Relating to repayment of governmental subdivision loans for disaster aid

Description

Senate File 344 authorizes the Executive Council to forgive the repayment of a loan in an amount up to $1.0 million for good cause shown.

Background

The Contingent Fund provides disaster assistance loans and is paid from the Performance of Duty appropriation outlined in Iowa Code section 7D.29. The Performance of Duty appropriation provides funding for emergency repairs to State property if sufficient funds are not available in a State agency budget. The appropriation may be used to fund a portion of the match for local governmental entities in areas where presidential disasters have been declared as specified in Iowa Code sections 29C.20 and 29C.20A.

All expenditures from the Performance of Duty appropriation must be approved by the Executive Council. The Performance of Duty appropriation is a standing unlimited appropriation from the State’s Economic Emergency Fund (EEF) established in Iowa Code section 8.55(3)(d). If sufficient funds are unavailable in the EEF to pay the approved expenditures, an appropriation is provided from the General Fund in an amount necessary to fund the deficiency. Prior to FY 2012, the standing unlimited appropriation was funded through the General Fund, although other sources were occasionally used in place of the General Fund.

Currently, disaster loans of this type are without interest, but must be repaid in full. These disaster loans are capped at a maximum amount of 75.0% of the obligation and expenditures of the project, meaning there is a minimum 25.0% local cost share.

Table 1 details disaster aid loans by fiscal year from FY 2011 through FY 2023. The average annual disaster aid over the past five fiscal years was $621,000.

Table 1 — Approved, Repaid, and Outstanding Disaster Aid Loans

Assumptions

• Additional expenses may occur due to increases in disaster recovery costs, disaster frequency, and the number of loans requested; however, these amounts cannot be estimated at this time.
• The average annual disaster aid loan amount may increase in the future, but this amount cannot be determined at this time.

Fiscal Impact

There are approximately $3.4 million in outstanding disaster aid loans, of which a portion or all may be forgiven by the Executive Council for good cause. None of the outstanding loans individually exceed $1.0 million. Repayments would otherwise be made to the EEF. The number and value of future loans that may be forgiven cannot be determined.

Sources

• Department of Homeland Security and Emergency Management
• Department of Management
• Treasurer of State’s Office
• Legislative Services Agency analysis