The National Flood Insurance Program (NFIP) is facing serious financial challenges and cannot afford to continue on its current path. The Government Accountability Office (GAO) has included the NFIP on its annual list of high-risk government programs since 2006 because of its ongoing potential to incur billions of dollars in losses. With an $18 billion debt to the Treasury and the persistence of subsidized premium rates for properties in high-risk areas, the NFIP continues to be underfunded and federal taxpayers remain at risk.

While many property owners depend on flood insurance for some measure of financial security, and many more should consider purchasing it to protect themselves from potential losses, serious reforms are needed to make the flood insurance program more self sufficient, reduce the potential for losses, and minimize the financial risk to taxpayers.

Many of us have been calling for fundamental reforms in a long-term reauthorization of the program for several years. Recent temporary lapses of the NFIP created uncertainty in the housing market and resulted in negative consequences for homebuyers trying to purchase required flood insurance protection. We believe a multi-year reauthorization with fundamental reforms to eliminate or phase out subsidized premiums is needed to help reduce the structural shortfall of the NFIP and protect America taxpayers.

In this respect, H.R. 5114 represents a step in the right direction. The bill includes constructive reforms to eliminate subsidized rates over time for non-residential properties and non-primary residences, including second homes and vacation homes. H.R. 5114 also raises the annual cap on rate increases from 10 to 20 percent, which will allow the NFIP to charge premiums more appropriate to the risk within a shorter period of time.

In addition, several Republican proposals have been incorporated into H.R. 5114 to strengthen the reforms in the bill, including provisions to eliminate subsidies over time for homes that are sold to a new owner (Garrett), impose minimum deductibles for all insured properties (Neugebauer), require a report on the feasibility of incorporating nationally recognized building codes into the NFIP's floodplain management criteria (Neugebauer), and direct the NFIP to report to Congress with a plan to repay its debt to the Treasury within ten years (Hensarling).

We are concerned by a provision to establish a new outreach grant program that represents an authorization for new spending. While there is a need to improve FEMA's communication with communities and property owners about the impact of new flood risk maps, we would prefer this effort be undertaken within NFIP resources. In addition, we are concerned by provisions that delay the phase out of subsidies and the phase in of risk-based rates. There is an inherent moral hazard when any premium rates are subsidized, and we believe these reforms are urgently needed. Charging less than full-risk rates by the NFIP maintains a system of financial incentives backed by the federal government for individuals to live and build in high-risk flood zones.

While the NFIP was originally intended to reduce the need for emergency disaster assistance from federal taxpayers to local communities, it only partially achieves this goal and has a long way to go to reach its potential to be self-sufficient.

SPENCER BACHUS.
SHELLEY MOORE CAPITO.
RANDY NEUGEBAUER.
J. GRESHAM BARRETT.
JEB HENSARLING.
SCOTT GARRETT.
WALTER B. JONES.
LYNN JENKINS.
LEONARD LANCE.
JUDY BIGGERT.