget and Impoundment Control Act, setting “strict” deadlines for adopting a budget resolution in the spring and passage of all appropriations bill prior to the beginning of the fiscal year on October 1. (The late Dick Mallary worked on this legislation while a Congressman.) Some observers estimate that Congress has made the deadline for adoption of a budget resolution about six times since the Budget Act was passed to ostensibly solve our budgetary problems.

    Regarding D.C.’s recalcitrance in funding disaster relief, after Vermont’s 1927 flood, native son and Pres. Cal Coolidge evidently told Congress in his State of the Union a month later “The Government is not an insurer of its citizens against the hazards of the elements.” Maybe Eric Cantor is just channeling ol’ Silent Cal.

  3. David Hallquist :

    I would be more than happy to pay $112 to help my fellow Vermonters who were impacted by Hurricane Irene. I would also be happy to pay $1100 if we do not receive the federal support. This is one of my basic expectations of government and fellow citizens in an effective democracy. We help each other, especially after a disaster.

  4. Dave,
    People with lower household incomes are less able to pay higher taxes that already are regressive, such as the gasoline tax; increasing the gasoline tax would make their life worse.

    Many of such households live in flood plains and on average suffered far more damage than $112.

    It would be much better to have a temporary increase in income taxes for households with incomes greater than $100,000/yr. These households have much more flexibility regarding their spending, than lower income households.

  5. Here’s a recovery-funding idea:

    What if Vermonters withheld our per-capita share of the US annual “defense” budget which amounts to $2 billion, or about $10,000 per Vt household per year?

    What if our brave VT legislators made a state law that banned Vermonters from paying Federal Income tax until the US government restores Constitutional Rule of law? (you know, the kind of thing where the US President can’t invade other nations without Congress declaring war? and the kind of thing where the US dollar is created/regulated by Congress instead of a private for-profit banking cartel known as the “Federal Reserve”)?

    What if Vermont created a “tax forwarder administration” that collected all IRS withholdings in a Vt State govt fund, to be released to the feds if and only if the numerous unconstitutional foreign occupations (wars) were ended?

    Since the feds aren’t following their own rules (aka the US Constitution) is it not time for Vermont to stand up and make our own rules in an effort to save ourselves?

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