Flood Insurance Reform: a Taxpayer’S Perspective
Total Page:16
File Type:pdf, Size:1020Kb
FLOOD INSURANCE REFORM: A TAXPAYER’S PERSPECTIVE HEARING BEFORE THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTEENTH CONGRESS FIRST SESSION JUNE 7, 2017 Printed for the use of the Committee on Financial Services Serial No. 115–21 ( U.S. GOVERNMENT PUBLISHING OFFICE 28–176 PDF WASHINGTON : 2018 For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 18:33 May 01, 2018 Jkt 028176 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\28176.TXT TERI HOUSE COMMITTEE ON FINANCIAL SERVICES JEB HENSARLING, Texas, Chairman PATRICK T. MCHENRY, North Carolina, MAXINE WATERS, California, Ranking Vice Chairman Member PETER T. KING, New York CAROLYN B. MALONEY, New York EDWARD R. ROYCE, California NYDIA M. VELA´ ZQUEZ, New York FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia STEVE STIVERS, Ohio AL GREEN, Texas RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota ANN WAGNER, Missouri ED PERLMUTTER, Colorado ANDY BARR, Kentucky JAMES A. HIMES, Connecticut KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio MIA LOVE, Utah DENNY HECK, Washington FRENCH HILL, Arkansas JUAN VARGAS, California TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas DAVID A. TROTT, Michigan CHARLIE CRIST, Florida BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada ALEXANDER X. MOONEY, West Virginia THOMAS MacARTHUR, New Jersey WARREN DAVIDSON, Ohio TED BUDD, North Carolina DAVID KUSTOFF, Tennessee CLAUDIA TENNEY, New York TREY HOLLINGSWORTH, Indiana KIRSTEN SUTTON MORK, Staff Director (II) VerDate Nov 24 2008 18:33 May 01, 2018 Jkt 028176 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\28176.TXT TERI C O N T E N T S Page Hearing held on: June 7, 2017 ...................................................................................................... 1 Appendix: June 7, 2017 ...................................................................................................... 53 WITNESSES WEDNESDAY, JUNE 7, 2017 Berni, Caitlin, Vice President, Policy and Communications, Greater New Orle- ans, Inc. ................................................................................................................. 7 Ellis, Steve, Vice President, Taxpayers for Common Sense ................................. 5 Lehmann, R.J., Senior Fellow, R Street Institute ................................................ 12 Saks, Joshua, Legislative Director, National Wildlife Federation ....................... 9 Sternhell, Rebecca Kagan, Deputy Director and General Counsel, New York City Federal Affairs Office .................................................................................. 10 APPENDIX Prepared statements: Berni, Caitlin, ................................................................................................... 54 Ellis, Steve ........................................................................................................ 62 Lehmann, R.J. ................................................................................................... 73 Saks, Joshua ..................................................................................................... 81 Sternhell, Rebecca Kagan ................................................................................ 90 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Hensarling, Hon. Jeb: Written statement of the National Association of Home Builders ............... 96 Written statement of the National Multifamily Housing Council and the National Apartment Association .................................................................. 98 Written statement of the Reinsurance Association of America .................... 102 Lynch, Hon. Stephen: Written statement of the Consumer Federation of America ......................... 104 Joint written statement of CIAB, IIABA, NAIFA and PIA .......................... 107 Written statement of the Credit Union National Association ...................... 110 Written statement of Mitchell J. Landrieu, Mayor, City of New Orleans ... 111 Written statement of the National Association of REALTORS® ................. 112 (III) VerDate Nov 24 2008 18:33 May 01, 2018 Jkt 028176 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\28176.TXT TERI VerDate Nov 24 2008 18:33 May 01, 2018 Jkt 028176 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\28176.TXT TERI FLOOD INSURANCE REFORM: A TAXPAYER’S PERSPECTIVE Wednesday, June 7, 2017 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The committee met, pursuant to notice, at 10:35 a.m., in room 2128, Rayburn House Office Building, Hon. Jeb Hensarling [chair- man of the committee] presiding. Members present: Representatives Hensarling, Lucas, Posey, Luetkemeyer, Huizenga, Duffy, Hultgren, Ross, Pittenger, Wagner, Barr, Rothfus, Messer, Williams, Poliquin, Love, Hill, Emmer, Zeldin, Trott, Loudermilk, Mooney, MacArthur, Davidson, Kustoff, Tenney, Hollingsworth; Waters, Maloney, Velazquez, Meeks, Capu- ano, Clay, Lynch, Scott, Green, Cleaver, Moore, Perlmutter, Himes, Foster, Delaney, Sinema, Beatty, Heck, Vargas, Gottheimer, Gon- zalez, Crist, and Kihuen. Chairman HENSARLING. The Committee on Financial Services will come to order. The Chair is authorized to declare a recess of the committee at any time. Today’s hearing is entitled, ‘‘Flood Insurance Reform: A Tax- payer’s Perspective.’’ The Chair now recognizes himself for 3 minutes for an opening statement. Today, we have 5 million households who are part of the Na- tional Flood Insurance Program (NFIP). Clearly, these people need some level of security, continuity, and predictability for their homes. They also deserve some fairness with respect to rates in the face of mapping issues and numerous cross-subsidies, because un- fortunately today, many moderate- and low-income individuals ac- tually subsidize others. But there is another group that deserves fairness as well, and that is the 110 million households who are not part of the National Flood Insurance Program, who subsidize the program. Ninety-six percent of Americans are currently subsidizing 4 percent. We know this is a program that is nearly $25 billion underwater and runs an actuarial annual deficit of $1.4 billion. It is unsustainable. The 96 percent of Americans have their dreams, they have their hopes, and they struggle to continue to bail out and subsidize a program that unfortunately is unsustainable. Before me and to my left and right is the national debt clock. It continues to spin out of control. I know some view this as some kind of partisan ploy. It is not. Perhaps others have grown accus- (1) VerDate Nov 24 2008 18:33 May 01, 2018 Jkt 028176 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\28176.TXT TERI 2 tomed to it, perhaps they are even anesthetized by it. But instead, it is something that should frighten us and it is something that should anger us. It is not something we can tax our way out of. As Lady Thatcher once said, sooner or later you run out of rich people. I, for one, cannot look my children in the eyes and be complicit or complacent in the national debt that threatens their future. It is not fair. We must act. It is both an economic and moral impera- tive. Now is the time, as the NFIP is up for reauthorization. There are a number of items that we must discuss and reform. One is mitigation. Mitigation can often be cost-effective. It is a clas- sic case where an ounce of prevention is worth a pound of cure. And I would ask that all fiscal conservatives be open to such. Another is premiums: 31 cents of every premium dollar goes to marketing and servicing of policies; this deserves attention. And only 46 cents is available to pay claims; this also deserves atten- tion. Risk transfer requirements are necessary as are catastrophe bonds. We have challenges in multiple lost properties where rough- ly 2 percent of all properties account for almost 25 percent of claims. And it begs the question, how many times should taxpayers be called upon to rebuild the same property? But most importantly, gradually, over time, we must transition all to actuarial sound rates, otherwise we are helping put more people in harm’s way. Equally important to both taxpayers and ratepayers is opening up the program to private market competition. Notwithstanding Congressional intent, the Federal Government has an effective mo- nopoly. We lose out on competition, we lose out on innovation which is a consumer’s best friend. I want to thank the many Members who have worked on this bill on a bipartisan basis. I want to especially thank Chairman Duffy for his leadership, Chairman Luetkemeyer before him, and the gentlelady from New York, Ms. Velazquez, on the other side of the aisle. This is a problem that is not going away and there is a bet- ter, smarter way to handle flood insurance. I now recognize the ranking member for 3 minutes.