Media ignored Mississippi's use of waivers to redirect funds designated for low-income Katrina victims

On the second anniversary of Hurricane Katrina's August 29, 2005, landfall, the media have largely ignored reports that Mississippi Republican Gov. Haley Barbour, leading the recovery effort in the state, has repeatedly sought, and obtained, waivers from the Department of Housing and Urban Development (HUD) allowing the state to spend federal funds that would normally be reserved for low- to moderate-income residents on other projects. As a consequence, just 20 percent of the $5.4 billion in Community Development Block Grants (CDBG) awarded to the state has been earmarked for programs designed to benefit Mississippi's low- to moderate-income Katrina victims -- less than half of the 50 percent requirement mandated by Congress, according to a recent report by the Steps Coalition, an organization that monitors the Mississippi Homeowners Assistance Program. Moreover, the $1.1 billion in federal funds that have been earmarked for programs benefiting lower income residents have been distributed very slowly. As the Biloxi Sun-Herald reported on August 26, the Steps Coalition said the program has been deficient in "helping people of low-to-moderate incomes." Furthermore, investigative journalist Tim Shorrock wrote in an August 29 Salon.com article that the distribution of federal funding in Mississippi under Barbour "has been badly skewed toward wealthy homeowners."

Despite widespread reporting on the reconstruction in the Gulf Coast, however, the media have essentially ignored Mississippi's use of waivers to redirect funds designated for low-income Katrina victims. Aside from the Sun-Herald and Salon, Mississippi's use of CDBG waivers and the Steps Coalition's findings about the state's distribution of funds to low-to-moderate income residents have gone largely unnoticed by the media. A Media Matters for America search* of the Nexis database for newspaper articles and transcripts from the past two years found only two articles covering these issues and revealed that even those reports afforded them scant attention.

The Associated Press reported on August 20 that Mississippi had obtained CDBG waivers:

[The Mississippi Development Authority's] Web site shows how many grant applications have been received and how many grants have been paid, but those details are too general, said Debby Goldberg, director of the Hurricane Relief Project at the Washington-based National Fair Housing Alliance.

"It doesn't give you any indication of who is it that's included in those numbers," said Goldberg. "Are these low income people? Are they moderate income people? Which communities is the money not flowing into," she said.

Goldberg said because the state is using federal Community Development Block Grants for the program, the funds must be used to promote fair housing. The original federal requirement for the CDBG funds was that at least 50 percent of the money go to low- to moderate-income people, but Mississippi received a waiver for that requirement in phase one, Goldberg said.

The Chicago Tribune reported in an August 29, 2006, article:

Critics, including Derrick Johnson, president of the Mississippi State Conference of the NAACP, said the state has lost sight of other serious concerns that resulted from the storm, such as low-income housing. More than 39,000 people still live in government trailers.

A report issued last week by the Mississippi NAACP and the Initiative for Regional and Community Transformation at Rutgers University said the working class is being left out of the recovery because the state requested a waiver allowing $5.1 billion in federal Community Development Block Grants to be diverted to uninsured or underinsured homeowners who want to rebuild. Meanwhile, the 47 percent of Gulf Coast residents who lived in rental housing are left out.

An April 25, 2006, Congressional Research Service report noted that "Congress included $11.5 billion in supplemental CDBG disaster recovery assistance for the five states affected by the Gulf Coast hurricanes in the Defense Appropriations Act for FY2006." The CRS also noted that the CDBG "program's authorizing statute requires each state and entitlement community to allocate 70% of its CDBG funds to activities that primarily benefit low- and moderate-income persons," but that the Defense Appropriations Act "lower[ed] the income targeting requirement for activities benefiting low- and moderate-income persons from 70% to 50% of the state's allocation." According to the report, the act also allowed HUD Secretary Alphonso Jackson to "grant waivers of program requirements" -- including the already reduced requirement that 50 percent of CDBG funds go to low- to moderate-income people.

According to the text of the supplemental, from its "Community Planning and Development" section:

Provided further, That in administering the funds under this heading, the Secretary of Housing and Urban Development shall waive, or specify alternative requirements for, any provision of any statute or regulation that the Secretary administers in connection with the obligation by the Secretary or the use by the recipient of these funds or guarantees (except for requirements related to fair housing, nondiscrimination, labor standards, and the environment), upon a request by the State that such waiver is required to facilitate the use of such funds or guarantees, and a finding by the Secretary that such waiver would not be inconsistent with the overall purpose of the statute, as modified: Provided further, That the Secretary may waive the requirement that activities benefit persons of low and moderate income, except that at least 50 percent of the funds made available under this heading must benefit primarily persons of low and moderate income unless the Secretary otherwise makes a finding of compelling need.

Since the supplemental was passed, Mississippi has sought and obtained four waivers to the 50 percent CDBG requirement. According to a March 9 memo from the National Low Income Housing Coalition, Mississippi has sought and failed to obtain a blanket waiver for the requirement but has instead obtained three "piecemeal" waivers from HUD going back to June 2006, at the request of Barbour:

On March 6, HUD published its third set of waivers allowing Mississippi and Louisiana to spend Community Development Block Grant (CDBG) Disaster Supplemental funds with less focus on low income people. Louisiana will be able to give salary bonuses to scientists lured from other states, and Mississippi won't have to worry about benefiting lower income people when giving grants to businesses.

Mississippi continues to seek a blanket waiver of the obligation to spend its $5.48 billion CDBG Disaster Supplemental funds without regard to benefiting lower income people. Although HUD has twice denied such a blanket waiver, Mississippi first avoided the requirement to spend at least half of the money to benefit lower income people when HUD granted a waiver related to projects included in the state's initial, partial Action Plan (see Memo, 6/16/06). HUD has repeatedly waived the low income benefit requirement on a piecemeal basis as Mississippi submits incremental, partial Action Plans. The latest HUD action again denies a blanket waiver, but grants the waiver for Mississippi's most recent partial Action Plan which will provide $340 million for business grants and loans and $160 million for downtown commercial revitalization.

When creating the CDBG Disaster Supplemental, Congress allowed HUD to waive the usual requirement that 70% of the money benefit lower income people, but set a floor of 50% benefit to lower income people. HUD quickly ditched the 70% lower income benefit requirement. Congress also enabled HUD to waive the 50% benefit floor if a governor demonstrated to HUD that there was a compelling need to not aid low income people.

On August 24, HUD granted yet another CDBG waiver to Mississippi, which went into effect on August 29.

As noted in an August 26 entry on the Daily Kos blog, the Steps Coalition released a report on August 24 detailing the amount of CDBG funds earmarked for low- and moderate-income people in Mississippi. According to the report, $1.1 billion in federal aid has been earmarked for three programs designed to benefit lower-income residents. Of those programs, the Phase II homeowner assistance grant program has been allocated the most funds -- $700 million. However, the Sun-Herald reported that, as of August 26, just $55 million in grants had been paid through the Phase II program. The Mississippi Development Authority, as of August 29, reported that $70 million in grants have been paid. The Steps Coalition recommended that "at least" $834 million "more be set aside for programs for low-moderate income residents."

From Tim Shorrock's August 29 Salon article:

Two years later, some of these areas are still distressed. One reason for the lack of attention paid to the Gulf Coast may be the massive investments made in the region by casino, hotel and real estate interests. That has created the appearance of a recovery that business promoters say has brought, and will continue to bring, enormous growth to the area. But many locals say that the casino-led development has done little to alleviate post-disaster conditions for most residents, including the 37 percent of the population -- approximately a half million people -- who earn below what federal guidelines deem low to moderate income. Moreover, maneuvering in Washington by the state's Republican leaders has diverted aid money away from some of the people who need it the most.

Hurricane Katrina "leveled everybody" on the Gulf Coast, says Reilly Morse, a civil rights lawyer from Biloxi who works for the Mississippi Center for Justice, a statewide organization that provides legal assistance to low-income residents. "For a very short while, everybody had the same experience, and that spawned a sense of community that I don't think ever existed before." But since the aid money began flowing, said Morse, "there's really been two recoveries here: one that generally favored homeowners with resources, and another one that basically priced the poor out of the housing market."

[...]

The $23.5 billion in federal funding that Mississippi's governor and its two Republican senators managed to obtain was unprecedented in scope for a state recovering from a natural disaster. But the distribution of the $4 billion the state obtained specifically to help residents rebuild their housing, thanks to Barbour, has been badly skewed toward wealthy homeowners.

Under the Department of Housing and Urban Development's Community Development Block Grant program, 70 percent of the funds are supposed to be allocated to low- and moderate-income people. But the governor successfully lobbied to waive that requirement, undercutting its impact on Katrina survivors. As a result, only 25 percent of the money has reached the poorer segments of the population. Renters, who make up 40 percent of the population in some sections of the coast, have received nothing. "Only a minuscule fraction has actually gotten into the hands of those that need it most," said Morse.

*Media Matters searched for "katrina and (mississippi or barbour) w/30 (community development or cdbg) w/20 waiv!"