Heritage Action Opposes $16 Billion Bailout of Federal Flood Program

Washington — On Wednesday, the Trump administration submitted a $29 billion disaster supplemental request to Congress. The request included $12.77 billion for the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund (DRF), $576.5 million for federal wildfire suppression, and a $16 billion writedown of the National Flood Insurance Program’s (NFIP) nearly $30 billion debt. In the official request, OMB Director Mick Mulvaney writes that “the NFIP required immediate financial relief to fulfill its obligations to its policyholders, but the program must also be reformed to place it on a sound financial footing and to enable the private market for flood insurance to expand.” OMB also argued the NFIP’s debt cancellation stems from “unforeseen, unanticipated events … it should be provided as an emergency requirement for budgetary purposes.” Heritage Action released the following statement from vice president Dan Holler:

“The administration’s request to treat a $16 billion bailout for the failing federal flood insurance program as an emergency is irresponsible. There have been numerous efforts over the past decade to make the NFIP financially and structurally sound, but special interest pushback successfully blunted serious reforms. Put another way, the NFIP’s existing debt stems from poor design and congressional inaction, not an unforeseen crisis.

“If the administration and congressional leaders want to write off the NFIP’s debt it should be paid for and tied with the reforms similar to those recommended by Director Mulvaney. Anything short of that is simply a taxpayer bailout of a failed, big-government program and a victory for the special interests.”

As The Heritage Foundation explained last month, emergency spending must meet five criteria: Necessary, sudden, urgent, unforeseen, and not permanent. The five-part test was first created by President George H.W. Bush’s Office of Management and Budget in 1991. In a report to Congress, as required by P.L. 102-55 (June 1991), OMB defined emergency spending as the following:

  1. Necessary expenditure–an essential or vital expenditure, not one that is merely useful or beneficial;
  2. Sudden–quickly coming into being, not building up over time;
  3. Urgent–pressing and compelling need requiring immediate action;
  4. Unforseen–not predictable or seen beforehand as a coming need (an emergency that is part of an aggregate level of anticipated emergencies, particularly when normally estimated in advance, would not be “unforeseen”); and
  5. Not permanent–the need is temporary in nature.