Jersey pols shill for the NFIP’s three-card monte
But earlier this week, the New Jersey state Senate topped them all, with its proclamation of a newly derived fundamental human right: the right to own beachfront property.
Garden State lawmakers would perhaps quibble with that characterization, but it’s difficult to imagine any other justification for S.R. 102, which passed the upper chamber March 18 by unanimous voice vote. The resolution declares the Legislature’s sense that Congress and the White House ought to “take all appropriate legislative and regulatory action necessary to increase subsidies for premiums paid for flood insurance through the National Flood Insurance Program, especially for property owners who have suffered frequent losses.”
Those who don’t follow the ins and outs of the NFIP closely might not immediately apprehend why that sentiment borders on self-parody. The NFIP has been offering overly generous subsidies to residents of flood-prone regions for more than 45 years, and the roughly 1% of policyholders who suffer “repetitive losses” (90% of whom were paying deeply discounted “grandfathered” rates ) have accounted for more than a third of all the program’s claims.
The result of this system, which the N.J. Senate apparently would like to see expanded, has been nothing but environmental catastrophe and financial ruin. To put it frankly, the NFIP is flat-broke, and has been ever since 2005, when hurricanes Katrina, Rita and Wilma forced it borrow more than $19 billion from the U.S. Treasury just to pay its claims. There was little chance the program ever would be able to pay down that debt, and what little progress it did make was quickly erased by Hurricane Ike in 2008 and Tropical Storm Irene in 2011.
But with claims still coming in from last year’s Superstorm Sandy, whatever hope may once have existed of the NFIP returning to fiscal sustainability has long since been swept away. When all is said and done, the Sandy claims are expected to put the program more than $30 billion in the hole, with no hope of ever digging itself back out.
Someday, some future Congress will have to bite the bullet and forgive that debt, which exists essentially as an accounting fiction. In the meantime, a strong bipartisan consensus has emerged in favor of reforming this broken system which, in addition to flushing billions of taxpayer dollars down the drain, has served to encourage development in the most risk-prone and environmentally sensitive regions, contributed to wetlands depletion, threatened endangered species and led to the overdevelopment of barrier islands that serve as natural buffers against hurricanes.
Last year, Congress capped nearly eight years of debate on flood insurance reform by passing the Biggert-Waters Act. It incrementally moves the program toward greater solvency by phasing out premium subsidies for second homes, commercial properties and properties that have seen severe repetitive losses. It raises the cap on annual rate increases from 10% to 20%. It asks the program to begin building a catastrophe reserve fund and permits it to leverage those funds through purchases of private reinsurance.
It’s not a perfect piece of legislation. It doesn’t address the program’s debt, or what the GAO has identified as lax oversight of its Write Your Own program. We’re still a long way from bringing the program to true actuarial soundness, much less to the full privatization that we at the R Street Institute would like to see.
But even the modest steps Biggert-Waters does take clearly trouble some coastal lawmakers. Like, for instance, state Sen. Christopher Connors, R-Forked River, author of the New Jersey resolution. Following the state Senate vote, Connors told The Press of Atlantic City:
“A perspective a lot of people didn’t realize is that the federal government realized they had a failed program for years and what they attempted to do to adjust the program was removing the subsidies so those in higher-risk areas would be paying higher rates,” Connors said Wednesday.
…“Removing subsidies is only ensuring that people who will be living near the water are very rich people. If you raise these costs and shift this burden onto them, you will drive out the middle class dream of living on the water,” Connors said.
One must at least credit Connors for his honesty. He recognizes that the program is failed. He concedes that the goal of reformers is to make those who live in high-risk areas pay more, in accordance with the basic principles of insurance. He’s a bit confused on the demographic distribution – in truth, research by the Institute for Policy Integrity shows that the wealthiest counties in the National Flood Insurance Program filed 3.5 times more claims and received $1 billion more in payments between 1998 and 2008 than the poorest counties – but the basic gist of Connors concern is pretty clear.
His concern is that folks in coastal communities have been having their lifestyles subsidized by the rest of the country for a very long time, and they don’t want to see anything change that.
In the Book of Matthew, Jesus compares those who hear his words and do not act upon them to “a fool, who built his house on the sand.” But who is the bigger fool, the one who builds his house on sand, or the one who chips in to rebuild it, over and over again?
The NFIP is a sucker’s bet, a three-card monte, of the sort that boardwalk hustlers have been peddling down the Jersey Shore for more than century. In that sense, the state Senate is just taking part in a long and storied Jersey tradition – playing out the long con.