With the National Flood Insurance Program set to expire at the end of May, the Senate Banking Committee’s Economic Policy Subcommittee is hosting a May 9 hearing on the need to reform the program.
Though legislation that would extend the program for five years – while phasing out premium subsidies and opening the program to private reinsurance capital – already has passed the full committee and the U.S. House, officials from the Federal Emergency Management Agency recently asked that the program be extended for two years without any changes.
In written testimony [attached] submitted for the hearing by The Heartland Institute’s Center on Finance, Insurance, and Real Estate, Deputy C-FIRE Director R.J. Lehmann contends the program is “not sustainable for an additional two years as it is currently constituted.”
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“The U.S. Government Accountability Office placed the NFIP on its list of high-risk federal programs in March 2006, and it has remained there in each successive year. The program is $17.775 billion in debt and can borrow only $3 billion more from the U.S. Treasury under its currently authorized borrowing authority. Given its debt load, NFIP continues to accrue nearly $1 billion in interest annually and the Congressional Budget Office projected in October 2011 that its current borrowing authority likely will be exhausted by or before 2014.
“Extending NFIP for an additional two years with no major changes would create a strong possibility that FEMA will either need to return to Congress to seek additional borrowing power or that the program will become insolvent.”
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