White House seeks $10 billion NFIP bailout
WASHINGTON (Dec. 10, 2012) — As Congress considers a White House request to raise the National Flood Insurance Program’s borrowing authority to $30.4 billion, the R Street Institute asks that lawmakers ensure the Federal Emergency Management Agency implements in a timely manner reforms to the program already called for under legislation passed earlier this year.
The Obama administration has requested a $9.7 billion increase the program’s borrowing authority as part of a $60.4 billion supplemental budget request submitted to Congress by the Office of Management and Budget to provide aid to areas affected by Hurricane Sandy.
Prior to the storm, the NFIP was already $18 billion in debt to the U.S. Treasury, with most of the total related to storm claims from Hurricane Katrina in 2005.
“While it is imperative that current NFIP policyholders be reimbursed for their flood claims, it is also clear that this bloated, misguided program cannot continue on its current path,” said R Street Senior Fellow R.J. Lehmann. “It was terribly unlikely the NFIP would ever be able to pay off even the $18 billion it already owed to the taxpayers, much less the more than $30 billion it would now be permitted to borrow.”
Under reform legislation passed earlier this year, the NFIP is to implement risk-based rates for frequently flooded properties, commercial properties and second homes that previously were granted subsidized rates. The bill also grants FEMA the authority to lay off some of the program’s risk on the private sector through the purchase of reinsurance or by issuing catastrophe bonds. R Street urges that these changes be implemented in a timely fashion, to reduce the program’s need to ask the taxpayers for more resources in the future.
“The reforms passed earlier this year were an important step toward putting the NFIP on more fiscally sound footing,” Lehmann said. “But in the long run, these are all risks that should be borne by the private sector. Continuing to use taxpayer resources to encourage people to build and live in risky, environmentally sensitive regions is simply bad public policy.”
