(Alexandria, VA) -- The National Flood Insurance Program (NFIP) is bankrupt in all but name, and Congress must either reform it or delegate it back to the states: that's the urgent message from Paul Gessing, Director of Government Affairs for the National Taxpayers Union (NTU). Gessing testified before Chairman Richard Shelby's Senate Banking, Housing and Urban Affairs Committee yesterday.
"In the aftermath of the 2005 hurricane season, the program will be forced to borrow an astonishing $24 billion from the Treasury," Gessing told the panel. "It's time to face facts: With premium payments yielding $2 billion per year and flooding likely to continue, even if not at the level we have seen in recent years, there is little likelihood of taxpayers ever recouping much of the $24 billion they are now owed. Thus, as Chairman Shelby said in his opening remarks at last week's hearing, the NFIP is bankrupt."
Gessing cited numerous instances from NFIP's troubled fiscal history to illustrate the need for Congress to cut the program's tight noose around taxpayers. As he noted, the number of insured assets has increased dramatically in the past few years, rising from $644 billion in Fiscal Year (FY) 2002, to $800 billion in FY 2005. That's a 24 percent increase in insured assets, while the number of policies, however, has increased only 6.5 percent during the same period. This imbalance deserves meaningful reform from Congress, Gessing concluded.
"The recent spate of hurricanes has only exposed what experts and taxpayers have known for a long time: federal meddling in the marketplace inevitably results in subsidies for some and significant costs for all taxpayers," Gessing's testimony continued. "Congress must act now to restore some semblance of a marketplace for flood insurance that provides adequate taxpayer protections or it must be willing to abandon the program entirely, leaving the responsibility of finding adequate insurance in the hands of individuals and insurance companies."
Nonetheless, Gessing pointed out there are "other reform measures lawmakers might consider," among them: "collecting actuarially sound rates that finance expected annual payments as well as a catastrophic reserve; increasing program participation through greater enforcement and by expanding the floodplain areas requiring coverage; and, increasing the use of disaster relief funds to mitigate future damage by making communities more flood/disaster resistant (through flood-proofing, elevating, and relocating repetitively damaged properties)."
After the recent spate of hurricanes devastated American shorelines, NTU's 350,000 members are concerned that without real reform, NFIP liabilities will strand taxpayers in a sea of red ink.
NTU is a non-partisan citizen group working for lower taxes, smaller government, and economic freedom at all levels. Note: For more information on NTU's efforts visit www.ntu.org.