Pamela Winston Olivia Golden An Urban Institute Kenneth ...

Federalism after Hurricane KatrinaHow Can Social Programs Respond to a Major Disaster?

After KATRINA

Pamela WinstonOlivia Golden

Kenneth FinegoldKim Rueben

Margery Austin TurnerStephen Zuckerman

An Urban InstituteProgram to Assess Changing Social Policies


After KATRINA

Pamela WinstonOlivia Golden

Kenneth FinegoldKim Rueben

Margery Austin TurnerStephen Zuckerman

An Urban InstituteProgram to Assess Changing Social Policies

Copyright © June 2006. The Urban Institute. All rights reserved. Except for short quotes, no part ofthis paper may be reproduced in any form or used in any form by any means, electronic or mechan-ical, including photocopying, recording, or by information storage or retrieval system, withoutwritten permission from the Urban Institute.

Assessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolutionof responsibility for social programs from the federal government to the states, focusing primarilyon health care, income security, employment and training programs, and social services. Researchersmonitor program changes and fiscal developments. Olivia Golden is the project director. In collab-oration with Child Trends, the project studies changes in family well-being. The project aims to pro-vide timely, nonpartisan information to inform public debate and to help state and localdecisionmakers carry out their new responsibilities more effectively.

The Assessing the New Federalism project is currently supported by The Annie E. Casey Foundation,The Robert Wood Johnson Foundation, the W. K. Kellogg Foundation, The John D. and CatherineT. MacArthur Foundation, and The Ford Foundation.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy ofpublic consideration. The views expressed are those of the authors and should not be attributed tothe Urban Institute, its trustees, its funders, or other authors in the series.

This paper was jointly supported by the Urban Institute’s After Katrina project and the Assessing theNew Federalism project, a multiyear effort to monitor and assess the devolution of social programsfrom the federal to the state and local levels. We would like to express our appreciation to the AnnieE. Casey Foundation for their support of Assessing the New Federalism and of this paper.

The authors thank Mark Greenberg, Susan Popkin, Elaine Ryan, and Wayne Vroman for theirthoughtful contributions and comments; Susan Kellam for her very helpful revisions of an earlierversion of this paper; and Rosa Maria Castañeda, Mindy Cohen, and Sonya Hoo for their invaluableresearch assistance. All errors are the responsibility of the authors.

About the Photographer

In addition to being an amateur photographer, Christian Kuffner works for WWOZ 90.7 FM, NewOrleans’ Jazz and Heritage Station, and plays accordion for a local band called the Zydepunks.

Christian is a native of Cuenca, Ecuador.

Programs that provide housing assistance, unemployment benefits, health care, andwelfare to low-income people and others in the United States have a complex struc-ture. Each program has a different mix of federal, state, and local roles in financing, indetermining who is eligible for benefits, and in deciding what those benefits will be.Even if this complexity can be juggled reasonably well for families, individuals, localgovernments, and states during normal times, however, Hurricane Katrina posed asevere test. This paper explores how these programs fared under the extreme condi-tions of the storm and its aftermath.

Hurricane Katrina dealt a severe blow to over a million people in Louisiana and thecoastal regions of Mississippi and had repercussions throughout the Gulf region.1

Low-income families and individuals in particular bore the brunt of the storm andflooding, losing their homes, jobs, and resources for recovery. Public programs hadserved many of these people before the hurricane hit, and many others became newlyeligible as a result of it. But the impact of Katrina strained the essential components ofthese programs, including their funding arrangements and eligibility and benefit stan-dards. It raised critical questions about the programs’ ability to respond swiftly andfairly to families and individuals affected by the storm, and about state and local gov-ernments’ incentives to respond effectively to victims’ needs.

In fundamental ways, social programs were not designed to respond readily to acrisis of Katrina’s dimensions. Emergency response mechanisms had to be developedand/or enacted immediately after the storm and flooding. For many months, greatuncertainty existed about states’ financial obligations, risks, and policy choices, andabout what programs would serve which evacuees, in what ways, and for how long.Over the past seven months, a number of program changes and emergency expansionshave been enacted through legislation or implemented through the executive branch.But on the whole, programs have provided limited and temporary aid to families andindividuals whose lives have been fundamentally disrupted by the storm. In addition,some federal response policies have not been communicated clearly to state and localgovernments and were not acted upon for many months, even as the 2006 hurricaneseason approached.

This paper examines four key programs that help individuals and families meet basicneeds and cope with crises: housing assistance provided through the U.S. Department

1


of Housing and Urban Development (HUD) and throughthe Federal Emergency Management Agency (FEMA);income replacement through Unemployment Insurance(UI) and Disaster Unemployment Assistance (DUA);health care through Medicaid; and cash assistancethrough Temporary Assistance for Needy Families(TANF). These are not the only important programs forlow-income people, but do represent essential nationalprograms with responsibility shared among federal, state,and local governments. (UI, Medicaid, and TANF areshared federal-state programs; housing assistance is feder-ally funded but administered by localities.)2

This paper first summarizes key findings from the pro-grams’ responses to Hurricane Katrina. It then describesthe central features of “normal” program structures priorto the disaster, identifies particular challenges Katrinaposed to these programs, explores the key policy responsesto the crisis within each program, and finally offers a rec-ommendation to enable more effective disaster responsesin the future.3

Key Findings on Housing Assistance,Income Replacement, Health Care, and Cash Assistance Programs● Cross-jurisdictional complexity. Hurricane Katrina

moved program recipients across state lines on a largeand sudden scale, but the programs’ varying eligibilityrules, funding structures, and fiscal incentives were notdesigned to accommodate such movement easily. Themassive involuntary population migration proved chal-lenging for many of these complex federal-state andfederal-local program arrangements, hindering rapid,effective, and planned response.

● Short-term solutions to a long-term problem. Pro-gram responses to Hurricane Katrina were better suitedto a short-term emergency than to the long-term dis-placement and requirements for rebuilding that Katrinacreated. For instance, the decision to use FEMA ratherthan HUD as the main housing agency for Katrina evac-uees suggests that the problem was defined largely asshort-term emergency assistance, rather than as meet-ing long-term needs created by the storm. Similarly,waivers and legislation that enable full federal fundingfor storm victims’ Medicaid coverage limit it to fivemonths, even though existing health conditions wors-ened for some people and others developed serious newhealth problems as a result of Katrina.

● Strained fiscal capacity. Prior to the storm, the Gulfstates’ fiscal capacity was among the lowest in the

nation, making them especially vulnerable. Particularlyfor Louisiana, the hurricane hit hard in multiple ways—it damaged or destroyed major sources of revenue,created huge new costs for recovery and reconstruction,and produced significant new needs for assistance. Formany programs, federal-state funding obligations meanthat these needs must be funded at least in part by thestates most severely hit. Exacerbating this fiscal stress isthe fact that states cannot operate at a budget deficit,although the federal government can.

● Lack of clarity. Uncertainty about the federal responseto the crisis—such as the availability and duration of fed-eral funding or the federal or state standards that applyto assistance programs—contributed to significant insta-bility and uncertainty for both hard-hit “home” statesand “host” states, such as Texas, that received significantnumbers of evacuees. It has also exacerbated the uncer-tainty individuals and families face.

● Need for an appropriate federal role. FEMA’s widelycriticized response to Hurricane Katrina certainly sug-gests that federal administration alone does not ensurethat individual, family, state, or local needs will be met.Still, federal involvement appears critical to ensuring aneffective response. For instance, the guarantee of federaldollars can allow host states to provide evacuees necessaryservices with less risk to their own financial position, andcan alleviate the enormous fiscal strain on hard-hit homestates. A speedier, more consistent federal response acrossprograms, with clearer and more timely federal guidanceto states and localities, would also go far in easing theburden on jurisdictions, individuals, and families.

Key Program Features During Normal OperationsThe housing assistance, income replacement, health care,and cash assistance programs described in this paper pro-vide basic support to people who meet their eligibilitycriteria. Tables 1, 2, and 3 detail program provisions—required state vs. federal financial contributions, benefitlevels, provisions (if any) for sudden changes in stateresources or program demand, and the populations theprogram served—and didn’t serve—prior to HurricaneKatrina. This section of the paper reviews the centralprogram features as they operate in noncrisis situations.

● Eligibility and benefit levels. Three of the four programsvary considerably by state in both eligibility criteria andlevel of benefits offered. States exercise significant dis-cretion in defining eligibility criteria for Unemployment

2 After Katrina

Fund

ing

stru

ctur

e

Fede

ral

Stat

e

Loca

l

Hou

sing

:FEM

Aan

dH

UD

Fully

fede

ral:

HU

Dpr

ovid

esfu

nds

prim

arily

byfo

rmul

afo

rpub

lican

das

sist

edre

ntal

hous

ing

proj

ects

and

hous

ing

vouc

hers

.FE

MA

hous

ing

aid

isal

sofu

llyfe

dera

llyfu

nded

.

Non

e.

Non

e ,bu

tloc

alho

usin

gag

enci

esad

min

iste

rfed

eral

publ

icho

usin

gan

dvo

uche

rpro

gram

s.

Une

mpl

oym

entI

nsur

ance

Fede

ralp

ayro

llta

x:(0

.8pe

rcen

ton

first

$7,0

00of

annu

alea

rnin

gs).

This

fund

sU

Ipro

gram

adm

inis

tra-

tion,

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oym

entS

ervi

ce,a

ndfe

dera

lloa

nsto

stat

esw

ithtr

ust

fund

defic

its.D

isas

terU

nem

ploy

-m

entA

ssis

tanc

eis

fund

edth

roug

hFE

MA

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epa

yrol

ltax

eson

empl

oyer

s:Th

ese

fund

bene

fitpa

ymen

tsto

clai

man

ts(s

o-ca

lled

regu

larU

I).

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e.

Med

icai

d

Fede

rale

ntitl

emen

tpro

gram

:The

fede

ralm

atch

tost

ate

fund

ing

rang

edfr

om50

%to

abou

t77%

inFY

2005

;the

Fede

ralM

edic

alA

ssis

tanc

ePe

rcen

tage

ishi

gher

for

poor

erst

ates

.

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esm

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eder

alm

atch

requ

irem

ent.

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FY20

05fe

dera

lm

atch

forL

Aw

as71

.04%

;for

MS,

77.0

8%.

Som

est

ates

requ

ire

loca

lcon

tri-

butio

nto

stat

em

atch

,but

the

fed-

eral

gove

rnm

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oes

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pora

ryA

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rN

eedy

Fam

ilies

Fede

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lock

gran

t:G

rant

sar

eba

sed

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ates

’pri

orA

FDC

spen

ding

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spen

ding

forr

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ms,

with

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ests

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igh

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rty

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ghgr

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stat

es.G

rant

sto

tale

d$1

6.6

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r;in

FY20

03;

$181

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wen

tto

LAan

d$9

6m

illio

nto

MS.

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Fal

soin

clud

eslim

ited

cont

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ncy

and

loan

fund

s.

MO

Ere

quir

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ts,7

5%to

80%

ofm

id-1

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spen

ding

leve

ls.

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es’t

otal

cont

ribu

tion

isab

out

$10.

5bi

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pery

ear.

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dM

SM

OE

fund

ing

forF

Y20

03w

as75

%fo

rbot

h.

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est

ates

requ

ire

loca

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tri-

butio

n,bu

tthe

fede

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over

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ms

are

stat

ead

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are

adm

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cost

s.

Tabl

e1

Fund

ing

Stru

ctur

eof

Sele

cted

Soci

alSe

rvic

es,P

rior

toH

urri

cane

Katr

ina

Sour

ces:

Gai

nsbo

roug

h(2

003)

,Gre

enbe

rgan

dR

ahm

anou

(200

5),K

aise

rFam

ilyFo

unda

tion

(200

5a,2

005b

),U

.S.D

epar

tmen

tofL

abor

(200

4),V

rom

an(2

005)

.

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D=

Dep

artm

ento

fHou

sing

and

Urb

anD

evel

opm

ent

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A=

Fede

ralE

mer

genc

yM

anag

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tAge

ncy

UI=

Une

mpl

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entI

nsur

ance

AFD

C=

Aid

toFa

mili

esw

ithD

epen

dent

Chi

ldre

n

MO

E=

mai

nten

ance

ofef

fort

Maj

orpr

ovis

ions

Stat

era

nges

LA,M

Sra

nkin

g

Hou

sing

No

fede

rale

ntitl

emen

t.

Hou

seho

lds

with

inco

mes

belo

w50

–80%

ofar

eam

edia

nin

com

ear

eel

igib

lefo

raid

thro

ugh

Sec-

tion

8vo

uche

rs(th

ough

75%

ofne

wvo

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rsm

ustg

oto

hous

e-ho

lds

unde

r30%

ofth

elo

cal

area

med

ian

inco

me)

.

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ion

8vo

uche

rsin

clud

ete

nant

-bas

edvo

uche

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rho

useh

olds

rent

ing

inth

epr

i-va

tem

arke

tand

proj

ect-

base

dvo

uche

rsth

atsu

bsid

ize

spec

ific

hous

ing

units

.

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ibili

tyis

veri

fied

annu

ally

.

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ific

elig

ibili

tyle

vels

are

setb

ylo

calp

ublic

hous

ing

auth

oriti

es.

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appl

icab

le.

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mpl

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ent

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ranc

e

Stat

esde

term

ine

elig

ibili

tyth

roug

hpa

stea

rnin

gsof

suffi

cien

tam

ount

and

aqu

alify

ing

job

sepa

ratio

n(s

uch

asa

layo

ff).

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ails

vary

wid

ely

acro

ssst

ates

.

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etar

yqu

alify

ing

and

othe

rreq

uire

men

tsva

ry.

Mon

etar

yqu

alify

ing

requ

ire-

men

tsar

eso

mew

hate

asie

rth

anav

erag

e.LA

rank

ed37

thof

51in

2004

(with

51be

ing

easi

est).

MS

rank

ed32

nd.

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mea

sure

uses

the

base

perio

dm

inim

umea

rnin

gsex

pres

sed

asa

num

bero

fw

eeks

atth

est

ate’

sav

erag

ew

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yea

rnin

gs.

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icai

d

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rale

ntitl

emen

tto

cate

goric

ally

elig

i-bl

elo

w-in

com

epe

ople

, inc

ludi

ngch

il-dr

en,p

regn

antw

omen

,cer

tain

adul

tsw

ithde

pend

entc

hild

ren,

peop

lew

ithdi

sabi

litie

s,an

dpe

ople

over

65.

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erw

ise

stat

esex

erci

sesu

bsta

ntia

ldi

scre

tion

over

elig

ibili

tyre

quir

emen

ts,

bene

fits,

and

serv

ice

leve

ls.

Fede

rally

requ

ired

cove

rage

Pare

nts:

Stat

eA

FDC

leve

las

of19

96Pr

egna

ntw

omen

:≤13

3%FP

LC

hild

ren

unde

r6:≤

133%

FPL

Chi

ldre

n6–

18:≤

100%

FPL

Stat

em

axim

aPa

rent

s:≤

275%

FPL

Preg

nant

wom

en:≤

275%

FPL

Chi

ldre

nun

der1

8:≤

300%

FPLa

LA Pare

nts:

≤20%

FPL

(wor

king

)and

≤13

%FP

L(n

onw

orki

ng)

Preg

nant

wom

en:≤

200%

FPL

Chi

ldre

n:≤

200%

FPL

MS

Pare

nts:

≤34

%FP

L(w

orki

ng)a

nd27

%FP

L(n

onw

orki

ng)

Preg

nant

wom

en:≤

185%

FPL

Chi

ldre

n:≤

185%

FPL

(infa

nts)

,≤13

3%FP

L(a

ges

1–5)

,and

≤18

5%FP

L(a

ges

6–19

)

Tem

pora

ryA

ssis

tanc

efo

rN

eedy

Fam

ilies

No

fede

rale

ntitl

emen

t.

TAN

Ffu

nds

may

only

beus

edfo

rfa

mili

esw

itha

preg

nant

wom

anor

ach

ildun

der1

8,th

ough

they

are

not

entit

led

toas

sist

ance

.

Oth

erre

quir

emen

tsar

ese

tby

stat

es,

with

som

efe

dera

lreq

uire

men

tsan

dex

clus

ions

:par

ticip

ants

mus

tmee

tw

ork

requ

irem

ents

and

fede

rala

ssis

-ta

nce

islim

ited

to5

year

s,w

ithso

me

exce

ptio

ns.

Som

egr

oups

,inc

ludi

ngm

any

lega

lim

-m

igra

ntsa

ndce

rtain

drug

felo

nsar

eex

-cl

uded

from

fede

rally

fund

edas

sist

ance

.

Var

ies

byst

ate.

The

max

imum

mon

thly

inco

me

atw

hich

afa

mily

of3

was

elig

ible

inFY

2003

rang

edfr

om$2

05in

AL

to$1

,641

inH

I.

LAan

dM

Sha

ve,r

espe

ctiv

ely,

the

3rd

and

8th

low

estm

axim

umin

com

elim

itsfo

rfam

ilies

tobe

elig

i-bl

efo

rass

ista

nce

($36

0pe

rmon

than

d$4

58pe

rmon

th).

Tabl

e2

Elig

ibili

tyfo

rSe

lect

edSo

cial

Serv

ices

,Pri

orto

Hur

rica

neKa

trin

a

Sour

ces:

Ense

llem

(200

5);K

aise

rFam

ilyFo

unda

tion

(200

5a,2

005b

);R

owe

and

Ver

stee

g(2

005)

;U.S

.Dep

artm

ento

fLab

or(2

004)

;Vro

man

(200

5).

a.In

stat

esw

ithhi

ghle

vels

ofco

vera

gefo

rchi

ldre

n,pr

ogra

ms

may

beSC

HIP

-onl

ypr

ogra

ms,

Med

icai

dex

pans

ion

prog

ram

s,or

aco

mbi

natio

n.

Insurance, Medicaid, and TANF. Wealthier states tendto offer more generous benefits. Program recipientsgenerally receive benefits from their state of residence,or—in the case of UI—the state where they work.4 Wellbefore Hurricane Katrina, Louisiana and Mississippiranked low in the expansiveness of their eligibility stan-dards and benefits levels. Housing assistance eligibilityand benefits are, as a rule, more nationally standardized.

● Required state financial contributions. All states arerequired to contribute financially to federal-state pro-grams. Of the four programs described, only housingassistance provided through HUD or FEMA and dis-aster unemployment assistance (DUA) do not requirestate funds. This funding responsibility affects states’policy choices on eligibility and benefit levels and—forthe programs where they have discretion—how manyeligible people to serve.

Even a small change in eligibility or benefit policiescan have a major effect on program costs, with a signifi-cant impact on poor states. Compared to other states, theGulf states historically have had weak revenue bases com-bined with high poverty. This significantly affects theirability to fund social programs. Even before Katrina,Louisiana and Mississippi ranked low in fiscal capacity.In 2002, Mississippi ranked last in revenue capacity5 andLouisiana ranked 44th of 50 states. When the states’ abil-ity to raise revenue was compared to the need for expen-ditures,6 Louisiana ranked even lower—47th of 50—andMississippi was again last. This indicates that theirrestrictive eligibility and benefit policies may be drivensignificantly by their constrained fiscal capacities.

● Limited provisions for sudden changes in need. Asexplained in the program descriptions below, these fourprograms have limited provisions at the national level toadjust for sudden changes in state financial situations,or for such expanded demand as that created by Katrina.In most cases, increases or major reallocations in fund-ing require federal legislation.

● Relevant populations not served prior to Katrina. Rea-sonable estimates of demand for each program beforeKatrina hit suggest that, for many years, benefits havenot reached all people with potential needs. In somecases, state policies and practices excluded certaingroups from eligibility. Funding limitations can alsopreclude eligible people from receiving assistance.

Housing Assistance

Standards for housing assistance through HUD are gener-ally national—households with incomes less than 80 per-

cent of the area median income are eligible, but waitinglists for vouchers and subsidized housing units are ex-tremely long. Vouchers can be taken across state bound-aries, but public housing residents lose their assistance ifthey move. With the federal funding base and eligibilitystandards for housing, about a quarter to a third of eligi-ble residents get assistance nationwide, a proportion mir-rored in Louisiana and Mississippi.

Neither HUD nor FEMA housing assistance requiresany state matching funds. HUD has no provisions torespond to a sudden increased need for housing, thoughFEMA’s housing assistance is, by definition, activated bysudden emergencies and can generally be mobilizedquickly. Finally, available housing assistance does not meetdemand across the country. With only a quarter to a thirdof eligible households receiving assistance in every com-munity nationwide (and few additional resources forexpanded needs), eligible applicants join long waiting listsand may wait for several years.

Unemployment Insurance

Low-wage earners who lose their jobs in Louisiana andMississippi are somewhat more likely to qualify for UIthan in other states that set higher monetary eligibilityrequirements. Yet, both states rank close to the bottom inbenefit levels and replacement rates (the proportion ofweekly wages replaced by weekly benefits). In 2004,Louisiana ranked 47th of 51 states in weekly benefits, andMississippi ranked last. Other eligibility policies—such asallowing an alternative base period determination (whichcan result in more low-wage workers qualifying for bene-fits) or good personal reasons for leaving a job—also varyamong states.7 Louisiana allows neither of these moreexpansive eligibility provisions. Mississippi allows “quits”for good personal reasons but does not have an alternativebase period (Vroman 2005).

The DUA program was created to provide benefits toworkers who are unemployed as a direct result of a disasterdeclared by the president and who do not qualify for reg-ular UI, often because they are self-employed or do nothave sufficient earnings. DUA benefit levels are generallyeven lower than those of UI. By federal regulation, DUAlevels fall between 50 and 100 percent of state UI benefitlevels. They are $85 and $97 per week in Mississippi andLouisiana (Ensellem 2005).

A state payroll tax on employers funds UI benefit pay-ments through a self-financing trust fund.8 In addition, a0.8 percent federal payroll tax on the first $7,000 of annualearnings funds UI program administration and other

Federalism and Hurricane Katrina 5

Stat

era

nges

LA,M

Sra

nkin

g

Hou

sing

Part

icip

atin

gho

useh

olds

pay

30%

ofin

com

eto

war

dre

nt;a

fede

ral

subs

idy

fills

the

gap.

The

bene

fitfo

rmul

ais

esse

ntia

llyth

esa

me

natio

nwid

e;LA

and

MS

resi

dent

spr

obab

lyre

ceiv

ele

sson

aver

age

than

thos

ein

othe

rsta

tes

beca

use

thei

rhou

sing

pric

este

ndto

belo

wer

.

Une

mpl

oym

entI

nsur

ance

Stat

esge

nera

llyre

plac

e50

–55%

ofpa

stea

rnin

gs,s

ubje

ctto

aw

eekl

ym

axim

um.M

axim

ara

nge

from

40–6

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03).

8 After Katrina

program purposes, including federal loans to states withtrust fund deficits. In past years, Louisiana and Mississippihave taxed covered employers at rates lower than the U.S.average; the low level of taxation reflects low benefit pay-outs in these states. DUA benefits are fully federally fundedthrough FEMA (though the program is administeredthrough the U.S. Department of Labor).

The unemployment compensation system can respondfairly quickly to an increase in need among those who sat-isfy a state’s rules and processes. When people who havelost jobs worked in one state but reside in or move toanother, the trust fund of the state in which they worked isresponsible for funding their benefits, and they are coveredaccording to that state’s eligibility and benefit levels. Dur-ing disasters, DUA provides temporary, modest financialassistance to people who do not qualify for the regular UIprogram. But many people who have lost jobs never gethelp from UI, even in typical times, and this was particu-larly true for people living in Louisiana and Mississippi inthe years before Katrina. Recipiency has long been low inboth states; the Louisiana rate was about 19 percent be-tween 1994 and 2003, and the rate in Mississippi was 23 percent, compared with a national rate of 32 percent(Vroman 2005).9 The relatively low rates reflect state eligi-bility rules and how they are administered.10 In addition,people claiming DUA may be denied benefits if they havelost their jobs for reasons resulting indirectly from a dis-aster (such as a local business slowdown) rather than thedirect destruction of a business.

Medicaid

Low-income people who meet state eligibility require-ments are entitled to Medicaid coverage. Federal lawrequires states to cover certain low-income groups, in-cluding children under 19, pregnant women, certain pooradults with dependent children,11 disabled people, andpeople over 65. But states have considerable discretionabout covering groups at slightly higher income levels.

Louisiana has covered children up to a higher incomethreshold than set by other Gulf states or than is federallyrequired: up to twice the federal poverty level (the federalrequirement is 100 to 133 percent of the poverty level,depending on the children’s age). However, the state ranksnear the bottom nationally in eligibility of both workingand nonworking low-income parents, though its packageof benefits is similar to many other states’.12 In FY 2005,nonworking parents in Louisiana were eligible only up to

13 percent of the poverty level (compared with 42 percentfor the country as a whole); working parents were eligibleonly up to the point where their incomes were 20 percentof the poverty level (compared with 69 percent nation-ally).13 Mississippi covered nonworking parents withincomes up to 27 percent of the poverty level and workingparents with incomes up to 34 percent of the poverty level(Kaiser Family Foundation 2005a). Medicaid recipientswho change state residency generally must reapply forMedicaid coverage to be eligible for coverage there. But astate’s temporary residents can be covered by their homestates if they can find a provider willing to accept the homestate’s payments.

The federal government pays a higher proportion ofMedicaid costs in lower-income states such as Louisianaand Mississippi. The 2005 Federal Medical Assistance Per-centage (FMAP) ranged from 50 percent to 77 percentaround the country. In Louisiana, the federal share was 71 percent; in Mississippi, 77 percent. Despite the relativegenerosity of the federal Medicaid contribution, poorstates must still juggle their low revenue capacity, highpoverty, and high levels of uninsurance among both theunemployed and workers lacking health coverage, to meettheir contribution and cover low-income families. Evenwith the federal funding, Medicaid cost a total of $4.45 bil-lion in Louisiana in FY 2003, of which $789 million wascontributed from the state’s general fund. This constitutesabout 12 percent of the state’s general fund expenditures(Kaiser Family Foundation 2005a; National Association ofState Budget Officers 2005).

Medicaid has no provisions for an automatic govern-ment response to sudden changes in a state’s financialsituation. However, the federal matching formula isrevised annually, based on changes in per capita income.In addition, the federal government has responded toextreme state needs in the past by writing legislation thattemporarily increases the match. For example, the 2003Jobs and Growth Tax Relief and Reconciliation Actincreased FMAP rates for 18 months to help states offsetrevenue reductions caused by the recession.

States often have chosen to not serve low-incomeparents whose incomes are above certain eligibility thresh-olds; federal law blocks states from serving adults withoutchildren unless the states have a waiver that allows this. To serve uninsured people who fall above state incomethresholds, Louisiana has typically relied on dispropor-tionate share hospital payments to finance hospitals caringfor uninsured patients.

Temporary Assistance for Needy Families

States have always set widely differing cash benefit levelsand, to some extent eligibility rules. Federal welfare reformin 1996 significantly widened the degree of state variationin eligibility and other policies, and though overall therange of state benefit levels has compressed somewhat,they have also by and large declined in real terms.14 Again,the Gulf states’ TANF eligibility policies and cash benefitsranked low nationwide. For 2004, Louisiana’s maximummonthly benefit for a family of three, at $240 per month,was ranked 7th from the bottom; Mississippi’s maximumbenefit, $170, ranked last.

TANF funding is allocated to the states in the form offederal block grants. The federal allocation to each state isbased largely on its federal entitlement funding under Aidto Families with Dependent Children (AFDC), whichrequired an approximately 20 to 50 percent state matchwith lower match requirements for poorer states. UnderTANF, some additional adjustment for high-growth andhigh-poverty states is now made in the form of supple-mental grants (both Louisiana and Mississippi havereceived these). TANF also requires maintenance of effort(MOE) spending by all states at a rate of 75 to 80 per-cent of their mid-1990s AFDC-related spending. SinceLouisiana, Mississippi, and the other Gulf states typicallyprovide among the lowest benefits in the nation, currentblock grants reflect the states’ historically low benefitlevels. In FY 2003, Louisiana received a block grant of $181 million, and Mississippi received $96 million. Bothstates were required to provide 75 percent in MOE spend-ing (Greenberg and Rahmanou 2005).

As a rule, if demand on TANF programs increasesrapidly, states have limited ability to expand coverage. Theblock grant allotments are essentially frozen in time, unlesschanged legislatively.15 The program has provisionsintended to accommodate changes in state resources orservice demands through a contingency fund and a loanfund. In the past, however, the requirements for gainingaccess to these funds have been difficult for states to meet.Prior to Hurricane Katrina, the contingency fund was usedrarely and the loan fund was never used.

Many poor families do not receive TANF benefits. Fed-eral rules stipulate that funds only be used to assist fami-lies with children or pregnant women. If states providecash assistance to families or individuals beyond this, theydo so without federal TANF aid. Although a few statesmaintain a state entitlement to assistance for those eligible,

none of the Gulf states have. Prior to Katrina, about 85 percent of poor Louisiana families and 82 percent of poor Mississippi families did not receive TANF cashbenefits.16

Challenges Katrina Posed to NormalProgram Structures and Operations

In addition to intensifying existing challenges for the fund-ing and administration of these programs, Hurricane Kat-rina created major new hurdles to serving the low-incomepeople most severely affected by the hurricane and itsaftermath. The storm and evacuation swelled the ranks ofapplicants for many programs and challenged state resi-dency rules by displacing so many people so quickly. Theurgency and magnitude of this large-scale migrationacross state and local borders may be unparalleled in theUnited States in the past century. In particular, Katrina

● increased the need for assistance;● moved this need across jurisdictional lines;● caused sudden and severe damage to state fiscal capac-

ity, particularly in Louisiana; and● created an unusually long time frame for an emergency,

with a high degree of uncertainty for both individualsand states and localities.

Housing Assistance

The Louisiana Recovery Authority estimated that 275,000 homes were destroyed and 650,000 people dis-placed by Hurricane Katrina, adding to the already-highdemand for limited housing assistance. The largest num-ber of Katrina evacuees moved from storm-affected areasto other locations within Louisiana, while Texas receivedthe second largest number of evacuees. Both the Atlantaand Chicago areas also received a large number. Overall,the Census Bureau’s Current Population Survey estimatesthat, as of January 2006, about 1.2 million people age 16and over evacuated as a result of Katrina. Over half had notyet returned to their homes six months later (Bureau ofLabor Statistics 2006a).


Hurricane Katrina destroyed about 18,750 businesses,according to the Louisiana Recovery Authority, pushing


over 500,000 people to file new claims for unemploymentinsurance (Holzer and Lerman 2006). The UI system gen-erally requires the state in which the applicant worked topay unemployment benefits for claimants who havemoved. This is typically handled by an interstate claimsprocess, a standard feature of UI program administration.The scale of movement necessitated by Hurricane Katrinaappears to be much greater, however, than has occurredwithin the UI system in the past. Several states haveassisted Louisiana and Mississippi with their administra-tive responsibilities, with Texas taking a lead role in theinterstate claims administration. It is also unclear if thehome states—in particular, Louisiana—have the financialcapacity to meet their requirements under the system.

Medicaid

The hurricane, flooding, and evacuation triggered a rangeof new physical and mental health care needs. In addition,they exacerbated existing medical problems as patientswith chronic conditions lost regular access to their main-tenance medications, medical supplies, and providers(Schneider and Rousseau 2005). Residents lost employer-based health coverage when their jobs disappeared. Manyuninsured or underinsured people who received medicalassistance through Louisiana’s system of charity hospitalshave been unable to continue care; the storm closed 10 hos-pitals, eliminating 2,600 hospital beds. In addition,Katrina damaged about 100 community health centers,further diminishing the state’s ability to care for low-income people (Louisiana Recovery Authority 2005,Schneider and Rousseau 2005).

Without a Medicaid policy response, evacuees from outof state would have had to locate providers willing to servethem through their home state’s Medicaid program, orhost states would have borne the financial burden of pro-viding services to thousands of new residents.


With the widespread loss of jobs and housing, demand forcash assistance and services through TANF would beexpected to increase both among evacuees in host statesand for those who remained in badly affected areas, espe-cially over the long run when aid from FEMA, unemploy-ment compensation, and other sources ends.17 A state thatserves a significant number of new TANF recipients wouldhave to determine how to fund this demand, typically with

few new resources, since each state’s TANF block grantallocation is largely fixed.

Katrina Slashed State Fiscal CapacityThe fiscal capacity of the Gulf states was already near or atthe bottom of the national range prior to HurricaneKatrina, due to both low revenue-raising ability andhigher-than-average expenditure needs (based on thestates’ underlying economic and demographic character-istics). The expectation that the hard-hit states contributesignificant amounts of their own revenues for these sharedfederal-state programs only exacerbates the problem.While overall capacity estimates are not available follow-ing Katrina, the federal Bureau of Economic Analysis(BEA) estimates that personal income in Louisiana in 2005fell by 9 percent from 2004 levels. In contrast, personalincome during that time grew by 4 percent in Mississippiand 6 percent in Alabama, probably because fewer areas inthese states were affected. Overall personal income grew by5.6 percent for the country as a whole, while Louisiana wasthe only state that experienced a decline in aggregate per-sonal income or per capita personal income.18

In 2002, Louisiana ranked 44 in revenue capacity; pre-liminary estimates in Yesim, Hoo, and Nagowski (2006)found that Louisiana would have been able to raise $3,850per capita had the average tax system been in place (thenational average was calculated as $4,661). Mississippiranked last and would have been able to raise $3,354 percapita. Given their relatively low revenue-raising ability,Louisiana and Mississippi exerted slightly higher effortthan might be expected, actually raising $4,398 and $3,768per capita, respectively. However, their effort was dwarfedby their expenditure needs even before Katrina, calculatedat $7,221 and $7,352 per capita respectively.

In the aftermath of Katrina, at the same time Louisi-ana’s revenue base was severely damaged, the state facedmajor new demands for rebuilding its infrastructure.FEMA estimates that the costs of Katrina’s (and Rita’s)effects in Louisiana are over $37 billion, or $8,244 percapita.19 In per capita terms, this is over three times theamount of money raised by state and local governments inLouisiana in 2002.

In contrast, the costs of other disasters have beensmaller in both absolute and per capita terms. The 2001World Trade Center attack was estimated to have causedover $8 billion in damages (in 2005 dollars), and becausethe disaster affected a smaller area in a state with a largerpopulation, this translated into a much lower cost of about

10 After Katrina

$428 per capita for the state. Similarly, the 1994 North-ridge earthquake in California was estimated to havecaused over $9 billion dollars in damages; this translatedinto a per capita cost of about $300 for the state. And bothNew York and California had greater fiscal capacity tobegin with. The 2002 fiscal capacity data also indicated thatNew York exerted additional tax effort after September 11,exceeding its estimated fiscal capacity in the aftermath.Other disasters have also affected a much smaller geo-graphic portion of their states, as reflected in the smallerper capita statewide costs (Louisiana Recovery Authority2005). These states, therefore, had a greater undamagedeconomic area to draw from in responding to the disasters.

Program Responses to Katrina

Congress and the Bush administration have enacted anumber of provisions to ease the burdens for hurricanevictims, for the jurisdictions from which they fled, and forthose areas to which they evacuated. Still, even with theseresponses, a high level of uncertainty remains about whatwill happen along the Gulf Coast, what program resourceswill be available and for how long, and what families willchoose to do. The federal responses so far have been par-tial when compared with the scale of dislocation andupheaval among evacuees and others directly affected byKatrina. There has also been a lack of clarity about manyfederal policies and how they should be implemented, cre-ating an additional burden for states, localities, and indi-viduals. It is also unclear how much the emergency willresolve itself over time, with evacuees returning home orchoosing to relocate permanently.

The program responses described in this paper haveattempted to address some of the challenges posed by Hur-ricane Katrina. As outlined in table 4 and highlighted inthis section, these efforts to meet the vast need have anumber of strengths and limitations. Some programresponses appear to recognize the Gulf states’ diminishedfiscal capacity while others do not. The responses so fargenerally underscore the emergency nature of this crisis,providing limited and short-term assistance rather than acoordinated long-term response.

Housing Assistance

FEMA’s existing Individuals and Households Program(IHP) and HUD’s new Katrina Disaster Housing AssistanceProgram (KDHAP), which was implemented through

executive action, began serving evacuees shortly after thehurricane. Both programs provide assistance for up to 18 months. The Katrina disaster program was imple-mented in late September, and serves only displacedpeople who were already tenants of HUD-assisted hous-ing. HUD also announced in late January 2006 the dis-tribution of $11.5 billion through the CommunityDevelopment Block Grant program for disaster fundingfor long-term rebuilding in five states (Louisiana, Missis-sippi, Alabama, Florida, and Texas) affected by HurricanesKatrina, Rita, and Wilma. State officials will determinehow to spend these funds (U.S. Department of Housingand Urban Development 2006).

Despite continued criticism that FEMA’s response tothe massive loss of housing has been slow and disorga-nized, the agency’s IHP is ultimately expected to serveabout 400,000 evacuees. However, IHP assistance is lim-ited by statute to either 18 months or a cap of $26,200.KDHAP is expected to serve about 50,000 prior HUD res-idents; these vouchers are also limited to 18 months. WhileFEMA has begun implementing a program to provide overa hundred thousand trailers, waiting lists are extremelylong and suitable locations appear to be scarce. In addi-tion, with arrival of the 2006 hurricane season, the safetyof these trailers in storm conditions is a concern (Lipton2006).

FEMA and HUD responded by providing aid to fam-ilies where they relocated, though with some constraints.For instance, people who hold Katrina disaster vouchersmust remain in their new jurisdiction. FEMA’s require-ment that the agency inspect damaged or destroyed homesto provide assistance outside of New Orleans or the threedesignated Mississippi disaster counties also appears toplace a burden on people who have evacuated long dis-tances from their home jurisdictions. In addition, thedemand created by Katrina is competing with existingunmet housing need—with Katrina evacuees bumpingprior applicants down waiting lists—and raising questionsabout the equity of who gets assistance and who doesn’t.Finally, the trailer program was intended largely to assistpeople in their original communities.

So far, FEMA has responded to evacuees’ need for shel-ter in part with vouchers for housing on the private mar-ket. In addition, under FEMA’s related IHP TransitionalRental Assistance program, Katrina evacuees can receivebenefits without prior home inspections. Recipients get athree-month benefit of $2,358, which is renewable for upto 18 months and cannot exceed $26,200 altogether. Thesepayments cannot be used for security deposits or utilities,


Fund

ing

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:FEM

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UD

(impl

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ugh

HU

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tena

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UD

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dho

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who

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ing

toK

atri

naan

dde

clin

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aile

rs;

peop

lefr

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FEM

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hom

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nfo

roth

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(exp

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sign

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tose

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pose

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aid)

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ghLA

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aid

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stat

e,be

twee

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ptem

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es

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mon

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oney

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ocat

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cher

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ista

nce

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edin

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yin

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ter-

ing

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ular

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spa

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dM

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seta

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fthe

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efit

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stat

ewid

em

axim

umof

$210

perw

eek.

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imum

paym

entw

as$5

,460

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1an

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aitin

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ved

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.)LA

surp

asse

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eun

em-

ploy

men

tlev

elre

quir

edby

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ral

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asof

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ober

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005;

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ere

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nded

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i-m

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ence

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ates

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ome

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ate

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hich

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ing

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cept

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nt.

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edby

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ontin

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don

ly.

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ficat

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ing

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tinge

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sist

host

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es,l

oan

fund

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sist

3m

ost

affe

cted

hom

est

ates

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ces:

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amily

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sian

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ated

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rina

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but recipients can apply for additional funds for othertypes of expenses. Any assistance received under this pro-gram, however, counts against the $26,200 cap.

However, it may be years before families are resettled,and by mid-February, families in FEMA-funded hotelrooms were facing uncertain prospects as the agency beganstopping payments and relocating them. HUD’s 18-monthKatrina disaster vouchers offer somewhat greater stabilityto the limited number of Katrina victims eligible, thoughthey lack the portability of prior Section 8 vouchers. Incontrast, after the Northridge earthquake, when manylow-income people lost housing for an extended time,Congress allowed HUD to successfully administer emer-gency vouchers for 18 months, at the cost of $3.5 billionfor 350,000 families. About 10,000 of these vouchers weremade permanent.

The Katrina program responses have also been markedby cumbersome implementation requirements, potentialadministrative duplication of existing assistance pro-grams, and inefficiencies, due to their short-term nature.FEMA’s decision to respond with an array of temporaryhousing options, rather than build on existing channelssuch as the HUD Section 8 voucher system, appears tohave created a less efficient or effective means of servinglow-income families’ needs (Katz et al. 2005).


Public Law 109-91, signed on October 20, 2005, trans-ferred a total of $500 million from the federal unem-ployment account to the three most affected states: $400 million to Louisiana, $85 million to Mississippi, and$15 million to Alabama. This allows the states either toreduce unemployment insurance tax rates or to postponeincreases in those tax rates (Congressional Budget Office2005b). PL 109-91 also provided additional flexibility tostates hosting evacuees, allowing them to use UI funds toassist the affected home states with their program admin-istration responsibilities. After Louisiana passed the setlevel of unemployment required by law, the federal-stateextended benefit program went into effect October 30;those whose regular UI benefits were exhausted couldapply for an additional 13 weeks of benefits (LouisianaWORKS, undated). In addition, DUA was implementedfor a 26-week period with the presidential declaration ofdisaster, and on March 6, 2006, President George W. Bushsigned a 13-week DUA extension.

It is unclear whether the new federal funds transferredto UI trust funds for the three most affected states havebeen sufficient to meet demand. To respond to the wide-spread need, Mississippi raised all UI claimants’ benefit

levels to the statewide maximum ($210 per week, or a total of $5,460) and waived the usual one-week waitingperiod for all who initiated new claims between Septem-ber 11 and December 3, 2005. As of January 2006, about140,000 unemployed workers from Louisiana, Mississippi,and Alabama were receiving regular UI benefits (about93,000) and DUA benefits (about 47,000) due to Hurri-cane Katrina. The majority of workers receiving benefits,about 99,000, were from Louisiana (National Employ-ment Law Project 2006b).

While Louisiana and Mississippi have somewhat easier-to-satisfy monetary qualifying requirements comparedwith all states, their very low benefits and replacementrates indicate that evacuees relocating in areas with ahigher cost of living are at a significant financial disad-vantage.20 About half of the Louisiana workers receivingregular UI and DUA benefits had moved out of state,according to the National Employment Law Project(2006a).21

The state where the worker was employed is required bythe regular UI system to fund evacuees’ benefits; thispotentially imposes considerable costs on Louisiana. Thisrequirement is especially difficult following Katrina, sincethe state’s ability to fund these costs is diminished, evenwith the additional federal funds. DUA, in contrast, is fullyfederally funded under FEMA.

Both regular UI and DUA provided some assistance for26 weeks after the hurricane. In addition, Louisiana imple-mented extended benefits starting in late October 2005,and DUA’s 13-week extension began in March 2006. Butwith the apparent destruction of an estimated 18,750 busi-nesses in Louisiana alone, and Louisiana’s relatively highunemployment rate even prior to Katrina (5.8 percent),the need is likely to extend well past this time period.22

While rebuilding has created some new jobs and is likelyto continue to do so, many of these jobs appear to requiredifferent skills than the displaced possess, and may noteven be accessible to them.

Medicaid

In mid-September 2005, the federal Centers for Medicareand Medicaid Services (CMS) initiated Medicaid waiversthat allowed host states, among other things, to serve evac-uees for five months with the assurance that they wouldnot be responsible for the state match requirement.23 Theeffect of the waivers, related MOUs between the federalgovernment and home states, and subsequent FY 2006federal budget allocations was that the federal governmentwould compensate host states serving evacuees for theusual state financial match requirement. The host states

14 After Katrina

could claim reimbursement from CMS for these servicesuntil the end of June 2006. The MOUs implied a potentialfinancial obligation for the Gulf states, until the federalbudget legislation was passed (Kaiser Commission onMedicaid and the Uninsured 2006a).

The FY 2006 budget reconciliation legislation, enactedin early February 2006, basically formalized the terms ofthe waivers and superceded aspects of the MOUs, provid-ing federal money to fund home states’ responsibility forthe host state’s match. The budget bill included up to anadditional $2 billion for the federal government to pay thehost and home states’ match through June 30, 2006. Thelimit on the funds makes this commitment more akin to ablock grant than Medicaid’s usual open-ended match.Whether the federal funding will be sufficient to cover thecosts incurred under the waivers, or for the home states’state match responsibilities, is unclear (Kaiser Commis-sion on Medicaid and the Uninsured 2006b).

Some evacuees may receive a more—or less—generousbenefit package than before Hurricane Katrina, becausethe Medicaid waivers stipulated that it must be at least asgenerous as the host state’s Medicaid or SCHIP programs.Home state services not covered by the host state may bepaid out of an uncompensated care pool, if the state hasone in their waiver. These waivers allowed host states toexpand their eligibility consistent with federal waiverguidelines, which in some cases were broader than exist-ing home state policies. To date, all host states have donethis. Even with the waivers, though, people with serioushealth conditions could remain ineligible for Medicaidbecause they do not qualify based on the eligibility guide-lines for evacuees. Those not qualifying for servicesinclude all adults without children (unless states have afederal waiver specifically to allow this), some parents, andcertain groups of immigrants.

Program changes enacted after Katrina provided someincentives for states to respond rapidly to the sudden andlarge movement of people. Because the Medicaid waiversspecified that the federal government would compensatethe host states for 100 percent of the cost of serving evac-uees, they eliminated the possible financial incentive forhost states to avoid or delay serving people. This couldpotentially have had very negative effects if treatment hadbeen delayed for physical or mental health conditionsrelated to the flood and evacuation.

Home states faced a far greater level of uncertaintyfollowing Katrina, however. For over five months, theexecuted MOUs between the federal government and thestates implied that Louisiana and the other states wouldeventually be financially responsible for the state match forservices provided to their evacuees, though they were likely

ill-equipped to do so. Congress’s passage in February ofthe FY 2006 budget bill, with its $2 billion in additionalMedicaid funding, appears to have freed the home statesof this obligation, assuming that the funding is sufficientover the long term. The budget bill left a number of fiscalproblems unaddressed, however. While the states are pro-tected for Medicaid for a period, there is still uncertaintyabout the size of the uncompensated care pools availableto cover uninsured people not eligible for Medicaid andMedicaid services covered in the home state but not in thehost state.

Although the federal legislation finally providedgreater certainty in February, the home states had tograpple for months with a lack of clarity about their fis-cal responsibilities. In addition, the period of federallyfunded coverage is still fairly limited—five months. Thisstands in contrast to the 7 to 11 months of assistance pro-vided under the New York State Disaster Relief Medicaidinitiative after September 11 (Robert Wood JohnsonFoundation 2003). Both home and host states must dealwith evacuees whose access to Medicaid services underthe Katrina waivers is running out. Finally, even theincrease in federal funding may not be sufficient toaddress the range of new and exacerbated physical andmental health needs resulting from Katrina, which couldpotentially take several years.


The TANF Emergency Response and Recovery Act of2005, enacted September 21, made already-authorizedfunds available to affected jurisdictions. It made the exist-ing TANF contingency fund available to host states—including Louisiana, Mississippi, and Alabama, forevacuees who remained within their borders—and pro-vided money from the TANF loan fund to these threehardest-hit states without requiring loan repayment orinterest.24 These states are also exempt from most otherTANF penalties until the end of FY 2006 if their failure tomeet federal requirements is due to the hurricane’s effects.

Given that each state’s TANF block grant allocation islargely fixed, a host state that served a significant numberof new residents would have to determine how to fund thisdemand with limited new resources. The TANF recoverylegislation provided some additional money through thecontingency and loan funds until the end of FY 2006. The contingency fund totals $1.9 billion; the loan fundprovided $32.8 million to Louisiana, $17.4 million to Mis-sissippi, and $18.7 million to Alabama. However, thecontingency fund allocations to host states are based on aset percentage of their block grants and not on the num-


ber of evacuees they have, so funding is likely excessive tosome states and inadequate to others. In addition, howthese funds are being used, or if they will be sufficient tomeet the demand for assistance over the long run, isunclear.

The TANF recovery legislation also attempted toaddress some of the financial and other risks for host statesserving evacuees. It made the already-existing TANF con-tingency fund far more accessible to host states than in thepast, and made available some additional federal resources(for example, moving up the disbursement of first quarterFY 2006 funds). These funds, however, may only be usedto provide short-term nonrecurring cash assistance tofamilies with children who are not otherwise receivingcash aid from any state. Work requirements and timelimits are also waived for these families until the end of FY 2006. The law technically authorizes no new money,however.25

While the changes to the loan fund exempt Louisiana,Mississippi, and Alabama from interest payments or non-payment penalties, the TANF recovery legislation doesrequire that they maintain prior levels of state spending togain access. The contingency fund waives the customary100 percent MOE requirement that states match federalfunds to gain access to the contingency fund (one of thereasons the fund was so rarely used). The scale of the states’short-term and long-term need to provide TANF cashassistance to Katrina victims is still unclear, however, leav-ing open the possibility that the fixed block grant structuremay pose problems in the future, especially with Louisi-ana’s deteriorated fiscal condition.26

ConclusionsA number of efforts have been made to address the crisisthat Katrina created. HUD’s Katrina disaster housingvoucher program was implemented September 26, 2005.FEMA’s emergency shelter efforts began shortly after thestorm and the Individuals and Households Program wasin operation by the end of September. These housinginitiatives were altered intermittently between September2005 and February 2006, when FEMA’s payment for hotelrooms came to an end. Congress approved emergencyallocations to the UI trust funds of the three directlyaffected states on October 20, and a 13-week extension toregular UI benefits triggered by the state’s high unem-ployment rate began in Louisiana at the end of October.The 13-week extension to Disaster Unemployment Assis-tance, first introduced in September, was signed by Presi-

dent Bush on March 6. CMS announced the availability ofits Medicaid waivers on September 16, and by mid-December, 17 had been approved. Federal budget legisla-tion signed in early February 2006 provided additionalfunds for home and host states’ Medicaid costs. TANFrelief and recovery legislation was introduced on Septem-ber 7 and signed into law on September 21.27

But many of the problems Katrina has created remainwith the arrival of the 2006 hurricane season, and criticalsteps should be taken now to ensure that future programresponses to large-scale disasters are significantly faster,more comprehensive, and more effective. This paperoffers one such proposal.

The shared federal-state-local government responsibil-ity for the programs described in this paper can make themcomplex even under normal circumstances. The massiveand sudden cross-jurisdictional migration of people inneed of services and the sheer increase in the demand forassistance, the sharp loss of state fiscal capacity, and theconsiderable length of time likely needed to resolve the enormous upheaval Katrina caused all further strainthe usual structures of these programs and challenge theirability to respond effectively to the disaster. While theresponses to Katrina by these four critical programs werecertainly important and welcome, they met only part ofthe need, were in many cases halting and unclear, and con-tributed to significant uncertainty for individuals and fam-ilies, and the jurisdictions trying to help them.

HUD’s Katrina housing voucher program was imple-mented shortly after the hurricane, but its vouchers wereavailable only to prior recipients of HUD housing assis-tance and are not portable to new jurisdictions. FEMA’semergency housing policies have been fragmented andconfusing for individuals, families, and jurisdictions alike.Regular UI provides unemployed workers who qualify thevery modest benefits of the home states in which theyworked, even when they have moved to far more costlyareas. Those who lost jobs as a direct result of Katrina anddid not qualify for regular UI could apply for DUA, but itspayments were even lower—about half those of the regu-lar program. Both programs provided assistance for a lim-ited period, given the scale of job loss Katrina created.While legislation passed within a couple months to addfederal funds to the hardest-hit states’ UI trust funds, itwas unclear if this would be enough to offset new demandfor assistance. The extension to DUA was enacted in earlyMarch, days after benefits had expired.

In the case of Medicaid, the federal government quicklyprovided waivers to clarify what the host states wereexpected to do for Gulf state evacuees over the near term.

16 After Katrina

But these waivers offered host states federal funding fortheir state match for only five months, and many evacueeswere not eligible for any Medicaid assistance. As the fivemonths’ coverage comes to an end, the host states face thequestion of how to provide services to evacuees over thelong term. In addition, the home states’ fiscal responsibil-ity for the state share of Medicaid costs was not resolveduntil the federal budget was passed in February. Moreover,the federal budget allocations possibly will not be sufficientto cover all of the costs incurred under the waivers, atwhich point the Gulf states could face costs if the MOUsare enforced.

TANF recovery legislation was also limited—for exam-ple, states can only use contingency funds for short-termnonrecurring aid to families with children who are nototherwise receiving state cash assistance. But the legisla-tion was enacted relatively quickly and addressed many ofthe major problems and uncertainties, including thefinancial burden on the home states and host states’ poten-tial financial incentives to avoid the costs of serving evac-uees. In this way, it stood in contrast to the efforts in theother programs, where administrative accommodationsleft significant insecurity for months after Katrina.

Thus, the development of these disaster responseslacked a clear and timely discussion of how to help evac-uees stabilize and resume their lives over the long run, andof the incentives, policy choices, and constraints facinghost and home states. To provide more effective assistanceto both people and jurisdictions, and to avoid thisextended paralysis in future major disasters, Congressshould take responsibility for debating and enacting emer-gency response provisions in each major federal-state-local program that assists needy people. This shouldinclude but not necessarily be limited to housing assis-tance, unemployment compensation, Medicaid, and TANF.The debate should include discussions of the appropriatelevel and type of response due to people deprived of theiremployment, housing, health care, assets, or otherresources as a result of a major disaster.

These emergency response provisions should explicitlystate

● how assistance would be triggered in the event of adisaster;

● what assistance individuals and families should receive;● how funding and service responsibilities would be allo-

cated among states, localities, and the federal gov-ernment, given the possibility of major populationmovements and the fiscal devastation of state and localgovernments; and

● how long program support for individuals and familieswould be continued, appropriate to the scale of thedisaster.

These disaster response mechanisms should be fully feder-ally funded, thus avoiding potential incentives among fis-cally responsible host states or localities to avoid servingpeople in need and lessening the financial burden on homestates or localities that may suffer the dilemma of dimin-ished fiscal capacity combined with increased need. Pro-gram administration, however, may best be shared amongthe national and state, and in some cases, local governments.

Congress must consider a number of other importantquestions as well.

● What criteria would trigger the determination that adisaster is of sufficient scale and impact to warrant useof these provisions?

● How exactly would the mechanisms be administered?● What funding would enable them to operate effectively?● How can Congress guide the determination of affected

regions, states, and localities, and the allocation of fundsamong them?

● What executive branch and Congressional actions wouldbe required at the time of the disaster to activate the emer-gency response provisions and to appropriate the funds?

Congress should also consider whether the eligibility stan-dards used and the services and benefits offered should besubstantively more expensive in the aftermath of a disasterthan during “normal” times. The Katrina experience sug-gests that these policy choices should recognize in someway the severity and long-term nature of the hardship andlong-term economic disruption caused by a major disaster.

In considering how best to approach the design of effec-tive emergency response mechanisms, Congress has anumber of useful sources of evidence from which to draw.TANF’s relative responsiveness in addressing the needs ofboth host and home states for an extended period (a yearor more) is worth exploring, as is the comparative lack of responsiveness within other programs. One reason for TANF’s response appears to be that administrativeframeworks—the contingency and loan funds—alreadyexisted within the program. Although they were limitedand had to be modified for Hurricane Katrina, they pro-vided administrative vehicles for a comparatively rapidresponse. Other lessons learned so far from the troubledresponse to Katrina, and the many studies currentlyreviewing that response and opportunities for improve-ment, can also offer insights.


In addition, lawmakers can learn from past disasters,including the Northridge earthquake and the aftermath ofthe World Trade Center attack. For example, to assist inhousing the displaced, Congress could authorize a pro-gram modeled on the response to the Northridge earth-quake that would provide wide-scale emergency vouchersfor up to 18 months and assist in locating appropriateaffordable housing. The New York State Disaster ReliefMedicaid program enacted after September 11 is anotherpossible model of a more coherent and enduring emer-gency response. Almost 350,000 people were providedwith a simplified and expedited enrollment process andMedicaid assistance for 7 to 11 months after the terroristattack, significantly longer than under the Katrina waivers.

The extensive difficulty that Katrina created also raisesquestions about whether the current complex mix of fed-eral, state, and local program responsibilities is the mosteffective way to serve families and individuals under nor-mal times. Some of the tensions that Katrina intensified—such as existence of widely different state UI benefits andeligibility policies at the same time the workforce is highlymobile—exist to a lesser extent at all times. While this isnot this paper’s focus, the period following Katrina offerspolicymakers and others the opportunity to address thesecritical questions, seeking more workable and equitableways to fund, set standards, and administer programsserving low-income people at all times.

The issues this paper outlines are unlikely to be resolvedsimply. But the widely recognized inadequacy of theresponse to Katrina—and its particularly harsh impact onlow-income families and individuals—creates a window ofopportunity for a basic “good governance” response.Without a fundamental remedy that can allow muchspeedier and more effective responses, possible futurecatastrophes such as an earthquake on the West Coast or alarge-scale terrorist attack on another major city could wellresult in a repeat of the fragmented and partial responseseen after Katrina.

Notes1. As of January 2006, the Census Bureau’s Current Population Survey

had identified about 1.2 million Hurricane Katrina evacuees age 16and older.

2. Programs for elderly and disabled people—such as Social Security,Medicare, and Supplemental Security Income—are generally fullyfunded and are not included here. In addition, while the paperfocuses on a selection of essential programs with a mix of intergov-ernmental arrangements, it does not include several other impor-tant programs for low-income people, such as Food Stamps andservices funded through the Social Services Block Grant.

3. The paper examines federal and state policies as of April 2006 but doesnot attempt to explore fully the implementation of these policies.

4. For Medicaid, patients may receive services from an out-of-stateprovider if they can find one that accepts payments from their homestate.

5. Revenue capacity measures the ability of a jurisdiction to raiserevenues, given its underlying demographic and economic char-acteristics (Yesim, Hoo, and Nagowski 2006).

6. This is based again on the average amount spent nationally given astandard set of demographic characteristics.

7. An alternative base period entails allowing applicants who areinitially deemed ineligible for UI benefits to have a second monetaryeligibility determination under an alternative period; in the alterna-tive period, more recent earnings can be taken into considerationthan would otherwise be the case. For job resignations, most stateswill compensate someone who quits only if it is for a work-relatedcause. Quits for personal reasons, such as to care for a sick relative,are generally not compensated (Vroman 2005).

8. The tax rate is based in part on employers’ unemployment experi-ence and therefore may be higher for those with higher rates of layoffand other job separation.

9. Recipiency is measured as the percentage ratio of weekly beneficia-ries to weekly unemployment.

10. In general, unemployed people may not receive benefits because ofinsufficient previous earnings, nonqualified reasons for job loss, andthe failure to maintain eligibility while receiving benefits (Vroman2005)

11. Parents who would have qualified for a state’s Aid to Families withDependent Children program in 1996 when the program was abol-ished continue to be covered by Medicaid. These generally areparents with incomes below 50 percent of the federal poverty level.

12. Due to the large share of low-income people in the Gulf states, thepercentage of their population covered by Medicaid is actuallyabove the national average.

13. The difference in eligibility levels for working and nonworkingparents results from states’ income disregards for working parents.

14. It is worth noting that Alabama, Louisiana, and Mississippi areamong only eight states that increased benefit levels in real termsbetween 1996 and 2004, but their benefits nonetheless remain verylow (Congressional Research Service 2005).

15. The TANF reauthorization contained in the FY 2006 budget billpassed by Congress in February 2006 did not change the prior basicallotments.

16. These numbers are derived from Urban Institute calculations, divid-ing the number of families receiving TANF cash assistance in eachstate in FY 2002 (Administration for Children and Families 2004)by the number of families with children under 18 under the FPL ineach state (Bureau of the Census 2003).

17. Estimating the need for TANF is complex because eligibilityrequirements vary widely among states and there is no entitlementto TANF assistance. TANF caseloads declined in Louisiana in themonths following Katrina and remained roughly steady in Texas,the other state that received the greatest number of evacuees. Thereceipt of assistance from FEMA and other sources would beexpected to affect a family’s TANF eligibility, at least for the imme-diate term.

18. According to estimates from the BEA, per capita personal incomedeclined by over 9 percent in Louisiana while growing by 4.6 per-cent in the country as a whole. However, these numbers reflect statepopulations as of July of each year. If we use end-of-year populationfigures for Louisiana (reflecting the hundreds of thousands who left

18 After Katrina

the state), per capita personal income still declined by about 3 per-cent from 2004 levels.

19. While Rita’s costs were much lower, the emergency conditionsalready in place following Katrina make differentiating betweencosts attributable to each hurricane difficult.

20. The UI system assumes that the home state will pay for benefitsthrough its trust fund for regular UI benefits, and requires that therecipient be served consistent with the home state’s policies.

21. In addition, initially the governor of Louisiana issued an executiveorder waiving the usual requirement that claimants report to the UIoffice every week as a condition of benefit receipt. This requirementwas reinstated at the end of November, but according to an inter-view with staff at the National Employment Law Project it was dif-ficult to notify claimants, many of whom had moved several times,and many fell off the rolls. It was also difficult for some claimants toreach the overloaded UI system by telephone.

22. In October and November, unemployment in Louisiana reachedover 12 percent, according to the Bureau of Labor Statistics (2006b).

23. CMS developed a waiver template and approved waivers on anexpedited basis. Between September and December, CMS granted17 host states waivers, and executed memoranda of understandingwith home states.

24. Federal guidance on the TANF legislation also allowed these loanfunds to be used for victims of Hurricane Rita (Office of FamilyAssistance 2005).

25. See Congressional Budget Office (2005a) and Social Security Ad-ministration (2005).

26. It is also possible, however, that if in the long run the state ends upwealthier, with its poor residents dispersed, block grant funding willbe sufficient or even greater than necessary to meet need.

27. Additional proposals have been made, though none appeared to beunder serious consideration as of mid-March. For instance, larger-scale short-term and long-term housing voucher programs wereproposed to meet the immediate needs of Katrina evacuees moreeffectively than the approaches taken so far by FEMA and HUD, andto tackle longer-term shortages in affordable housing (see Popkin,Turner, and Burt 2006). The unsuccessful Grassley-Baucus legisla-tion of September (S. 1716) proposed significantly more consistentand comprehensive responses in Medicaid, unemployment com-pensation, and TANF.

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ing Cash Assistance by Number of Recipient Children, FY 2002.”Washington, DC: U.S. Department of Health and Human Services.http://www.acf.hhs.gov/programs/ofa/annualreport6/chapter10/1043.htm.

Bureau of the Census. 2003. “Selected Economic Characteristics.”American Community Survey. Washington, DC: U.S. Departmentof Commerce. http://www.census.gov/acs/www/.

Bureau of Labor Statistics. 2006a. “Hurricane Katrina and the Employ-ment Situation Report.” Washington, DC: U.S. Department ofLabor, February 3. http://www.bls.gov/katrina/empsitbrief.htm.

———. 2006b. “State and Local Personal Income 2005 (BEA 06-10).”Washington, DC: U.S. Department of Labor, March 28. http://www.bea.gov/bea/regional/data.htm.

Center on Budget and Policy Priorities. 2003. “Introduction to theHousing Voucher Program.” Washington, DC: Center on Budgetand Policy Priorities, May 15. http://www.centeronbudget.org/5-15-03hous.htm.

Congressional Budget Office. 2005a. “Cost Estimate: H.R. 3672, TANFEmergency Response and Recovery Act of 2005.” Washington, DC:Congressional Budget Office, September 26. http://www.cbo.gov/showdoc.cfm?index=6660&sequence=0.

———. 2005b. “Cost Estimate: H.R. 3971, QI, TMA, and AbstinencePrograms Extension and Hurricane Katrina Unemployment ReliefAct of 2005.” Washington, DC: Congressional Budget Office, Octo-ber 25.

Congressional Research Service. 2005. “TANF Cash Benefits as of Jan-uary 1, 2004.” CRS Report for Congress. Washington, DC: TheLibrary of Congress, September 12.

Ensellem, Maurice. 2005. “Reforming Disaster Unemployment Assis-tance to Support Families Left Jobless after Hurricane Katrina, TheirEmployers and the Region’s Economy.” Press Release. New York:National Employment Law Project, September 13.

Gainsborough, Juliet F. 2003. “To Devolve or Not to Devolve? WelfareReform in the States.” Policy Studies Journal 31:4 (603–23).

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Kaiser Commission on Medicaid and the Uninsured. 2006a. “A Com-parison of the Seventeen Approved Katrina Waivers, Updated Jan-uary 2006.” Medicaid Fact Sheet. Washington, DC: The Henry J.Kaiser Family Foundation.

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National Employment Law Project, February 9. http://www.nelp.org/docUploads/KatrinaExtension.pdf.

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Yesim, Yilmaz, Sonya Hoo, and Matthew Nagowski. 2006. “Measur-ing the Fiscal Capacity of States: A Representative Tax System/Representative Expenditure System Approach, Fiscal Year 2002,Draft.” Tax Policy Center and the New England Public Policy CenterReport. Boston, MA: Federal Reserve Bank of Boston, April.

20 After Katrina

Pamela Winston is a research associate in The Urban Institute’s Center on Labor,Human Services, and Population.

Olivia Golden is a senior research fellow and director of the Assessing the NewFederalism Policy Center at the Urban Institute.

Kenneth Finegold is a senior research associate in the Income and Benefits PolicyCenter at the Urban Institute.

Kim Rueben is a senior research associate at the Urban Institute–Brookings Institu-tion Tax Policy Center.

Margery Austin Turner is director of the Urban Institute’s Metropolitan Housing andCommunities Policy Center.

Stephen Zuckerman is a principal research associate in the Health Policy Center at the Urban Institute.

21

About the Authors

The UrbanInstitute2100 M Street, N.W.Washington, D.C. 20037

Phone: 202.833.7200Fax: 202.429.0687http://www.urban.org

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