Follow the Money: Hurricane Sandy Recovery, Two Years Later

Kate Donahue Sandy Pic 9-7

Imagine a hurricane as an injury—say, a broken leg. The immediate injury is painful, but relief and the support of friends and family arrive swiftly. The outlook seems hopeful.

However, once the cast is on, there are still weeks to months of recovery ahead. This time is crucial for the prevention of future injury but may attract the attention of a much narrower circle of friends and family than did the original injury.

Hurricanes, and many other natural disasters, follow a similar pattern. The initial event draws a frenzy of media attention, often accompanied by donations from well-wishers worldwide. Once the narrative becomes less gripping, and the affected community enters the state of slow recovery, attention dwindles.

But that’s precisely when the story becomes most interesting.

Disasters are natural, but how we respond to them is completely under the control of humans—mainly politicians. That process gives rise to a fascinating political story.

Hurricane Sandy presents a particularly notable case study. The most significant recent development that the response to Sandy underscores is the rise of Community Development Block Grants (CDBG). These grants give states and cities flexibility in how they spend their money, but the grants also introduce delays and can make it difficult to understand exactly how relief money is being spent.

Only by deepening our understanding of CDBGs can we hope to understand the future of disaster relief. Understanding the strengths and weaknesses of our current relief system is all the more important because, with climate change, large-scale disasters are likely to happen more frequently—and we’re still learning how to pick up the pieces afterwards.

Financial anatomy of a disaster

Hurricane Sandy hit New York City and New Jersey during the last week of October 2012. Relief teams began picking up the pieces as soon as the storm waters receded, and in some cases, even before. In an interview with the HPR, Christina Farrell and Jonathan Jenkins of the Office of Emergency Management in New York City discussed the emergency response. According to Farrell, “The transition from preparation to response was seamless.” This was in part because the response was “guided by our storm plan” developed far in advance of the event, added Jenkins.

Funding for post-hurricane recovery efforts, however, was substantially slower to arrive. President Obama released his funding request in early December 2012. It contained $50.7 billion in funding and a $9.7 billion increase in the borrowing authority of the National Flood Insurance Program, a government agency that sells flood insurance and was facing a high number of claims after Hurricane Sandy. Congress was roiled by partisan debate over the proposed bill. Finally, in early January, it approved $9.7 billion for the NFIP and $50.5 billion in disaster aid—just $200 million less than Obama wanted.

The deal was not reached for a full three months after Hurricane Sandy, but perhaps it’s good that we waited. The sum of money, after all, is huge. But just how huge? For context, the chart below shows Hurricane Sandy appropriations compared with all of 2012 spending.

Sandy Appropriations 9-7

File: “2013 Budget”.
Sources: Fiscal Year 2014 Historical Tables, Office of Management and Budget., page 87.
Also: HR 152 text.

This chart shows that HR 152, the bill appropriating funds for Sandy relief, is a small but significant part of the overall total. For example, it’s larger than the entire budget of the Department of Homeland Security, bigger than the Department of Justice, and bigger than NASA, the Department of the Interior, and the International Assistance programs combined.

This is why disaster relief is such an important issue, especially in the context of climate change. We simply can’t afford to keep facing such disastrous events unprepared.  But where, exactly, is all that money going?

The cleanup crew

Despite its enormous size and complexity, the bill can more or less be understood through the four departments that receive the most funding from it: the Department of Housing and Urban Development, the Department of Transportation, the Department of Homeland Security (largely FEMA) and the Department of Defense. Between the four of them, they recieved roughly 92 percent of the total spending.

A casual reader might be confused; why, exactly, is the Department of Housing and Urban Development receiving $16 billion? This is the next segment of the story of Hurricane Sandy, one that has been decades in the making.

Disaster FUnding 9-7

File: “CDBG chart”
Sources: HR 152
HUD: HUD website detailing CDBG spending

The above chart shows disaster relief spending by year since 1993. Note that all figures are in 2013 dollars: the increase in spending is due to much more than inflation. There could be many reasons for this pattern. Carolyn Kousky, a researcher at Resources for the Future, discussed this trend in a recent interview with the HPR and asked, “Is this a function of disasters getting much larger or how Congress has been thinking about financing disaster recovery?” Her answer: “it seems like a little of both.”

Note the pattern of which department receives the most funding for each disaster. Pre-2000, the answer is almost always overwhelmingly FEMA. September 11, 2001, however, turns out to be the tipping point, the first disaster in recent memory to rely heavily on CDBGs.

CDBGs are grants that are given to states, cities or other applicants. Before using the funds, the applicant must write a report to Congress on what it intends to do, and it must be approved before funds can be distributed. While this allows for greater accountability, it also adds a further opportunity for delay. CDBGs were originally meant to increase access to affordable housing. However, 9/11 recovery didn’t seem to fall neatly under the typical disaster relief umbrellas like FEMA. CDBGs offered the flexibility and choice that Congress, states and cities desired.

Since 9/11, use of CDBGs has increased dramatically. In 2005, FEMA got about $52 billion in funding, largely for Hurricane Katrina, while CDBG’s received $19 billion in funding in 2006. In 2008, disaster funding for CDBGs was almost on par with FEMA funding. After Hurricane Sandy, CDBG funding finally surpassed FEMA.

Why CDBGs matter

This change might not seem hugely important. Doesn’t the dollar amount of funding matter more than exactly which agency handles it? To a certain extent, yes. But this shift is important because of its impact on the timeframe of relief efforts.

Most notably, CDBGs are generally slow to take effect when compared to traditional relief efforts. HR 152 was passed in early 2013, containing $16 billion for HUD. HUD has since been releasing the money to applicants in installments—in March 2013, November 2013, and May 2014. The main recipients have been New York State, New Jersey, and New York City. So far, HUD has released $13 billion, roughly 81 percent of the $16 billion it received overall.

While managing to disburse this much money—albeit 18 months after the original event—is very impressive, it’s worth noting that much of the money has yet to be spent by the states and cities that applied for it. In contrast, as of May 2014, FEMA had allocated all of its Sandy money and spent 75 percent of it.

To a certain extent, HUD can be forgiven for taking its time. These are enormous amounts of money, dwarfing HUD’s usual budget and leaving it in the unenviable position of trying to ensure that all of the money is spent correctly and effectively. Toward that end, HUD has required reports from all the applicants. New York City in particular has a very useful website illustrating all of its CDBG funding and its usage—largely a mix of funding for housing, businesses and overall resilience.

Applicants obviously work hard to obtain this funding, but a sizable burden also falls on them when it comes time to spend their allocated money. Daynan Crull, of the New York City Mayor’s Office of Long-term Planning and Sustainability, has been working to help New York recover from Hurricane Sandy. In an interview with the HPR, he said that the main purpose of his office was to “rebuild and repair from damage that was done by Hurricane Sandy, but [to] do so bearing in mind the risks from future storms and that those risks are increasing.” New York City has focused especially on mitigating the damage from future storms, perhaps reasoning that an ounce of prevention is worth a pound of cure. If another Hurricane Sandy hits New York, city planners want the impact to be much smaller—which could mean less disaster relief aid needed in the future.

Crull’s statement encapsulates the political challenges of disaster funding. While it makes sense that spending to mitigate the effects of future storms is a good idea, some may question the role of the federal government. “Why is that a federal responsibility?” asks Len Shabman of Resources for the Future in an interview with the HPR. “We’re still trying to sort that out.”

Such issues regarding the role of government illustrate how disaster relief aid is an important but frequently neglected topic—hotly debated only when the combination of natural events and political conflicts leave us no alternative. However, it seems unlikely that the issue of disaster relief aid will stay under the radar for much longer. The stakes are high: billions of dollars for large-scale disasters, which with climate change are likely to happen more frequently. The challenges should concern not only those who were directly impacted by Hurricane Sandy, but anyone who lives in the United States and pays taxes. Disaster recovery is a complicated and intriguing financial puzzle—one that we’re not even close to solving completely.

 Photo Credit: David Handschuh/New York Daily News



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