Reallocation of Hurricane Katrina Emergency Appropriations: Defense and Other Issues

Reallocation of Hurricane Katrina Emergency Appropriations: Defense and Other Issues

Order Code RL33197
CRS Report for Congress
Received through the CRS Web
Reallocation of Hurricane Katrina Emergency
Appropriations: Defense and Other Issues
December 15, 2006
Coordinated by Amy Belasco
Specialist, National Defense
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

Reallocation of Hurricane Katrina Emergency
Appropriations: Defense and Other Issues
Summary
As the first session of the 109th Congress draws to a close, some Members
continue to address urgent needs from Hurricane Katrina funding. On October 28,
2005, the President proposed to reallocate $17.1 billion of the $60 billion in funds
previously appropriated for disaster relief in two Katrina supplementals (P.L.109-61
and P.L.109-62). On the same day, the President submitted a request to rescind $2.3
billion to offset some of the costs of the federal response.
Congressional action on the reallocation and rescission proposals may occur
before the first session of the 109th Congress adjourns if the package is attached to
the FY2006 Defense Appropriations bill (H.R. 2863) or some other legislative
vehicle. Some of the issues raised by the proposal include the following:
! How would the reallocation of funds from FEMA affect recovery
efforts?
! What programs would receive additional funds and what is the
urgency of those needs?
! Is all of the proposed $2 billion payment to contractors for higher
shipbuilding costs necessary and appropriate?
! Are additional funds for these or other programs needed now to meet
the needs of states, local governments, and other entities that
continue to provide assistance to Hurricane Katrina victims?
! What programs would be affected by the proposed rescissions?
This report will be updated as events warrant.

Contents
The President’s Reallocation Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Disaster Relief Fund Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Activities Funded to Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Components of the President’s Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Potential Issues in Reallocation Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Proposal to Expand Transfer Authority For All Agencies . . . . . . . . . . . . . . . 6
Army Corps Of Engineers Reallocation To Cover Initial Costs. . . . . . . . . . . 7
President Proposes $1.3 Billion For Flood Control and Navigation . . . 8
Initial Funding of Wetlands Restoration to Reduce Storm Damage . . . 8
Issues in Department of Defense Reallocations . . . . . . . . . . . . . . . . . . . . . . . 9
Potential Oversight Issues in Ship Cost Increases . . . . . . . . . . . . . . . . . . . . 10
Navy’s Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Questions About Navy’s Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Potential Overlap Between Government and Insurance Liabilities . . . 12
Uncertainties in Navy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Urgency of Navy Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Segregating Katrina-related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Efficiency of Navy’s Ramp-Up Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Issues in DOD’s Military Construction Request . . . . . . . . . . . . . . . . . . . . . 16
DOD’s Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Potential Issues in Military Construction Request . . . . . . . . . . . . . . . . 16
Funds For Bases Affected by BRAC . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Emergency Nature and Visibility of Funds . . . . . . . . . . . . . . . . . . . . . 17
Department of Housing and Urban Development . . . . . . . . . . . . . . . . . . . . 18
Urban Homesteading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Katrina Disaster Housing Assistance Program (KDHAP) . . . . . . . . . . 19
Additional Block Grant Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Transportation Would Receive $2.4 billion . . . . . . . . . . . . . . . . . . . . . . . . 20
$1.2B to Replace and Repair VA Hospitals . . . . . . . . . . . . . . . . . . . . . . . . 20
Funds to Rebuild NASA Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Funds for Small Business Administration Loans . . . . . . . . . . . . . . . . . . . . . 21
Environmental Protection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The President’s Proposed Rescissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
List of Tables
Table 1. Previous Appropriations and President’s Reallocation
and Rescission Request for Hurricane Katrina . . . . . . . . . . . . . . . . . . . . . . . 5
Table 2. Proposed Rescissions to Offset the Cost of Hurricane Katrina . . . . . . 24
Table 3. DOD’s $6.6 billion Re-Allocation Request . . . . . . . . . . . . . . . . . . . . . . 27
Table 4. Military Construction & Family Housing Request By service . . . . . . . 27
Table 5. Military Construction & Family Housing Request By Basea . . . . . . . . 28

Assistance was provided by Mary Bley, Knowledge Services Group, CRS. This
report is based, in part, on previous work coordinated by Ralph Chite, Resources,
Science and Industry Division, and Jennifer Lake, Domestic Social Policy Division,
CRS.

Reallocation of Hurricane Katrina
Emergency Appropriations: Defense and
Other Issues
The President’s Reallocation Request
On October 28, 2005, President Bush submitted a reallocation request to
Congress that would transfer to other agencies $17.1 billion of the $60 billion
appropriated to the Federal Emergency Management Agency’s (FEMA’s) Disaster
Relief Fund (DRF) to respond to Hurricanes Katrina, Rita, Wilma, and other
disasters. According to the White House, the proposed reallocation is “to undertake
response and recovery activities in the affected regions that cannot be funded by
FEMA under the Stafford Act,” primarily for repair and replacement of federal
facilities. The same day, the Administration also submitted a package of rescissions
totaling about $2.3 billion to offset part of the cost.1 This report deals primarily with
the reallocation requests. A separate section entitled “The President’s Proposed
Rescissions” outlines proposed rescissions.
The Administration contends that after the reallocation is made, “remaining
amounts available in the DRF are expected to be sufficient through May of 2006 to
proceed uninterrupted with ongoing disaster-response efforts underway in the
affected regions, state and local infrastructure rebuilding requirements, as well as
potential costs arising from Hurricane Wilma.” According to Director of OMB
Joshua Bolten, these proposed reallocations “address pressing needs through May
2006,” and OMB anticipates recommending additional funding for further recovery
and reconstruction in early 2006.2
The timing and legislative vehicle to respond to the President’s proposed
reallocation is currently being negotiated. According to press reports, some Members
are considering attaching the Congressional version of the reallocation request to the
conference version of FY2006 Defense Appropriations bill (H.R. 2863). In a recent
1 OMB, FY2006 Estimate No. 13, Reallocation package for Hurricane Katrina Relief and
Recovery (Various Agencies); hereinafter, OMB, Reallocation package, Oct. 28, 2005.
[http://www.whitehouse.gov/omb/budget/amendments/reallocation_package_10_28_05.pdf]
; hereinafter, President’s Reallocation request, October 28, 2005;OMB, FY2006 Estimate
no. 14, Rescission package to Help Offset the Costs of Hurricane Katrina (Various
agencies), 10-28-05; hereinafter, OMB, Rescission package, Oct. 28, 2005.
[http://www.whitehouse.gov/omb/budget/amendments/rescission_package_10_28_05.pdf]
2 OMB letter to the President, October 28, 2005 accompanying OMB, Reallocation
package, Oct. 28, 2005, p. 1.

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interview, Chair of the Senate Appropriations Committee, Senator Cochran, from
Mississippi, has called for doubling the Administration’s request by adding funds to
help storm victims rebuild homes, increase social service grants, and aid agricultural
disaster victims. The specifics of the Cochran package are not public — some press
reports say that the plan includes $11 billion to $13 billion in community
development block grants for homeowners in Mississippi and Louisiana who didn’t
have flood insurance and more funds for the levees — and negotiations, including
with both the White House and other Members, are ongoing.3 Mississippi Governor
Haley Barbour and some Members of Congress have also called for additional aid.
The prospect for the original or a revised package of additional assistance remains
unclear because of fiscal concerns. Unless offset, extra funds would add to the $314
billion deficit predicted by CBO for FY2006, which many analysts now say will be
closer to $350 billion. Other major concerns are how quickly the levees will be
repaired and rebuilt and whether they would be able to withstand another major
storm, how best to aid victims, and how to reconstruct the region.4
In the near-term, many are concerned with the level of protection that will be
available at the start of the 2006 hurricane season. By June 2006, the Army Corps of
Engineers expects to have completed its repairs of the existing infrastructure.
However, the findings from the Corps’ investigation into the causes of the floodwall
failures are not anticipated until June 2006, raising the question of whether the
agency will be able to improve the floodwalls’ reliability when repairing the damaged
levees and floodwalls for the 2006 hurricane season that begins in June.5
Disaster Relief Fund Activity
(Written by Keith Bea; x7-8672)
The President’s reallocation request would cancel $17.1 billion that Congress
appropriated to the Federal Emergency Management Agency (FEMA)’s Disaster
Relief Fund (DRF) and reallocate those funds to other federal agencies. The Federal
Emergency Management Agency of the Department of Homeland Security (DHS)
draws from the DRF, which serves as the source of funding for activities authorized
by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford
3 Roll Call, “Cochran Pushes Katrina Funds,” December 7, 2005, p. 1; Clarion-Ledger,
“Cochran must snap fed purse shut,” editorial, December 14, 2005; Associated Press,
“Lawmakers Scramble for storm aid,” December 14, 2005; The Sun Herald, “Aid package
‘on track’; Mississippi officials more optimistic,” December 15, 2005; Times-Picayune,
Pressure is on for improved levees,” December 15, 2005; USA Today, “Money worries stall
help for Katrina victims,” December 15, 2005.
4 Congressional Budget Office, The Budget and Economic Outlook: An Update, August
2005, p. 2; [http://www.cbo.gov/showdoc.cfm?index=6609&sequence=0&from=7]
5 See CRS Report RL33188, Protecting New Orleans: From Hurricane Barriers to
Floodwalls by Nicole Carter; [http://www.congress.gov/erp/rl/pdf/RL33188.pdf]

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Act).6 The statute authorizes the provision of emergency management assistance,
including disaster relief, in two broad categories — direct federal aid and financial
assistance provided through grants.
Direct federal aid involves operations undertaken before and after significant
catastrophes occur, generally through “mission assignments” given to federal
agencies by the official designated to be responsible for managing the federal
response. Federal assistance provided to individual victims, states, tribal
governments, units of local governments, and certain nonprofit organizations is used
to provide mass care, restore damaged or destroyed facilities, clear debris, and aid
individuals and families with uninsured needs, among other activities. All funds
appropriated to the DRF remain available until expended; the DRF is a “no-year”
account.7
Activities Funded to Date. As of November 30, 2005, roughly $32
billion had been obligated from the DRF to provide emergency assistance to victims,
communities, and states affected by the hurricanes and other declared major disasters
and emergencies. Almost $40 billion remained unobligated as of that date.8 Of the
$32 billion obligated, $19.3 billion has been dedicated to needs resulting from
Hurricane Katrina, $2.7 billion for those from Hurricane Rita, and $800 million from
Hurricane Wilma.9
The obligated funds have been used to relieve the immediate suffering of
individuals and families, to clear debris, to reimburse federal agencies for the costs
of technical and direct assistance, and to support federal operations such as search
and rescue, delivery of consumables, and meeting immediate needs. The $19 billion
6 For background on the Stafford Act, major disaster, and emergency declarations see CRS
Report RL33053, Federal Stafford Act Disaster Assistance: Presidential Declarations,
Eligible Activities, and Funding, by Keith Bea. For information on the declarations see
“2005 Federal Disaster Declarations,” at [http://www.fema.gov/news/disasters.fema], visited
Dec. 5, 2005.
7 Money appropriated to the DRF remains available for all major disaster and emergency
declarations issued by the President. The $62.3 billion appropriated in the supplemental
appropriations legislation, plus other funds previously appropriated as well as the $2 billion
appropriated in P.L. 109-90 in the FY2006 appropriations legislation for the Department of
Homeland Security, resulted in a total of over $71 billion available since Hurricane Katrina
made landfall. For background on the types of federal budget accounts see CRS Report 98-
410, Basic Federal Budgeting Terminology, by Bill Heniff, Jr.
8 Because the hurricanes occurred toward the end of FY2005, the majority of funds
obligated from the DRF in that fiscal year were not used for activities caused by the
hurricanes. Funds are obligated “when contracts are signed, grants awarded, trips taken,
mission assignments signed,etc.”SeeDisaster Relief Terms Used,” at
[http://appropriations.house.gov/_files/FEMAstatusrpt1202.pdf], visited Dec. 7, 2005.
9 Table on FY2006 Disaster Relief Fund activity;
[http://appropriations.house.gov/_files/FEMAstatusrpt1202.pdf], visited Dec. 7, 2005.

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obligated as of November 30 in response to Hurricane Katrina has been obligated as
follows:
! $8.0 billion for human service needs including unemployment
compensation, personal needs that are not met by insurance, and
temporary housing (including vouchers for hotel/motel rooms and
mobile homes);
! $2.2 billion for debris removal, public building repair and
replacement, and damage inspections;
! $4.4 billion for technical and direct assistance provided by federal
agencies;
! $14.7 million for inspections and hazard mitigation; and,
! $4.7 billion for administrative expenses, almost $3 billion of which
has been obligated for mission assignment operations undertaken by
other federal agencies at the direction of the federal officer
responsible for coordinating response activities.10
As a general rule, the obligation of funds from the DRF varies according to
the needs that result from a catastrophe. Aid to victims for immediate concerns
(housing, purchase of clothing, uninsured essential needs) is provided quickly; longer
term concerns, such as the reconstruction of facilities and development of new
infrastructure, can take years in order for completion of the federal commitment. The
devastation caused by Hurricane Katrina, and the need to consider the redesign and
components of many communities, including New Orleans, will likely result in
months if not years of plans and contracting negotiations. The quantity of the debris
that still exists, and, to some degree, the complications associated with the disposal
of hazardous material, constitute one major obstacle to prompt recovery and
rebuilding in the area.
Components of the President’s Request
Major components of the President’s $17.1 billion reallocation request are:
! $6.3 billion to repair and replace federal facilities (about $3.5 billion
for the Department of Defense and $2.8 billion for other federal
agencies);
! $1.8 billion to repair the levees, locks, and restore wetlands;
! $2.3 billion to repair highways and roads;
! $3.6 billion for various grant and loan assistance programs for states
and individuals;
10 “Katrina Declarations by Major Object Class,” Ibid. Mission assignments to federal
agencies included $165 million to the U.S. Coast Guard, $115 million to the Federal
Protective Service, over $3.5 billion to the Army Corps of Engineers, and $1.6 billion to the
Department of Defense. See “Katrina Mission Assignments,” Ibid.

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! $1.1 billion for military personnel costs including activating
reservists; and
! $2.0 billion for higher Navy shipbuilding costs.11
Table 1 summarizes the appropriations made to the FEMA and other federal
agencies in the first two Katrina supplementals (P.L. 109-61 and P.L.109-62) and the
President’s reallocation and rescission proposals by department or Federal agency.
Table 1. Previous Appropriations and President’s Reallocation
and Rescission Request for Hurricane Katrina

In billions of dollars
Department/Federal Agency
P.L.
P.L.
Total
Reallocation Rescission
109-61
109-62
Approp.
Request
Request
FEMA Disaster Relief Fund
$10.0
$50.0
$60.0
NA
NA
Defense
.4
1.5
1.9
See below
See below
Army Corps of Engineers
0
.4
.4
See below
See below
Proposed FEMA
NA
Cancellation
0
0
0
-17.1
Proposed Reallocations
Agriculture
0
0
0
0.5
-0.6
Commerce
0
0
0
0.1
-0.1
Education
0
0
0
0
0
Defense
0.5
1.4
1.9
6.6
-0.2
Energy
0
0
0
0
-0.1
Health and Human Services
0
0
0
0.6
-0.1
Homeland Security
10.0
50.0
60.0
0.4
-0.3
Housing and Urban
0
0
0
2.2
-0.1
Development
Interior
0
0
0
0.1
-0.3
Justice
0
0
0
0.1
0
Labor
0
0
0
0.1
-0.1
State
0
0
0
0.0
-0.1
Transportation
0
0
0
2.4
0
Treasury
0
0
0
0.0
0
Veterans Affairs
0
0
0
1.4
0
Army Corps of Engineers
0
0
0
1.6
0
EPA
0
0
0
0.0
-0.2
GSA
0
0
0
0.1
0
Intern. Assistance Programs
0
0
0
0
0
Broadcasting Bd of Gov.
0
0
0
0
0
11 CRS calculations based on President’s reallocation request; U.S. Executive Office of the
President, Office of Management and Budget, “Estimate No.13,”at
[http://www.whitehouse.gov/omb/budget/amendments/reallocation_package_10_28_05.pdf

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Department/Federal Agency
P.L.
P.L.
Total
Reallocation Rescission
109-61
109-62
Approp.
Request
Request
Corp. for Public Broadcasting
0
0
0
0
0
Federal Commun. Commiss.
0
0
0
0
0
NASA
0
0
0
0.3
0
SBA
0
0
0
0.5
0
Armed Forces Retire. Home
0
0
0
0
0
Judicial Branch
0
0
0
0.1
0
TOTAL
$10.5
$51.8
$62.3
$17.1
$-2.3
Notes and Sources: Totals may not add due to rounding. Below $100 million rounded to zero.
CRS calculations based on P.L. 109-61, P.L. 109-62, and Office of Management and Budget,
FY2006 Estimate No. 13, Reallocation package for Hurricane Katrina Relief and Recovery
(Various Agencies);
[http://www.whitehouse.gov/omb/budget/amendments/reallocation_package_10_28_05.pdf]
and OMB, FY2006 Estimate no. 14, Rescission package to Help Offset the Costs of
Hurricane Katrina (Various agencies), 10-28-05;
[http://www.whitehouse.gov/omb/budget/amendments/rescission_package_10_28_05.pdf]
Potential Issues in Reallocation Requests
This section discusses potential issues associated with the Administration’s
reallocation requests. Additional issues may be identified as developments warrant.

Proposal to Expand Transfer Authority For All Agencies

In the October 28 Reallocation request, the President proposes a
government-wide general provision that would permit any agency or department to
transfer “funds available in FY2006” between or within accounts to meet an
emergency requirement in response to Hurricane Katrina if the transfer is for “higher
priority items,” and not for a requested item that has been “denied by law.” Congress
would be notified within 15 days of all transfers.12
This proposed language would place no limits on the individual or total
amounts that could be transferred for Katrina-related emergencies, and would permit
the Administration to define which transfers are for a Katrina emergency since
Congress would only be notified after-the-fact.
The exclusion of items “denied by law” would allow the Administration to
12 Reallocation proposal, “Government-wide General Provisions.”

CRS-7
alter and reverse the detailed programmatic decisions of the appropriations
committees and Congress that are generally included in report language. After-the-
fact notification does not necessarily protect Congressional interests, and goes against
the general congressional practice of requiring prior approval by the Appropriations
Committees of certain types of transfers (moving funds between accounts) and
reprogrammings (moving funds within an account).13
Congress generally places limits on the amount and types of transfers of
appropriated funds by setting total funding caps for transfers each year and caps by
type of appropriation, as well as requiring advance notification to the relevant
congressional committees. Transfers generally are limited to a small percentage of an
agency’s funds such as five percent or less.
While some agencies have transfer authority to meet emergencies, such
authorities are limited to particular purposes and other conditions may apply such as
exhausting other funds, requiring replenishment through supplementals, and advance
notification to the Appropriations Committees. For example, some Department of the
Interior agencies can transfer funds for emergency replacement of buildings and
facilities damaged or destroyed by fire, flood, storm, or other “unavoidable causes”
provided that emergency funds are first exhausted and transferred funds are
replenished through a supplemental. The Forest Service in the Department of
Agriculture can transfer funds to the Wildland Fire Management account for various
fire emergency purposes if the Appropriations Committees are notified and if all other
wildfire suppression funds are obligated. The Administration’s proposed language
does not include these type of limits.
Another example is the authority for the Corps of Engineers for emergency
response to natural disasters (33 U.S.C. §701n) which permits transfer with some
conditions: “The Secretary of the Army may allot, from existing flood-control
appropriations, such sums as may be necessary for the immediate prosecution of the
[emergency disaster response] work herein authorized.” This language, however,
applies only to flood control monies in an emergency, whereas the proposed language
does not limit the purposes, the amounts, or the accounts from which funds may be
transferred.
Army Corps Of Engineers Reallocation To Cover Initial Costs.
(Prepared by Nicole Carter, x7-0854)
As a result of the first two Katrina supplementals, the Corps of Engineers has
received $400 million in direct appropriations and is estimated to receive $4.2 billion
in FEMA reimbursements for technical assistance, engineering, and construction
management, emergency contracting, power, roofing, repair of wastewater and solid
waste facilities, and monitoring and stabilization of damaged structures and the
13 CRS Report RL33151, Committee Controls of Agency Decisions, by Louis Fisher.

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demolition of hazardous structures.14 The Administration’s proposal would provide
an additional $1.6 billion to the Corps of Engineers, including:
! $1.3 billion for rehabilitation and repair of flood control, storm
damage reduction projects, and navigation facilities;
! $250 million for Gulf coastal ecosystem projects that help
reduce storm damage risk; and
! $5 million for an expedited study of reducing flood and storm
damages in the greater New Orleans metropolitan area.15
President Proposes $1.3 Billion For Flood Control and Navigation.
This $1.3 billion proposed reallocation is intended to cover at full federal expense
initial repairs to the existing federally-constructed flood control and navigation
projects. These funds would not cover the cost of actions to provide a higher level
of hurricane protection system for coastal Louisiana. The ongoing investigation of the
reasons for the failures is likely to affect what actions are taken to repair the levees
and the costs of those actions.
As of November 2005, only a preliminary analysis about how the New Orleans
levees failed has been completed. Analysis of what caused the foundation failures of
some of the levees protecting New Orleans (e.g. faulty design, poor construction) is
ongoing. The results of these investigations are likely to determine the long-term
actions that are taken to repair the levees, which could vary widely in cost. Estimates
of the cost of building a hurricane protection system for New Orleans from a Category
5 storm start at $3.5 billion with estimates for protecting coastal Louisiana as high as
$32 billion.
Initial Funding of Wetlands Restoration to Reduce Storm Damage.
The proposed reallocation of $250 million for coastal ecosystem studies and projects
to improve flood protection is expected to provide funding for the first steps in this
effort. Plans to respond to the loss of coastal wetlands range from $2 billion for near-
term actions to $14 billion for a more comprehensive approach.
14 Weekly Reports on the Allocation and Obligation of Appropriated Funds,” U.S. Army
C o r p s o f E n g i n e e r s , R e p o r t o f D e c e m b e r 1 , 2 0 0 5 ,
[http://appropriations.house.gov/_files/CORPSstatusrpt1202.pdf], visited Dec. 5, 2005.
15 The $5 million requested for a study of reducing flood and storm damage is similar to a
broader $8 million study already funded in the Energy and Water Development
Appropriations Act for FY2006 (P.L. 109-103).

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Issues in Department of Defense Reallocations
(Written by Amy Belasco, x7-7627)

The Administration proposes that $6.6 billion be transferred from FEMA’s
Disaster Relief Fund to the Department of Defense (DOD) to pay for ship cost
overruns due to damage at shipyards, restore damaged defense facilities, and evacuate,
re-locate and provide for military and civilian personnel beyond the costs covered by
the $1.9 billion already appropriated to DOD in the first two Katrina supplementals
(P.L.109-61 and P.L.109-62).16
The $6.6 billion transferred to DOD would pay for the following:
! $2.0 billion to pay shipbuilders for estimated increases in the cost of
11 ships under construction at Ingalls shipyard in Pascagoula, MS and
Avondale shipyard in New Orleans;17
! $2.0 billion for urgent repair of facilities and equipment, and to
evacuate and temporarily re-locate military and civilian personnel;
! $1.5 billion to replace facilities and family housing units on military
bases;
! $550 million to activate reserve personnel for relief and recovery
efforts; and
! $600 million for defense health and other costs.18

Few, if any, issues are likely to be raised about the request for military
personnel costs — primarily to cover the costs of deploying 40,000 military personnel
(including about 31,000 National Guard).19 DOD’s estimate assumes that the number
of activated reservists would be drawn down to about 5,100 by mid-January, and
16 Of the $1.9 billion appropriated to DOD in the first two Katrina supplementals, $1 billion
has been obligated including $400 million for military personnel, $430 million for facilities,
base support and supplies and equipment, and $84 million for humanitarian relief for DOD
civilian employees, military personnel and dependents; see DOD, Monthly Report on
Hurricane Katrina Estimated Costs, September 30, 2005.
17 The two damaged shipyards, Ingalls, Pascagoula, MS, and Avondale, New Orleans, LA
both belong to Grumman, which is responsible for final assembly of the ships; other
contractors, such as Lockheed Martin, provide subassemblies for ships assembled at these
yards.
18 CRS calculations based on Department of Defense, FY2006 Hurricanes Katrina & Rita
Budget Allocation Request and Rescissions, November 2005. Other includes health,
procurement, research, development, test and evaluation, and commissary repairs.
19 Since the Stafford Act cannot cover government salaries, DOD bears the cost of activating
reserves, who assisted in rescue and recovery efforts for both civilians and DOD personnel.

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remaining at that level to early May.20 If higher or lower levels than planned
materialize, this estimate could change.
Nor are issues likely to be raised about DOD’s request for $1.95 billion in
Operation and Maintenance (O&M) funding that would be used to repair utility
systems and facilities at military installations, conduct hazardous waste disposal and
environmental cleanup, support teams supporting recovery, evacuate and sustain
civilian workers, and continue temporary operations, and replace equipment and
supplies. Facility restoration estimates are based on engineering assessments of the
cost to repair existing facilities deemed repairable.21 DOD typically exercises wide
discretion in handling O&M costs. See Table 3 for more details about DOD’s request.
Potential Oversight Issues in Ship Cost Increases
Navy’s Request. In the request, DOD asks for broad authority to transfer
$$2.0 billion from its Shipbuilding and Conversion, Navy
“for necessary expenses related to the consequences of Hurricanes Katrina and
Rita, which shall be available for transfer within this account to replace
destroyed or damaged equipment, prepare and recover naval vessels under
contract; and provide for cost adjustments for naval vessels for which funds
have been previously appropriated . . .”22
According to DOD’s justification material, the Navy’s $2.0 billion is expected
to cover:
! $289 million for additional overhead charges because of downtime;
! $543 million assuming a 25% increase in labor hours because loss of
skills, inefficiency, as well as higher wages to retain workers in
competitive environment;
20 CRS calculations based on data in OMB, Reallocation Request, October 28, 2005;
[http://www.whitehouse.gov/omb/budget/amendments/reallocation_package_10_28_05.pdf
Department of Defense, FY2006 Hurricanes Katrina & Rita Budget Allocation Request and
Rescissions, November 2005, p. 9.
21 Of the total, $1 billion is for the Navy, $605 million for the Air Force, $271 million for
the Army, $24 million for the Marine Corps and the remainder for defense wide activities;
see Department of Defense, FY2006 Hurricanes Katrina & Rita Budget Allocation Request and
Rescissions, November 2005, pp. 10-16.
22 The total Navy request is $1.987 billion, rounded to $2.0 billion in this discussion. Office
of Management and Budget, OMB, FY2005 Estimate No. 13, Reallocation of $17 billion
of FEMA funds for Katrina needs, hereinafter, OMB, Reallocation Request, October 28,
2005, entry for Department of Defense, Procurement, Shipbuilding and Conversion, Navy.
[http://www.whitehouse.gov/omb/budget/amendments/reallocation_package_10_28_05.pdf]

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! $715 million for replacing government and contractor-furnished
equipment;
! $132 million for damage to naval vessels under construction;
! $61 million for technical manuals and other items;
! $246 million for estimated higher contract premiums and escalation
for LPDs 22 and 23.23
The language in the Navy’s request appears to cover a broad array of expenses and
would allow DOD to transfer funds between ships, which is unlike regular defense
appropriations bills where Congress designates the amounts for individual ships in
report language. Therefore, the breakdown of costs above is essentially illustrative,
in other words, it is an estimate which could change based on how the scope of
expenses actually develop. The Navy’s total estimate for higher ship costs due to
Katrina damage is $2.7 billion but apparently, a decision was made to request $2.0
billion from Congress initially with the remainder requested in a later supplemental.
According to a September 21, 2005 memo from then Assistant Secretary of the
Navy John J. Young to the Deputy Secretary of Defense, the rationale for the Navy’s
request was to take a “proactive” approach in order to preserve the skills of the
workforce, “limit the schedule slips, and associated inevitable long term cost
increases, on ships under construction,” and return the shipyards to “their capability,
and profit opportunities, prior to the day Katrina hit.” Young also noted that this
approach also “has the short-term benefit of contributing in a significant way to the
restoration of jobs and the economy in the Gulf Coast.”24
Questions About Navy’s Request. Several questions that could be raised
about the Navy’s request for $2.0 billion in funding that would go to shipbuilders
(primarily Northrop Grumman) to cover higher costs for the 11 ships under
construction at the Ingalls are:
! Does the Navy’s request set any limits on the government’s liability
for higher costs due to “business interruption” resulting from the
damage in the shipyards, and if not, should language to impose limits
be added? Could a Navy decision to reimburse contractors for most
if not all higher costs due to natural disasters create new precedents
for other government contractors?
! Is there some overlap between Northrop’s claims with its insurers and
23 Department of Defense, FY2006 Hurricanes Katrina & Rita Budget Allocation Request and
Rescissions, November 2005.
24 Assistant Secretary of the Navy, John J. Young, Memorandum, for Deputy Secretary of
Defense (Acting), “Hurricane Katrina,” September 21, 2005. The estimate of $2.7 billion
is from this memo.

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the $2.0 billion requested by the Navy? If the Navy agrees to cover
these costs in advance, what incentive would Northrop have to
negotiate with its insurer? Would Northrop be required to reimburse
the Navy for any costs recovered from its insurers?
! What are the assumptions underlying the Navy’s estimates and are
they reasonable? Would delaying the request allow the Navy’s
estimate to include fewer unknowns and allow insurance negotiations
to proceed further?
! Why is the Navy requesting funds with a five year availability to deal
with an emergency? Should the Navy instead request one-year funds
in FY2007 in its “Cost to Complete” line item that is designed to
handle ship cost overruns?
! Is there any potential for the Navy to use these funds to cover non-
Katrina cost increases? How could Congress increase transparency
and tracking to limit the likelihood that other types of increases will
be covered with these monies?
! Is the Navy’s current plan the most efficient business approach?
Would a full hiatus in shipbuilding efforts while the yards are fully
restored be more efficient and could the delays be acceptable for
ships which typically have a life of 30 years or longer?
Potential Overlap Between Government and Insurance Liabilities.
It appears that the Navy may not be liable for all higher ship costs due to Hurricane
Katrina. Northrop reportedly is currently in discussions with its insurer about the
extent and nature of its coverage for “business interruptions” — lost earnings due to
business disruptions resulting from the property damages. This could include, for
example, the higher costs because of delays and downtime because workers are
returning gradually and Northrop is devising workarounds because equipment is not
available to follow standard procedures. These problems are expected to delay
schedules by several months and increase costs.
Although Northrop has already collected $500 million for damage to its
facilities, the company has not yet submitted claims to its secondary insurer, which
covers costs in excess of $500 million, for the higher costs due to business
interruption. According to a SEC filing, Northrop and its insurance provider are in
“disagreement regarding coverage for certain losses above $500 million.” If the
contractor can show that costs are higher because of schedule delays attributable to the
damage to property from the storms, then the insurance company may be liable for
some costs.

CRS-13
The Navy appears to be assuming that the government is liable for all higher
production and overhead costs, damage to equipment, and escalation due to business
interruption. (Northrop is collecting from its insurance company for damages to its
facilities.) Citing a wartime, 1942 memo from Secretary of the Navy Knox, the Navy
claims that the government assumes the risk for loss or damage to Government-owned
property, which, in the case of ships, is defined as including “raw materials, work in
process, and completed products to which the Navy has taken title.”25
This assumption does not appear to take into account contractual limits on
costs. For cost-plus contracts, the government continues to pay higher costs up to the
amount appropriated. Once that limit is reached, the Navy would need to re-negotiate
its contract based on the funds appropriated. For fixed price, incentive-fee contracts,
the contractor and the government share costs that are above the target price on a
50:50 basis until the total level in the contract — which includes the fee or profit for
the contractor — is reached. At that point, the contractor is liable for all additional
costs.
In the case of cost-plus contracts, Northrop’s insurer is apparently expecting
that the government would be responsible for only part of the costs in fixed price
contracts. For both contract types, the amount or upward limit on the government’s
liability is not yet decided. If the Navy runs out of funds in its fixed price contracts,
those would need to be re-negotiated. For fixed prices, the Navy and Northrop will
need to reach a settlement about how costs may be shared. Of the Navy’s $2.7 billion
estimate of total costs, about 75% is for ships under fixed price contracts.26 If the
Navy and Grumman shared the cost overruns in the fixed price contracts, the Navy
may not need much of the roughly $1.5 billion in the request for those contracts, and
possibly some of the funds requested for cost-plus contracts.
If the Navy pays Northrop for such costs in advance, the company would have
little, if any, apparent incentive to engage in the complex, long-term negotiations with
its insurance company that are likely. As proposed, the language in the Navy’s request
(see above) does not appear to set any upward limits on the government’s liability and
does not require that Northrop reimburse the government for any payments it may
receive for higher costs due to business interruption.
25 Frank Knox, Secretary of the Navy, to the Chiefs of the Bureaus, Offices and Boards,
Navy Department on “Builder’s Risk Insurance - Ships,” June 12, 1942, and Chief of the
office of Procurement and Material, “PM Circular Letter 330-4 (Revised)” to the chiefs of
the Bureaus, Navy department, September 26, 1942. See also Navy response to CRS
questions, December 5, 2005.
26 CRS calculations based on table in Assistant Secretary of the Navy, John J. Young,
Memorandum, for Deputy Secretary of Defense (Acting), “Hurricane Katrina,” September
21, 2005; DDG, LCAC, T-AKE and LHDs are under fixed price contracts, and the LPD is
a cost plus incentive fee contract.

CRS-14
Uncertainties in Navy Estimates. Developed in mid-September only two
to three weeks after the storms, the Navy’s rough estimate includes an additional $833
million for higher overhead and labor charges, based on three months of downtime
and three months ramp up to the pre-Katrina workforce level, a 25% increase in the
number of labor hours needed to complete ships, and higher wages for skilled laborers
because of competition for those workers in other restoration efforts.27 The 25%
increase in labor hours is based on Grumman’s experience with change orders.

Originally, there were 20,000 workers at Ingalls, Pascagoula and Avondale
shipyards. After Katrina, there was a two-week hiatus when no workers could return
to the shipyards. By mid-October, about 16,000 workers had returned to work
including 2,700 who were working part-time.28 More recently, Northrop is estimating
that the Pascagoula yard will experience closer to one month of downtime and nine
months of ramp-up; there was much less damage in Avondale. The new assumption
would generate a different estimate of higher costs. The Navy and Grumman are
currently developing new schedules for each ship.
Some observers would argue that given the level of uncertainty from both
ongoing insurance negotiations and the effect of the damage on ship schedules, the
Navy could be better off waiting to develop its estimate of ship cost overruns. The
same argument could be made about the Navy’s estimates of $715 million to replace
government-furnished and customer furnished equipment — some of which may be
repaired and some replaced — and $132 million for damage to ships under
construction.
Urgency of Navy Request. As is customary, the Navy is requesting that
shipbuilding monies be available for five years even though the request is for
emergency funding. The Navy argues that a longer availability “allows the Navy to
more judiciously execute available funds,” that some contracts may require more than
six months to renegotiate and award, and that vendor issues and labor inefficiencies
could also take more than a year.29 These rationales may not be consistent with the
FY2006 budget resolution criteria that emergency funds are to be used for “urgent,
pressing, and compelling needs requiring immediate action,” or with OMB’s criteria
that the reallocation include only funds needed until May 2006.30 Since substantial
funds remain in the shipbuilding accounts for these ships, it is also not clear that the
Navy needs the funds immediately.
Some would argue that it could be more appropriate for the Navy to use its
“Cost to Complete” line item designed to cover unanticipated increases in ship costs.
27 Young, Memorandum, “Hurricane Katrina,” September 21, 2005; Navy response to CRS
questions, December 5, 2005.
28 Navy, “Briefing to Congressional staffers”, November 18, 2005.
29 Navy, “Response to CRS Questions,” December 5, 2005.
30 Sec. 402 (c) of the FY2006 Concurrent Budge Resolution (H.Con.Res. 95 ).

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In that line, Congress designates specific funds for cost increases for individual ships
that are available for one-year.31 One-year funds are provided to ensure closer
scrutiny. The unanticipated costs due to Katrina could be considered a more extreme
version of other delays experienced in shipbuilding programs. If the Navy requested
funds in its FY2007 budget, it could also rely on later, and presumably more accurate
estimates.
Segregating Katrina-related Costs. As proposed, the language in the
Navy’s request does not include any mechanism that would require the Navy to show
that cost increases were attributable to Katrina damage rather than other factors.
Congress might want to consider adding reporting requirements where the Navy
would track and certify that ship cost increases funded with these monies were
attributable to delays related to damage from Katrina.
Efficiency of Navy’s Ramp-Up Plan. The Navy’s justification does not
include production schedules for ships in the two yards because those are currently
being developed.32 Northrop and Grumman appear to be pushing for workers to return
as quickly as possible and are looking to swapping work and workers between
shipyards, out-sourcing work where capacity or equipment is not available, and
developing workarounds. Northrop required that all workers return by October 17,
2005 in order to retain their seniority and benefits.33
The Navy does not appear to have considered any alternative approaches, such
as closing down the shipyards for six months to a year while repairs are underway, and
then starting up at a level closer to complete operations. Although such an approach
would raise concerns, including potential loss of skills among workers, it might be
more efficient and more appropriate particularly if environmental hazards and housing
shortfalls remain critical and if repairs to the levees are delayed. While the Navy
dislikes delays in receiving new ships, ships typically last at least 30 years; a
temporary delay might be acceptable if an alternative approach was more cost-
effective.
Critics of the Navy’s proposal have suggested that the funding requested may
be too high, that contractors should share costs and that allocating funds for this
purpose signals questionable government priorities.34 No hearings have been held on
these issues thus far.
31 See for example, Sec. 8099 in P.L.108-287.
32 Navy response to CRS questions, December 5, 2005.
33 Navy briefing to Congressional staff, “Hurricane Katrina Impact on Gulf Coast Shipyards,
November 18, 2005.
34 “U.S. Navy seeks hurricane aid for shipyard,” New York Times, November 18, 2005. Add
cites.

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Issues in DOD’s Military Construction Request
DOD’s Request.
DOD’s $1.5 billion request for military construction and
family housing funding would be used to replace facilities and infrastructure in
Louisiana, Mississippi, and Florida that were severely damaged by the storm as well
as for repair and replacement of family housing. DOD’s rationale for its family
housing request is that there are not sufficient units available on the private market
that would be affordable to service personnel.
DOD’s request includes:
! $414 million for the Army;
! $570 million for the Navy;
! $439 million for the Air Force; and
! $45 million for Defense-wide facilities.
For more details, see Table 4 for funding by service and account.
Air Force and Navy facilities suffered major damage to facilities in Louisiana
and Mississippi as can be seen in Table 5. The facilities with the highest bills include
Naval Construction Battalion Training Center and Jackson Barracks in New Orleans,
Keesler Air Force Base and the Stennis Space Center in Mississippi and various
reserve facilities. See Table 5 for funding, types of projects, and the BRAC status of
individual bases.
Potential Issues in Military Construction Request. Several questions
could arise about the President’s request to reallocate $1.5 for military construction
and family housing needs due to Katrina, some similar to those for shipbuilding.
1) Why is DOD requesting funds to rebuild facilities that are being closed or
significantly realigned as part of BRAC? Should all facilities be returned to their
previous or upgraded status if there is capacity available at other bases to perform
certain functions?
2) Should DOD request one-year rather than five-year military construction monies
for emergency requests and to encourage closer scrutiny in light of the uncertainty of
quickly-developed cost estimates? Would some kind of reporting requirement be
merited because of the potential inaccuracy of estimates?
3) Is it wise to press to restore DOD facilities and return DOD military and civilian
personnel before repair of the levees is complete and utility and other services may not

CRS-17
be restored? Are all projects and needs equally urgent? For example, is replacement
of a DOD fitness center of equal importance as replacement of equipment repair
facilities?
4) What is the full amount of funding likely to be needed? And could DOD finance
some of these requirements from within existing resources?
Funds For Bases Affected by BRAC. DOD is requesting funds for
some projects on bases that are scheduled to close or be realigned. For example, $58
million is proposed to construct two new bachelor enlisted quarters at Naval Station
Pascagoula, MS, which is slated for closure, and $20 million for a new central energy
plant and $25 million for a new Diagnostic Center at Keesler Medical Center,
scheduled to be realigned to a community hospital.
DOD is also proposing to spend $86 million at Keesler Air Force base and
$313 million at Construction Battalion, Gulfport, MS for family housing on bases
where privatization initiatives are already underway. It is not clear why DOD would
request funds for these bases which are slated for closure or realignment or where
privatization of housing is already underway.
Emergency Nature and Visibility of Funds. DOD is requesting that
funds be available for the standard time periods for each accounts — five years for
military construction and shipbuilding, three years for RDT&E, two years for
procurement and one year for O&M and military personnel accounts. As with
shipbuilding, it could be argued that if military construction funds are an emergency,
then they should be available for one year.35 DOD would argue that retaining the
traditional time periods fits with how each type of funding is typically managed.
If Congress provides the funds as requested, the monies for Katrina-related
damage will be mixed with regular peacetime funding and wartime funding. That may
make it difficult, if not impossible, to track how funds are actually used and to ensure
that funds intended for one purpose are not used for another purpose. To increase
visibility, Congress could require that DOD set up separate accounts and require
quarterly reporting on use of the funds. This approach has been used in recent
supplementals when Congress provided funds for war where it was difficult to
estimate expenses in advance (for example, the Iraq Freedom Fund that included
initial Iraq war spending).
Unlike most military construction requests, estimates for these projects were
developed in a matter of weeks rather than months, creating questions about their
35 OMB, Reallocation Request, October 28, 2005, p. l, letter to the President from OMB
Director, Joshua Bolten, and passim for length of availability of different appropriations
accounts.

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accuracy. Requests also do not include the amount of detail typically provided to
Congress on such projects. A potential precedent for dealing with such uncertainty
is the 15-day advance notification requirements added by Congress to war
supplementals in recent years in response to the uncertainties of military construction
projects needed in support of Iraq and Afghanistan.36
DOD has not provided Congress with an estimate of the full amount that may
be needed or a timetable that would outline the urgency for the funds. The timing of
a return of military personnel to bases may also depend on the time and effectiveness
of repairs to the levees, restoration of utilities, and dealing with environmental issues
in the region.
Department of Housing and Urban Development
(Prepared by Maggie McCarty, 7-2163)
The Administration’s October 28th reallocation package would transfer $2.2
billion to the Department of Housing and Urban Development including:
! $250 million for an urban homesteading initiative;
! $390 million to HUD’s Section 8 account for the Katrina Disaster
Housing Assistance Program (KDHAP);
! $1.5 billion for Community Development Block Grants (CDBG); and
! $70 million for HUD’s HOME Investment Partnerships program.
Urban Homesteading. (Prepared by Eugene Boyd, 7-8689) A speech made
by President Bush on September 15, 2005 included a new Urban Homesteading
proposal as a key feature of the government’s response to Hurricane Katrina. Urban
homesteading would allow Katrina evacuees to occupy a government-owned home
at a favorable mortgage rate, in exchange for their personal investment of sweat equity
in the property. Under this approach, defaulted housing or other property in the region
owned by the federal government would be conveyed to eligible citizens free of
charge, through a lottery. In return, homesteaders would pledge to rebuild on the lot,
with either a mortgage or help from a charitable organization like Habitat for
Humanity. HUD, in cooperation with other federal agencies, local governments, and
public housing authorities, would support the development of homes on federal
property in communities across the region, and would encourage nonprofit
organizations to commit properties as well.
The October 28th reallocation package submitted by the Administration
includes $250 million for urban homesteading. Of that amount $50 million would be
36 See Division B, Chapter 10, Sec. 1001 (a) and (b), P.L. 107-117; Sec. 1001 (a) and (b),
P.L. 107-206; Title I, Chapter 3, P.L. 108-11.

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provided to the Self-Help and Assisted Homeownership (SHOP) account to finance
the construction or rehabilitation activities, subject to enactment of the Hurricane
Katrina and Rita Recovery Homesteading Act of 2005, introduced on December 13,
2005 as H.R. 4514. The remaining $200 million would be available to reimburse the
insurance funds of the Federal Housing Administration (FHA), the Housing Program
Account of the Department of Veterans Affairs (VA), and the Rural Housing
Insurance Fund Program Account of the Department of Agriculture (USDA) for
transferring the affected properties.
Katrina Disaster Housing Assistance Program (KDHAP). ( Prepared
by Maggie McCarty, x7-2163) KDHAP was created in early October and is currently
administered by HUD, but funded through a mission assignment from FEMA. It
provides special rental assistance vouchers to families that were displaced by
Hurricane Katrina and that were receiving HUD assistance or were homeless before
the storm. This includes families that had Section 8 vouchers and lived in public or
other assisted housing, as well as families that were living in homeless shelters. The
October 28th reallocation request proposes to transfer over $390 million from FEMA
to HUD’s Section 8 account for the KDHAP initiative. By transferring the funding
from FEMA to HUD, HUD would gain total control of the program. (For more
information on KDHAP, see CRS Report RL33173, Hurricane Katrina: Questions
Regarding the Section 8 Housing Voucher Program.)
Additional Block Grant Funds. In several past disasters, Congress has
provided emergency supplemental appropriations to HUD’s HOME Investment
Partnerships (HOME) program and Community Development Block Grant (CDBG)
program. HOME and CDBG are block grant programs through which HUD
distributes housing and community development funding to state and local units of
government. HOME funds can be used to build or rehabilitate owner- or renter-
occupied housing and provide first-time home buyer or tenant-based rental assistance
to low and moderate income families. CDBG funds can be used for a much broader
array of activities including housing, community development, economic
development, public assistance, assistance to sub-recipients (including for-profit and
non-profit entities, and religion-based organizations), and disaster relief efforts
including short-term disaster relief, disaster mitigation, and long-term disaster
recovery efforts. The President’s reallocation proposal would provide $1.5 billion for
CDBG and $70 million for HOME. (For more information, see CRS Report
RL33078, The Role of HUD Housing Programs in Response to Disasters and CRS
Report RS22303, Community Development Block Grant Funds in Disaster Relief and
Recovery.)

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Transportation Would Receive $2.4 billion
(Prepared by David Randall Peterman; x7-3267
The President proposes $2.4 billion in additional appropriations for the
Transportation Department, including $2.3 billion for the Federal Highway
Administration (FHWA)’s Emergency Relief Program to repair damaged highways
that are eligible for relief under that program. Funds would be available until
expended, state matching requirements would be waived, and the limit of $100
million for Emergency Relief projects in a single state for a single fiscal year could
be exceeded. If the $2.3 billion is more than is needed for Hurricane Katrina-related
projects, the remaining funds could be used for other emergency relief projects.
The President also requests $40.6 million, which would come from the Airport
and Airway Trust Fund, to fund the FAA’s Facilities and Equipment account to repair
air traffic control towers, buildings, and navigation aids damaged by Hurricanes
Katrina and Rita. The requests also includes $7.5 million to repair and reconstruct the
damaged Poland Street pier and warehouse in New Orleans, Louisiana, which are
owned by the Maritime Administration, and used by the U.S. Navy to support the
Ready Reserve Force Fleet, cargo ships that may be used for rapid deployment of
military forces.
$1.2B to Replace and Repair VA Hospitals
(Prepared by Sidath Panangala, x7-0623)
The Administration proposes to transfer $1.4 billion to the Department of
Veterans Affairs including:
! $1.2 billion primarily to replace the VA medical center in New
Orleans and also add a new bed tower to the medical center in Biloxi,
Mississippi;
! $198 million to replace pharmaceuticals and other medical equipment
in VA facilities; and
! $24.9 million for activating new VA regional office in New Orleans,
Louisiana, as well as miscellaneous operating costs to continue
veterans benefits processing.
A portion of the Administration’s $1.2 billion construction request would
accelerate plans to add a bed tower to the VA medical center in Biloxi, Mississippi
because the nearby Gulfport VA medical center that had been slated for closure was
destroyed by the storm.37 Under the proposal, VA intends to replace clinical functions
37 The Capital Asset Realignment for Enhanced Services (CARES) Commission, a
commission that evaluated health care needs of veterans over the next 20 years, called for

CRS-21
at VA medical center in Biloxi, Mississippi within 2 or 3 years rather than by 2010.
Some observers have also suggested that Keesler Air Force Base Hospital in Biloxi,
Mississippi, which is two miles away from the VA hospital in Biloxi, could pick up
the VA workload.
The Administration is also proposing several general provisions for VA that
would make additional adaptive housing grants (e.g. for wheelchairs), extend
subsistence allowances for vocational rehabilitation, and expand other independent
living benefits veterans displaced by Hurricanes Katrina and Rita through FY2006.
Funds to Rebuild NASA Facility
(Prepared by Marcia Smith, x7-7076)
The President’s proposal includes $325 million for costs associated with
hurricane recovery at NASA’s Stennis Space Center in Mississippi, NASA’s primary
rocket engine test facility, and the Michoud Assembly Facility, a government-owned
facility in New Orleans, LA operated by Lockheed Martin, where space shuttle
External Tanks are manufactured. The funds would be used to repair and replace
equipment and infrastructure, environmental remediation and emergency operations.
According to its September 30, 2005 operating plan, NASA estimates that it will cost
$760 million to repair damages and relocate staff.
While NASA has shifted $100 million in FY2005 funds to begin hurricane
recovery efforts — with hopes that the accounts would be replenished from a later
supplemental appropriation — the funds shifted combined with the proposed
reallocation of $325 would still not equal NASA’s estimated costs.
Funds for Small Business Administration Loans
(Prepared by Eric Weiss, x7-6209)
The October Reallocation package would provide the Small Business
Administration (SBA) with:
! $277 million for disaster loan funds for homeowners, renters and
businesses who are victims of Hurricanes Katrina, Rita or Wilma or
other natural disasters;
! $189 million for SBA’s salaries and expenses account to pay for
additional staffing to process disaster loan applications; and
closure of the Gulfport facility and the transfer of patients to Biloxi, 8 miles away. For
detailed information on the CARES Program see, CRS Report, R.L.32961, Veterans’ Health
Care Issues in the 109th Congress, by Sidath Viranga Panangala.

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! $5 million for the SBA’s Office of the Inspector General, a 25%
increase that would be used to oversee the new loans and guarantees.
As of December 2, 2002, the SBA had approved $1 billion in disaster loan
applications, a higher rate than earlier. Some disaster victims are applying for SBA
loans expecting to be rejected because this rejection will make them eligible for grants
from FEMA and others.
Some observers have suggested that additional authority may be needed,
including a proposal by Representative Baker in H.R. 4100 to create the Louisiana
Reconstruction Corporation that would purchase property in Louisiana that was
damaged by Hurricanes Katrina and Rita for redevelopment including public
infrastructure. The seller would receive enough to pay off any existing mortgage or
other debt and would be given the right of first refusal to buy the property after it is
redeveloped. The Louisiana Reconstruction Corporation would be funded by Treasury
bonds subject to the appropriations process. The money borrowed would be repaid
from the proceeds of selling the property.
Environmental Protection Agency
(Prepared by David Bearden, x7-2390)
The Administration’s proposal would reallocate an additional $15 million to
EPA for its Leaking Underground Storage Tank Program that would be targeted at
areas affected by Hurricanes Katrina and Rita, including site assessments to speed the
identification and initiation of corrective actions to address human health and
environmental risks.
As of December 1, 2005, FEMA reports EPA obligations of $361 million for
its mission assignments in emergency hurricane response activities. Based on agency
statements, EPA appears to be using these funds for cleanup activities, mostly in
coordination with state and local officials, including environmental assessments,
sampling and analysis of contaminants, and removal and disposal of hazardous
materials.38 The scale of additional environmental activities needed in the wake of the
storm is not clear at this point.
The President’s Proposed Rescissions
In an effort to address concerns about the cost of the federal response to
38 For additional information, see CRS Report RL33115, Cleanup after Hurricane Katrina:
Environmental Considerations, by Robert Esworthy, Linda Jo Schierow, Claudia Copeland,
and Linda Luther.

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disasters, the President submitted a proposed rescission package of $2.3 billion
together with his reallocation package. The President states, in his transmittal notice,
that the rescissions are to come from “lower-priority federal programs and excess
funds.”39 The President indicates the specific reasons for each rescission in his
proposal. The rescissions, if approved by Congress, would cancel a portion of the
funding for 12 departments and 5 agencies and other federal governmental entities.40
The amount of the rescissions would range from $4 million for the Broadcasting
Board of Governors to $641 million for the Department of Agriculture.
The specific rescission proposals appear to raise varying degrees of
controversy, and there have been different levels of interest in the impacts of the
proposed rescissions on agency programs and activities. How the rescissions would
be applied and their effects on funding levels also would vary. In some cases, the
proposals would reduce funding levels still further below last year’s appropriation,
and in other cases, funding would terminate programs. Further, the amounts of the
proposed rescissions are not necessarily an indicator of their potential for controversy,
as some of the rescissions are relatively small but may be of concern to Congress or
affected stakeholders.
Table 2 describes individual rescissions in the Administration’s October 28,
2005 package. The table was prepared by Amy Belasco with the help of James
Monke, Maggie McCarty, Stephen Cooney, Lynne Corn, Ross Gorte, Betsy Cody,
Larry Nowels, David Bearden, Eric Weiss, Ralph Chite, David Whiteman, Paul Irwin,
Jennifer Lake, and Pamela Smith.
39 U.S. Executive Office of the President, Office of Management and Budget, “Estimate
No.14,”available online at
[http://www.whitehouse.gov/omb/budget/amendments/rescission_package_10_28_05.pdf],
visited Nov. 1, 2005.
40 The departments that would be affected by the rescission include Agriculture, Commerce,
Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and
Urban Development, Interior, Labor, State, and Treasury. The five agencies or other federal
governmental entities from which funds would be rescinded include the Environmental
Protection Agency, the Broadcasting Board of Governors, the Corporation for Public
Broadcasting, the Federal Communications Commission, and International Assistance
Programs.

CRS-24
Table 2. Proposed Rescissions to Offset the Cost of Hurricane
Katrina
(millions of dollars)
Funds to
Federal
be
Agency
rescinded
Activities
Rescinds $500M for Forest Service wildfire fighting
that could be needed in FY2006, and $9M for rural
development grants which the Administration has
proposed to terminate and Congress has restored.
Also rescinds $10M in conservation operations,
$40M in Rural Utilities Services grants, $45M in P.L.
Department of
480 foreign assistance, and $37M in food stamp
Agriculture
$641
programs.
Rescinds the $49M remaining in the Emergency Steel
Loan Guarantee Program that could be used to
guarantee up to $600 million in loans to financially
distressed steel mills; rescission would terminate a
Department of
program that Congress recently extended to the end of
Commerce
$55
2007.
Rescinds $155M in unobligated funds unlikely to be
Department of
needed or funds for programs executing slower than
Defense
$155
expected.
Rescinds funds from the Literacy Program for
Prisoners ($5 million), the Individuals with
Disabilities Education Act ($51 million), the Smaller
Department of
Learning Communities program ($90 million), and
Education
$151
the Tech-prep Demonstration program ($5 million).
Rescinds $100M in unobligated FY2005 funds for a
waste treatment plant at DOE’s former nuclear
weapons production site at Hanford in Washington
that Congress assumed would be available when it cut
DOE’s FY2006 funds; not clear whether would
Department of
further delay project which has experienced
Energy
$100
construction difficulties.
Rescinds funds from the following programs: Health
Resources and Services Administration for
construction facilities improvement, Health Centers
loan guarantees, and the Nursing Education Loan
Repayment Program ($8 million), the federal portion
of liquid assets of student loan revolving funds at
institutions of higher education participating in
certain health professions education programs ($100
million), the Centers for Disease Control and
Department of
Prevention for Individual Learning Accounts ($7
Health and
million) and the National Institutes of Health for
Human Services
$130
buildings and facilities ($15 million).

CRS-25
Funds to
Federal
be
Agency
rescinded
Activities
Department of
Rescinds $261M for accrual payments for Medicare-
Homeland
eligible employees in the Coast Guard which the
Security
$261
Administration says have already been made.
Department of
Rescinds funds from Housing for Persons with
Housing and
Disabilities ($100 million), Brownfields community
Urban
redevelopment grants ($24 million), and Community
Development
$130
Development loan guarantees ($6 million).
Rescinds $183M from Bureau of Reclamation funds
for restoration of the Walker River Basin in Nevada,
which would stall the project, $35M from Bureau of
Land Management firefighting programs that could
be needed, $34M or 10% cut to the National Park
Services’ construction funds, $28M for state grants to
the Land and Water Conservation Fund that would
eliminate all but administrative funding, as well as
smaller grants programs in the Fish and Wildlife
Service (FWS), including $6M from the Cooperative
Endangered Species Conservation fund, where the
Administration is seeking to increase state
participation. Also cut would be $5M rescission from
$226M for Payments in Lieu of Taxes, a program that
compensates local governments for federal lands in
their jurisdictions where they cannot collect taxes,
which the President has proposed to cut and which, in
Department of
most years, Congress has increased in response to
the Interior
$306
local concerns.
Rescinds funds from Job Corps construction,
rehabilitation, and acquisition ($25 million) and the
Department of
Responsible Reintegration of Youthful Offenders
Labor
$70
program ($45 million).
Rescinds $50M from embassy security programs,
$16M from narcotics control, including $12M from
research on using mycoherbicides in eradication
efforts, which has run into opposition from the UN,
Colombia and Afghanistan but which Congress has
supported; and $9M from FY2005 funds for the
Andean Counterdrug initiative for, a high priority
initiative to eradicate drugs and establish alternative
Department of
development programs in Colombia, Bolivia, Peru,
State
$75
Ecuador, Brazil, Venezuela, and Panama
Rescinds $10M from Internal Revenue Service’s
Department of
processing and $10M from its health insurance tax
the Treasury
$20
credit administration.

CRS-26
Funds to
Federal
be
Agency
rescinded
Activities
Rescinds $166M from EPA’s Clean Water State
Revolving Fund , which awards grants to states, based
on a statutory formula, to provide seed monies to
issue loans to localities for constructing and
upgrading sewage treatment plants and other
wastewater infrastructure. The rescission would
reduce funding to $730 million, $190 million below
the FY2006 enacted level and almost $360 million
below FY2005. The rescission would eliminate the
Environmental
Congressional add in FY2006 that responded to state
Protection
concerns that more federal funding is needed to meet
Agency
$166
water quality standards.
Rescinds $20M for transition assistance to the former
International
states of the Soviet Union, which the Administration
Assistance
sought to reduce to $482 million but Congress
Programs
$20
approved $514 million for FY2006.
Broadcasting
Board of
Rescinds $4M in unobligated capital improvements
Governors
$4
funds.
Corporation for
Public
Rescinds $10M as part of enacted advance
Broadcasting
$10
appropriation.
Federal
Communication
Rescinds $13M in regulatory fee collections that may
s Commission
$13
not be needed to support FCC activities.
Notes and Source: Administration’s rescission package and other sources; Office of Management
and Budget,EstimateNo.14;
[http://www.whitehouse.gov/omb/budget/amendments/rescission_package_10_28_05.pdf]].

CRS-27
Table 3. DOD’s $6.6 billion Re-Allocation Request
in millions of dollars
Category
DOD
Army Navy
Air
Defense-
Total
Force
wide/
Defense
Health
Higher Ship Costs
$1,987
$0
$1,987
$0
$0
Urgent Repair and Recovery
645
73
269
299
5
Evacuation of Mil. Personnel
570
88
246
226
11
Equipment
397
30
126
187
53
Temporary Continuing Ops.
185
31
97
28
28
O&M for National Guard
43
43
0
0
0
Facility Restoration
761
51
527
83
49
Military Construction
973
414
435
79
0
Family Housing
495
0
135
360
0
Military Pay and allowances
399
241
15
144
0
Defense Health Program
149
0
0
0
149
TOTAL
$6,605
$970
$3,836
$1,406
$393
Source: Department of Defense, FY2006 Hurricanes Katrina & Rita Budget Allocation Request
and Rescissions, November 2005.
Table 4. Military Construction & Family Housing Request By
service
in millions of dollars
Service
Military
Family
Family
TOTAL
Construction
Housing
Housing
Operation &
Construction
Maintenance
Army
$414
$0
$0
$414
Navy
435
49
86
570
Air Force
79
47
313
439
Defense-wide
45
0
0
45
TOTAL
$973
$96
$399
$1,468
Notes and Sources: Department of Defense, FY2006 Hurricanes Katrina & Rita Budget
Allocation request and Rescissions, November 2005, pp. 25-p.50.

CRS-28
Table 5. Military Construction & Family Housing Request By
Basea

in millions of dollars
Service, Base and
Funding
Number and Types of Projects
BRAC
Location
Request
Status
Naval Construction
$189.3
21 projects: armory, training facilities,
Minor
Battalion Center,
bachelor enlisted quarters, public works,
realign
Gulfport Miss
roads, security.
Naval Station,
58.5
2 project: two bachelor enlisted
Close
Pascagoula
quarters.
Stennis Space Center
66.9
3 projects: boat operations, ocean
Minor
sciences laboratory and power supply
realign
upgrades.
Keesler Air Force
89.3
12 projects: mess, training facilities,
Major
Base and Keesler
administrative buildings, maintenance,
medica
Medical Center
training, headquarters, fencing, medical
l center
energy plant and lab.
realignb
Naval Air
78.7
4 projects: utilities, fitness center, and
Realign
Station/Joint Reserve
hangars.
Base, New Orleans
Naval Support
41.4
5 projects: administrative buildings,
Major
Activity, New
public works, bachelor enlisted quarters,
realign
Orleans
youth center, utilities upgrade.
Jackson Barracks,
148.8
6 projects: readiness center,
Realign
New Orleans
maintenance shops and infrastructure
replacement.
Louisiana Army
124.5
5 projects: 5 readiness centers.
Unchan
National Guard
ged
Readiness Centers
Mississippi
140.8
9 projects: 7 readiness centers and 2
Unchan
Readiness Centers &
field maintenance shops.
ged
Field Maintenance
Shops
Air National Guard
35.0
6 projects: troop quarters,
Unchan
Combat Readiness
squadron/wing operations and training,
ged
Training Centers,
infrastructure, training, administrative
Gulfport, MS.
building.
Family Housing
86.2
2 projects: construction of 296 units at
Unchan
Naval Construction,
about $275,000 each and housing office.
ged
Gulfport/Stennis
Space Center region,
MS

CRS-29
Service, Base and
Funding
Number and Types of Projects
BRAC
Location
Request
Status
Family Housing
$313.0
1 project: construction of 1,067 units at
Realign
a
Construction,
about $280,000 each.
Keesler Air Force
Base
Family Housing,
48.9
Repair of housing at Meridian Naval
Unchan
O&M, Navy
Construction Battalion Center, Gulfport,
ged
MS
Family Housing
47.0
Provision of 865 temporary housing
Unchan
O&M, Air Force
units at about $54,000 each at Keesler
ged
Air Force Base, MS and repair of units
at Barksdale AFB, LA.
Notes and Sources:
a. Dan Else contributed to this table.
b. The medical center at Keesler Air Force Base is to be converted to a community hospital with a
net loss of 1,207 military, civilian, and indirect support jobs.