CBO Issues Cost Estimate for National Flood Insurance Program Administrative Reform Act

WASHINGTON, July 18 -- The Congressional Budget Office issued the following cost estimate:

H.R. 2875

National Flood Insurance Program Administrative Reform Act of 2017

As ordered reported by the House Committee on Financial Services on June 21, 2017

SUMMARY

Under current law, property owners can buy flood insurance through the National Flood Insurance Program (NFIP). Property owners who buy insurance through the NFIP pay annual premiums which are deposited into the National Flood Insurance Fund (NFIF) and are used to pay flood damage claims submitted by policyholders. Those premiums and payments are not subject to annual appropriation.

H.R. 2875 would give NFIP policyholders the option to buy a higher level of coverage under the Increased Cost of Compliance (ICC) program, which provides payments to property owners to undertake flood mitigation activities following a flood claim. The bill also would direct the Federal Emergency Management Agency (FEMA) to make several administrative changes to the NFIP related to claims payment determinations, program staffing, and related matters.

Assuming appropriation of the necessary amounts, CBO estimates that implementing H.R. 2875 would cost $11 million over the 2018-2022 period, mostly for an advisory committee on flood insurance. Enacting the legislation would affect direct spending and revenues; therefore, pay-as-you-go procedures apply. However, because any increase in NFIP collections and revenues would be offset by increased direct spending, CBO estimates that the net effect on the deficit would be negligible.

CBO estimates that enacting H.R. 2875 would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2028.

H.R. 2875 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would impose no costs on state, local, or tribal governments.

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary effect of H.R. 2875 is shown in the following table. The costs of this legislation fall within budget function 450 (community and regional development).

View table here: https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/hr2875.pdf

BASIS OF ESTIMATE

For this estimate, CBO assumes that H.R. 2875 will be enacted near the end of fiscal year 2017 and that the necessary amounts will be appropriated each year.

Spending Subject to Appropriation

H.R. 2875 would establish a flood insurance advisory committee, which would include members from across the federal government and the private sector. The committee would be responsible for reviewing and making recommendations on several different aspects of the NFIP. Based on information from FEMA about the resources that would be needed for this committee, CBO estimates that implementing this provision would cost $10 million over the 2018-2022 period, mostly for salaries, expenses, and expert advice.

The bill also would direct the Government Accountability Office to complete two studies on the NFIP. The first would analyze the policies and practices for adjusting claims for losses under the NFIP. The second would analyze how the NFIP handles earth movements that stem from flooding, such as landslides, when adjusting claims for losses under the program. Based on the cost of similar studies, CBO estimates that completing those studies would cost $1 million in 2018.