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Democrats press for $24.6B National Flood Insurance Program debt forgiveness

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Democrats press for $24.6B National Flood Insurance Program debt forgiveness

Forgiving the $24.6 billion debt amassed by the National Flood Insurance Program continued to be a sticking point for key Democrats as Congress weighs reforms to the program.

Rep. Maxine Waters, D-Calif., ranking member for the House Financial Services Committee, said during a June 7 hearing to discuss the program that a discussion draft of the reauthorization bill, which has yet to be introduced in either chamber, "absolutely falls short in many respects."

"Our requests are simple: provide a long-term reauthorization to ensure stability and confidence in the market [and] address the debt and the billions of dollars it costs policyholders already struggling with unaffordable premiums," Waters said.

She argued for "guardrails" to keep private-market insurers from hiking rates beyond the point of affordability and for Congress to direct the Federal Emergency Management Agency, which controls the program, to invest more money into mitigation measures.

Democrats have maintained that the debt accumulated by the NFIP should be forgiven and that premiums should fund mitigation efforts instead of paying down the debt, which costs about $400 million annually to service.

Insurance Subcommittee ranking member Rep. Emmanuel Cleaver, D-Mo., said it is not in taxpayers' best interest to "pile on debt" with the debt already accumulated. Forgiving the debt, he argued, would allow real estate firms and FEMA to have a degree of stability.

"I think we are really interested in getting the private sector to get more involved," Cleaver said. "The opportunities for expansion also I think is a magnet for participation as we move into the next few years with the private sector."

But Rep. Sean Duffy, R-Wisc., chairman of the Insurance Subcommittee, responded that the trio of the Congressional Budget Office, Government Accountability Office and FEMA have expressed that forgiving the debt would not make the program solvent.

The CBO issued a report in April that projected that the NFIP will have "insufficient receipts to pay the expected claims and expenses over the 2018–2027 period and that FEMA will need to use about $1 billion of its current $5.8 billion of borrowing authority from the Treasury to pay those expected claims."

The GAO's report, also released in April, found that even if Congress forgives the debt, additional premiums still would be needed to reduce the likelihood of borrowing in the future and could create affordability issues for certain property owners, ultimately discouraging them from purchasing flood insurance. But the report also stated that eliminating the debt could curtail the need to hike rates to pay interest and principal on existing debt.

Steve Ellis, vice president of Taxpayers for Common Sense, agreed with Duffy, saying that last year was one of the greatest loss years for the program because of Hurricane Matthew. "While certainly this program teeters on the brink of solvency, these larger events sort of drag it down," he said.

Rep. Jeb Hensarling, R-Texas, chairman of the full committee, asked witnesses if it was fair that taxpayers in localities where there is not much flooding foot the bill for the ailing program in the form of taxes.

Caitlin Berni, vice president of policy and communication of Greater New Orleans Inc., responded that "every state" is affected by flooding and that without the extreme events of Hurricanes Katrina, Sandy and Matthew, the program would need little change with regard to taxpayers.

Waters warned there would be "irreparable harm" done to millions of Americans who rely on the NFIP to protect their homes and businesses if Republicans ignore her call to work with Democrats on the details of the measure by the Sept. 30 deadline.