Good morning, thank you for inviting me here to testify. I am Steve Ellis, Vice President of Programs at Taxpayers for Common Sense, a national, non-partisan budget watchdog. First, I would like to commend the Chairman and the Committee for holding this series of hearings. I am confident that it will aid the Committee as it develops the appropriate mix of water resource initiatives for the Gulf Coast and begins applying the lessons learned through Katrina and the other storms to our nation’s water resource policy as a whole.

In the Gulf Coast area, we are faced with a significant challenge – the need for speed, and the need to do it right. As a budget watchdog, I would add that we need to do it fiscally responsibly as well. The outpouring of individual support for the relief effort, which has already reached $2 billion, shows just how important this issue is to the nation. We owe it to the American people to spend their tax dollars wisely on the relief effort, and to use that money to rebuild effectively and intelligently. Taxpayers have already spent $70 billion on relief to date, and we expect tens of billions more in the days to come.

The fundamental responsibility of government is to take care of its citizens. In the area of flood and storm damage reduction, it is clear that government has failed. We spent $123 billion on flood control projects in the last century, but annual costs from flood damage have increased from $2.6 billion annually in the first 50 years of the 20th century to more than $6 billion per year over the last decade.

Right after Katrina flooded New Orleans, the airwaves were full of Army Corps of Engineers officials stating that the levees and floodwalls performed as expected – they provided category 3 protection and Katrina was a category 4 storm. But according to recent testimony, Katrina was no longer a category 4 hurricane when it hit New Orleans. Engineering panels sponsored by the National Science Foundation and the American Society of Civil Engineers found that the levees and floodwalls did not perform to design or promise. Additionally, these experts raised concerns that there may have been possible malfeasance on the part of individuals constructing flood control structures.

This initial analysis should send shivers down all of our spines. If it is true that the levees were brought down by shoddy craftsmanship, we need to know whether this was an isolated case, or whether this is just one of many projects nationwide that we should be concerned about.

We also need to learn more about the assumptions that Corps officials made when constructing and maintaining the London Street, 17th Street and Industrial Canal flood protection projects, and we should take a good look at how construction was supervised. In one of my jobs with the Coast Guard, I served as the Contracting Officer’s Technical Representative for a boat construction contract. In that capacity, I learned that inspection and oversight is as important as the initial construction itself. The Corps’ failure to oversee and predict the vulnerabilities in New Orleans flood protection is quite possibly the most troubling incident in the agency’s recent history.

So where do we go from here. Here are a few principles that TCS would urge the Committee, Congress and the administration to consider regarding rebuilding water infrastructure in the Gulf Coast and learning from Katrina.

· Rethink the level of protection – Everyone agrees that we must give New Orleans at least the category 3 level of protection that it was supposed to have before Katrina. However, we cannot expect any levee to automatically meet all our needs just because the Corps has deemed it “category 3,” or even “category 5.” Hurricanes are extremely dynamic entities. We should endeavor to obtain significant protection from a variety of threats, not just a repeat of Katrina.

· Identify what to rebuild – Although it will be difficult process, we will have to identify areas that are too damaged or so vulnerable to future storms that they should not be rebuilt. Just like after the Great Midwest Flood of 1993, this is a tough task that should be managed and led by Louisianans. But the federal government needs to be clear that if individuals want to rebuild in hurricane-ravaged areas, they should do it without the aid or encouragement of Uncle Sam. In past crises, some affected towns have responded by relocating out of the floodplain. After the Flood of 1993, the post-event analysis recommended that damaged communities should move critical infrastructure out of the floodplain where possible. When floodwaters returned in 1995, the damage was far less. If relocation is not practical, infrastructure and densely populated areas should have the highest level of flood protection possible. This strategy makes sense, but we also have to realize that Mother Nature is very creative, versatile and powerful. We can mitigate the risks with levees, floodwalls and constructed wetlands, but the risk of catastrophic flood damage will always be there.

· Reevaluate our policies – The potentially shoddy levee construction in New Orleans should not be all that concerns us regarding levees. Our nation’s water resource policies are antiquated and often fail to adequately protect us. The Principles and Guidelines – the rules governing Corps of Engineers project design and selection – are more than two decades old. We need to update these rules to fully account for all costs and benefits of Corps projects, modernize economic procedures and remove biases toward large construction projects.

We have a $58 billion backlog of Corps of Engineers projects and the agency has a roughly $5 billion budget. Rather than pumping up the Corps budget as some insist, we must establish a system of prioritizing project investment so we don’t squander precious tax dollars maintaining waterways with no traffic, rather than constructing essential flood damage reduction projects.

National flood policies also make little sense. Our 35-year experience with flood insurance has failed: FEMA estimates that flood insurance claims this year will exceed $22 billion, but the National Flood Insurance Program has the capacity to pay about $2 billion per year. Further, our policies discourage adequate flood protection. Since the typical homeowner does not have to buy flood insurance if they have 100-year flood protection, we have essentially dumbed down our flood protection to the 100-year level. Remember, there is still a 1% chance that these areas would flood every year; people buy lottery tickets hoping to win with far worse odds than that. The convention of describing the level of protection by assigning it an x-year level, be it 50-, 100-, or 500-, is confusing and leaves individuals with an unrealistic view of their protection.

· Let the economy help itself – Many private sector industries are now pleading with the government to help them rebuild. Small businesses, the oil and gas industry, fishing industry, the port – all are seeking significant federal support to get them back on their feet. We strongly urge the incentives to be small, targeted and short in duration. Katrina was an unthinkable tragedy, but it also provides an opportunity to let the market correct the mistakes of the past. For instance, some businesses or infrastructure may have been inappropriately located, at high risk from storms. Taxpayers should not subsidize them to be built right back in harm’s way. The federal government should be trying the rev the Gulf Coast’s economic engine, but if the government’s hand – or handout – is too heavy it will stifle innovation and economic incentives to reduce exposure to storm risk.

· Forward thinking – There are a lot of plans on the books for providing adequate flood protection for New Orleans and Louisiana. We must resist the urge to simply dust them off and get building. Our approach to providing adequate protection must be integrated and multi-faceted, and it must be tailored to include the lessons learned from this unthinkable tragedy. Our planning must be dynamic and we have to think outside the box, because traditional approaches will likely not succeed. We should look at ideas like Dr. Sherwood Gagliano’s plan to divert some of the Mississippi River water and sediment to restore coastal marshes. This plan was highlighted in the Wall Street Journal recently. Furthermore, we need to make policy changes that will help provide the smarter floodplain development and protection incentives.

· Don’t try to do everything – Congress has already been asked to fund the “do everything for everyone” approach. We shouldn’t try to rebuild everything that was damaged by Katrina because the regions that were hit were obviously very exposed to storm damages. Funding and activity must be targeted to accelerate, but not dictate the rebuilding process. The federal role in rebuilding will set precedents for future natural disaster response, so we must be judicious in our activities.

That gets me to major concern for Taxpayers for Common Sense – cost. The nation needs to set some investment priorities in the Gulf Coast region. We cannot afford to protect everything, everywhere and pay everyone to come back to New Orleans. We had a $317 billion budget deficit last year. We are fighting a war. New Orleans is an important and valuable investment, but we have to target our funding wisely.

Thank you very much for inviting me here to today to testify and I’ll be happy to answer any questions you might have.

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1 Brennen Jensen and Elizabeth Schwinn. Chronicle of Philanthropy. “Donations to Hurricane Relief Exceed $2 Billion, But Costs Soar.” November 3, 2005. Available at http://philanthropy.com/free/update/2005/11/2005110302.htm.
2 Senate Budget Committee Republican Staff. Budget Bulletin. October 4, 2005. Available at http://budget.senate.gov/republican/analysis/2005/bb08-2005.pdf.
3 Taxpayers for Common Sense and National Wildlife Federation. Crossroads: Congress, the Corps of Engineers and the Future of America’s Water Resources. March 2004. 20 -21.
4 Senate Homeland Security and Governmental Affairs Hearing. Hurricane Katrina: Why Did the Levees Fail?. November 2, 2005.
5 Jeanne Cummings. The Wall Street Journal. “Swept Away: How Rhineland, MO, Saved Itself but Lost a Sense of Community.” July 15, 1999.
6 Interagency Floodplain Management Review Committee. “Sharing the Challenge: Floodplain Management Into the 21st. Century”. June 1994.
7 Federal Emergency Management Agency. “Success Stories from the Missouri Buyout Program”. August 2002.
8 David I. Maurstad, Acting Director and Federal Insurance Administrator, Mitigation Division, Federal Emergency Management Agency. Testimony before the House Committee on Financial Services. October 20, 2005.
9 Betsy McKay. The Wall Street Journal. “Moving the Mississippi”. October 29, 2005.