The billions of dollars in flood damage Hurricane Harvey wrought in Texas puts pressure on a debt-ridden National Flood Insurance Program that is fast approaching a deadline for a congressional overhaul — or at least a temporary reauthorization.
When it returns from recess, Congress will have less than two weeks to work through a new version of the law before the program's Sept. 30 expiration.
A number of proposals are on the table. But officials say a full agenda facing Congress and time constraints make temporary reauthorization of the program likely, possibly with some minor tweaks.
The longer-term goal after a temporary reauthorization would be a more consumer-friendly flood insurance program that spreads the cost across a wider group of property owners, proponents said in the aftermath of Harvey's devastation and the 2016 flood that ravaged south Louisiana.
"I think this certainly strengthens our case and it highlights the need for affordable, available flood insurance, and the need to get more people buying flood insurance," said Caitlin Berni, vice president of policy and communications for Greater New Orleans Inc. The economic development group worked closely with Sen. Bill Cassidy, R-La., on proposed flood insurance legislation.
The amount of flooding in Texas, where less than 20 percent of homeowners have flood coverage and an estimated 100,000 houses flooded, highlights the real effect of some of the proposed legislation, Berni said.
U.S. Rep. Garret Graves, R-Baton Rouge, said a short-term reauthorization is likely, with little, if any, policy changes. "It's hard to say what will get in. It depends on the support we can build with Texas and other states," Graves said.
Reauthorizing the National Flood Insurance Program, even temporarily to work through an overhaul, is important to Louisiana. Over the past 40 years, the state has accounted for about 10 percent of the program's flood policies, about 20 percent of the claims and 34 percent of the total payouts by the flood program.
The state had more than 491,316 policyholders as of June 30, and state Insurance Commissioner Jim Donelon has said he expects that number to reach 500,000. That would be close to a 6 percent increase since the flood over the 472,681 policies in Louisiana as of Sept. 30, 2016.
Graves and Rep. Cedric Richmond, D-New Orleans, said they would like to see at least two initial provisions added: tighter limits on how much time the program has to pay claims checks to policyholders and providing homeowners with access to the full amount of their claim payment.
Currently, policyholders with a mortgage on their house must sign the check and send it to their lender. The mortgage company places the money in escrow and typically issues payments for repairs in three parts to ensure the work is being done to restore the value of the house.
Graves said the practice hampered repairs after the August 2016 flood in south Louisiana. For too many homeowners, the initial amount released didn't cover the down payment the contractor required to begin work.
Chris Gillot, the Cassidy staffer who handles the flood insurance program, said more time will be needed to reach consensus on major changes proposed. Cassidy's bill includes reforms to make flood insurance more affordable and to speed up the processing of claims; allows capital markets to buy flood risk; and encourages more private insurance coverage.
Proposed legislation from Cassidy and Sen. John Kennedy, R-La., would stabilize the program long term while protecting policyholders, Berni said.
Berni said it would be "a missed opportunity" if some proposals that everyone supports don't make it into an overhaul. Among them is improving flood mapping and modernizing coverage so homeowners can bring their houses up to code after a disaster to avoid future flooding.
Many of the reforms should have been in place before the peak of hurricane season, Gillot said. These and other reforms should be put in place in the next couple of months rather than another year from now, he said.
Berni said a short-term extension of the program might be for three months or even two years.
"On the one hand, a two-year extension of the current program is not a bad scenario for south Louisiana," Berni said. "We'll maintain our current rate structure and our current 'grandfathering,' which is good, and we won't be in a position where we have to swallow some of the harmful policies that the House is proposing."
A package of bills passed by the House would restrict grandfathering provisions that have allowed homeowners to continue paying lower rates when flood maps change that otherwise would cause premium increases for policyholders.
Rep. Jeb Hensarling, a Dallas Republican and chairman of the House Financial Services Committee, oversaw a renewal package that would make coverage more expensive and limit coverage for homes that have flooded more than twice.
Hensarling has criticized the flood insurance program, saying 96 percent of taxpayers are subsidizing 5.1 million property owners, particularly the wealthy with beach houses. Hensarling maintains that rates should be based on actual risk. He also wants to phase out the program.
Even during Hurricane Harvey, Hensarling told Politico he was committed to pushing through his overhaul.
Graves said there are some problematic program proposals, and Harvey is going to highlight the issues in that legislation.
The storm also will provide a real education for those who've "dug in" on faulty assumptions about flood insurance, he added. Graves was careful not to identify the problematic proposals and politicians involved.
Keep in mind that policyholders have put more than $40 billion into the flood insurance pot, Graves said. There is no pool of federal funds to defray costs for disasters like 9/11, earthquakes or unprecedented hurricanes like Katrina, Sandy or Harvey.
"I think this is a scenario where you should be patting ratepayers on the back and saying, 'Hey, you know what? You saved federal taxpayers, you saved the federal Treasury over $40 billion as a result of paying into these things,' ” Graves said.
It's one thing to say the program should remain solvent through regular flood events, Graves said. But no one can expect it to cover extraordinary, catastrophic events like Sandy or Katrina, where, he said, U.S. Army Corps of Engineers' mistakes led to flood wall and levee failures.
Still, paying the Harvey claims could complicate the program renewal. The program owes $24.6 billion to the U.S. Treasury and has a $30.4 billion borrowing limit. Some like Hensarling say the Harvey claims will require another taxpayer bailout. Others like Cassidy believe the the program's $1.7 billion in cash, $5.8 billion in additional borrowing authority and reinsurance that covers 26 percent of claims from $4 billion to $8 billion will be sufficient.
The program has paid out $2.4 billion for more than 29,000 claims for the August 2016 flood in south Louisiana and paid $8.3 billion for Sandy in the northeast.
At least some of the Louisiana delegation's proposals should make it into law, Berni said, but not if it also means taking on exorbitant rate increases or the loss of coverage that would result from incorporating the House bills.
Berni said flood insurance is a bipartisan issue and the current version of the program was supported by 70 percent of members in both houses. That vote was a rollback of risk-based rates passed in 2012's Biggert-Waters Act that eventually drew a backlash. Rates were so high they stalled the real estate market in Louisiana and rendered tens of thousands of properties worthless, critics said.
During a Tuesday conference call with reporters, Kennedy said he isn't conceding the possibility of completely revising the flood insurance program.
Congress also faces a contentious fight over raising the debt ceiling, a potential government shutdown on Oct. 1, passing a long overdue budget and a multibillion-dollar emergency aid package for Harvey's victims. Kennedy said members of Congress are capable of multitasking.
"To me, it's unthinkable to not have some sort of reauthorization," Kennedy said. "That is just not going to happen, and I don't want people to be concerned."