Legislation designed to delay rate increases for some National Flood Insurance Program policyholders would add $2.1 billion to the program’s debt over the next 10 years, according to a cost estimate released by the Congressional Budget Office.
The Homeowner Flood Insurance Affordability Act, which may be voted on by the full Senate this week, would push back rate increases for primary homeowners until six months after the Federal Emergency Management Agency completes an affordability study. The affordability study was required to be conducted by the Biggert-Waters Flood Insurance Act of 2012 and was supposed to be finished by April 2013. FEMA Administrator Craig Fugate has said the study has been delayed by a lack of resources.
SB 1846, which was authored by Sen. Robert Menendez, D-N.J., would allow FEMA to use additional resources to complete the affordability study (Best’s News Service, Jan. 8, 2014).
But the CBO said delaying the rate increases would reduce net income to the NFIP by about $2.1 billion by 2024.
“Under current law, CBO expects that, on average expenditures, of the program will exceed collections over the next 10 years,” the CBO said. “Reducing net income would increase those shortfalls, resulting in additional borrowing by the program.”
Menendez’s bill came after many NFIP policyholders said their rates were set to increase dramatically, starting this month. Menendez said in a Jan. 7 statement that all other aspects of the Biggert-Waters Act would continue to proceed. He said that means the most costly subsidies for NFIP policyholders will continue to be phased out.
It is unclear whether the CBO report will alter the chances of the Senate voting to pass the Menendez bill.
The Senate is currently locked in contentious negotiations over whether to extend unemployment insurance benefits for an additional three months, at a cost of $6 billion. Many Senate Republicans have said the cost of any extension of unemployment insurance should be offset by spending cuts.
The debate over unemployment insurance has delayed a vote on the Menendez bill, according to two of the senator’s spokesmen.
Meanwhile, Congress is working to complete a budget bill before federal funding runs out on Jan. 15.
In addition to the Menendez bill, several other pieces of legislation have been introduced in both chambers of Congress that are designed to soften the financial impact of the Biggert-Waters Act.
Those bills have so far failed to gain traction among lawmakers. The Menendez bill appears to be the most likely to pass the Senate, given that it has picked up the support of a bipartisan group of senators from coastal states.
Mississippi Insurance Commissioner Mike Chaney has turned to the federal courts in an effort to delay some NFIP rate increases.
But this week, a U.S. Chief District Judge Louis Guirola Jr. of the federal court in Gulfport, Miss. delayed consideration of FEMA’s attempt to dismiss the lawsuit, which seeks to halt implementation of the NFIP rate hikes (Best’s News Service, Jan 8, 2014).
Chaney’s lawsuit is the leading edge of several coastal states’ push to delay the NFIP rate increases. Several coastal states, including Louisiana, Florida, Alabama and Massachusetts are among those that have filed briefs in support of Mississippi’s effort.
By Jeff Jeffrey, Washington Bureau manager
Source: AM Best