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Policy Recommendations for a Long-Term Disaster Recovery Package

Kathya Severino

Largely due to the slow pace of its disaster relief efforts in Puerto Rico, the Trump Administration’s response to Hurricane Maria has been heavily criticized. More than a month after the storm devastated the island, 62% of the inhabitants lack power and 20% of the island is without running water.

As of today, the proposed disaster supplemental appropriations add up to approximately $51.7 billion. However, appropriations for disaster relief are not just limited to Puerto Rico but encompass other disaster relief efforts in Texas, California, Florida, and the U.S. Virgin Islands.

After removing the $4.9 billion loan [KS1] and National Flood Insurance Program funding, which for the most part does not benefit PR, approximately $30 billion for disaster relief funds must be divided among Texas, Florida, Puerto Rico, and the U.S. Virgin Islands. Additionally, these measures are expected to fund only short-term recovery efforts rather than the medium and long-term recovery of Puerto Rico.

According to Puerto Rico Governor Ricardo Rosselló, Congress is expected to address a long-term package for Puerto Rico close to December 2017.[1] It is still unclear whether this bill will follow the trend of previous relief bills for Hurricane Katrina and Sandy; those both received emergency funding through large disaster relief bills early into recovery efforts. Several congressional members of the GOP have been outspoken in their disapproval of including long-term funding in emergency funding bills rather than through a yearly spending bill. Florida Sen. Marco Rubio (R) said in a statement:

“Close to 70 percent of the funding in the Sandy supplemental was for spending on projects over three years after the storm. Many were worthy projects, but they should be funded as part of the yearly spending bill, not as part of an emergency funding measure designed to address the immediate costs of providing assistance after a disaster.”[2]

The Budget Control Act (BCA) 2011 (Pub.L. 112–25) created two different categories of disaster relief funding: emergency spending and disaster relief spending. The discretionary spending limit can be adjusted upward to make room for an uncapped amount of emergency spending. Disaster relief spending, however, is subject to certain caps. The limit established by the BCA on adjustments to the caps for disaster relief is based on the average funding provided for disaster relief over the last ten years, excluding the highest and lowest annual amounts.[3] The limit on cap adjustment is not a restriction on disaster assistance, but rather it is a restriction on how much the cap can be upwardly adjusted in a given fiscal year to accommodate assistance. This is important because the FY 2018 Federal Budget has not been yet passed the House, while the proposed budget narrowly passed the Senate with a 51-49 vote. The House must pass a budget that takes into account the large amount of disasters requiring federal aid. Currently, the proposed FY 2018 budget has cut the budget for the Department of Agriculture, Department of Commerce, funding for several Federal Emergency Management Agency (FEMA) grant programs, Department of Housing and Urban Development, and many other agencies that play an important role in the long-term recovery of a community affected by a disaster.

Disaster relief and recovery can be divided into two broad categories, response and recovery; these in turn go through various overlapping stages.

Response

Short-Term Disaster Relief. This stage can last days and in the case of Puerto Rico has lasted weeks. Activities conducted during this stage include: rescue missions, mass care/sheltering, clearing primary transportation routes, establishing emergency and temporary medical care distributing food and water, and providing alternate power sources for essential services.

Disaster Recovery: Weeks to Months. This serves as an intermediate stage in order to facilitate long-term recovery in the area. It is important to stabilize the situation in order to minimize economic impact to both the local government and the community. Activities conducted during this stage include: restoring downed power lines, debris removal, provide interim housing, reestablishment of businesses, temporary employment for those unemployed by disasters and begin to repair and restore damaged infrastructure.

Recovery

Long-Term Recovery and Rebuilding: Months to Years. This is when rebuilding and economic recovery take place. Activities conducted during this stage include: developing permanent housing, increasing housing resiliency, addressing the debt, revitalizing the vulnerable power grid, business rebuilding, implementation of economic revitalizations strategies, and implementing mitigation strategies.

The long-term recovery needs of Puerto Rico should be addressed sooner rather than later. Setting up an initial long-term funding plan shows a federal commitment to recovery. This type of clear commitment is necessary in order to slow down mass out-migrations and prevent businesses from leaving the island and causing further economic damage. This long-term plan should address the following:

Recommendations for Long-Term Recovery:

Disaster Loans and Grants

  • Community Disaster Loans Waiver. Waive the state level guaranty and local collateral requirements under 44 CFR § 206.364(d).

Housing

  • Address the Issue of Informal Housing

While FEMA offers assistance for rebuilding damaged homes, it is only available to those who can prove ownership of the property, that the property was built in a lot for which they have a property title or that were built with the government permits.

No reliable data exists on how many people live on lots without property titles. However, many estimates point to the existence of a significant amount of informal housing on the island. Housing Secretary Fernando Gil told El Nuevo Día that he estimates that in just three municipalities, Carolina, Loíza and Canóvanas, around 11,000 families live on land over which they do not have title. The National Association of Home Builders (ACH), meanwhile, estimates that 55% of all housing units in Puerto Rico do not have permits of any kind.

  • Temporary Housing

Hurricane Maria has destroyed thousands of homes across Puerto Rico. There are 5,700 Puerto Rican residents currently living in shelters with many more displaced from their homes. Two weeks after the storm, FEMA had only approved about 14,000 applications for assistance from distressed Puerto Ricans. Many residents who lost their homes but lack property titles likely lack the money to rebuild themselves. Families displaced from their homes need access to safe temporary housing. A waiting list already exists for access to government housing on the island. The federal government should increase HUD funding for the island in order to expand the Section 8 program and bring additional government housing up to code so it can be offered to displaced residents.

  • Housing Assistance Waivers and Needs Assistance Funding

A waiver should be granted to surpass the $33,100 cap on the maximum amount of housing assistance that can be provided. 42 USC § 5174(h) Waive the local matching requirement for Other Needs Assistance Funding, which covers grants to replace personal property and help meet medical, dental, funeral, transportation, and other serious disaster-related needs not covered by insurance or other aid programs. (Section 4501 of P.L. 110-28, 121 Stat. 156.)

  • Housing and Urban Development (HUD) Community Development Block Grants for Disaster Recovery Program (CDBG-DR)

Much of the aid that local governments rely on to rebuild affordable housing comes through the CDBG-DR program. Grant maximum funding for housing- and infrastructure-related projects under the HUD CDBG-DR program.

Infrastructure

  • Federally Guaranteed Loans or Backstops

The Treasury Department should guarantee loans for critical infrastructure development projects.

  • Federal funds for Public Re-Investment Plan

Rebuilding Puerto Rico and enabling its economic recovery will require tens of billions of dollars in new capital investment. Federal funds should be linked to a clear and public re-investment plan, developed by Puerto Rico. Measures should be put in place to ensure that these funds are not siphoned off to Puerto Rico’s creditors.

  • FEMA cost share for infrastructure repairs (C-G)

A waiver to lower local cost share for public infrastructure repairs costs from 25% to 10% was recently approved by the White House. However, even with this reduced costs share Puerto Rico lacks the funds needed to address all infrastructure needs. H.R. 2266 appropriated a transfer of up to $150 million to the Disaster Assistance Direct Loan Program to lend a territory or possession of the United States funds to cover cost-sharing. It is unlikely that these funds are enough to cover all of Puerto Rico and the U.S. Virgin Island’s cost sharing requirements.

  • Department of Commerce

Increase funding to Economic Adjustment Assistance infrastructure programs to increase construction related activity in a timely manner. Expedite Economic Development Administration (EDA) Program timelines for the Public Works programs in order to repair substantially damaged electricity grids and air traffic control infrastructure.

Taxes and Credits

  • Establish a more efficient way of addressing Puerto Rico’s lack of a mirror tax code (H.R.3823 Disaster Tax Relief Bill)

The bill modifies several tax provisions and rules for individuals and businesses in areas affected by Hurricanes Harvey, Irma, and Maria, including provisions regarding: early withdrawals and loans from retirement plans, employment-related tax credits, deductions for charitable contributions, deductions for personal casualty losses, and income requirements for the earned income tax credit and the child tax credit. However, due to the absence of a mirror code payments to Puerto Rico differ than those to residents of States or the U.S. Virgin Islands.

The law states:

“The Secretary of the Treasury shall pay to Puerto Rico amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to residents of Puerto Rico by reason of the provisions of this title if a mirror code tax system had been in effect in Puerto Rico. The preceding sentence shall not apply with respect to Puerto Rico unless Puerto Rico has a plan, which has been approved by the Secretary of the Treasury, under which Puerto Rico will promptly distribute such payments to its residents.”

Nutrition Assistance and Agriculture

  • Puerto Rico does not have access to all possible federal aid.

Agriculture is a small part of the Puerto Rican economy, contributing just 0.8% to its GDP and employing 1.6% of its labor force. But it was decimated by Hurricane Maria. The hurricane wiped out about 80% of the crop value in Puerto Rico. That amounts to a $780 million loss. 

In order to fully benefit from federal disaster relief Puerto Rico should have access to:

  • USDA’s Farm Emergency Loans
  • USDA Noninsured Crop Disaster Assistance Program
  • USDA Emergency Forest Restoration Program
  • USDA Emergency Assistance for Livestock
  • USDA Honeybees and Farm-Raised Fish Program
  • USDA Livestock Forage Disaster Program
  • USDA Livestock Indemnity Program
  • USDA Tree Assistance Program.
  • USDA Disaster SNAP (a disaster-specific NAP grant was proposed in the latest House bill)

 

  • Reauthorize the “Farm Bill” or Agricultural Act

The “Farm Bill,” also known as the Agricultural Act, was last passed in 2014, and authorizes programs to both assist farmers and provide food assistance until 2018. The farm bill is ideally expected to emerge from the House and Senate Committees by the end of the year, and will include several provisions that will be fundamental to the hurricane recover efforts, especially the Supplemental Nutrition Assistance Program (SNAP).

Puerto Rico’s Farm Service Agency administers several assistance and disaster programs that will depend on the Farm Bill’s reauthorization, including the Noninsured Crop Disaster Assistance Program and the Emergency Conservation Program.

  • Expanding access to Temporary Assistance for Needy Families, and weatherization assistance

Puerto Rico receives up to $71.5 million per year under the Temporary Assistance for Needy Families (TANF) block grant program. The amount of funding available to states and territories under the TANF block grant has not increased, even for inflation, since TANF was established two decades ago. States are eligible for contingency funding to meet additional need during unfavorable economic conditions, but Puerto Rico and other territories are not eligible for TANF contingency funding. Congress should increase Puerto Rico’s FY 2018 TANF block grant so that it can provide families with income security and other increased needs.

Furthermore, Puerto Rico receives federal funding under the Low-Income Heating and Energy Assistance Program (LIHEAP) to provide cooling, crisis, and weatherization assistance. Congress should provide Puerto Rico with LIHEAP emergency contingency funding to meet additional utility and weatherization assistance needs due to Maria. LIHEAP in Puerto Rico is used to provide assistance to help low income Puerto Rican residents pay their utility bills. The majority of the territory still lacks power, LIHEAP can expand aid to help pay for alternative power and cooling sources.

Healthcare

  • Raise Medicaid Program Funding

Today, nearly half of Puerto Ricans rely on Medicaid, but unlike in states where the federal government pays a fixed share of Medicaid costs based on the state’s relative per capita income, for Puerto Rico and U.S. territories the federal share only covers up to 55% of costs up to a fixed annual funding cap. The Affordable Care Act provided a one-time supplemental federal grant of over $7 billion to be used to cover the federal share above the fixed annual cap, but that funding is nearly exhausted, after which Puerto Rico would be required to fund roughly 80% of its Medicaid program. Failure to address this issue now, as part of any additional congressional package later this year, could significantly impair Puerto Rico’s future, and increase the likelihood that hundreds of thousands of people will leave Puerto Rico permanently. Additionally, the Federal government should temporarily increase Medicaid funding to cover 100% of costs. This was done during Hurricane Katrina for several months after the storm.

  • Create a comprehensive transfer policy between “Mi Salud” and Medicaid

 Migration[KS2]  from Puerto Rico to the U.S. mainland has greatly increased due to Hurricane Maria. A significant portion of those leaving the island are “Mi Salud” patients (Puerto Rico’s Medicaid equivalent). Some patients seeking treatment in the U.S. mainland are having issues accessing Medicaid. Comprehensive policy should be established in order to make the transition easier and provide guidance to Puerto Ricans permanently or temporarily moving to the U.S. mainland.

  • Automatically enrolling residents in Medicare Part B and extend Part D premium and cost-sharing assistance

While enrollment in Medicare Part B—insurance for outpatient visits, physician services, and some home visits—is automatic for residents of U.S. states receiving Social Security, Puerto Ricans must opt in by contacting their local Social Security office. In addition, low-income Puerto Rican residents who are eligible for Medicare Part D are not eligible for the same premium and cost-sharing subsidies available to residents of the 50 U.S. states and the District of Columbia. Puerto Rican residents should be automatically enrolled in Part B going forward, and late enrollment penalties should be waived for those who are already Medicare eligible. Congress should also extend Part D premium and cost-sharing assistance to Puerto Rico residents.

  • Medicaid’s Disproportionate Share Hospital program

The federal government should include Puerto Rico in Medicaid’s Disproportionate Share Hospital program, which requires state Medicaid programs to make payments to qualifying hospitals that serve large numbers of individuals who are uninsured or covered by Medicaid.

Codes or Regulations

  • Update FEMA flood maps

FEMA flood maps have not been updated in nine years, even though they are supposed to be updated every five years.

  • Update zoning codes

Direct relevant agencies to review zoning codes and ordinances for urban and rural development to assure that they are updated and take into account possible risks related to climate change.

Economic Recovery

  • Incentives to Stop Brain Drain

Economic woes have contributed to severe brain drain over the years. The population has dropped by more than 8% since 2010. According to the New York Times, “the cost of living in Puerto Rico is 13% higher than in 325 urban areas elsewhere in the United States, even though per capita income in Puerto Rico is about $18,000, close to half that of Mississippi, the poorest of all 50 states.”[4] The population drain in turn makes it harder and harder for Puerto Rico’s economy to recover. People will likely migrate on account of the storm, which will make recovery more difficult.

  • Remove Regulatory Burdens for Transportation of Cargo

Remove regulatory burden inhibiting cargo commerce between Puerto Rico, the mainland, and international markets.

a. Jones Act

Import costs in Puerto Rico are often much higher than in neighboring islands partly to the island being subject to Section 27 of the Merchant Marine Act of 1920, known as the "Jones Act." The Jones Act requires all shipping to and from U.S. ports to be conducted with US vessels and crews. However, the extent effect of the Jones Act on the economy is debated by some. While there is no consensus over the act’s effect, most agree that the net effect is negative —largely because it boosts the cost of imported goods to island residents but also because it makes exports less competitive and diminishes the viability of the island as a major regional trans-shipment port.

b. Century of Aviation Reauthorization Act

Prior to this act, federal law barred foreign carriers from exchanging cargo among their own fleet or from transferring cargo among different carriers while on U.S. soil. The foreign carrier had to make the full trip on its own foreign aircraft, and was prohibited from transferring cargo to or from a U.S. carrier flying the international leg. Section 808 of the Vision 100-The Century of Aviation Reauthorization Act allowed Alaska to be exempt from this. A waiver from the Century of Aviation Reauthorization Act, similar to the one granted to Alaska, could allow Puerto Rico to compete to become a major cargo hub in the Caribbean and Latin American region.

c. Electronic Export Information filing requirement

The Census Bureau regulations require an exporter to provide Electronic Export Information (EEI) filed electronically for shipments between the United States (including U.S. territories) and a foreign nation. EEI filings are not required for shipments between U.S. states. However, EEI filings are required for shipments from the states to Puerto Rico, and are required for shipments from Puerto Rico to the states. This policy does not apply to all U.S. territories. For example, EEI filings are required for shipments from states to the U.S. Virgin Islands, but are not required for shipments from the U.S. Virgin Islands to the states. Filings are not required for shipments between the states and American Samoa, Guam, or the Northern Mariana Islands.

In a written submission to Congressional Taskforce on Economic Growth in Puerto Rico, the Express Association of America stated that not only does the EEI requirement place an unnecessary burden, particularly on small and medium business, on what is otherwise considered interstate commerce but also it adds an additional cost to many goods purchased in Puerto Rico. In regards to gathering statistical data the Express Association of America proposed utilizing aggregated data sources (such as Sistema Unificado de Rentas Internas) rather than shipment-by-shipment basis.

  • Improve Current Energy Infrastructure

The lack of reliable power is a critical roadblock to achieving economic recovery for Puerto Rico. FEMA regulations limit public assistance funds to grid repair, replacement and restoration rather than improving the electrical infrastructure.  Making Puerto Rico’s energy infrastructure more resilient should be a priority in further disaster relief bills and appropriations. If this is done through hazard mitigation grants a cost share waiver should be approved.


 [KS1]Link to previous Congressional appropriations brief

 [KS2]Link to Migration Brief