Louisiana Faces Pricey Hurricane Bill

Louisiana is expecting a $3.7 billion bill from the federal government for the state's share of the hurricane recovery, far exceeding anything the governor had anticipated.

The state is already dealing with its own crippling budget problems, including dramatic jumps in unemployment, business shutdowns and a state budget deficit of nearly $1 billion in tax revenue alone, and the estimate from the Federal Emergency Management Agency (search) was a shock.

"You knew that the bill was coming. You knew that the disaster was large. Nothing could prepare you for that," Gov. Kathleen Blanco's (search) spokeswoman Denise Bottcher said Friday.

FEMA has also started telling homeowners in some hurricane-damaged regions of Louisiana and Mississippi that it has decided not to wait for individual home inspections and will begin paying up to $26,200 per home based on satellite images of the most heavily damaged areas, the Washington Post reported on its Web site late Friday.

"It is presumed these homes are uninhabitable, and these persons will be eligible for the maximum amount they can receive," FEMA spokeswoman Nicol Andrews explained to the Post.

But paying for that type of assistance, primarily home repairs and temporary housing, is also the largest chunk of the state's bill. The state picks up 25 percent of the cost without a say in who receives the help — about $2.8 billion for Louisiana according to estimates in a FEMA report released by the governor's office.

FEMA has not formally announced the move to base some payments on satellite images rather than inspections, but according to the Post, the areas it will cover are in the Louisiana parishes of Orleans, Jefferson, St. Bernard, St. Charles and Plaquemines, and in Mississippi's Jackson, Harrison and Hancock counties.

In the FEMA report given to Blanco's office, the cost of the federal response to Hurricanes Katrina (search) and Rita (search) in Louisiana was estimated at about $41.4 billion, or about $9,200 for each state resident.

When Blanco was told the state would have to repay an estimated $3.7 billion, "she was stunned. It was almost disbelief," Bottcher said. The state budget approved earlier this year for the entire 2005-06 fiscal year was $18.7 billion.

Bottcher said officials will look at possible loan arrangements and federal help to cover the state's share of the hurricane costs, but she said stretching the payments out for 30 years still would cost more than $100 million a year.

Mark Merritt, a former Federal Emergency Management Agency official working as a consultant for the governor, said FEMA's rules allow for some flexibility in states paying their cost but not anything lengthy enough to be practical for Louisiana.

FEMA has picked up the complete cost of emergency assistance, including debris removal and overtime pay for emergency workers, but that is for emergency work only, and it ends later this month — unless the White House agrees to extend it.

Louisiana could choose not to make some infrastructure or building repairs to shrink part of its price tag, but the majority of the state's share of the FEMA cost is beyond state control.

New Orleans, meanwhile, was given a $120 million federal loan Friday to keep the city's vital services running only until about March.

The city was allowed to borrow the money as FEMA approved the first round of post-Hurricane Katrina loans — $181 million — for cash-strapped local governments in Louisiana. Under terms mandated by Congress, the loans will have to be repaid.

Last month, Mayor Ray Nagin (search) cut 3,000 non-essential city workers from the payroll. None of those positions would be restored with the loan money.