WASHINGTON — In an unexpected breakthrough in negotiations with Louisiana officials, the Bush administration announced Wednesday that President Bush would ask Congress for an additional $4.2 billion to help the state repair and rebuild homes battered by Hurricanes Katrina and Rita.
Federal support for housing reconstruction, which has been the subject of protracted negotiations between Washington and local officials, is considered a prerequisite for wider recovery because it opens the way for thousands of displaced people to return to New Orleans and surrounding areas.
On Wednesday, Louisiana officials emphasized how crucial they felt housing was to the region's economic recovery. "The reality is there's an awful Catch-22 in Louisiana, and that is that people want to return, they want to put their kids back in school, they want to go back to work, but they can't do that, because there's no place for them to live," Rep. Bobby Jindal (R-La.) said.
The funds, which must be approved by Congress and are conditional on federal approval of a statewide recovery plan, are part of an estimated $18-billion spending plan for Gulf Coast reconstruction that the administration is scheduled to unveil today. The funds will be included in the supplemental budget request Bush will send to Congress.
Louisiana officials had complained that the administration wasn't providing enough housing help to allow the region to recover fully. On Wednesday, there was nothing but praise for the president.
"On behalf of the people of Louisiana, I have to say a very special thank you to the president," said Gov. Kathleen Babineaux Blanco, a Democrat who has often crossed swords with the administration over Katrina. She pledged Wednesday to use the money to build a "safer and smarter Louisiana."
Blanco appeared at a briefing with almost the entire Louisiana congressional delegation, New Orleans Mayor C. Ray Nagin, four parish presidents and members of the Louisiana Reconstruction Authority, a group the governor assembled to direct recovery efforts.
Blanco spoke of listening to Bush's speech in an eerily deserted Jackson Square during his Sept. 15 visit to New Orleans and wondering if the president's commitment to help Louisiana would ever become reality. "Mr. President, you are committed ... we know you care," she said Wednesday.
The $4.2 billion comes in addition to $6.2 billion that has been approved to repair housing. It puts the total funds available for Louisiana housing at $12 billion, including hazard mitigation funds from the Federal Emergency Management Agency. Although the $6.2 billion was slated for homeowners who didn't have insurance because they lived outside the flood plain, the new funding will be available to people throughout the state, within or outside the flood zone, insured or uninsured, said Sean Riley, a Louisiana Reconstruction Authority member.
Blanco estimated that payments to individual homeowners could be as high as $150,000, though any insurance payments and FEMA payments would be deducted. She added that they might forgive some mortgages, but she didn't know how far they could go.
The funding news was a victory for the Louisiana contingent, which clashed with the administration in January over its rejection of a homeowner bailout plan that officials considered crucial for recovery. That plan would have created a new federal agency to buy out homeowners, paying them 60% of their houses' pre-storm value and paying off their mortgages.
At the time, the administration said that more money might be forthcoming.
Sen. Mary L. Landrieu (D-La.), who didn't attend the briefing, offered qualified praise.
"Rebuilding communities involves many things, including housing as well as public safety and flood protection, infrastructure and healthcare, schools and universities, jobs and economic development," Landrieu said in a statement. "While an additional $4.2 billion in federal funding is vitally important in this effort to fund the housing component, many of these other needs remain unmet."
The reconstruction authority's recovery plan will address, among other things, the question of homeowners who want to rebuild in flood-prone areas.
The plan, which will encompass the entire state, will be submitted to the Housing and Urban Development secretary, who must approve it before the funds will be dispersed. The group worked closely with the president's federal coordinator for Gulf Coast rebuilding, Donald E. Powell, who said housing, along with levee reconstruction, represented the greatest challenges in the region.
"Jobs, healthcare, education, without housing it's all academic," Powell said. "I am encouraged by the progress [regional leaders] are making toward a detailed plan on how to rebuild their community. These funds will help them realize those plans."
The funding news came on a day when Congress agreed to increase the amount the National Flood Insurance Program is allowed to borrow from the Treasury as it is in danger of running out of funds. After Katrina hit Aug. 29, Congress raised the agency's borrowing limit from $1.5 billion to $3.5 billion in September, then to $18.5 billion in November. On Wednesday, Congress increased it to $21.1 billion.
Also Wednesday, the House voted to give the Small Business Administration an additional $712 million for disaster loans, which largely will be used to meet needs in the Gulf Coast.