ANALYSIS: Flooding Heaps New Financial Woes on Louisiana

“How’s your house?” That’s the new greeting for many across south Louisiana as a 20-parish area digs out of catastrophic flooding and its aftermath. The logical next question often remains unspoken: “How do you pay to fix this?”

That’s the question facing a Louisiana state government that has been staggering from one budget crisis to the next. The misery that the storms heaped on residents of wide stretches surrounding Baton Rouge and Lafayette delivers yet another blow just as the state seemed to be on track to getting its financial bearings.

State agencies estimate they have poured at least $13 million and counting into flood response work, with the Louisiana National Guard alone spending about $800,000 a day, according to the governor’s chief budget adviser, Commissioner of Administration Jay Dardenne.

Those costs are only going to balloon higher in the recovery effort.

“Somebody asked me, ‘What do you anticipate the price tag to be?’ I said, ‘Gosh, I haven’t even gotten to that, the total,'” said House Speaker Taylor Barras, R-New Iberia, whose district received flood damage.

While FEMA will reimburse much of the cost of rescue and recovery work, the price tag for the state’s share could still be sizable — tens of millions, possibly hundreds of millions of dollars — because the flood damage is so extensive.

Gov. John Bel Edwards said the state’s financial woes won’t hamper the response and that the money will have to work itself out later.

“We’re not pinching our pennies in this disaster. We’re spending whatever it takes,” Dardenne said. But he acknowledged the costs for the state are “going to be huge.”

Under federal law, FEMA picks up 75 percent of the costs associated with responding to the disaster, including debris removal and repair of disaster-damaged public facilities, like roads. State and local government agencies pay the remaining 25 percent.

And those agencies must spend their own money first. FEMA provides reimbursement after collecting documentation.

FEMA says it pays 100 percent of the housing assistance that it provides to storm victims — grants to help with costs for rental assistance and some home repairs. But that federal cost share drops back down to 75 percent for other types of individual assistance, like grants for disaster-related medical expenses or money to replace furniture and appliances.

The Edwards administration hopes to move to a better match rate that the state has received after some hurricanes, in which the federal government pays 90 percent. That higher match rate, however, requires action from the president, according to FEMA.

The flooding’s devastation is yet another financial hit to a state that just worked its way through closing the worst budget shortfall seen in 30 years — a state that still has lingering projects from hurricanes Katrina and Rita in 2005 and hurricanes Gustav and Ike in 2008.

Only a few days ago, Treasurer John Kennedy had been optimistic after seeing the July tax collection numbers. That encouragement may have been washed away in the flood.

“We may cry after August,” Kennedy told state officials.

In the short-term, new financial gaps will be added to an expected deficit left from the last budget year whose size remains unclear. The catastrophic flooding also has made it more likely the state will need a short-term bank loan to keep paying for government operations.

“We’re burning cash right now and we’re not taking in revenue in a lot of these areas because offices have been closed,” Dardenne said.

Tax extensions have been granted in the flood-ravaged region, delaying money the state needs to pay its bills and making the state less certain of what money it will receive.

In the long-term, the damaging impact on the state treasury could be deepened by lost economic activity caused by the flooding, or it could be boosted by an influx of spending on construction supplies, replaced cars and new furniture.

The question marks are large.

Remembering the financial see-saw caused by Katrina and Rita, Senate President John Alario, R-Westwego, told colleagues, “We have to be very, very careful with any money we spend at this point.”