When the levee breaks…
Senate Majority Leader Harry Reid, D-Nev., has yet to schedule floor time for consideration of the National Flood Insurance Program reform bill the Senate Banking Committee passed unanimously early last month. While we’re still hopeful the Senate will vote on the package, there remain some roadblocks to be cleared.
Among these are some lawmakers’ efforts to continually weaken the legislation with carve-outs that, in the past, have proven to be a death-by-a-thousand cuts. Sens. Thad Cochrane, R-Miss., and Mark Pryor, D-Ark., are to try to earn exemptions for their own parochial concerns, mounting an effort to persuade committee members to amend the bill by releasing residual risk properties from the requirement to purchase flood insurance.
Levees, dams and other flood control structures are important to mitigating flood risk. Undertaking such mitigation can sometimes be a prerequisite for a community to be eligible to participate in the NFIP at all. And to encourage mitigation and sound floodplain management, it is perfectly reasonable for communities to have their lowered risk profiles reflected in lower flood insurance premiums than their residents would otherwise have been required to pay had the dams and levees never been built.
We support risk-based flood insurance prices, and the Senate bill would charge residual risk properties rates that comport with the size of their risk. But a lower risk of flooding is certainly not the same thing as no risk of flooding. As several recent floods, and notably Hurricane Katrina, have amply demonstrated, levees fail, sometimes quite catastrophically.
Failing to inform property owners of such risks is irresponsible, as it could leave them with nothing but the hope of taxpayer-funded disaster assistance in the case of a major breach. And since the requirement applies only to those properties with mortgage loans held by a federally regulated lender or government–sponsored enterprise, the loss of collateral should a flood destroy the property would also ultimately be borne by the taxpayers.
Moreover, granting carve-outs for these properties can open the proverbial floodgates for other lawmakers to seek further and further exemptions for their own special interests, which could ultimately doom efforts for reform.
The Congressional Budget Office recently declared that the bill under consideration in the Senate would increase the NFIP’s net income by $4.7 billion over the next decade. Given that the program is currently $17.8 billion in debt, and still faces the possible risk load of catastrophes above and beyond what’s called for in the actuarial tables, the changes contemplated in this legislation don’t go nearly far enough to fix the NFIP’s problems and eliminate taxpayer exposure. But they are an important first step, one we hope the Senate chooses to take soon
