Flood insurance reform urgent for struggling Floridians



Florida's congressional delegation launched a massive effort to amend every bill they could before the end of December in an attempt to delay premium increases for flood insurance policyholders across Florida, but Congress recessed on Friday without passing a delay.

Their hurry-up offense was unable to protect hundreds of thousands of Floridians from unaffordable rate increases, preventing serious repercussions in the state economy.

Florida has more than 2 million policies in the National Flood Insurance Program (NFIP) and the Biggert-Waters Reform Act, which Congress passed in 2012, requires that they all move to market rates. Those who will be most affected by the rate increases live in Pinellas, Miami-Dade, and Lee counties, as their residents account for almost 48 percent of the subsidized policies in the state.

The Florida delegation attempted to delay the hike in premiums that will affect these policyholders because the threat of higher rates could spell economic trouble for Florida. Many Florida policyholders cannot afford the higher premiums, and the changes required by the Biggert-Waters Act are already causing declining home sales as a result of the increased costs in the new flood insurance rate structure. This could lead to significant reductions in home sales and values, and to reductions of county tax receipts as property values are re-calculated.

Under the act, which took effect on October 1, premiums are set to rise on January 1 for 13 percent of Florida’s subsidized policyholders. Removing the subsidies and increasing premium rates for all of the nation’s policyholders is intended to eliminate the program’s debt.

But according to a recent study, Florida policyholders are not contributing to the NFIP’s debt. The study showed Floridians paid $3.60 in premiums for every $1 collected in flood claims from the program during the last 30 years, making Florida the 14th largest donor to the program.

Perhaps unexpectedly, leading the pack of donor states are Colorado and New Mexico, who each paid more than $10 in premiums per $1 received in claims. Eleven states have received more in payouts over the 30-year period of the study than their policyholders paid in premiums, with six of those states receiving double or higher what they paid in premiums.

In 1968, Congress created the NFIP, which allowed homeowners in participating communities to purchase flood insurance if the community followed flood management ordinances and adopted standards for new construction. Many purchasers received subsidized rates, but as flood damage and program costs rose, the NFIP grew its deficit. Subsidized rates account for 13 percent of policyholders in Florida, compared to a national subsidy rate of 20 percent.

In addition to the fight in Congress, state officials are on the hunt to protect Floridians. In November, Florida joined Alabama and Mississippi in a lawsuit against the Federal Emergency Management Agency (FEMA), which administers the NFIP, arguing that FEMA failed to complete the required affordability study before implementing the Biggert-Waters Act, and that they based the new, higher rates on outdated information. The brief asks the courts to force FEMA to complete the required studies, and take into account the economic impact of the bill before implementing it.

The implementation of the Biggert-Waters Act, and the rate increases that will occur on January 1, will be important to all Floridians and can have a serious impact on the health of the state economy. TaxWatch applauds the efforts of Florida's congressional delegation and state leaders who are working to protect our economy and the taxpayers who fund it.

Dominic M. Calabro is president and CEO of Florida TaxWatch, an independent, nonpartisan, nonprofit taxpayer research institute.

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