CLIMATEWIRE | The federal government is planning to withhold $8 billion in disaster funds from states due to temporary new spending restrictions outlined in a previously unreported document that shows how the budget turmoil in Congress could affect the nation.

The restrictions, which the Federal Emergency Management Agency imposed on itself, threaten to delay thousands of FEMA-funded projects in 27 states and territories aimed at repairing roads, buildings and other facilities damaged by disasters in recent years, the FEMA document shows.

Puerto Rico is projected to be hit the hardest, as it struggles to rebuild from Hurricane Maria in 2017, earthquakes in 2020 and Hurricane Fiona in 2022.

The financially strained U.S. territory could have up to $2.6 billion withheld for projects such as rebuilding critical facilities like hospitals and the electrical grid, the FEMA document shows.

“This is an enormous impact not just on the pace of rebuilding but on the economy,” Puerto Rico Resident Commissioner Jenniffer González-Colón (R) told E&E News in a statement. “This has an immediate effect on municipalities, contractors and suppliers.”

The $8 billion represents the amount of money that FEMA would ordinarily give states for rebuilding projects but expects to withhold under spending restrictions it imposed Aug. 29 to preserve its dwindling Disaster Relief Fund.

Under the restrictions, known as “immediate needs funding,” FEMA has stopped giving states money for non-urgent projects related to damage from disasters that happened more than a year ago. FEMA generally pays 75 percent of the cost of the projects.

In turn, FEMA is funding only “urgent recovery efforts” such as clearing roads and sheltering displaced residents immediately after a disaster. The restrictions have not affected FEMA’s ongoing aid to Hawaii after recent wildfires and to Florida, Georgia and South Carolina after Hurricane Idalia.

A senior FEMA official told E&E News that the agency could end up withholding more money if Congress is delayed in approving new disaster funding.

“The number could grow the longer INF is put in place,” the official said, using the acronym for immediate needs funding.

FEMA’s funding restrictions will remain in place until Congress replenishes the disaster fund by approving either a fiscal 2024 budget or special funding for FEMA.

Neither action appears imminent. As House Republicans remain divided on federal spending, a government shutdown appears increasingly likely to start at midnight on Saturday when fiscal 2023 ends.

The potential withholding of $8 billion marks the first time FEMA has fully accounted for the effect of its spending restrictions — and shows that its financial impact could be much larger than perviously thought.

Administrator Deanne Criswell told a House hearing Sept. 19 that the agency had withheld $1.5 billion from states since the restrictions began. Criswell did not mention the $8 billion projection and urged Congress to approve new disaster funding “without delay.”

The senior FEMA official updated Criswell’s figures in an interview and said the agency has withheld $2.8 billion since Aug. 29 for more than 2,000 rebuilding projects.

FEMA’s withholding does not automatically prevent states, territories and localities from starting reconstruction projects. Some jurisdictions could begin the projects using their own money and wait for FEMA reimbursement.

But smaller jurisdictions with limited funds are “not going to be able to continue” with rebuilding projects, Criswell told a House Transportation and Infrastructure subcommittee on Sept. 19.

FEMA has imposed “immediate needs funding” restrictions eight times since 2003, most recently in 2017 when hurricanes Harvey, Irma and Maria quickly drained the disaster fund.

FEMA disclosed the $8 billion projection in the fine print of a report it published Sept. 11 on the disaster fund. A footnote to an appendix notes that there will be “an estimated $8 billion in projects delayed due to Immediate Needs Fund.”

A separate appendix explains in tiny typeface the amount of money that FEMA expects to withhold in connection with 27 disasters for which permanent reconstruction work is underway.

The 27 disasters include the coronavirus pandemic, which resulted in every state receiving disaster funds. FEMA estimates that $4.5 billion of the $8 billion it expects to withhold will be distributed among the 59 states, territories and tribes that are receiving disaster aid for their pandemic response.

Some of the disasters for which FEMA expects to withhold funds occurred 18 years ago, including hurricanes Katrina, Rita and Wilma.

The withholding would have a substantial effect on Puerto Rico and its 3.2 million residents, nearly half of whom live in poverty.

The island has faced long delays in rebuilding from Maria, due partly to its dilapidated infrastructure before the hurricane.

The territory has received $33 billion from FEMA — more than any state or territory has gotten after a single disaster. But billions of dollars of work remain to be done.

González-Colón, the resident commissioner, said 4,100 rebuilding projects worth $1.9 billion are in various stages of planning or construction and need FEMA funding.

“Any of those projects that has not already had the funds fully disbursed and in the hands of the local funding recipient would see payments held back,” González-Colón said. That could have a “chain reaction effect of delaying the time for approval, start, or completion.”

Florida and Louisiana also face significant impacts from the FEMA restrictions.

The agency indicated it expects to withhold $376 million for projects related to Hurricane Laura, which hit Louisiana in 2020, and Hurricane Ida, which damaged several states including Louisiana in 2021.

FEMA also expects to withhold $265 million for projects related to Hurricane Ian, which caused massive damage across Florida in 2022.

Sen. Rick Scott (R-Fla.) has urged lawmakers to approve President Joe Biden’s request for $16 billion in emergency cash for FEMA’s disaster fund. But the supplemental funding request remains blocked by lawmakers who oppose Biden’s simultaneous request for $24 billion in aid to Ukraine.

FEMA is seeking an additional $20 billion for its disaster fund in the fiscal year that begins Sunday.

“FEMA said it needs $36 billion and anything less than that is simply inadequate,” Scott said in a statement.

Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2023. E&E News provides essential news for energy and environment professionals.