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Bill to improve National Flood Insurance Program to reduce direct spending by $187 million

Current program extremely financially unstable

With the clock ticking on how much longer the National Flood Insurance Program will last, the Congressional Budget Office, a nonpartisan analysis for the U.S. Congress, calculated the costs of one of the main bills in the running to update the program. The CBO found that the bill would reduce direct spending by $187 million.

The drop in spending is a much-needed adjustment given the current program has an expected one-year shortfall of $1.4 billion.

According to the FEMA’s website, “The National Flood Insurance Program aims to reduce the impact of flooding on private and public structures. It does so by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations.”

Originally established in 1968, President Donald Trump on Friday passed a three-month extension for the program, which was set to expire on Sept. 30, 2017, in hopes that Congress would comes up with a long-term financial solution for the program. The program is now set to expire on Dec. 8, 2017.

The bill the CBO calculated is the 21st Century Flood Reform Act of 2017, H.R. 2874, sponsored by Rep. Sean Duffy, R-Wis.

“The legislation also would make a number of changes to the NFIP aimed at improving the financial status of the program and encouraging the growth of a private market for flood insurance,” the CBO stated.

And most importantly, the CBO said that it estimated the changes made by this legislation would increase collections from NFIP policyholders but would reduce the number of property owners who purchase insurance through the NFIP.

On net, the CBO estimated that the changes made by H.R. 2874 would reduce direct spending on net by $187 million over the 2018-2027 period. Meanwhile, enacting H.R. 2874 would increase revenues by about $4 million over the 2018-2027 period, the CBO stated.

Other key parts of the bill that the CBO noted is that H.R. 2874 also would authorize FEMA to perform activities related to the flood insurance program, such as making grants for flood mitigation, administering a state affordability program, updating the process for appealing flood map information, implementing an independent actuarial review of the program, operating a flood insurance clearinghouse, and starting a pilot program for offering community-based flood insurance.

While fees paid by policyholders would offset the cost of some of those activities, the CBO estimated that implementing other provisions would cost $75 million over the 2018-2022 period, subject to the appropriation of the authorized and necessary amounts.

The House Committee on Financial Services ordered the CBO to examine the bill back in June after it passed through the committee by a vote of 30-26.

“We cannot continue to call on the American taxpayer to bailout a program that is currently drowning in $25 billion of red ink and suffers a $1.4 billion annual actuarial deficit,” said Financial Services Committee Chairman Jeb Hensarling, R-Texas, at the time. “These bills put the National Flood Insurance Program on a path toward actuarial soundness where all will be protected, no one will be denied a policy, all will benefit from competition, the NFIP will be sustainable, and the national debt clock will spin a little less rapidly.”

The other bill Hensarling referred to is the National Flood Insurance Program Policyholder Protection Act of 2017, H.R. 2868, sponsored by Rep. Lee Zeldin, R-N.Y., which unanimously passed through the committee.

“The bill would protect NFIP policyholders from unreasonable premium rates and require FEMA to conduct a study to analyze the unique characteristics of flood insurance coverage of urban properties,” according to the committee.

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