Congress appears set to fix 'duplication of benefits' problem for 2016 Louisiana flood victims
WASHINGTON — Thousands of Louisiana flood victims who borrowed money from the Small Business Administration could soon have clearer access to Restore Louisiana rebuilding grants under a deal worked out by congressional leaders.
The change to federal disaster-relief policy was included in a compromise struck in the early hours of Saturday morning on a largely unrelated, sprawling reauthorization of the Federal Aviation Administration and other transportation programs.
The overall bipartisan deal was largely negotiated by top committee Democrats and Republicans from the House and Senate over the summer and is expected to be passed into law in the coming weeks without significant additional changes. A final vote in both chambers of Congress had not yet been scheduled but is expected sometime in the coming week, ahead of a Sept. 30 deadline to renew federal aviation funding.
News of the deal on Saturday prompted quick responses from Gov. John Bel Edwards and members of the Louisiana Congressional delegation who have been pressing for the disaster policy change for two years.
"As soon as Congress finalizes, the President signs, and (U.S. Department of Housing and Urban Development) issues guidance, we will immediately provide the assistance to homeowners who were previously impacted by this impediment deserve,” Edwards said.
U.S. Rep. Garret Graves, R-Baton Rouge, said the duplication of benefits provisions twice passed by the House in previous votes finally made it into the package, which appears set to make it into federal law. Graves helped author the language and has lobbied colleagues for the past two years to pass a "fix" to the bureaucratic snag.
"Persistence overcomes stupidity," Graves said Saturday morning. "Last night, we finally reached an agreement with the Senate and White House on our duplication of benefits legislation that passed the House nearly 10 months ago."
The final congressional deal also includes other beneficial disaster policy changes previously adopted in the House, including one that would greatly limit a Federal Emergency Management Agency penalty that has cost local schools millions in aid and another that would ensure nonprofit food banks can get federal help.
Changing the SBA's so-called "duplication of benefits" rules has been a priority for Louisiana's congressional delegation almost since record-breaking amounts of rain flooded large swaths of the Baton Rouge metro area in August 2016.
Federal officials encouraged homeowners to take out low-interest loans from the SBA, which thousands did to rebuild their damaged homes. But few — if any — realized that federal rules would count those loans against any later grant money under regulations designed to prevent disaster victims from getting paid twice for the same damage.
Louisiana homeowners snagged by the rule ended up facing decades of loan repayments when they'd otherwise have gotten grants for the same amount.
Pat Forbes, director of the Louisiana Office of Community Development, said Saturday that if SBA loans are completely removed as a duplication of benefits, more than 6,000 Louisiana households would receive roughly $215 million in Restore grants to repair their homes or pay down loans.
Graves also pushed a number of other disaster policy reforms as part of a larger overhaul, dubbed the "Disaster Recovery Reform Act." The House of Representatives has twice passed the act, including as an attachment to its preliminary version of the FAA legislation passed in May. New Orleans Rep. Cedric Richmond, D-New Orleans, co-authored several of those provisions with Graves.
One provision that made it into the final deal, Cassidy said, will modify how FEMA applies an insurance penalty that has cost several area public school districts millions of dollars in federal assistance.
FEMA penalizes school systems that don't have insurance for schools in the special flood hazard area, which federal government deems most at risk for flooding. But FEMA has interpreted the $500,000 penalty to apply to each flooded building on a school campus.
That view hurt suburban Baton Rouge districts that have several campuses in low-lying areas and can have more than dozen buildings on a single campus. Late last year, school officials in Livingston and Ascension parishes said the FEMA insurance penalty could cost their respective districts $20 million and $21 million each in lost federal aid.
School officials had argued they should have been treated as systems were after Hurricane Katrina when the $500,000 penalty was applied once to an entire campus. Cassidy's statement says the final version of the Senate bill will do just that.
School officials in Ascension and Livingston have said the penalty didn't halt repairs in most cases but required them to tap reserves or take other steps to provide the upfront cash.
The bill also clarifies that food banks and nonprofit long-term recovery organizations are eligible for disaster aid from FEMA and requires FEMA to issue a guidance explaining how the agency will reimburse local governments for flooded roads.
Cassidy's statement says FEMA has no clear policy on damaged roads and isn't willing to reimburse local and state governments for flood-related damage.
Some parishes, like Ascension, had tried to get FEMA to reimburse it for millions in 2016 flood damage to roads only to be rejected.
But Forbes, whose office has wrangled with HUD for two years over its interpretations of disaster policy, also cautioned that he has not seen the legislation's final language. Depending on the wording, he said, the impact could be far less.
Louisiana Congressman, however, were bullish Saturday on the legislation's prospects to resolve the longstanding issue.
The Senate had appeared less receptive to the disaster policy changes, declining to include them in several previous bills. Sen. Bill Cassidy, R-Louisiana, lobbied colleagues and key committees chairs over the past few months to pass the SBA loan fix and other disaster policy overhauls.
“Thousands of people in the great floods of 2016 were told to get an SBA loan and then found out that, because they did what they were told, they could not get a Restore Louisiana recovery grant. Folks were punished for being responsible and doing the right thing. This bill fixes that, and I look forward to voting for it,” said Cassidy.
The agreement, Graves said, "finally puts an end to the ridiculous policy that a loan and a grant are the same thing. Most importantly, this allows the release of hundreds of millions of dollars from the Restore Louisiana program to flood victims who deserve the ability to recover."
Forbes, the state official charged with managing the Restore recovery program, said many of the households affected by the current SBA duplication of benefits policy received what Restore calls a “zero award,” meaning no state aid. That happened, Forbes said, because their approved SBA loan amount was greater than their cost of repair.
Other households closed on an SBA loan but never took the money, primarily because homeowners didn't think they could pay it back, Forbes said. He said these families haven't gotten any federal help besides FEMA individual assistance dollars that went out shortly after the floods.
U.S. Rep. Steve Scalise, R-Metairie, the House majority whip, said he looked forward to "leading the effort to get this bill passed through the House next week and to the President’s desk as soon as possible.”
"The flawed ‘duplication of benefits’ rule essentially penalized people for playing by the rules and trying to get their lives back together quickly," Scalise said in a statement.