Cashing Out Government Relief for Victims of Natural Disasters
by Jeremy Leandrew Brown
ABSTRACT
Hurricane Katrina was one of the most costly U.S. natural disasters of all time. Even
though the attention of many people was focused only on Katrina, the overall 2005 hurricane
season was abnormally costly. Including the storms of 2004, those two seasons accounted for
seven of the twelve most costly natural disasters in American history. Taking into account the
unpredictability of nature, there should be a way in which the government can protect and assist
its citizens, if not during such disasters, then, certainly, immediately after them, and in a way that
is economically feasible.
Even though the government has spent a substantial amount of money on relief efforts for
Katrina, it has faced an uphill battle that has polarized many segments of the country. If priorities
are considered in the equation, one issue that rises to the top of the rest is the welfare of the
people affected by such disasters. In analyzing what should be done about the people, a main
concern involves the kind of financial relief that the government should provide to victims of
natural disasters.
In the days after Katrina, it was understandable that the government provided temporary
shelter, clothing, food, and stipends. However it begins to be problematic, months down the line,
when the government is still providing the same services. What should the government’s relief
efforts for people affected by natural disasters be, and how long should they last? In reference to
the type of relief that should be provided, the U.S. Unemployment Compensation program and
Temporary Aid for Needy Families program provide viable models. Instead of giving people
temporary housing or trailers, the government should provide cash, and leave the decision in
terms of what people want to do with the money in their hands. That is economically efficient
because it allows the needs of people to be provided for on an individual basis, instead of the
government deciding what needs should be fulfilled. Cashing out benefits is a more viable
solution.
The proposed plan will focus government resources in a practical way, instead of
throwing resources at people with no foreseeable effect, as is presently done. The first priority in
terms of a natural disaster is the people who are affected. The proposed plan will serve to allow
individuals more options to improve their quality of life after such disasters.
1
Table of Contents
ABSTRACT ....................................................................................................................................... 1
INTRODUCTION ............................................................................................................................... 2
HISTORY OF NATURAL DISASTER RELIEF EFFORTS ..................................................................... 3
THE STAFFORD ACT...................................................................................................................... 4
FEDERAL EMERGENCY MANAGEMENT AGENCY ........................................................................... 5
HURRICANE KATRINA ................................................................................................................... 6
GOVERNMENT EFFORTS DURING HURRICANE KATRINA................................................................ 6
PROBLEMS WITH KATRINA RELIEF EFFORTS ................................................................................ 7
THE PEOPLE AFFECTED BY NATURAL DISASTERS ....................................................................... 9
CONCENTRATING ON THE NEEDS OF PEOPLE................................................................................. 9
CURRENT SYSTEM (DISASTER UNEMPLOYMENT ASSISTANCE) ................................................... 11
MODEL SYSTEMS ........................................................................................................................ 12
Unemployment Compensation Program ................................................................................ 13
Temporary Assistance for Needy Families............................................................................. 14
PROPOSED SOLUTION ................................................................................................................... 16
INITIAL PERIOD ........................................................................................................................... 17
TEMPORARY ADDITIONAL ASSISTANCE (PROPOSED PLAN) ........................................................ 18
SOCIAL BENEFIT OF CASH PAYMENTS ........................................................................................ 26
PROBLEMS THAT MAY ARISE FROM THE PROPOSED SOLUTION.................................................. 27
CONCLUSION................................................................................................................................. 28
INTRODUCTION
Millions of Americans around the country tuned in on their televisions as the events of
Hurricane Katrina unfolded in 2005. As cameras rolled, images of the thousands of people
stranded on rooftops and gathered at stadiums, as well as the overall chaos of the situation,
created a lasting impression on the American psyche. Even though headlines gravitated towards
only Katrina, the entire 2005 hurricane season was abnormally costly. Along with the 2004
hurricane season, those two hurricane seasons accounted for seven of the twelve most costly
natural disasters in American history. Nature’s destructiveness has been a constant enemy of the
United States since the Pilgrims landed on Plymouth Rock. As the country has become more
2
populated and urbanized, the destructiveness of nature has not only become more caustic, but
more costly. Knowing nature’s volatility, the government must find an economically feasible way
to protect its citizens, if not during a disaster, then at least in the days and months following.
The U.S. government has spent a substantial amount of money on relief efforts for
Katrina, but the problems that have been exposed during those efforts have polarized many
segments of the country and they continue to burden taxpayers. One issue that rises to the top
involves the kind of financial relief that the government should provide victims of natural
disasters. In the days after Katrina, it was understandable that the government provided
temporary shelter, clothing, food, and stipends. However, it begins to be problematic when three
or four months down the line the government is still providing the same services. What should
the government’s relief effort for people affected by natural disasters entail, and how should it be
provided?
A benefit system that does not under-compensate people affected by natural disasters but,
at the same time, does not promote dependency or exhaust government resources should be in
place. Instead of providing temporary assistance to victims of natural disasters, the government
should cash out these benefits in a system that is a hybrid of the Unemployment Compensation
Program (UC) and the Temporary Assistance for Needy Families Program (TANF) to guarantee
that economic justice will be administered to those who are affected by natural disasters, while
ensuring that government resources will not be exhausted. The system should be an adequate
remedy for both a small number of individuals affected by a tornado in Oklahoma and a large
number affected by a hurricane in New Orleans.
HISTORY OF NATURAL DISASTER RELIEF EFFORTS
3
THE STAFFORD ACT
“The Robert T. Stafford Disaster Relief and Emergency Relief Act (Stafford Act)
gives the President the authority to issue a major disaster declaration after state and local
government resources have been overwhelmed by a natural catastrophe.”1 It is the principal legal
authority for providing assistance to state and local governments after catastrophic events.
“Under the Stafford Act, the President’s declaration of a major disaster provides the full range of
disaster assistance including, but is not limited to, the repair, replacement, or reconstruction of
public and non-profit facilities, cash grants for the personal needs of victims, housing, and
unemployment assistance related to job losses caused by the disaster.”2
Disaster relief and emergency assistance are provided to state and local governments
under the Stafford Act only if the President of the United States declares either a major disaster
or an emergency. The Stafford Act defines two types of declarations, and specifies the assistance
programs that are triggered by each: major disasters and emergency declarations. There are
several critical distinctions between major declarations and emergency declarations. Major
disaster declarations do not apply to certain non-natural events. “By statute, a non-natural event
can be a major disaster only if caused by a fire, flood, or explosion. Also, the President is not
authorized to declare a major disaster unless the governor of an affected state requests the
declaration. By contrast, the President is authorized to declare an emergency without waiting for
the request of a governor.”3
1
Robert T. Stafford Disaster Relief and Emergency Relief Act, 42 U.S.C. § 5122 at 2 (2007).
Id.
3
Ernest B. Abbott, Representing Local Governments in Catastrophic Events: DHS/FEMA Response and Recovery
Issues. (Department of Homeland Security, Federal Emergency Management Agency) (Recent Developments in
Homeland Security and Emergency Management), 37.3 URB. LAW. 467,467 (2007).
2
4
FEDERAL EMERGENCY MANAGEMENT AGENCY
The Federal Emergency Management Agency (FEMA) oversees natural disaster relief
efforts. “FEMA’s primary mission is to reduce the loss of life and property and protect the nation
from all hazards, including natural disasters and acts of terrorism and other man-made
disasters.”4 However, since Hurricane Katrina, FEMA and its mission have come under public
scrutiny. Even though FEMA’s main objective is to pre-disaster mitigation, by giving incentives
communities and individuals to prepare for disasters, FEMA must deal with the fact that many
institutions and people fail to prepare. As disaster strikes, as it did in the Gulf Coast region, the
media and politicians then ask FEMA to provide assistance to those who were most unprepared
for and most affected by the disaster. “FEMA is then blamed for any and all inefficiencies, just as
the agency has been blamed for most of the problems concerning the aid given to people affected
by Hurricane Katrina.” 5 The question then becomes what are FEMA’s obligations and
responsibilities?
When federal emergency response teams arrive at a disaster scene, they commit to
providing all of the assistance that they can, consistent with existing laws and policies, in order to
meet emergency needs and to help communities and individuals to recover. However, this
assistance can only be as generous as is authorized by statute and regulations. Laws and rules
prohibit the agency from providing assistance where some physical or financial mitigation rules
have been violated, and all grants are subject to subsequent audit. While the statutes, regulations,
and FEMA’s published polices set forth relatively clear criteria for awarding disaster assistance
grants, FEMA views all grants made under the public assistance to be discretionary. As a result,
4
Federal Emergency Management Agency, http://www.fema.gov/ (last visited November 23, 2007).
5
any applicant who is disappointed by a denial of assistance will have considerable difficulty
obtaining a judicial review of this determination.6
HURRICANE KATRINA
Hurricane Katrina devastated the Gulf Coast of the United States. Along with
Hurricane Rita, which followed a month later, the two hurricanes created one of the most
destructive hurricane seasons ever recorded in the nation’s history. “The storms affected 90,000
square miles, including flooding over 80 percent of New Orleans. More than 1.5 million people
were directly affected and more than 800,000 citizens were forced to live outside of their homes
for extended periods of time making it the largest displacement of people in the United States
since the great Dust Bowl migrations of the 1930s.” 7 As the days went by, government scrutiny
increased and many people questioned the apparently slow efforts of the government, as
Americans watch people stranded in the disaster-stricken area.
GOVERNMENT EFFORTS DURING HURRICANE KATRINA
The initial periods after Hurricanes Katrina and Rita were the subject of much
controversy. Even though many people were dissatisfied with the role that the government played
in the relief efforts, the federal government did incur much of the cost of those initial relief
efforts. “The General Services Administration helped FEMA to obtain more than $1 billion in
supplies, equipment, and services for the relief efforts. More than 85,000 families were provided
5
Abbott, supra note 18
Id.
7
Department of Homeland Security, Hurricane Katrina: What Government is Doing,
http://www.dhs.gov/xprepresp/programs/gc_1188338502848.shtm (last visited October 26, 2007).
6
6
with hotel and motel rooms; 850,000 families were provided temporary housing assistance; and
119,000 manufactured homes were used by displaced families.”8
As of July 2007, Congress and the President have provided a total of $94.8 billion in
budget authority to multiple federal agencies for cleanup, rebuilding, and migration efforts
related to the hurricanes. In addition to that amount, some agencies used portions of their annual
appropriations to respond to the disasters. However, because most of those agencies are not
required to provide separate accountings of such spending, the Congressional Budget Office
(CBO) has been unable to track those funds.9
Even though substantial amounts of money were allocated in response to the 2005
hurricane season, the problems associated with the disasters have not been solved. In fact, some
problems seem to have only gotten worse.
PROBLEMS WITH KATRINA RELIEF EFFORTS
The government is still dealing with a plethora of issues, including repairing
infrastructure, providing housing, assisting businesses, assisting evacuees, and even addressing
insurance claims concerning the effects of Katrina. “Since Hurricanes Katrina and Rita destroyed
more than 200,000 homes in Louisiana, the state has focused its immediate funding priorities on
housing and infrastructure repairs.” 10 However, the region’s economy and the recovery of
8
Id.
Congressional Budget Office, The Federal Government’s Spending and Tax Actions in Response to the 2005 Gulf
Coast Hurricanes, 5 (August 1, 2007) (on file with author), http://www.cbo.gov/ftpdocs/85xx/doc8514/08-07Hurricanes_Letter.pdf.
10
The Progress of Louisiana’s Recovery after Hurricane Katrina and Rita, 2007: Hearing before the U.S. Senate
Subcomm. on Response and Recovery of the Senate Comm. of Homeland Security and Governmental Affairs, 110th
Congress at 2 (2007) (statement of Walter Leger, Member, Board of the Louisiana Recovery Authority).
9
7
communities will require additional assistance as everyone struggles to rebuild the New Orleans
and surrounding communities.
“Even though the region’s housing market has stabilized during the past couple of years,
especially in the suburban parishes that received less damage than New Orleans, home prices and
rent prices remain high. The home buying frenzy that took place in the region during the year
after Katrina has slowed. Many properties that are up for sale may be in need of repair and are
not immediately inhabitable.”11
Katrina has also affected the insurance market. “The best estimates suggest that the
private insurance industry will pay out approximately $50 billion for Katrina alone, making it the
single costliest insurer payout in U.S. history. Some insurers are no longer selling new property
policies to customers in hurricane-exposed areas, while rates and deductibles are rising for all of
those who can obtain coverage. Reinsurance rates, in particular, appear to have soared.”12
In the business sector, “more than 81,000 businesses were affected by the storms in the
most impacted parishes. There are 4,200 fewer business establishments in the hardest hit parishes
today than there were prior to the storm.”13
The displacement of so many people also has had a great impact on local governments.
For example, “in New Orleans alone, the loss of population and the tax base has forced the city
to reduce its Contracts Department from 35 employees before the storm to just two employees
11
Amy Liu & Allison Plyer, A Review of Key Indicators of Recovery Two Years after Katrina, The Brookings
Institution Metropolitan Policy Program & Greater New Orleans Community Data Center 1 (August 13,2007),
http://www.gnocdc.org/KI/KatrinaIndex.pdf .
12
Robert E. Litan, Preparing for Future “Katrina’s”, 2 (March 2006),
http://www.brookings.edu/comm/policybriefs/pb150.pdf
13
Leger supra note 10
8
today.”14 The hardest hit areas no longer have the capacity or financial capability to rapidly deal
with the contracts, planning, and other responsibilities that the recovery requires.
The rebuilding process in New Orleans has left many public and private organizations
struggling to prioritize the many issues concerning the effects of Katrina. “Loosely defined
bureaucratic organizations are in constant battle about who controls what, while residents,
planners, and politicians debate what to build, when to build, and how to pay for it.”15
THE PEOPLE AFFECTED BY NATURAL DISASTERS
CONCENTRATING ON THE NEEDS OF PEOPLE
Hurricane Katrina has exposed many problems with bureaucracy pulling the
government in various ways and, all the while, continuing to burden taxpayers. The immediate
well-being of the people affected by hurricanes is, of course, the first priority. When attempting
to solve problems that have been exposed, the responsibility of the government to provide
financial relief to victims of natural disasters must be addressed.
More than 1.3 million people were evacuated during the period after the storms,
and approximately 250,000 are still unable to return to their homes due to damage. 16 Many
evacuees have expressed their resolve not to return to New Orleans.
In 2007, two years after Hurricanes Katrina and Rita, there are still more than 107,000
households across the United States receiving temporary housing assistance from FEMA because
of the disasters.17
14
Id.
Amy Westfeldt, NYC’s Lessons for New Orleans Recovery, September 8, 2007,
http://ap.google.com/article/ALeqM5j7hWGosZpogVbZ1A_MsVyubXs1Q.
16
Leger supra 10
17
Congressional Budget Office, The Federal Government’s Spending and Tax Actions in Response to the 2005 Gulf
15
9
Many people displaced by the hurricanes moved to Houston or Baton Rouge. “In 2006,
some 50,000 evacuees were believed to still remain in Baton Rouge. Meanwhile, more than
250,000 Katrina evacuees live in Texas, with 111,000 in Houston alone. That year, almost 60
percent were of those evacuees in Houston were jobless, and 40 percent were living on less than
$500 per month.” 18 The vast majority of the Katrina evacuees in Houston were supported by
money from the federal government.
Even though the government has supported people affected by the hurricanes for the past
two years, the data shows that such efforts are becoming costly and, at the same time, are
somewhat ineffective. For example, Table 1 shows that, in 2006, a year after Hurricane Katrina,
substantial money was still being given to evacuees.19 This cost comes not from only FEMA, but
also from the city of Houston, where the bulk of evacuees fled.
Table 1
City of Houston: Katrina Aid & Recovery Expenses and FEMA Obligated Funds
(as of August 4, 2006)
Total
Expense
FEMA
Obligated
Funds
% of Expenses to
be Reimbursed
by FEMA
$274,323,407
$274,323,407
100%
Housing (Rent, Utilities, Furnishing,
Management and Housing Services)
Total Housing
City Personnel
Straight Time (All Employees)
$341,886
$341,886
100%
Overtime (Police Dept.)
$9,417,606
$5,488,768
58%
Overtime (Fire Dept.)
$3,446,180
$1,127,005
33%
$148,137
$148,137
100%
Overtime (All other Employees)
Coast Hurricanes, 3 (August 1,2007) available at http://www.cbo.gov/ftpdocs/85xx/doc8514/08-07Hurricanes_Letter.pdf.
18
Wade Goodwyn, Houston Holds Hope, Despair for Katrina Evacuees, National Public Radio, August 27, 2007
www.npr.org/templates/story/story/php?storyID=13979111.
19
City of Houston Weekly Financial Report, www.npr.org/templates/commonn/image_enlargement.php?imagr
ResID= 5731921 (August 4, 2006).
10
Non-Housing Expenses (Materials, Equipment, Rentals, and Services)
Contract Legal Services
All other Non-Housing Expenses
Total Expenses
$25,000
$0
0%
$7,872,317
$7,872,317
100%
$295,574,534
$289,301,521
98%
In 2007, 90,000 evacuees still live in Houston. “Ruqayya Gibson, the Katrina aid director
for Action CDC, a privately-funded agency, says that, two years after the hurricane, there are still
major obstacles in reference to helping the evacuees who live in Houston. She further
emphasized her concern by citing the example of a single black woman from Louisiana who was
working at Wal-Mart in New Orleans who cannot find that same type of job in Houston.”20 This
illustrates the frustration of the evacuees who are in Houston but can’t find a job but who can’t
move because they have no money to do so.
Many also believe that the large concentration of evacuees has caused crime to escalate in
Houston. “Arrests among Katrina evacuees have cost Harris County’s criminal justice system
more than $18 million to date.”21
CURRENT SYSTEM (DISASTER UNEMPLOYMENT ASSISTANCE)
The Disaster Unemployment Assistance (DUA) Program is an avenue to help people who
have been economically impacted by natural disasters. “The DUA Program provides monetary
assistance to individuals who are unemployed as a direct result of major disasters and who are
20
Goodwyn supra note 18.
Kris Axtman, With Bulk of Katrina Evacuees, Texans Begin to Feel Burden, Christian Science Monitor, August
22, 2006, www.csmonitor.com/2006/0822/p04s01-usec.html
21
11
not eligible for regular unemployment compensation benefits.”22 The program is funded through
FEMA.
Even though the DUA Program is a practical solution, its use in subsequent natural
disasters remains problematic, especially in disasters with the ferocity of Hurricane Katrina. One
of the problems of the DUA Program is that it helps only a limited portion of those affected by a
disaster: those unemployed as a direct result of the major disaster.
A major disaster includes physical damage or destruction of a place of employment,
physical inaccessibility of a place of employment due to its closure by the federal government in
immediate response to the disaster, or lack of work or loss of revenues, provided that, prior to the
disaster, the employer (or the business in the case of a self-employed individual) received at least
a majority of its revenue or income from an entity that was either damaged, destroyed, or closed
by the federal government in immediate response to the disaster.23
MODEL SYSTEMS
The model proposed here is based on a combination of the current Unemployment
Compensation program and the Temporary Assistance for Needy Families program, and it
provides a framework for a viable solution in terms of how to provide relief to individuals. The
goals of the Unemployment Compensation Program are similar to those that the government
wants to implement in reference to relief efforts in natural disasters. This includes providing
temporary and partial wage replacement to involuntarily unemployed workers who have been
recently employed and helping to stabilize the economy during recessions. However, instead of
22
U.S. Department of Labor, http://workforcesecurity.doleta.gov/unemploy/disaster.asp (last visited November 23,
2007).
12
stabilizing the economy during recessions, the proposed disaster system would help to stabilize
the economy during natural disasters. TANF provides a template for work incentives for people
who are affected by natural disasters. These incentives allow people to be productive and to
gradually get off government subsidies without suffering much harm. The model system would
provide a 6-month to one-year window during which people are able to receive money from the
government to help them to get back on their feet. Instead of giving people temporary housing or
trailers, the plan allows for the government to provide people with cash and allow them to decide
what to do with the money and where to live.
Unemployment Compensation Program
“The Social Security Act of 1935 created the Federal-State Unemployment Compensation
Program. The U.S. Department of Labor oversees the system, but each state administers its own
program. In general, the states set weekly benefit amounts as a fraction of the eligible
individual’s average weekly wage, up to some state-determined maximum. The total maximum
duration available nationwide is 39 weeks. The regular state programs usually provide up to 26
weeks of coverage.” 24
“The Temporary Extended Unemployment Compensation Act of 2002 provides up to 13
weeks of additional federally funded UC benefits to individuals in all states who exhaust their
regular UC benefits.”25
23
Julie Whittaker, Disaster Unemployment Assistance, Congressional Research Report Service for
Congress, 14 (June 2, 2006), http://digital.library.unt.edu/govdocs/crs/permalink/meta-crs-10158:1.
24
U.S. Department of Labor, http://workforcesecurity.doleta.gov/unemploy/uifactsheet.asp, (last visited November
25, 2007).
25
Id.
13
“State-determined weekly benefit amounts generally replace between 50 to 70 percent of
the individual’s average weekly pretax wage, up to a state-determined maximum. The average
weekly wage is often calculated only from the calendar quarter in the base year in which the
claimant’s wages were highest.”26
Temporary Assistance for Needy Families
Temporary Assistance for Needy Families is a block grant program that is administered
by the Office of Family Assistance. It helps to place recipients into jobs and it turns welfare into
a program of temporary assistance. “TANF also requires that the recipient work as soon as he or
she is job-ready or no later than two years after first receiving assistance and failure to adhere to
the work requirements can result in a reduction or termination of benefits to the family.”27
Activities that count toward a state’s participation rates include unsubsidized or subsidized
employment, on-the-job training, work experience, and providing child care services.
The program has been criticized because, in most states, families lose eligibility for
TANF cash assistance when they reach income levels that are well below the poverty line (and
almost no state has eligibility thresholds above the poverty line). “However, research has shown
that the policy of requiring participants to be employed in order to be eligible to receive benefits
improves employment outcomes for families and serves as an effective incentive for families to
find and keep jobs.”28 This research has also demonstrated that these policies can reduce poverty
by providing income assistance on top of the earnings that families receive when they work.
26
Id.
U.S. Department of Health & Human Services, Administration of Children & Families, Office of Family
Assistance, at www.acf.hhs.gov/programs/ofa. (last visited on November 29,2007).
28
Liz Schott, Using TANF or MOE Funds to Provide Supplemental Assistance to Low-Income Working Families,
Center On Budget and Policy Priorities, (July 23, 2007), http://www.cbpp.org/5-24-07tanf.htm.
27
14
Some State programs within the states’ TANF programs that have been economically
more positive in terms of providing economic justice to recipients which will be incorporated in
the proposal include periodic bonus payments to employed TANF leavers, work support
payments, and eligibility for the Earned Income Tax Credit.
Some states provide lump-sum, periodic incentive or bonus payments to help the families
of individuals who have left TANF for work to remain employed. Under this bonus approach,
when a family member finds a job, and no longer needs assistance from TANF, he or she
receives a bonus that helps him or her to make ends meet, and it provides an incentive for the
individual to continue working. “Since individuals are most likely to lose their jobs in the first
few months after leaving TANF, providing additional financial support during this crucial period
may help to prevent those individuals from quickly returning to the TANF caseload.”29
“A state can also provide ongoing supports to employed families including families of
individuals who have left the TANF caseload that, while funded with TANF dollars, are not
considered “assistance.” Because transportation and other work supports for individuals who are
employed are not considered assistance under the federal TANF rules, a state could provide a
payment designed as a work support on a monthly basis, and not trigger TANF time limits or
child support provisions.”30
Some 20 states provide a state Earned Income Tax Credit, with 16 of these providing
fundable credit under which a payment is made to the family. Refundable state EITC
29
30
Id. at 8
Id.
15
expenditures are a permissible use of TANF funds and are considered “non-assistance.” In 2005,
10 states funded some portion of their refundable EITCs with TANF.31
PROPOSED SOLUTION
Instead of the current trend of subsidizing rent and providing temporary housing, food
stamps, and other handouts indefinitely, the government should provide individuals with
temporary assistance and then the cash value of these provisions, and allow the individual to
choose his or her form of assistance.
To understand why giving people cash payments is a better system of assistance than
giving out goods; one must consider the dilemma with the Food Stamp Program. The federal
government fully finances food stamp benefits, and reimburses one-half of the state’s
administrative expenses. Food stamp benefits are dependent on a household’s size, monthly
income, and a maximum monthly benefit level. “In 2005, the Food Stamp Program served almost
26 million Americans, and the average monthly food stamp benefit was $93 per person.
Historically, food stamp benefits were issued as booklets of coupons; however, some 80 percent
of food stamp benefits are now delivered through an electronic benefit transfer system, in which
recipients use debit-like cards to pay for their food at the checkout counters of authorized
stores.”32
However, a rising concern among those who receive food stamps is nutrition. According
to a study by the Department of Agriculture, food stamp usage raises calorie consumption by as
much as 10 percent more than if the recipients were given cash. Unused food stamps cannot be
turned in for cash, and, instead, are often used for food that recipients would not otherwise buy.
31
Id.
16
A plausible solution, taken from the Department of Agriculture study, is to give people cash
instead of food stamps, and let them make their own decisions about how much to buy. Cashing
out food stamps is more convenient for the poor and does not result in unhealthful diets or
mismanagement of family finances.33
This same principal goes into considering cash-based relief for people affected by natural
disasters. Instead of creating another food stamp dilemma, give recipients individual cash
assistance, and let them make their own decisions as to how to spend the money. This gives the
person the buying power, instead of the government.
Two models that are also relevant to the proposed policy consideration are the
Unemployment Compensation Program and the Temporary Assistance for Needy Families
(TANF) Program. Even though the DUA is already an established way for people affected by
natural disasters to receive cash benefits, it is only a way in which to supplement the
unemployment compensation program that exists. A separate program, founded on the principles
of the Unemployment Compensation and TANF models, would be a practical solution. It would
address the concerns of people who feel burdened by the continuous aid to victims of natural
disasters, and people who are concerned about those people who are dependent on government
subsidies and what happens to them when those subsidies run out.
INITIAL PERIOD
The proposed plan is not directed towards the initial relief for natural disasters.
The policies are geared more towards efforts used 3 to 6 months after a disaster. It is
32
Jon Forman, Making America Work, 76 (2006).
Douglas J. Besharov, We’re Feeding the Poor as if They’re Starving, American Enterprise Institute for Public
Policy Research, December 1, 2002, http://www.aei.org/publications/pubID.31/pub_detail.asp,
33
17
understandable that during the chaotic first few days after a natural disaster, the government’s
role should be to provide food, clothing, shelter, and stability. Individuals also need time to make
sure their families are safe from any harm.
A 3 to 6 month period, depending the nature of the disaster, allows all parties involved to
evaluate the situation. This period would allow the government to evacuate people and secure
their health and safety, and it allows the people to settle down from the upheaval that these
situations bring.
The initial period also allows the government to determine the extent to which the
proposed plan will be utilized. In a situation where it is less likely that people may return to their
normal routines, because, then the proposed system will be used to curb such problems. For
example, there are differences between the California wild fires and Hurricane Katrina and how
victims of each disaster would be helped under the proposed system in mind. The former is a
situation in which it would have been reasonable for citizens impacted by the disaster to recover
with assistance given only during the initial period. However, the latter demonstrates a situation
in which the problems involving displaced people were too vast so that there is a need for the
proposed plan to be initiated.
The initial period not only helps to remedy short term problems arising from natural
disasters, but also it helps government officials to plan long-term initiatives in terms of battling
the subsequent problems.
TEMPORARY ADDITIONAL ASSISTANCE (PROPOSED PLAN)
Two years after Hurricane Katrina, many people are still receiving government subsidies
in various forms. The proposed model is a way to curb such spending. It will move people off
18
government aid and, at the same time, allow those who have been affected by natural disasters to
be productive citizens.
Before the initial period is over, people will be given notice of the upcoming changes in
the relief that the government will provide. In that way, people will be aware of their options,
which will help in terms of turnover. Checks will be distributed to the heads of households and
amounts will be adjusted for two parent families and the number of dependents. If a person
decides to move in order to look for work, then he or she would have to give timely notice of the
move and provide an address so the government would be able to send them checks.
Unlike the Unemployment Compensation model and TANF, benefits will not be based on
past work history, but on current conditions, which may include the severity of the disaster,
damage to the area, and number of dependents that affected families have. By looking at these
criteria, it will be easier for the government to allocate resources in a timely manner. Another
fundamental difference from the proposed model for Temporary Additional Assistance (TAA)
and the UC and TANF models is that, in the UC and TANF models, the federal government
allocates resources to the states and allows them to set up the program, making programs
different in each state. That can be problematic because, as Hurricane Katrina demonstrated, the
extensiveness of some natural disasters couple with the size of some states forces people to move
to different states which gives people the motivation to move to a small number of locations. To
solve this problem through TAA, however, the national government will allocate the resources
through FEMA or some other agency. Because FEMA might have a tough time distributing
checks, benefits could be paid through all state systems of the UC, through Social Security, or
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through the IRS system. No matter what agency distributes the checks, the uniformity of the
system will allow people who, in reference to the Katrina refugees, migrate as far as to Alaska
the same benefits as those who stay in Louisiana.
The attribute of the Unemployment Compensation model that is most beneficial to the
proposed model is its structure. This includes the amount and the temporary duration of the
benefits. Even though both the amount and duration can be extended by the legislature, the ideal
amount is one that is equivalent to the resources that are currently given by the government to aid
Katrina victims. This includes food, clothing, rent, utilities, furnishings, management and
housing services, materials, and equipment rentals. However, instead of designating the places
where people should live, after the first couple of months of emergency assistance, giving people
the cash equivalent allows them to decide on their own and may lead them to other places across
the country with the goal of finding work. Like the UC, the proposed plan will allows for
benefits up to a maximum of 39 weeks, which can be extended. However, given the severity of
disasters like Hurricane Katrina, allowing people to receive benefits for up to a year may be ideal.
This duration will allow people time to find areas that are good fits for their families; in addition,
it is economically reasonable and it will allow people time to look for jobs. This time frame
would also allow the government to concentrate on other areas that were impacted by the natural
disaster, including rebuilding communities. Meanwhile, those who would like to, one day, return
to the affected communities will, at least, be self-sufficient while waiting to return.
Under the UC, the state-determined weekly benefit amounts are generally pre-tax wages
up to some state-determined maximum. The average weekly wage is often calculated only from
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the calendar quarter in the base year of the claimant’s average weekly pre-tax wages, with high
wage earners receiving lower wage replacement rates. Unlike the UC plan, the calculation of
determined benefits under TAA will not be based on income during prior work experience.
Weekly benefits will be calculated by the various indicators, including dependents, one or dual
income, and other such factors.
The Health and Human Services poverty guidelines will be a foundation to be used to
calculate amounts that individuals and households will be receiving under the proposed program.
“The poverty guidelines are a simplified version of the federal poverty threshold for
administrative purposes; for instance, financial eligibility for certain federal programs may be
used.”34
Table 2
2007 Health and Human Services Poverty Guidelines35
Annual income of
Persons in household
Poverty line
Weekly income
1
$ 10,210.00
196.35
2
13,690.00
263.27
3
17,170.00
330.19
4
20,650.00
397.12
5
24,130.00
464.04
6
27,610.00
530.96
7
31,090.00
597.88
8
34,570.00
664.81
for each additional person, add
3,480.00
66.92
With the poverty guidelines as a proxy, the basic benefit that people will receive is based
on family size. Table 2 demonstrates that, depending on the size of the family, there will be
34
U.S. Department of Health and Human Services, http://aspe.hhs.gov/poverty/07poverty.shtml (last visited
November 25, 2007).
35
Federal Register, Vol. 72, No. 15 at 3147,3148 (January 24, 2007).
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additional money that the family will be given, which is consistent with the poverty guidelines. It
may be as much as an additional $3,480 for each additional person.
However, instead of giving individuals money that is equivalent to the poverty guidelines,
it is more than likely that legislature will compromise on an amount that will be less.
Initially, people will be given a lump sum that will help them to transition from the initial
period of tangible benefits to that of the monetary benefits of the proposed plan. After the initial
lump sum, the monetary benefit will level off. People may also have the option of FEMA being
able to still rent buildings, but just charging rent as an offset against the monthly benefits. Table
3 provides a range of monetary benefits that households can receive, with the poverty guidelines
as the basis. For instance, if it was decided that benefits would be set at an amount that was 65%
of the poverty line, then the potential weekly benefit that the family of four would be around
$258 a week.
Table 3
Theoretical Amounts Payable to Families
Persons in household
1
2
3
4
5
6
7
8
for each additional
person, add
65% of poverty
line
$6,636.50
$8,898.50
$11,160.50
$13,422.50
$15,684.50
$17,946.50
$20,208.50
$22,470.50
Weekly
income
$127.63
$171.13
$214.63
$258.13
$301.63
$345.13
$388.63
$432.13
85% of
poverty line
$8,678.50
$11,636.50
$14,594.50
$17,552.50
$20,510.50
$23,468.50
$26,426.50
$29,384.50
Weekly
income
$166.89
$223.78
$280.66
$337.55
$394.43
$451.32
$508.20
$565.09
$2,262.00
$43.50
$2,958.00
$56.88
The incentives to work found in TANF are the guiding principles that are incorporated in
the TAA. TANF promotes an income supplement if a person finds a job within certain period of
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time. Research has shown that income supplements are an effective work incentive, and the
combination of increased earnings and increased assistance reduces poverty.
Commenting on two decades of research on income supplement programs in the United
States and Canada, Manpower Demonstration Research Corporation (MDRC) president Gordon
Berlin concluded that earnings supplement policies increase the range of options that
policymakers have to encourage work and combat poverty. Indeed, they are the only policies
consistently to have had positive effects on both work and income constantly. A 2005 evaluation
by MDRC of four income supplement programs in the United States and Canada found that all
four increased employment rates and earnings and reduced the extent and depth of poverty.
Earnings supplements were particularly effective at improving employment outcomes for the
most disadvantaged participants: longer-term welfare recipient with neither recent work
experience nor not a high school diploma.36
Using the states’ benefits programs under TANF will help to resolve how work incentives
are being calculated and administered. The amount of the benefit should be something that
actually helps a family to meet basic needs, supplement earnings, and for families leaving the
program, ease the transition from the program periods to work. The program will be a
combination of providing different benefit amounts for different months by stepping down the
basic benefit over time and boosting the benefit to provide an additional bonus when certain
milestones are met.
“In Utah, for example, under their TANF program, an amount equal to a full TANF grant
for the first two months and 50 percent of the grant amount for the third month is provided.
23
Similarly, the Vermont law provides a higher benefit ($100 a month) for the first six-month
period and a reduced benefit ($50 a month) for the second six-month period.” 37 In the TAA,
there will be a systematic reduction of the basic benefit that each household will receive. The
proposed plan will decrease at the 6 month mark in a feasible range from somewhere between 30
to 60%. The reduction is only for the base benefit that each household receives and does not
eliminate any bonus that is received, if certain incentives are met.
Also, the program will provide additional periodic bonus payments. “Arkansas provides
additional bonuses when job retention targets are met, including a $400 bonus after meeting the
federal work participation requirements for three consecutive months and a $600 bonus after an
additional six consecutive months of meeting the federal work participation requirements.
Arkansas also provides a Work Pays exit bonus of $1,200 when income exceeds the federal
poverty level.”38 “Washington State is proposing to provide periodic additional bonus payments
tied to actions by the employed individual, including participating in a career services assessment
and an employment planning interview.”39 The proposed plan can pull from the incentives that
the above-mention states provide. Under TAA, a person working 2 to 3 consecutive months or
receiving income that is above the poverty line will be able to receive a cash bonus which will be
a percentage of his or her TAA compensation.
Theoretically by decreasing benefits over time, the program provides a transition from
receipt of cash assistance to non-receipt and recognizes that many families face financial
36
Liz Schott, Ctr. on Budget and Policy Priorities, Using TANF or MOE Funds to Provide Supplemental Assistance
to Low-Income Working Families, 21 (July 23, 2007), http://www.cbpp.org/5-24-07tanf.htm.
37
Id. at 11.
38
Id at 11.
39
Id. at 11.
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difficulties in the first couple of months of employment, during which they may need to purchase
uniforms or other clothing, but may need to pay for child care up front, and begin to pay new
transportation costs. States that provide bonuses are trying to promote certain outcomes, such as
helping individuals to retain employment or participate in advanced planning. Unfortunately,
there is not a sufficient amount of research evidence to know which of the previously stated
approaches in terms of increasing or decreasing the benefit over time is better. 40
Another work incentive that is feasible is a tax credit. The Victims of Terrorism Tax
Relief Act of 2001 added § 139 to the Tax Code, which provides that gross income does not
include any amount received by an individual as a qualified disaster relief payment. Section
139(b) identifies receipts that are eligible for classification as qualified disaster relief payments:
payments for reasonable and necessary personal expenses resulting from a qualified disaster,
payments for reasonable and necessary repairs made to a personal residence or furnishings within
that are required because of a qualified disaster, payments made by a common carrier by reason
of death or physical injury stemming from a qualified disaster which did start, and payments
made by a governmental agency as relief for a qualified disaster.41 Extending this tax provision to
individuals who have found work within the time period of the program will act as an incentive
for people to work because it allows more income for the family, which would normally have
been taxed by the federal government. Not only does it provide incentives for people to work, but
it provides great incentives to hire people under the program.
40
Id. at 11.
Samuel A. Donaldson et.al., Federal Income Taxation of Individuals: Cases, Problems and Materials 346-347
American Casebook Series (2nd ed. 2007).
41
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Other incentives found in TANF that TAA could use include community services, jobs,
income subsidies, and hiring incentives for potential employers, as discussed above. However,
where TANF uses the money from welfare to create these incentives, the TAA would use the
money that FEMA spends to for Katrina evacuees.
SOCIAL BENEFIT OF CASH PAYMENTS
The proposed plan can curb many of the economic problems associated with natural
disasters such as Hurricane Katrina, and trickle down to other areas of concern which have
plagued the country. For example, the government is still giving housing subsidies to Katrina
evacuees, and two years after the disaster, people are heavily dependent on these subsidies
because work in the region in which they are living is scarce. Instead of paying people’s rent, the
government can give that money to individuals, which will free them to find employment in other
areas.
Another problem that will be solved by the implementation of the program involves the
high unemployment rate of people affected by natural disasters. In Houston, 60 percent of
evacuees were still unemployed a year after Hurricane Katrina. By giving people the freedom to
find employment, as well as incentives to work, the proposed plan will address this issue and
increase employment.
Another major problem in Houston was the crime that has been associated with the
evacuees of Hurricane Katrina. The evacuees ended up living in a concentrated area of the city,
which, in turn, spawned crime since many of the people who were forced to move to Houston
came from low-income neighborhoods. The same situation happened when poor blacks moved
north during the 1930s and 1940s. Many were forced to live in concentrated areas, which we
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know today as project housing. As people were forced to live in concentrated areas for longer
than the government intended, property values decreased and crime increased. The housing for
Katrina evacuees, just like the project housing of the 1930s and 1940s, was set up for only
temporary use. In fact, in Houston, the increase in crime since the hurricane is now known to the
police and the media as the “Katrina Effect.”
Under this proposal, the crime problem will be curbed to a degree because, instead of
forcing people to move to certain areas, creating high concentrations of people, the plan would
provide mobility to them. Instead of forcing people to stay in Houston because that is where the
government is providing subsidized housing, the government would give the money to the
person. The person is then afforded the freedom to travel to different areas to find work and
housing.
PROBLEMS THAT MAY ARISE FROM THE PROPOSED SOLUTION
If the government does its part in the initial stages of relief, then the amount of fraud will
be lessened. Further, since checks will be administered to households, the most important thing
that people should have, along with a name and a Social Security card, is an address at which
they can be found, no matter whether it is a house or a homeless shelter.
Even though there may be problems associated with the plan, the economic advantages
outweigh the potential problems. The program will allow individuals to get back on their feet in a
timely way and, at the same time, curb the substantial cost that the government incurs when it
provides relief over a long period of time.
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CONCLUSION
The proposed solution for people affected by natural disasters allows for economic
assistance to those individuals affected, while not burdening taxpayers. Using the Unemployment
Compensation and TANF models as foundations, the new model provides monetary assistance
from the government to people so that they may get back on their feet. Instead of giving people
temporary housing or trailers, the government should provide people with cash, and put the
decision of what to do with the money in the individual’s hands. In this way, the needs of people
are on an individual basis and, instead of the government deciding what needs should be
fulfilled, the individual will be able to make that decision.
The proposed plan will focus government resources in a practical way instead of as it is
now, under the current system which throws resources at people, with no foreseeable end. The
first priority after a natural disaster is safeguard those affected. The proposed model will help to
combat some of the problems that were associated with the aftermath of Hurricane Katrina. This
plan will serve to allow individuals more options to improve their quality of life after such
disasters.
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