Statement of Administration Policy: H.R. 1236 - National Flood Insurance, Mitigation, and Erosion Management Act of 1991

(House)
(Erdreich (D) AL and 6 others)

H.R. 1236 represents the most significant change to the National Flood Insurance Program (NFIP) since passage of the Flood Disaster Protection Act of 1973, and the Administration supports substantial portions of the bill. Nevertheless, if H.R. 1236 is presented to the President in its current form, the President's senior advisers will recommend a veto because of the mandated scoring language contained in Section 604. The Administration urges adoption of the amendment to be offered by Rep. Gradison to strike Section 604.

Section 604 contains the CBO scoring language required by House Rule XXI. In a letter of December 21, 1990, the President stated that he would veto any bill containing such language. The effect of this provision is to overturn a key element of the Federal spending control mechanisms enacted pursuant to last year's Budget Agreement. As the President said, "[i]f specifically negotiated and agreed provisions are to be undone..., how can we reasonably expect the Agreement to be taken seriously?"

The Administration supports the existing broad-based flood insurance coverage requirements, and supports the bill's intent of improving compliance with those requirements. However, the Administration opposes the new regulatory mandates which the bill would impose upon lending institutions which at present are not Federally-regulated and which issue mortgages that are not guaranteed by the United States.

In particular, the Administration objects to a provision in Title II which would establish the Department of Housing and Urban Development (HUD) as a regulator for any financial institution that is not presently regulated by another Federal agency. This is a significant class of financial institutions, many of which are not now subject to HUD regulation. HUD lacks the resources to monitor these institutions effectively, in light of its primary responsibility to monitor the lenders and servicers who participate in the insurance programs of the Federal Housing Administration (FHA). Further, HUD has little or no means of enforcement over lenders who are not currently FHA- approved. Lastly, Title II's compliance requirements would increase the Federal Government's liability to make insurance payments in the future.

Section 403 would authorize the Director of the Federal Emergency Management Agency (FEMA) to invest certain funds in interest- bearing obligations issued or guaranteed by the United States. The Administration recommends that this provision be amended to authorize the Secretary of the Treasury, in consultation with the Director of FEMA, to invest such amounts in public debt securities. This amendment would be consistent with the existing handling of most other funds with investment authority, including flood insurance.

Scoring for the Purposes of Pay-As-You-Go

H.R. 1236 would change direct spending; therefore, it is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990 (OBRA). OMB's preliminary scoring estimates of this bill are presented in the table below.

($ in millions)

Final scoring of this legislation may deviate from these estimates. If H.R. 1236 were enacted, final OMB scoring estimates would be published within five days of enactment, as required by OBRA. The cumulative effects of all enacted legislation on direct spending will be issued in monthly reports transmitted to the Congress.