By Brandon Moseley
Alabama Political Reporter
U.S. Senator Richard Shelby (R) from Alabama urged that the Senate not pass a provision which would postpone the implementation of risk based premiums for National Flood Insurance. The debate occurred during a meeting of the full Senate Appropriations Committee Thursday to discuss the markup of the fiscal year 2014 appropriations bills for Commerce, Justice, Science, and Related Agencies and the Department of Homeland Security.
Senator Shelby said that he opposed a provision in the appropriation which would delay National Flood Insurance Reform. “This provision would, in effect, delay the implementation of risk-based premiums for the National Flood Insurance Program. The adjustment of those premiums is part of a larger reform package that passed on a bipartisan basis only about one year ago,” Sen. Shelby said.
Sen, Shelby continued, “I strongly supported these reforms as Ranking Member of the Banking Committee. It is critical that they be allowed to move forward to place the National Flood Insurance Program on a more sustainable footing. Two years ago, the flood insurance program was $18 billion in the red; it is now $24 billion in debt and growing. Delaying the implementation of risk-based premiums means, among other things, that participants in high-risk areas will continue to be subsidized and the program could slip further into debt.”
The Chairwoman of the Senate Appropriations Committee is Sen. Barbara Mikulski (D) from Maryland. Sen. Shelby said, “The Chair of the Homeland Security subcommittee has been an energetic participant in this debate for many years. She has been steadfast in her concern for those in her state that may not be able to afford actuarially sound rates. One problem, however, is that the language in this bill will exempt even the wealthiest of homeowners from having to pay their fair share. It also fails to compel the completion of an affordability study by a date certain. If this bill ever gets consideration on the floor, I would hope that the Senator from Louisiana would be willing to put the wealthy and affluent back on the hook for actuarially sound rates.”
In private insurance, the company collects more in premiums than they pay out in claims based on the best estimates from their actuaries. The premiums are invested, reserves are maintained based on the likelihood that a catastrophic event occurs. The government does not run the National Flood Insurance Program like that. Premiums go to the government and the government pays out claims with little regard for profit since the Treasury is treated like an unlimited reserve.
Senator Shelby said, that both the subcommittee mark-up for the Commerce, Justice, Science bill and the Homeland Security Bill are the product of bipartisan work and input. Sen. Shelby thanked the Chair for her willingness to incorporate ideas from both sides of the aisle.
Sen. Shelby said, “There are many reasons to support both pieces of legislation. Regrettably, however, I will be opposing the bills because they conform to an overall allocation that will ultimately violate the Budget Control Act.”
Sen. Shelby warned, “If we do not adhere to the law, the result will be a large-scale sequestration and even the highest-priority programs will suffer from across-the-board cuts. The budget constraints that we face today make it necessary to spend wisely and put in place strong taxpayer protections.” Sen. Shelby pointed to the specific provision in the Homeland Security bill which delays the implementation of flood insurance reform as an area where spending has been out of control.
Sen. Shelby said in conclusion, “I would also hope that the Chair would be open to working on language that would require the completion, at a date certain, of the affordability study we put in the original bill. Madam Chair, about one year ago Congress took a significant bipartisan step to reform a broken program. This is a feat we do not often accomplish around here. If this language becomes law, however, it will be a significant step backward. This Committee should not endorse this course of action.”
Senator Shelby is the Vice-Chairman of the Senate Appropriations Committee.