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Federal flood insurance program in limbo on Capitol Hill as Harvey’s toll mounts

By Mike DeBonis

August 29, 2017 at 7:34 PM

A home is surrounded by floodwaters from Tropical Storm Harvey on Monday in Spring, Tex. Experts say far too few homeowners have flood insurance. (David J. Phillip/AP)

The devastation Hurricane Harvey has wrought in southeastern Texas has brought new focus to the National Flood Insurance Program — and to a pending Republican effort to restructure and partially privatize an industry that has been effectively subsidized with tens of billions of federal taxpayer dollars.

The program is set to expire Sept. 30, and no new policies can be written after that date unless Congress acts to extend it. Claims on existing policies, which can see payouts up to $350,000, are also at risk as the program approaches a $30 billion borrowing limit that experts say Harvey's toll could quickly breach.

All but a tiny portion of U.S. flood policies are underwritten by the National Flood Insurance Program, or NFIP, which was established in 1968 after private insurers left the flood insurance market because of large and unpredictable losses.

Related: [The country’s flood insurance program is sinking. Rescuing it won’t be easy.]

Even before stormwaters swept across metropolitan Houston, debate on how to restructure the NFIP exposed fissures in Congress that crossed traditional partisan lines, pitting conservatives who want to scale back the government costs for the program against lawmakers from flood-prone regions wary of jacking up their constituents' premiums.

epa06168742 Mindy Walker and her three year old son Connor Martinez are helped out of a boat after being rescued from their home along Cypress Creek at Kuykendal 15 miles northwest of downtown Houston, Texas, USA, 28 August 2017. The areas in and around Houston and south Texas are experiencing record floods after more than 24 inches of rain after Harvey made landfall in the south coast of Texas as a category 4 hurricane, the most powerful to affect the US since 2004. Harvey has weakened and been downgraded to a tropical storm and is expected to cause heavy rain for several days. EPA/MICHAEL WYKE
Alexendre Jorge evacuates Ethan Colman, 4, from a neighborhood inundated by floodwaters from Tropical Storm Harvey on Monday, Aug. 28, 2017, in Houston, Texas. (AP Photo/Charlie Riedel)
A Houston fire department rescue boat is seen stranded near a car rental shop during the aftermath of Hurricane Harvey on August 28, 2017 in Houston, Texas. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
A truck driver walks past an abandoned truck while checking the depth of an underpass during the aftermath of Hurricane Harvey August 28, 2017 in Houston, Texas. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
Flood victims walk through a shelter in the George R. Brown Convention Center during the aftermath of Hurricane Harvey on August 28, 2017 in Houston, Texas. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
People wait outside a shelter in the George R. Brown Convention Center during the aftermath of Hurricane Harvey on August 28, 2017 in Houston, Texas. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
A family salvages items from their garage after floodwaters receded during the aftermath of Hurricane Harvey on August 28, 2017 in Houston, Texas. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
Ducks make their way through floodwaters from Tropical Storm Harvey on Monday, Aug. 28, 2017, in Spring, Texas. (AP Photo/David J. Phillip)
A home is surrounded by floodwaters from Tropical Storm Harvey on Monday, Aug. 28, 2017, in Spring, Texas. (AP Photo/David J. Phillip)
Belinda Penn holds her dogs Winston and Baxter after being rescued from their home as floodwaters from Tropical Storm Harvey rise Monday, Aug. 28, 2017, in Spring, Texas. (AP Photo/David J. Phillip)
Joe Garcia carries his dog Heidi from his flooded home as he is rescued from rising floodwaters from Tropical Storm Harvey on Monday, Aug. 28, 2017, in Spring, Texas. (AP Photo/David J. Phillip)
A row of tractors are surrounded by floodwaters from Tropical Storm Harvey on Monday, Aug. 28, 2017, in Spring, Texas. (AP Photo/David J. Phillip)
Cattle are stranded in a flooded pasture on Highway 71 in La Grange, Texas, after Hurricane Harvey on Monday, Aug. 28, 2017. (Jay Janner/Austin American-Statesman via AP)
People evacuate a neighborhood in west Houston inundated by floodwaters from Tropical Storm Harvey on Monday, Aug. 28, 2017, in Houston, Texas. (AP Photo/Charlie Riedel)
HOUSTON, TX - AUGUST 28: Stranded vehicles sit where they got stuck in high water from Hurricane Harvey on Dairy Ashford Drive, August 28, 2017 in Houston, Texas. Harvey made landfall shortly after 11 p.m. Friday, just north of Port Aransas as a Category 4 storm and is being reported as the strongest hurricane to hit the United States since Wilma in 2005. (Photo by Erich Schlegel/Getty Images)
Firefighters put out a fire during the aftermath of Hurricane Harvey on August 28, 2017 in Houston, Texas. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
HOUSTON, TX - AUGUST 28: Local apartment residents cross high water on North Braeswood Blvd to escape the flooding from Hurricane Harvey August 28, 2017 in Houston, Texas. Harvey, which made landfall north of Corpus Christi late Friday evening, is expected to dump upwards to 40 inches of rain in areas of Texas over the next couple of days. (Photo by Erich Schlegel/Getty Images)
A Jeep drives through a neighborhood inundated by floodwaters from Tropical Storm Harvey on Monday, Aug. 28, 2017, in Houston, Texas. (AP Photo/Charlie Riedel)
Spc. Garth Parks, left, and Pfc. Taylor Garen, center, chat as Garen packs her alert bag at the Tyler Armed Forces Reserve Center in Tyler, Texas, on Monday, Aug. 28, 2017. Unit 136 military police battalion has deployed some members and equipment for Hurricane Harvey relief efforts in Houston while the headquarters unit waits for their mission instructions. (Chelsea Purgahn/Tyler Morning Telegraph via AP)
Robert Dressell of Tyler and Adam Turner of Tyler pack the back of a pickup truck with fuel before leaving from WC Custom Boats in Noonday, Texas to head to areas affected by Hurricane Harvey Monday morning, Aug. 28, 2017. The group took six boats stocked with fuel and water headed to the Houston area to assist in Hurricane Harvey rescue efforts. (Sarah A. Miller/Tyler Morning Telegraph via AP)
HOUSTON, TX - AUGUST 28: People walk down a flooded street as they evacuate their homes after the area was inundated with flooding from Hurricane Harvey on August 28, 2017 in Houston, Texas. Harvey, which made landfall north of Corpus Christi late Friday evening, is expected to dump upwards to 40 inches of rain in Texas over the next couple of days. (Photo by Joe Raedle/Getty Images)
LA GRANGE, TX-AUGUST, 28: Residents of La Grange view the devastation to parts of the downtown flooded by the Colorado river rising by 54 feet because of rains caused by Hurricane Harvey. Residents from this area were evacuated yesterday and the river flooded the area early this morning
HOUSTON, TX - AUGUST 28: People get off busses after being rescued as they seek shelter at the George R. Brown Convention Center in Houston, TX on Monday, Aug 28, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 28: A Coast Guard helicopter lowers someone in Houston, TX on Monday, Aug 28, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 28: A man sleeps as people seek shelter at the George R. Brown Convention Center in Houston, TX on Monday, Aug 28, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 28: People move from helicopters to busses as they land on Highway 69 after being rescued in Houston, TX on Monday, Aug 28, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 28: People move from helicopters to busses as they land on Highway 69 after being rescued in Houston, TX on Monday, Aug 28, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
A man helps a woman get covered up at the George R. Brown Convention Center that has been set up as a shelter for evacuees escaping the floodwaters from Tropical Storm Harvey in Houston, Texas, Tuesday, Aug. 29, 2017. (AP Photo/LM Otero)
Robert Salgado, center, sleep with relatives Jesse Alexander Leija, right, and Leliana Salgado on the floor at the George R. Brown Convention Center that has been set up as a shelter for evacuees escaping the floodwaters from Tropical Storm Harvey in Houston, Texas, Tuesday, Aug. 29, 2017. (AP Photo/LM Otero)
Sam Speights exits a window of his home that was destroyed in the wake of Hurricane Harvey, Monday, Aug. 28, 2017, in Rockport, Texas. (AP Photo/Eric Gay)
WESTLAKE, TX - AUGUST 29: Texas Army National Guard members help down families that were rescued from their flooded Pine Forest Village neighborhood due to high water from Hurricane Harvey August 29, 2017 in Houston, Texas. (Photo by Erich Schlegel/Getty Images)
A woman is wheeled by first responders into the George R. Brown Convention Center that has been set up as a shelter for evacuees escaping the floodwaters from Tropical Storm Harvey in Houston, Texas, Tuesday, Aug. 29, 2017. (AP Photo/LM Otero)
People wait in line for an HEB grocery store to open during the aftermath of Hurricane Harvey on August 29, 2017 in Deer Park, Texas. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
HOUSTON, TX - AUGUST 29: Volunteers in boats rescue people and their pets from their homes near interstate 45 in Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
In this aerial photo, water is released from the Addicks Reservoir as floodwaters rise from Tropical Storm Harvey on Tuesday, Aug. 29, 2017, in Houston. (Brett Coomer/Houston Chronicle via AP)
Water from Addicks Reservoir flows into neighborhoods as floodwaters from Tropical Storm Harvey rise Tuesday, Aug. 29, 2017, in Houston. (AP Photo/David J. Phillip)
Residents evacuate their homes near the Addicks Reservoir as floodwaters from Tropical Storm Harvey rise Tuesday, Aug. 29, 2017, in Houston. (AP Photo/David J. Phillip)
Airplanes sit at a flooded airport near the Addicks Reservoir as floodwaters from Tropical Storm Harvey rise Tuesday, Aug. 29, 2017, in Houston. (AP Photo/David J. Phillip)
A Texas flag flies over floodwaters caused by Tropical Storm Harvey in La Grange, Texas, Monday, Aug. 28, 2017. (Ralph Barrera/Austin American-Statesman via AP)
Highways around downtown Houston are empty as floodwaters from Tropical Storm Harvey overflow from the bayous around the city Tuesday, Aug. 29, 2017, in Houston. (AP Photo/David J. Phillip)
HOUSTON, TX - AUGUST 29: Volunteers in boats rescue people and their pets from their homes near interstate 45 in Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
US President Donald Trump(C) listens alongside Texas Governor Greg Abbott(L) and First Lady Melania Trump(R) during a firehouse briefing on Hurricane Harvey in Corpus Christi, Texas on August 29, 2017. President Donald Trump flew into storm-ravaged Texas Tuesday in a show of solidarity and leadership in the face of the deadly devastation wrought by Harvey -- as the battered US Gulf Coast braces for even more torrential rain. / AFP PHOTO / JIM WATSONJIM WATSON/AFP/Getty Images
REFILE - CLARIFYING LOCATION Isiah Courtney carries his dog Bruce through flood waters from Tropical Storm Harvey in Beaumont Place, Houston, Texas, U.S., on August 28, 2017. REUTERS/Jonathan Bachman
Volunteers line up to sign up to help with the shelter for victims of the flooding from Tropical Storm Harvey at a shelter opened at the Lakewood Church in Houston, Texas, Tuesday, Aug. 29, 2017. (AP Photo/LM Otero)
Kingwood, TX-AUGUST, 29: Police and volunteers rescue residents flooded by the San Jacinto river in Kingwood, Texas. The boats are on a road that was passable yesterday.
Kingwood, TX-AUGUST, 29: Volunteer Dustin Langley, who lives two hours North of Houston and came down with a friend to volunteer, helps a family to their escape their flooded apartment in Kingwood, Texas. They placed them on their boat and took them to safety.
Kingwood, TX-AUGUST, 29: Volunteer Dustin Langley, who lives two hours North of Houston and came down with a friend to help, points to an apartment with stranded residents flooded by the San Jacinto river in Kingwood, Texas
People wait to help evacuees during the aftermath of Hurricane Harvey on August 29, 2017 in Houston, Texas. Hurricane Harvey has set what forecasters believe is a new rainfall record for the continental United States, officials said Tuesday. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
HOUSTON, TX - AUGUST 29: Larry Koser Jr. (L) and his son Matthew look for important papers and heirlooms inside Larry Koser Sr.'s house after it was flooded by heavy rains from Hurricane Harvey August 29, 2017 in the Bear Creek neighborhood of west Houston, Texas. The neighborhood flooded after water was release from nearby Addicks Reservoir. (Photo by Erich Schlegel/Getty Images)
People wade through chest deep water down Pine Cliff Drive as Addicks Reservoir nears capacity due to near constant rain from Tropical Storm Harvey Tuesday, Aug. 29, 2017 in Houston. ( Michael Ciaglo/Houston Chronicle via AP)
Local residents check the water level of the Barker Reservoir after the Army Corp of Engineers started to release water into the Clodine district as Hurricane Harvey caused heavy flooding in Houston, Texas, on August 29, 2017. Harvey has set what forecasters believe is a new rainfall record for the continental US, officials said Tuesday. Harvey, swirling for the past few days off Texas and Louisiana has dumped more than 49 inches (124.5 centimeters) of rain on the region. / AFP PHOTO / MARK RALSTONMARK RALSTON/AFP/Getty Images
Volunteers and first responders work together to rescue residents from rising flood waters in Houston on Tuesday, Aug. 29, 2017. Forecasters expect the storm to linger over the Gulf before heading back inland east of Houston sometime Wednesday. The system will then head north and lose its tropical strength. (Scott Clause/The Daily Advertiser via AP)
Residents are rescued by a truck from floods caused by Tropical Storm Harvey in east Houston, Texas, U.S. August 29, 2017. REUTERS/Adrees Latif
HOUSTON, TX - AUGUST 29: Glenda Montelongeo, Richard Martinez and his two sons are helped out of a boat after being rescued near Tidwell Road and Toll road 8 in Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 29: People are unloaded after being rescued by a large truck along Tidwell Road near Toll road 8 in Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 29: People are rescued by large trucks along Tidwell Road near Toll road 8 in Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
Kingwood, TX-AUGUST, 29: Police and volunteers wait to help residents to shore who were saved by police and volunteers in boats from the flood caused by Hurricane Harvey in Kingwood, Texas
HOUSTON, TX - AUGUST 29: People are rescued by large trucks along Tidwell Road near Toll road 8 in Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 29: Downtown is seen from Highway 69 in North Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
HOUSTON, TX - AUGUST 29: People are rescued by large trucks along Tidwell Road near Toll road 8 in Houston, TX on Tuesday, Aug 29, 2017. Rising water from Hurricane now Tropical Storm Harvey pushed thousands of people to rooftops or higher ground Sunday as the had to flee their homes in Houston. (Photo by Jabin Botsford/The Washington Post)
Samaritans help push a boat with evacuees to high ground during a rain storm caused by Tropical Storm Harvey along Tidwell Road in east Houston, Texas, U.S. August 28, 2017. REUTERS/Adrees Latif TPX IMAGES OF THE DAY
WESTLAKE, TX - AUGUST 29: Texas Army National Guard members Sergio Esquivel, left, and Ernest Barmore carry 81-year-old Ramona Bennett after she and other residents were rescued from their Pine Forest Village neighborhood due to high water from Hurricane Harvey August 29, 2017 in Houston, Texas. Harvey, which made landfall north of Corpus Christi late Friday evening, is expected to dump upwards to 40 inches of rain in areas of Texas over the next couple of days. (Photo by Erich Schlegel/Getty Images)
Photo Gallery: Houston officials described a vast rescue effort and said about 3,500 people had been brought to safety.

"We need a sustainable program, and today we don't have it," House Financial Services Committee Chairman Jeb Hensarling (R-Tex.), a staunch conservative who has pushed for privatization and other changes to provide for a self-sufficient program, said Tuesday. "I've been telling people for four years that we are one major storm away from another taxpayer bailout, and that day has come. So if anything, it creates more momentum and a greater onus on getting our bill into law."

The effort has had backing from the Trump administration, whose budget proposed eliminating the NFIP's Flood Hazard Mapping Program, saving $190 million in fiscal 2018, as well as another $8.9 billion in other savings over the coming decade achieved in part by "encouraging private competition in the flood insurance market."

But Hensarling's plan to extend the program, which passed his committee in June, has yet to come to the House floor amid frustration from Republican leaders who wanted the committee to draft a more broadly palatable NFIP extension that could pass quickly on a bipartisan basis. Notably skeptical of Hensarling's efforts is House Majority Whip Steve Scalise (R-La.), who represents a hurricane-prone district and has closely monitored the debate as he recovers from a serious gunshot wound he suffered in June.

Related: [Want to be mad about government insurance? Be mad about the program that will be critical after Harvey.]

"Are we really going to have a philosophical debate about what role the federal government should play in flood insurance when people's homes are underwater?" said a House Republican leadership aide who spoke on the condition of anonymity to candidly describe internal discussions. "It's just an absolute political loser at this point."

The leaders of the Senate Banking Committee last month proposed a bipartisan bill that would extend the program through 2023 but does not include the most controversial provisions in the House bill. That bill has yet to emerge from the panel, although it could serve as a blueprint for a compromise.

The debate over the future of the NFIP stands apart from the larger question of how Congress will offer relief to Harvey's victims, most of whom do not have flood insurance coverage. That price tag could rise into the tens of billions of dollars beyond insurance payouts, based on the costs of similar recent storms and early estimates from the financial industry.

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Volunteers continued to brave the rain to rescue residents trapped in their homes. (Dalton Bennett, Whitney Shefte/The Washington Post)

But Harvey is certain to affect the flood insurance debate, as well. "Forgive the pun, but it certainly roils the water, that's for sure," said Steve Ellis, vice president of Taxpayers for Common Sense, a nonpartisan group that advocates changes to the NFIP.

The program owes more than $24 billion to the U.S. treasury, and most observers see little hope that the debt can be recovered from policyholders. Neither the House nor Senate reauthorization bills propose raising the program's borrowing cap, so another congressional battle could develop after Harvey claims start to be paid out.

Restructuring advocates say the hurricane represents a crisis that should not go to waste. "Storms like Harvey help concentrate the mind that this is a program that is broken, and the response to a broken program is not simply to continue and expect a different outcome," Ellis said.

Related: [Where Harvey is hitting hardest, 80 percent lack flood insurance]

It's the nature of those changes that is at issue. Hensarling said that wider privatization would mean lower premiums for homeowners, but lawmakers of both parties fear that his proposals would lead to unsustainable premium increases. Democrats oppose provisions that they think will lead private insurers to cherry-pick the least-risky properties, leaving the government on the hook for huge potential losses on the remainder.

Other criticisms tend to cross lines of party or ideology. Conservatives and liberals alike question whether taxpayers ought to subsidize some coastal dwellings — often vacation homes on shore property — that have been repeatedly inundated over the course of decades.

"Let's ask some tough questions: Should we subsidize houses that are built in flood zones?" said Michael A. Brown, who served as administrator of the Federal Emergency Management Agency under President George W. Bush — and was ousted in the wake of Hurricane Katrina in 2005.

W. Craig Fugate, who served as FEMA director under President Barack Obama, said that although any changes to the NFIP shouldn't affect current policyholders, "we ought to stop growing it."

Harvey has shaken up the debate. Many of the inundated homes in the Houston area aren't located on fragile coastlines, but in suburban subdivisions that are outside the floodplains where home lenders typically require flood insurance coverage.

"I suppose one might think of abandoning Houston, Texas, and just leaving it for other forms of life, but that's not realistic," said Rep. Al Green (D-Tex.), who represents parts of southern Houston, serves on the Financial Services Committee and thinks that Congress should forgive the program's debt.

"At some point, we have to realize that this is a United States of America and in the spirit of unity, we will have to absorb that debt," he added. "This is not money that is being thrown away; it's going to benefit the health and welfare of our citizens.

Carolyn Kousky of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania, who has studied the NFIP, said fundamental tensions between those who want to keep premiums artificially low and those who want a self-sustaining, actuarially sound program are just some of the obstacles to changing it.

"There's a real split between those who would like to see the NFIP contract as much as possible and those who would like to expand it, and I'm not sure that Harvey will bridge those differences," she said.

That certainly appears to be true in the House. Rep. Maxine Waters (D-Calif.), the top Democrat on the Financial Services Committee, called for a bipartisan NFIP reauthorization in a statement this week and said that Harvey "again makes clear that Americans need access to affordable flood insurance."

But Hensarling made clear Tuesday that he has no intention of settling. "To the best of my knowledge," he said, "the speaker or the [House majority] leader does not wish to have Maxine Waters and the Democratic minority write this bill."

Ed O'Keefe contributed to this report.

Related: Read more at PowerPost


Mike DeBonis covers Congress and national politics for The Washington Post. He previously covered D.C. politics and government from 2007 to 2015.

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