bank and they are prime targets for republicans and their quest to let's get to your telephone calls a. new york, cathy, a republican.

go ahead. caller: i just want to tell the representative that my feeling is that we should have absolutely nothing to do with the libyan conflict. the best thing we can possibly do is to help the president of our country stand up and publicly state that the european union and the islamic countries need to solve this. i don't really give a damn anymore whether we are a humanitarian or whatever we are. this is not our fight. i have a son in the united states navy. he is in the enterprise battle group. he is currently deployed. the last thing i want to have happened is handstanding off the coast of libya and our blood and treasure going to something that is not our fight.

guest: thank you for your eloquence. i hope your son will come home soon. we have to understand that we are not living in isolation. i want to go back to a point that was made before and the article that susan read about the banks. we are focused like a laser beam in our country on jobs. that is what we should be doing, creating jobs and putting people to work. the banks, by creating markets overseas, by investing in development and training and working in partnership with other countries, creates jobs because our exports to these countries are increased. it is not just because we are good people, also we are. it is in the national security interest of the united states, and when a disaster occurs, we have an obligation to be helpful. i know we will as we have been

in haiti and responding to other disasters. host: next is its duty, an independent. -- next is judy, an independent. caller: i see some money going out for [unintelligible] things like that. i see a lot of money going up for military aid to governments that are not necessarily too nice to their people. i would like to know the proportion of military aid we are sending to actual humanitarian aid. guest: that is a good question. it is about 20 times or more. i happen to agree with you. secretary gates and general petraeus and admiral mullin have made that point very well. we see in afghanistan that the

civilian aid is absolutely essential to resolving this conflict. we are putting many, many billions more dollars in the defense program then in the civilian side. i think that has to be changed, hopefully in my lifetime. host: good morning. caller: i am from westchester county. hello. i would love to have a town meeting with ms. lowey so we can look eye to eye so we do not have to be on the telephone for 40 hours to ask a question. howl are our national interests involved in helping women have babies in other countries? how does that help our national

interest? the other two ladies -- we are involved in other countries, giving money to their military. a couple of years down the road, they are knifing us in the back. we have to stop giving all this aid to governments and let them figure out what they want to do. for heaven's sakes, it is not in our national interest to give money to people to stop having babies in the third world countries. we have to help our own citizens. that is all i would like to say. maybe one of these days, which will have a nice, big town hall meeting where mrs. lowey is actually there. guest: i have been in office for 22 years. every year, i go to the supermarkets, libraries, office hours, and please call my

office. you do not have to wait for a great, big meeting. i would be delighted to meet you one-on-one. i think it is important to know that we do not live in isolation. we are all connected. in the days of one part of the world and not getting to the other part -- what happens, be it in japan or china, what happens in afghanistan, pakistan, is certainly relevant to our own security here. i mentioned the banks before because i am very concerned about jobs in west chester county. i have worked hard to get fda loans so we can help businesses expand. in terms of international assistance, again, we export to japan. they export to us. we export to china. we are all interconnected.

when there are asian flus, they are exported as well. i would be happy to talk to you further. host: we are trying to give you some news updates on the earthquake and tsunami as we talk here about these federal spending priorities. this is a sad story. as many as 300 bodies have been found in one city. the next telephone call as we talk about foreign spending with congresswoman nita lowey. this is a real personal story for her this morning. caller: i just want to say that i believe in giving foreign aid to people because people around the world need the help.

a lot of the money goes to governments that keep it for themselves. as i was growing up as a kid, [unintelligible] i think they need to do a lot more in this country. thank you. guest: and thank you, sir. i do want to say that a good deal of our aid is delivered to organizations like save the children who are working with families and villages. there is a small group in guatemala, for example, that is training people to make products such as pocket books so they can sell them and support their own families. let's remember, again, we are living in a global economy. we are living in a global world it. if there are diseases abroad,

they can come here. if there is a disaster abroad, because of the good nature of the people of the united states of america, we do want to assist as in haiti. i do want to say that mexico, which is right on the border of texas, we may be assisting and training their police force and their military, but it is in the interest of the united states of america keeping us safe here to help those in mexico. host: how is your working relationship with the new chair? guest: she is a delight. she is from texas. now she is chair and i am the ranking member. and maybe the only committee with two women. host: you feel that even though you have different priorities for spending, you can find consensus? guest: there is no question. many of our priorities are the

same. we are looking to the whole budget to make sure every dime is spent effectively and there is no waste. the gentleman talked before about giving funds to the people rather than the government. corruption has been a big issue for me as it has been for secretary clinton. recently, when the president tried to raise taxes, there was a mass demonstration. frankly, if we are giving all of that aid, there should be many more people paying their taxes especially at the top level. host: the next call is from new york. good morning. caller: i should probably say i am a tea party member more than a republican. i think andrew cuomo is doing some very good things for the state. i am so mad at the entire congress. our debt payments are larger

than the state budget. we are destroying this country with the massive level of debt we are piling up. neither party is willing to do anything. one party is offering a third of a percent. while we are racking up debt at exponential levels. guest: let me say, number one, i have known in drew, since he was a kid. he lived to run the corner from me in queens. i am very proud of him and i think he is doing a good job. secondly, i happen to agree that we have to tackle the debt. i am opposed to the $40 billion in subsidies to the oil industry. there are many special cause outs for large corporations and businesses that we have to attack. there has been major assaults on appropriations and earmarks. i have always said that you have to be careful when you provide a

legislative director of it earmarked. no one is looking at the special giveaways. i think we have to do a lot more because addressing the debt is essential n. but you cannot do it with a sledgehammer. with ave to do it in scalpel. teachers would of been laid off. the programs would of been cut. title 1 programs would of been cut. money to the national institutes of health providing research for cancer, alzheimer's, diabetes, wouldn't been cut. i am hoping we can come to some bipartisan solution in the senate so rationality will prevail rather than this hammer approach of cutting. host: from twitter --

guest: let me say that there has to be a balance because we provide a lot of money, if you are talking about haiti, to the non-governmental organizations. there are over 10,000 of them in haiti. they are there to deal with humanitarian services to help build better schools. unless we train the government, unless we work with the institutions, i am very concerned that we are not going to accomplish what we really have to do, and that is removing ourselves. the non-government organizations cannot be there forever. the institutions have to train to deliver the services. what want to see if we want to develop communities outside of port-au-prince, i want to see what i call a community of learning, a school at the center

of the community, and around that, job opportunities. a big career inferred just announced they were going to have a business in it -- a big korean firm just announced they were going to have a business in haiti. the purpose of foreign aid is to help people help themselves. host: our next call is another new yorker, william, a democrat. caller: i would like to suggest several reasons why the the eight budget should be cut. the d.a. has offices in 63 countries and that is way too much. the second reason is [unintelligible] medical marijuana [unintelligible] something that congress is

lagging behind with sentiment on this issue. i think this is something that needs to be cut. i think the people need to question its such as the congresswoman. guest: thank you, sir. i would say to you that the legalization of drugs is a debate that we really have to have. certainly in mexico when you see the drug cartels that have infiltrated the military, infiltrated the police, our guns going over to mexico, and the drugs coming from central america to mexico to the united states -- we have to work on our drug control programs here. we have to try and do something about more effective programs to stop people from getting addicted to drugs. but i think the legalization of drugs is clearly a debate that

we have to have that. host: the next call is from the bahamas. zack, you are on the air. caller: the national times that you were " prettquoting. host: i did not know the ownership of the financial times. caller: you may want to check that. that is not the only publication that muammar gaddafi owns. ms. lowey, you strike me as very naive when it comes to foreign -- i am surprised that you are on the forum committee. -- on the foreign aid committee.

i am familiar with eastern europe. i have some background there. anything is better than muammar gaddafi. the person leading the rebels has a ph.d. i am surprised the protesters and libya -- they are sitting ducks. maybe some kind of advice [unintelligible] i tell you, anything is better than muammar gaddafi. that is my comment. guest: let me say that you certainly seemed well informed. the secretary of state and the president are very aggressively involved in this issue. the secretary of state is going to egypt, tunisia, and libya.

i think she is leaving on sunday and working actively with other members of the community. our military is in afghanistan. we are in so many parts of the world. it seems to me although i would like to stop the murder rings and the killings immediately that we have to work in coordination with the international community. host: here is a headline from the washington post, the lead story today. you suggest the white house is actively involved. there are critics who are saying they have been dragging their feet. what is your reaction? guest: well, i think words are find but action is what really counts. we have our forces in

afghanistan right now. we are actively training and working in pakistan. and i would like to say that there should be a no fly-zone. then in my conversations with the secretary and others, it is not necessarily the whole solution. i think our secretary of state going there this week, the beginning of next week, and working with the other members of the community is essential, speaking out and supporting the opposition is one thing. but sending our young men and women abroad is another. i think that they are being cautious but very directive in their thought process. host: let's move to the larger discussion over the continuing resolution.

we hear there are republicans that going to announce another short-term continuing resolution with cuts. guest: i wish i had a vision that could assure me that we would not be making massive cuts that are really going to affect not just my community but all around. we have to be very careful when we appropriate at the time of the huge debt. let's remember that when president clinton left the white house, we had a surplus. let's just remember that. we are all part of this effort in looking for waste, fraud, and abuse, but you cannot use a hammer. in my district, when i talked to several hundred people who are involved with head start, these are working people.

what they going to do with their kids? there are teachers who are preparing to be laid off because there is no money at the state or local level to support them. police, firefighters, the national institutes of health. i am hoping we can do it in a bipartisan way and come up with a plan that does not get to the bones of our government and our services to the people. host: we are going to be taking this weekend at the virginia festival of books on "book tv." we are going to be alive at this weekend from the organization of american historians. we will have live panel sessions on both saturday and sunday on c-span3.

anbama, diana is independent. caller: i appreciate you taking my call. in reference to the foreign aid, let's bring that down to the united states grassroots. well with the perception be of me if i took my husband's income and went across the road and fixed my neighbor's roof and painted his house and advised his children while at the same time allowing my home to deteriorate? there are advertisements on the tv to help feed the children. now they are putting u.s. children in there. i wish they would amend that and make it not north american free trade but make it north american fair trade because the blue- collar labor of the united

states is not surviving here. we cannot protect or clothe our own. we have to take care of home first. guest: thank you and i appreciate your thoughtful comments. i visit the food banks in westchester county, n.y., and the numbers have just increased dramatically, not just the people who are out of work, but people who have low-paying jobs and cannot afford to feed their family. that is why i and working so hard in the congress to focus on jobs, jobs, jobs. to me, this is what our primary responsibility is it. when the unemployment rate keeps climbing, we have to focus on jobs. i agree with you that putting people to work is uppermost and

is why i support the programs of the small business administration. in my community, i have seen jobs in the biotech field, going from 400 to about 1600. another company that installs solar panels went to half a dozen people to over 100 people because of support from some of the small business administration programs. so, we have to focus like a laser beam on creating jobs. again, we do not live in isolation. what happens overseas affects us. china, for example, is taking our jobs, is frankly exporting more than we are exporting. this affects us. i mentioned the avian flu. people fly.

they travel around the world. the flu does not stay in one place. we are all interconnected. when there is turmoil in one part of the world, it can affect us here at home. it is in national security issue to invest in foreign aid. host: we are almost out of time. let's take one more call. caller: good morning and thank you. i would like to say that just what the congresswoman mentioned, if head start is not being funded properly, why are we giving to foreign aid to other countries? if there is any other country i would move to, it would be japan because they are such a great country. i want to say that we do not need to by our friends via financial aid. this is ridiculous. host: we do not need to by our

friends. guest: is a matter of developing or alliances, working together in the interest of the united states of america. in haiti, when there is poverty and people do not have homes or a place to live, it is not a matter of buying our friends but to make sure we can bring stability in the country because they are right on our border. the same thing with mexico. people travel everywhere and we are all interconnected. i hope that in addition to suppor

the national flood insurance program was injured more than 5.5 million u.s. homes is now almost $18 billion in debt. now a house subcommittee hearing looks at the reasons behind the

debt and what changes might be made to the program. this hour and 35 minute portion includes remarks from governor agency officials. >> the housing community effort opportunity will comeeffects of coast will be minimal. i would like to note that administer fugate cannot join us today given he must remain at

the fema headquarters to monitor the developments in hawaii, alaska and the west coast and the pacific territories and to coordinate possible federal assistance to state and local governments. we understand his responsibilities and we hope that we'll meet with the administrator within the next few weeks. with that, we are going to have opening statements and i will start and welcome today's hearing. where we will examine legislative proposals to reform the national flood insurance program or nfip. it is critical that well in advance of nfip's september 30th expiration date, congress begin a dialogue and shape a reformed measure. millions of homeowners and businesses in illinois and across the country, not to mention our recovering housing market can ill afford the turmoil by program labs which occurred during the previous congress.

that said to the credit of my colleague, ms. waters, the former subcommittee chair, much progress was made on fip reform legislation, some of which is included in the draft bill under consideration today. there's no question that the program is in dire need of reform. for many years, the nfip has been, for lack of a better phrase, under water with long standing management and financial challenges and last reformed in 2004. the nfip borrowed millions from taxpayers followinging the 2005 gulf coast hurricanes and continues to be financially unstable. since 2006, the nfip has been cited by the government accountability office as a program of high risk and in need of fundamental reform. we work to restore the financial integrity of nfip so homeowners and businesses in floodplain areas like many in my state of

illinois, are not left without any protection and taxpayers are not on the hook of the failing of nfip. we must work towards a long term plan for flood insurance that eliminates taxpayer risk in the near term important reforms to the nfip must improve its financial stability, reduce the burden on taxpayers and examine ways to increase private market participation. today, i would like to welcome guest members to our committee, regulators, engineers, realtors to examine flood insurance programs that businesses and local communities can count on. with that, i recognize ranking member for his opening statement. we have agreed to limit the opening statements for five minutes. >> good morning, chair woman, biggert. i want to thank our witnesses for taking time to testify.

as you may recall, we were successful in passing the flood insurance reform priorities act of 2010 last summer, which was introduced by congresswoman waters. the bill received received broad bipartisan support, here we are once again. since the program is slated to expire at the end of september, i hope we can work together to pass this necessary legislation and not allow the program to lapse as it's done in the past. finally, as we move forward, we need to make sure reauthorization has the stability to enter our housing market. i look forward to all the testimony. i would like to introduce two statements for the record. the first is from the american insurance association, write your own flood insurance coalition, aia expresses the need for meaningful and long term extension and. the second is the national wildlife coalition, it raises environmental concerns to keep in mind as we move forward with

nfip reform this year. thank you, mrs. chair woman. i would like to see who else on our side would like some time as it permits. >> thank you. at this point, i ask unanimous consent that our colleague, mr. palatso can participate in the hearing today. without objection, welcome. i recognize representative dole for two minutes. >> thank you, madam chair woman. i want to welcome you all here as well. thank you for being here. the flood insurance program insures more than 5 million residential and commercial property owners and more than 20,000 american communities. these millions of property owners and their communities depend on this program to provide some measure of security against inevitable flood risks. at the same time, with this program's existing debt and with the persistence of federally

subsidized premiums, the program remains under capitalized and the solvency is in jeopardy. all of which places the american taxpayer at an ongoing substantial risk. clearly, we need to minimize taxpayer risk by making this program more self sufficient and by expanding the private sector's role in protecting against flood disasters. the important question for us is how to accomplish these important objectives. one thing be that also seems clear is that the strategy of short term authorizations and the corresponding temporary program lapses have not worked to minimize taxpayer risk or to expand the private sector's role. in fact the short term authorizations and temporary lapses have had the opposite effect while also destabilizing already fragile housing market. to properly reform and strengthen this program, we need to reauthorize this program on a long term basis and we need to do so promptly to avoid any additional lapses in the program.

long term reauthorization will allow us to create stability and predictability for property owners while moving towards meaningful and necessary reforms. we must also gradually reduce federal subsidies that keep taxpayers on the hook. we must consider how to deal with repetitive lost properties to index coverage for limits for inflation and expand available coverages. we need to consider policies that will limit adverse selection and better spread risks. we need to consider giving private market insurers some certainty and uniformity regarding applicable law under what is necessarily a national flood insurance market. in the end, we need to create the conditions under which the taxpayer risk is minimized, private sector involvement is expanded and policy owners are protected. i look forward to working with the chair woman and my colleagues on both sides of the

aisle to achieve these most important national objectives. i yield back. >> thank you. i would also like to ask for unanimous consents for ms. mccarthy, a member of the full committee, to participate in today's hearing. without objection, so ordered. now recognize mr. cleaver for two minutes. >> thank you, madam chair, to you and to the ranking member. are with the tsunami hitting japan yesterday, or last night, it provides us with a reminder of the devastation that can be caused by flooding and it also is appropriately getting the attention of the fema administrator, which is why the administrator is not with us this morning. madam chair, i think that it's

time that we do an overhaul of the nfrp because obviously, there are concerns. we attempted in the aftermath of katrina to provide some reform to the program. we didn't get very far. something has to be done. we are about $18 billion under water, pardon the pun, and the program simply can't continue as it is now. we need to struggle with and debate, if necessary, the issue of the wind damage coverage which was one of the controversies when we tried to deal with this issue back in 2009. i'm looking forward to raising those questions about reform to our panel this morning. and to actually find out from them whether or not they believe

that we have time to do anything before the september expiration date. because i think, you know, if we move expeditiously, maybe we can address this issue. thank you, madam chair. i yield back. >> thank you. i would also like to submit for the record, by unanimous consent, letters or reports from all state professional insurance agents, international code council, lloyds of london and the national multi-family housing council. without objection, so ordered. we now start with our witnesses. and i would also like to submit without objection the testimony of administrator fugate for the record without objection. we are happy to have with us maurice williams brown, managing

director, of the government accountability office and manager sally mcconkey, manager of state plan manager, coordinated hazard assessment and mapping program illinois state water survey. as you may know, if you can address the dais for five minutes. ms. brown, you're recognized for five minutes. >> thank you, chairman biggert, ranking member, and members of the subcommittee, i appreciate the opportunity to participate in today's hearing on the national flood insurance program. as you know, floods are the most frequent natural disasters in the united states caughting billions of dollars of damage each year. this morning, i would like to share my thoughts on three

areas. fema's administration of nfip, the proposed reforms put forth in the discussion draft and other possible areas for reform. first, nfip serves a vital role in providing protection against flooding to over 5.6 policyholders nationwide. nfip is one of 30 programs or areas on gao's 2011 high risk list. it first appeared on this list in march 2006, after the 2005 hurricane season exposed the potential magnitude of long-standing structural issues on the financial solvency of the program and brought to the forefront a variety of operational and management challenges that must be addressed to especially ensure the long term stability of the program. in our ongoing work, examining fema's management of nfip, our preliminary results reveal challenges and strategic planning, human capital

planning, intraagency collaboration. records management, acquisition management and information technology. while fema continues to make some progress in addressing certain areas, fully addressing these fundamental issues will be vital to its long term operational efficiency and stability. second, using the broad public policy goals identified by gao on the role of the federal government in providing natural catastrophe insurance, i will share some thoughts on reforming an fip at outlined in the discussion draft. these broad goals include charging rates that reflect the risk of flooding, limiting costs to the taxpayer, encouraging broad property owner participation, and encouraging private sector involvement. successfully reforming nfip will require a tradeoff among these often competing goals. for example, currently, nearly one in four policyholders does

not pay a full risk rate and others pay grandfathered rates. the discussion draft addresses the structural issue by phasing out these rates over time. this not only results in rates that reflect the risk of flooding but also can help minimize the cost to taxpayers and could help encourage private sector participation. the tradeoff involves potentially losing policyholders who may opt to leave the program, potentially increasing post disaster federal assistance. however, these challenges can be overcome by a variety of options, including targeted subsidies. the goal of encouraging broad participation could be achieved by increasing targeted outreach to help diversefy the risk pool. one way to do this is make sure the incentive structure is consistent with the goals of expanding participation in low

risk zones and areas subject to repeated flooding but has low penetration rates among others. encouraging private markets is the most difficult challenge because there is currently no broad based private market for flood insurance for most residential and commercial properties. as originally envisioned, nfip was established as a cooperative arrangement between the federal government and the private sector with both assuming a share of the risk. the concepts in the discussion draft would begin to address this issue by giving fema greater authority to explore alternatives. for example, the discussion draft addresses the possibility of reinsurance. finally, while the discussion draft begins to address many of the broad public policy goals, i would like to offer a few other areas for consideration as the reform discussion continues. for example, leveraging mitigation programs and ways to make them more effective, including clarifying fema's

authority to charge higher rates when property owners refuse or do not respond to mitigation offers or allowing fema to apply surcharge when mitigation offers are refused. actuarial rates and whether they should be sufficient to pay for catastrophic losses and any borrowing from treasury. aappropriating for any subsidies until the rates or fully phased in and authorizing fema to map for all present flood risk including erosion. chairman biggert, ranking member gutierrez, this concludes my oral comments and i would be happy to answer any questions at the appropriate time. thank you. >> thank you very much. now recognize ms. mcconkey for five minutes. >> the association of state floodplain managers thanks this

subcommittee, chairman biggert and ranking member gutierrez for your attention for the need to reauthorize the the national flood insurance program. we appreciate the opportunity to comment on the discussion draft legislation and to share our thoughts on the current status of the nfip, challenges the program confronts and opportunities to improve our nation's efforts to reduce flood related losses. the association of state floodplain managers and its 29 chapters represents over 14,000 state and local officials. all asfpm members are concerned with working to reduce our nation's flood related losses. asfpm believes the nfip has been a useful program for addressing flood losses in the nation and should be reauthorized without lapse. a reauthorization of two to three years is important for the stability of the nfip and the associated predictability is

important for the lenders, housing industry, home buyers, policyholders and the write your own insurance companies. while a longer period of authorization is important, it must be balanced with the need to fully consider many important reform ideas which will need further evaluation and consideration by the committee. there are fundamental issues that need to be thoroughly considered. for example, should the nfip accommodate catastrophic losses rather than the average historic alloss year. are there realistic affordable obltti ti objectives? are they expected to cover catastrophic losses. the nation must carefully balance the issue of who pays for development of risk. we believe a two to three year reauthorization will provide the needed reliability while allowing time for fema to complete its rethink nfip --

short person, i guess. allow time for fema to complete its rethink nfip project and congress and the committee to review and consider the significant policy and legislative options and recommendations for management and operation of the nfip. the report is expected out june of 2011 and we think this project will identify or does identify the tensions and the tradeoffs of various options and needs careful and deliberate consideration. asfpm has identified a number of concepts which we feel should be part of any reform. first, a comprehensive national flood risk management framework is needed to actually reduce flood related losses of life and property in the nation. we must move beyond the current nfip minimum approaches and achieve a fuller integration of federal programs. secondly, bold reforms should be considered to address current flood insurance issues.

flood insurance should gradually move towards being actuarial sound to reflect actual risk and enable market based financial decisions. third, floodplain mapping has changed significantly over the life of the program. better technology, improved methods and creation of risk assessment techniques allows for the identification of flood hazard areas and enables the creation and distribution of this information to decision makers. technological advances will continue and a long term authorization of the mapping program is needed so we can fully utilize those advantages, continuing to improve in advance flood risk identification. fourth, improvements in floodplain management and hazard mitigation elements of the nfip should be continuously evaluated. with respect to the current discussion draft, we find that the draft developed by the subcommittee thrincludes a numb of important chains nges to the

nfip. we note that these constitute revisions rather than full reform that we are discussing and would urge that the subcommittee plan on an in-depth consideration of the significant policy and legislative recommendations for the nfip during the two to three year reauthorization period. asfpm appreciates that the proposal attempts to modify and tighten previous proposals to delay the mandatory purchase requirement of properties in areas newly mapped as floodplain. however, as a matter of principle, if the risk is known and documented it's not appropriate for the federal government to help people ignore their risk. rather than delay mandatory purchase, we prefer the subcommittee consider other methods of addressing the affordability issue. i actually grew up in east st. louis, illinois, where my father owned aa business. we lived and worked in the floodplain with no real

knowledge of the risk we were at. we knew the levees were there and counted on them. to be abruptly confronted with the significant expense of flood insurance would have been very, very hard on my family and my dad's business. but to have flood damages to our home and to the businesses that were uninsured that we could not recover from would have been devastating. there are a number of aspects in the discussion draft that asfpm agrees with, such as the proposal to use differentiated deductibles for preand post properties. the phase in of actuarial rates for certain properties is a step forward and we agree with most of the listed categories. asfpm very much supports the establishment of the technical mapping advisory committee and should be an advisory council to provide stake holder input to assist fema in improving its processes.

there are a number of issues that require further consideration. while asfpm does support a more in depth study of privatization, any such movement in this area must ensure there are continued strong incentives for comprehensive floodplain management which is one of the great strengths of the current program. further, we would like to suggest two other studies which would be an order in addition to the privatization initiatives already provided for in the draft. a study of the feasibility of group insurance for entire communities, for identified flood hazard areas or residual risk areas behind levees. secondly an economic analysis of the overall effect on taxpayer funds providing flood insurance vouchers to low income property owners. also the severe repetitive loss program is needed to assist in reducing the approximately $200 million drain on the national flood insurance fund. we urge the committee to work with fema to identify category changes to better implement this program and the use of demolish

and rebuild as a mitigation option. asfpm is grateful for the opportunity to share our thoughts with the subcommittee and hope they will be helpful as you move forward with legislation. we will glad to answer any questions and assist the subcommittee any way we can. >> thank you. we'll begin the question and answer period. i recognize myself for five minutes. ms. brown, over the past five years, fema has paid more than $2 billion in interest payments to service its debt, nearly $2 billion more to reduce it. fema still owes $17.75 billion to u.s. taxpayers, many of us asserted fema would be unlikely to repay its debt. do you foresee any scenario in which the debt can be repaid over time? and can you outline a range of public policy options for how

congress might enable fema to be able to address its debt to the u.s. treasury? >> we have looked at this issue and the bottom line is, as it currently stands, fema has been able to make principal repayments because they have experienced relatively low flood loss years. that's how they've been able to do it. it's not clear it's reasonable to expect that to continue to occur it in the future in order for fema to be able to make those payments. there's a possibility that in srn years where fema experiences higher than normal flood years that they actually could see their borrowing from treasury go up because they may have to borrow from the treasury in order to make their interest payment. there are a range of scenarios that could be taken to address this. a decision could be made to forgive the debt in order to

allow the program to start on a more sound financial footing, provided appropriate reforms are in place. there's another way to do it would be to consider, you know, a surcharge that fema could add to existing premiums to be used to pay down the debt. that raises questions of fairness. is it fair for the current and future policyholders to have to pay a surcharge to repay the debt? so there are many ways to think about it. this isn't something that we have specifically studied, but we've looked at and read a number of possible alternatives, but this is a challenge that has to be addressed in order for the program to be put on a more stable financial footing going forward. >> well gao has also suggested that operational and management issues may also limit efforts to

address the nfip's financial challenges and meet the program goals. can you highlight some of those issues for us? >> yes. in the last decade, we've identified and made recommendations to address issues surrounding the rate setting process and how that's handled. we've raised issues with the quality of the data that fema uses to do some of its rate setting. we've raised concerns about the financial management controls and the system in place. we've had findings surrounding the oversight of the wyos. we've looked at the incentive structure that fema uses to incent wios the number of policyholders in the program and expanding the risk pool. we've also, in the work that we currently have underway, we've identified a number of challenges associated with their information technology and

investments that they've made in a program -- technology program that failed that cost fema substantial sums of money. human capital management, identifying where they need people in a mechanism to make sure the program is being adequately managed during emergencies and outside of emergencies. so a full range of issues to be fully advised. >> thank you. ms. mcconkey, i might get it right sometime, given your experience in illinois, can you provide the committee with your point of view on risk-based pricing and how it should work? and also alternatives that communities can consider for mitigating flood damage. >> yes. >> or risk i should say. >> it's very important that the people who are living at risk know the risk and share -- and be part of the paying for their

risk. it is, we feel, inappropriate to externalize that risk to the rest of the taxpayers, the federal taxpayers, but we also understand that you have to gradually move towards actual rates for flood insurance and that we also need to look at a more holistic view of our at risk communities and not just consider flood insurance or just a levee to be the ultimate answer. we need to look at really having more sustainable communities which might include a retreat from -- strategic retreat from the floodplain or buying flood easements or other mitigation techniques that will really long term reduce our flood risk in the nation. >> thank you, my time is expired. recognize the ranking member gutierrez for five minutes. >> i would like to yield my time to congressman cleaver. >> thank you, ranking member

gutierrez. i do have some questions. ms. mcconkey, you're a midwesterner and grew up in the shadows of missouri. we've had unusual snowfall this winter which means that very shortly, a mixture of the me melting snow and 9 normal spring rains can and does often create flooding along illinois and missouri. we are also still in the throes of a recession. a large number of unemployed

folk are living in areas that are susceptible to flooding. do you agree that it would be difficult for many of the people just struggling to exist, who did not purchase flood insurance to have to go to a private insurer at a time like this. i mean there's a great deal of talking about the privatization. i mean, what does privatization do to people who are vulnerable like those -- you probably know some of them. is it unfair for us to think in terms of privatization as a way for them to protect their homes and property? >> actually, what we believe is that to deal with people the

affordability issue should be manage a program, a program like hud that has experi .. could -- actually i can talk pretty loud. we really think that it shouldn't be handled through the insurance mechanism to deal with the affordability. it should be through a means tested program handled by hud like you could get vouchers if you can't afford the flood insurance. you have the protection of the flood insurance without distorting the insurance aspect of the program and you have protection for individuals through -- that's irrespective if it's fema, flood insurance or if it's private. that's our solution. i don't know how the rates would change with the privatization. i can't speculat >> well, i guess to some degree it is, but i'm concerned about people who are just struggling right now to survive. >> exactly.

>> and vulnerable. i'm from the missouri side. my other concern that i appreciate very much you moving ahead trying to do something with regard to the flood insurance overhaul. it seems to me that there ought to be, and you were asked the question, you know, maybe if this bill moves, and i hope something moves because i think, you know, we're dealing with an $18 million problem, and the fact there's people here who are vulnerable. i would really hope that before september that we have a bill and the legislation addresses the $18 billion problem we have, and i don't -- i mean, i listen carefully to the the options,

none of them are extremely attractive i might add, but we've got to do something, or we'll continue to meet and talk about $18 billion problem, and i think now is the time to atact the problem. i don't think we should wait. i don't know whether fema should send options, maybe even more than you just mentioned or some way we need to begin that struggle now instead of postponing it. i yield back the balance of my time. >> thank you. i think mr. cleaver that we really are having this hearing now because we do need to move ahead with expected having the maybe another hearing, but at least a markup soon. you know, as this is a draft

discussion right now, but we really wanted to proceed, and i know that the study is supposed to come out in june, but i think we really want to be moving ahead before then, and i think we'll get an update as far as everything going on with the study too, but it's important we don't let this slide. as you know, it's harder to do it later on and get the senate engaged which has always been a problem. >> [inaudible] >> well, you could say that. [laughter] i now recognize mr. hert from virginia. >> thank you for being here and your obvious interest in this important issue. the chairwoman spoke about the

debt incurred with this program, and i read that the deficit, the built-in deficit for this program has been $1.3 billion, and i was wondering if you could talk about that deficit. is that something that's been consistent post katrina or pre-katrina. are you able to comment on that? >> i'm not. this isn't anything we've spectically looked out. >> okay. with respect to the proposal we're evaluating with this draft bill can you talk about what the taxpayer subsidy taxpayer program is? >> i can give a rough estimate based on the full risk rates currently charged and the estimate for the subsidized amount, and the current estimate is that the subsidy basically results in those sub sigh

dpiezed -- subsidized properties paying 45% of the risk rate. we did a calculation on the policies and estimate around $1.8 billion a year is being subsidized. that's the amount lost in premiums if there was a full risk across the board. >> and gao in looking at this draft bill been able to determine what the -- what that might be reduced to if you're able to encourage the private market to come into this business? gr well, -- >> well, it depends on how that happens. the challenge with flood insurance has been historically there really wasn't a private market and there wasn't a private market for a number of reasons, and so depending on how that was structured to bring the private market in, there was a number of things to be dealt

with. if you bring the private market in and they are able to focus on the lowest risk properties, that would leave the programs with a very concentrated risk pool in all the riskiest properties will be in fip, and that can potentially expose the programs to greater losses because there's this concentrated risks so the impact that the private market has is really unclear until there's a better sense of kind of how that would be structured, and what role the nfip would play in that particular scenario. >> okay. obviously one of the fundamental issue that we all have to kind of deal with in this issue to me is a new one and is the issue of moral has -- hazard. there are places people should not live, and under the current

proposal that we're looking at today do you see the moral behavior that's encouraging people to do things that are not in their best interest, would that be minimized or could that be increased by the proposal that we're looking at today, and i'd like an answer from you, ms. brown, and you ms. mcconkey. >> it's a clear small to a property owner that they are living in harm's way. to the extent that they move in that direction, it definitely, you know, would help elevate the risks that home owners and property owners are exposed to currently. >> ms. mcconkey? >> i don't think i can say it

any better. >> okay. thank you. thank you madam chair. >> i now recognize mr. cleaver for his five minutes. >> thank you. just one question, and i'd like to yield the balance of my time to the gentle lady from new york . i'm still on the $18 billion, and there's been some suggestions that perhaps reinsurance could be a way to eliminate future debt. i'd like to get the feel of your response to that from both of you. , either of you. one of you. [laughter] >> well, the issue of reinsurance the thing in the draft that was interesting is, you know, it's an opportunity for fee fima to do experiments.

we looked at this a couple years ago, and there wasn't an appetite at that time. it's worth revisiting. the way it current works is nfip while it's an insurance program, it doesn't function like private insurance because private insurers purchases reinsurance to cover that catastrophic level of risk. what happened, and we saw this happen in katrina because representative hurt's point, it wasn't running a deficit because it was self-funding until 2005, and treasury became the reinsurer because any losses over and above the amount that could be covered through premiums because there is no reserving mechanism was borrowed from the treasury, and what you're left with a treasury, the program now has this outstanding

debt to the treasury because there wasn't, you know, the opportunity for any type of reinsurance mechanisms. >> i yield to -- [inaudible] >> basically i want to say thank you to chairwoman for having this hearing. i think it's extremely important. i just want to give you a background. i live on long island, and we have a lot of shoreline, so obviously, we have a lot of homes that need flood insurance in case of a hurricane, and so far we've been blessed not to have that hurricane, but i represent center in nassau county, and fema and appointly what -- apparently what fema had done was go to a county with higher level of flooding and took those maps and put them into nassau

county, the center of nassau county, and they are saying in certain areas in this particular village, we're a little bit higher even though we are not near any water, and i stress that. we are not near any water, nor have any of the families had floods for over 25 years. is there a possibility? absolutely. should we look at that? absolutely. i guess the question i want to ask is the draft legislation which i agree on con tape -- contains the provision of the mapping of the advisory counsel made up of representations with many agencies familiar with mapping. i'm interested in your thoughts of having the mapping process in an entire independent agency to ensure we update the maps. we just had our maps updated. just to give you a side bar, i have a retirement home somewhere

out in the county that's very close to the water. i did not get an increase. i am now not in a flood zone, and i don't understand that at all because when it rains heavy, the water from the bay comes up basically on the lawn, so something's wrong here. if i'm living there, i hob paying more -- i should be paying more in my opinion. i shouldn't say that, but right now, i'm getting away with it. [laughter] the people in the center of the county in my opinion, the maps are wrong. i would like your opinion on bringing back the technical mapping advisory counsel to have more accurate maps. >> okay. we very much endorse the idea of bringing back the mapping of the advisory committee. actually, when it was enstated in i think it was 1994 or 1995, it was thrir recommendations to

-- their recommendations and they brought out the map mod earnization program that led to great progress in improving the accuracy of the maps in those places. yes, we do believe that that's an important body to have as an advisory counsel. through fee ma's risk map program, the next five year initiative, they have taken certain very strong steps to address quality issues with the mapping, and also to have greater engagement with the community so there's more ground proofing to what they're doing earlier on in the process. >> let me stop you there. that was the big dpail euro. -- failure. they did not let the neighborhood know or the counties know. they just asked them for their old maps which is very upsetting. >> fema has addressed a lot of problems in that regard with their risk map process.

it's very clearly prescribed to anyone, the group that i manage, we do the digital fund rate maps and do the studies for illinois counties. we've done 78 of the 102 counties. i'm involved in that process. i read the rules because that's what we're supposed to do and through the risk map process, there really is strong community engagement, early on technical meetings so there's ground proofing of what you're doing, and fema set up, and i apologize, i may not have the right phrase, but an independent arbitration panel for when there are appeals to the maps. i think they've listened. they heard about these problems, and the risk map makes great strides in addressing the accuracy and the outreach issues. >> thank you. ms. brown, anything? mr. cleaver, want your time back? >> i think his time has expired. >> oh, sorry.

[laughter] i now recognize mr. dolt. >> thank you. we are delighted to have another person from illinois here. >> thank you for the invitation. >> you noticed in the past that congress noted that repetitive lost properties constituted a significant drain on the nfip. do you have any suggestions on the repetitive lost properties and how to make them less of a liability? >> yes. this is also an issue that we've looked at over time, and while great strides were made with amendments that were made in the 2000 to address repetitive lost properties, the number of properties has continued to increase, and we looked at february numbers, and they are continuing to increase. there are a couple things that

we would propose to be reconsidered that deals with mitigation offers and what happens when those offers are refused or not responded to in terms of allowing fema perhaps to start to apply a surcharge above a full risk rate for those properties. if the homeowner choosing to refuse or not respond to an offer, and also really focusing some attention on the mitigation programs and determining if there are ways to make them more figure and effective as a way to address the issue of the repetitive lost property. >> just following up on my colleague on the other side who talked about reinsurance. you're currently not using reinsurance right now; correct? >> in fema, no. >> is there any question that fema is able to use it? >> that i'm not sure about if they could if they wanted to.

right now, the mechanism is for it to, for them to rely on borrowings from treasury. >> i mean, would perhaps additional insight or authority from congress be necessary to let them do that? it's certainly a common practice out there in the insurance industry in order to protect from catastrophic losses, and certainly when we look at those areas that are particularly hard hit were those that continually to be hit again and again, and it would seem to me that potentially having that mechanism or vehicle available may be something they might want. is that something, i mean, what is your take in >> well, my take on whether they could do it now? this is where i really wish mr. fugate were here to address that officially. i think that's definitely one of the options that needs to be on the table and discussed in terms of reforming the program going forward. >> okay.

ms. mcconkey, a question for you on vouchers. you talked about vouchers before. can you give me any sort of an idea on how you anticipate or would like to see something like this, how it would be administered, and do you have any idea what the cost of that would be? >> to answer your last question first, no. that's actually the cost of it is a study that we recommend be initiated through this draft legislation. the voucher system we envision as something to be managed through the housing and urban development because they have experience with means tested voucher systems. fema does nots, but this way it allows for people to get the message about the risk that they have with their home, and yet, not be burdened in these times or because families that really are just operating on the edge would not be burdened with the cost that we would put that cost

up. it also provides them with fuller protection than no insurance at all. if you have insurance, then that means you've got money to pay off your mortgage, but if you are relying on disaster assistance, you are still in obligated for that mortgage. you really aren't covered, so it really provides lower income people with greater coverage. the voucher system, as we said, we believe it should be means tested, and that is the extent of my knowledge on that. we have to do more research to give you a more thorough answer. >> okay. and with just the short amount of time i have left, you talked in your testimony before about, or lest in testimony in past, about floodplain coverage going from 100 year to potentially expanding it beyond that in terms of, you know, 250 or a 500 year event. do you have any idea of how much of the country would be covered under those instances?

>> that's something that it -- i don't know that anybody could just estimate that without some research on it. going beyond the 100 year looking at the 500 year would be something to consider as a residual risk area. probably you could estimate the amount of flood, the difference between 100 and 500 year floodplain acreage. >> the time has expired. >> thank you, madam chair. i'll save questions for the second panel, thank you. >> ms. mccarthy, would you like to claim your time? then we'll go to mr. palotso.

>> thank you for allowing me to participate in this morning's very important hearing. thank you chair. i ask consent that any full statement be included in the record. >> without objection. >> i represent mississippi's 4th congressional district, the only district representing the mississippi golf gulf coast. we applaud the continued leadership to the agency. the national flood insurance program is critically important to south mississippi and in area exposed to flood risk. as floods are among the most costly disasters in the united states, i urge the committee to closely consider reforms offered by administrator fugate and pass a long term authorization. madam chairwoman, in the absence of fugate, i would like to submit questions for the word for him.

>> without objection. all members will -- request for questions will be put in the record. >> thank you. i would had be remiss that the high cost of wind insurance is a major factor preventing coastal resident from building homes and attracting new industry. i'm committed to a bipartisan effort to resolve this with the goal of providing residents in the needed coverage. i look forward to working with the financial services committee to find solutions to our problem. thank you again, chairwoman biggert to be here today, and i yield back. >> thank you. mr. duffy, do you have questions? well, i'd like to thank so much the witnesses. this has been a very informative and very helpful to us, and thank you so much for being here. >> thank you. >> thank you. >> and i might wait until later, but those members who have written questions, that will be

open for 30 days for submitting questions to you and answers in a written response. we will now move to the next panel. [inaudible conversations] >> if we can do this very quickly, i might mention that the floor is estimating that we will have votes between 11:45 and 12:15, so we want to move as expeditiously as possible. [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> okay. if the panel can take their seats, and if they know where they are sitting. [inaudible conversations] [inaudible conversations] >> all right, i'd like to introdeuce the second panel. we have vice president and

taxpayers for common sense in washington, d.c.. then we have teri sullivan, the committee on flood insurance national society of realtors in spokane, washington. spencer hold houldni, brokers of america and ericson insurance services. sandra parrillo, the chair of the national association of mutual insurance companies and president and ceo of mutual fire insurance company from rhode island, and vice president flood operations r harleysville

pennsylvania, and barry rutenberg first vice chairman of national association of home builders from washington, d.c.. if you could limit your comments to fivemens, and then we'll have question and answer. >> thank you. good morning, chairwoman biggert and members of the subcommittee, i'm part of a national nonpartisan budget watchdog. thank you for inviting me here to testify, and i'd like to recognize the people effected by the tsunami and how it shows the importance of the fema and flood insurance program. they long advocated for flood insurance in the program, and with $3 billion justify --

offsetting the $18 billion debt, it must be reformed, and the question is how. any reauthorization in the program must make significant changes to put it on sounder footing with more sound rates and accurate maps. the discussions to draft legislation being circulated by the committee is a good start. it tacklings rate and subsidy issues, creates a mechanism to increase confidence in flood mapping, and doesn't stick taxpayers with the bill. there's a collection of updated maps, add a new business line to the program, and ensure the program's liabilities actually increase each year. we look forward to making this good start an even better final product. we are allied with a coal lyings of free consumer groups who are responsible, fiscally sound approaches to policy that

promotes public safety. the depth and breath of the coalition, some at this table, underscores the importance of reforming fi p. i would like to submit the principles of reform for the record. >> without objection. >> to summarize quickly and clearly, those principles are maps are accurate and up to date, risk-based rates, any subsidies are targeted to those who need them, and use mitigation for a tool. they een dorse those principles to better protect people, property, environment, and the taxpayer. i want to talk about the flood insurance and the draft legislation from the taxpayer perspective. they do not charge sound rates. the program's goal of fiscal solvency charges premiums to generate enough revenue for a historic loss year. that means years are left out of the equation. the program covers any fiscal short falls by borrowing from the u.s. treasury which is a

significant subsidy in and of itself because the loans are interest free. there's cross subsidies as well. the draft legislation provides a mechanism to move towards more sound rates for many properties. the graduated phase in rates are responsible for the home owner and the program. the legislation stipulations properties have rates increase by 20% annually until they pay the estimated risk rate. the sub sighs not be available to less properties. that's policies. these changes move the program in the right direction. what appears unchanged is subsidies to prefirm and loss properties that do not meet the specific criteria. it is not clear how many properties or the potential losses this represents, but it is an area that must be reformed. these properties have been subsidized for decades. the nation's floodplains are dynamic, shifting from the impact of development, weather patterns, and changes.

flood maps must be up to date, accurate, and based on the best science. we support the vision of flood mapping counsel to develop new standards for rate maps that up corporate risk, be graduated, and reflect realities on the ground. the fema that implements protocols is critical. the development of new maps standards should not and be will delay the ongoing modernization efforts. that is critical to the viability of the program. we appreciate that unlike previous legislation that the bill does not automatically slow the increases. the draft legislation could delay or undercut new maps by giving authority to suspend purchase requirements. insulating people from the changes related to the maps on paper does not change the realities, their property is at risk. there are some troubling expansions in the draft. one is the creation of the new insurance product for business

spruption in the loss of personal residence. another has increases by a measure. with the programs in debt, it doesn't make sense to expand the coverage provided. we support the legislation and encourage fema to pursue the risk initiatives. they should have a catastrophic reserve. communities and individuals should be reduced flood responsibility with mitigation. on balance, the draft legislation is a good step forward. we look forward to working with the committee and congress to move the program in the right direction and off the backs of taxpayers. thank you. >> thank you very much. mr. sullivan. you are recognized for five minutes. >> good morning, chairman, and ranking member. >> could you turn on the mic? thank you? it should show green. >> is that better. >> yeah. >> good morning and thank you

for inviting me to testify today regarding legislation to reform the national flood insurance program. i'm tear -- terry sullivan. i've been associated with the realtors for 17 years. currently, i serve as chair of thrks er's land use committee. i'm honored to represent the views of more than 1.1 million realtors engaged in all aspects of resident issue and commercial real estate. as you know, flooding claims more lives and property than any other natural disaster in the united states. it happens anywhere, along rivers where snow melts or rain falls as well as the coastlines. without the national flood insurance program, 5.6 million home and business owners across the u.s. would not have access to the affordable flood insurance. since the year 2000, the program

has averted 16 billion -- $16 billion in property loss in the 21,000 communities where flood insurance is required. in short, the programs saves taxpayers money. chairwoman biggert, thank you for your leadership and drafting the legislation to reauthorize the nfip for five years. this would end the current stopgap approach that has led to nine extensions and five lapses in the program since 2008. a five year reauthorization would provide needed certainty for the real estate markets to recover from the longest recession since the great depression. the many extensions and shut downs have immeasurably underminded confidence. just one the lapses be later canceled more than 47,000 home sales in june 2010 alone. we are pleased to see the bill

would add coverage options for business interruption and loss of residential use. it has not been updated since 1984 would be indexed for inflation. finally, the bill ensures that repetitive lost properties have an insurance rate to reflect their lost history, a provision we strongly support. all of these reforms will encourage participation, increase the fiewndz for nfip, help property owners recover from flooding, and increase federal assistance from underinsured properties suffer flood loss. while we understand the need for tough reforms to strengthen the program long term, we remain deeply concerned about provisions to return to a time when taxpayers relied on private insurers to administer the program. it didn't work then. it won't work now.

madam chair, this is the federal register notice from 1977. it provides the history of nfip and how we got to the government program we have today. with your permission, i'd like to have it included in the record along with my written statement. nar strongly opposed to the initiatives or bills including hr45 to end the nfip. >> without objection. >> thank you. >> the bottom line is the private market charges too much. today, the four companies that write, only 200 private policies would have to ramp up by 3,000% to the nfip's 5.6 million current policies. the private insurance market simply cannot guarantee either affordability or availability of flood insurance. nar believes that congress should reform the program, not

end it. again, on behalf of the entire membership of the national association of realtors, thank you for provideing us this opportunity to share our views on a vital program, and i look forward to answering any questions you may have. >> thank you very much, mr. mr. houlden. >> i'm happy to be here to present our association's perspective on extension and reform of nfip. i'm the president of ericson insurance, the second generation and with offices in new york. i served on the big i board since 2006. the big i is the nation's oldest and largest trade organization with independent insurance

agents and brokers, we represent a network of more than 300,000 agents, brokers, and employees. they serve as a sales force with the right to own your companies. it's from this point we understand the capabilities and challenges of the insurance market when it comes to dismers flood risks. this hearing is especially timely in lighted of severe storms anded flooding occurring in the northeast and west coast. in fact, my firm fielded nearly 75 calls this week when clients experienced water in their homes up in connecticut. we commend the subcommittee for looking at this very important issue. the big i believes that the nfip provides an important service to people who suffered a natural disaster. they have been and continues to be largely uni believe to underwrite flood insurance because the catastrophic nature of the losses. the nfip is the only way for people to protect against their home or business due to flood

damage. prior to 1968, the only remedy available was federal disaster assistance. since then, the nfip filled the void creating a reliable safety net. for two decades up until the 2005 hurricane season, the nfip was self-supporting. with that said, we realize the program is far from perfect and calls on congress to take care the situation. the big i is very encouraged by the legislation and flood act. they released a 12 point plan and we're happy to see these incorporated in a proposed legislation. the first is a long term authorization as we support. as you know, congress relied on short term extensions. they fired on three separate occasions only to extend by

congress each time. we are grateful for the action, we believe that long term extension is critical. additionally for years, the big i asked to phase out subsidies found in the program. the draft legislation addresses this for many properties. the big i supports the ideas and phasing out subsidies for commercial building, second and vacation homes, homes experiencing significant damage or improvements, repetitive loss properties or homes sold to new owners. we welcome the draft legislation's proposal to increase the amounts fema can raise premiums in any year. they in connection with the premium 10% on a property. the draft legislation proposes to increase this to 20% to allow the program to move even more properties towards rates. the big i is pleased that the draft legislation is modernizing nfip by increasing limits by indexes them for inflation and allows fema to option the

purchase of business interruption with a living in coverage. the exclusion of business interruption coverage is particularly important to big i members and their commercial climates because it reimburses them for lost income thrush they inabout to operate due to flood loss. there's a particular rib restaurant in my town shut down since monday. it was flooded. they are losingf dollars a day and still their payroll and mortgage continue. it's an uninsurable loss today. with another 2 inches of rain last night, there's a good chance they will not open for another week. the big i supports the additional living expenses. if their home is not livable because of flood loss, they need arrangements. the big i is appreciative of the opportunity to testify. adopting the reforms found in a draft legislation helps make the

nfip more sound and more effective of serving consumers and taxpayers. thank you. >> thank you, mr. houlden. >> thank you, i'm frank nutter and we manage the cost of natural katrina tas trough fema risks. we reduce financial volatility. it serves the same function for the national flood insurance program. as currently operates, the nfip is not an insurance program, but it should be, and can can be. the full application of risk-based rates in a risk bearing role for theerer insurance success tore transforms the program. by doing so, they achieve the goal of protecting taxpayers, and the treasury. it's a held belief that the risk bearing role is unachievable.

on behalf of our community, we would challenge that suggestion. we commend the chair's discussion draft regarding protecting taxpayers with risk-based rates. the risks were introduced early in the program as an inducement for communities to come into the program, and it was successful. the number of subsidized properties has risen in recent years. in addition, the rates facilitated the development of a coastal areas including those high risk to flood loss and compromised use of the natural floodplain to mitigate damages. according to the gao it's 1% of the policies, but 25%-35% of the losses. capstones on rates are popular, but the caps distort risk assessment by builders, officials, and policyholders, and across subsidies to those living in high risk flood

areas. again, we commend the draft in this regard. the nfip should plan for extreme events, but does not. fema represents 55% of the policies are actuarially sound. this rejects the representation because the nfip does not incorporate a catastrophe factor for frequent severe lost years, and relies on the annual lost model for its pricing. this is ill suit the for a risk whether it's in the private or public sector. because of the model, the nfip has not planned for or priced out extreme event years. this pointings out the program should operate like an insurance entity. if it did, it can eliminate tax taxpayer and reinsurance through bonds. the private sector role in the program now is appropriate and it relates to the right to own program which is the provided the nfip with a valuable marketing arm. for a variety of reasons, a

private insurance market for flood risk has not developed. we believe, however, that the private reinsurance risk bearing role for the nfip can be established, and that the nfip can address extreme event expo sure and reduce the risk on taxpayers and reinvest. both sectors have significant capacity and believe flood risk can be reinsuranced or transferred. this is a private sector into the nfip and risk based rates. we offered two approaches to do this. the first is a reinurns approach. with most state property insurance plans, fair plans, and wind storm pools, nearly all insurers address their voluntarity through the purchase of reinsurance. as with these other government talentties and private sectors, it works with modelers to provide market to market with an evaluation of the risk portfolio, determine what risks

are needed for transfer, and seek coverage in the private sector. should the nfip find the bids unattractive, it would not go guard with the placement. the nfip therefore is in the same place as it is now depending on public debt. if it was successful, they provide relief to taxpayer ease. as is reflected in the discussion draft, no study is necessary to evaluate the alternative, but it's pursued at this time with a full opportunity to evaluate proposals. the second option we have highlighted exists in the current draft, and that's the reauthorization of the a reinsurance pool. section of the legislation adopt the in 1968 provides the director of fema to encourage and arrange for appropriate financial participation in risk bearing by insurance companies. to insist on joining a pool on terms as agreed upon to enable insurers with federal financial

assistance to assume a reasonable portion of responsibility for claims under the flood insurance program. the provisions of the statute authorizing the pools have long been dormant, yet they are a viable mechanism for the creation of another pool, this time to reinsure the national flood insurance program that voluntarily wish to provide capacity. the director in those participating insurers into into negotiations and could individually subscribe capacity on an annual basis. this probably doesn't change the right to own program. fema is the ensurer of the flood risk at the consumer level, but transfers risk from the taxpayers to the private sector and allows those who wish to participate to do so. this reinsurance program and or the reauthorization of the standing facility are both compliment tear and not exclusive to each other. it may well be sufficient to move forward without delay. we look forward to working with

the committee and the congress in reforming the flood insurance program and the reintrodiewx of a reinsurance role in it. thank you. >> thank you very much. ms. parrillo. you are recognized. >> thank you. thank you for the font to speak here -- opportunity to speak here today. i'm president and chief executive officer the providence mutual fire insurance company, one of the oldest company. we began as a small company if 1800 and today provide personal and commercial insurance protection to more than 65,000 policyholders in new england, new york, and new jersey. we employee approximately 75 individuals as remitted by more than 300 independent agents and based in rhode island. i'm here to present our views on the national flood insurance program. we represent more than 1400 property and casualty insurance

companies ranging from small farm mutuals to state carriers to large national writers. members serve the needs of millions of consumers and businesses in every town and city across america. collectively, members cover more than 50% of all homes in the country. i'd like to begin by thanking the committee for hard work on producing a discuss draft of proposed legislation. we are encurnlged that the draft reflects the input with the stated goals of protecting taxpayers and policyholders. it is our opinion that the nfip is in need of reform in order to achieve this goal. they believe that the best option is optimizing the current framework by imp policemenning reforms that express the weaknesses. subsidize premiums charged on a nonactuary basis, and some are as high as 60%. this is overdevelopment near

desire water front locations. in addition, those who need coverage is low, 30% of those who need insurance. the nfip was created in 1968 because of the absence of a viable flood insurance market. this makes is impossible to pool risk among a large enough population for private insurers to offer a viable and affordable insurance product. the public-private partnership that merged between the federal government and write your own companies has the potential to offer an answer to this problem. we believe with the right mix of reforms, the program can begin to address the problems of adverse selection, miranda rule -- moral hazard. there's five octoberives -- objectives. the nfip must charge risk-based rates to be a solvent program.

they reflect the true cost of coverage. under the current structure, there's no chance the program will repay the debt it accumulated in 2005. we recognize that the move to actuarially sound rates is likely to be painful to move to the higher premiuming to be charged in some instances, but those who need assistance, flood vouchers might be offered on a mean's tested basis to mitigate the costs, however, any subsidies that the government believes are necessary must be independent of the nfip and fully transparent. subsidies cannot continue to be hidden president insurance mechanism, and homeowners should be fully aware of the real risks and costs of where they live. second, update and improve the accuracy of flood maps. flood maps must be updated based on the best available science with the goal of ensuring that flood maps accurately reflick the risks caused by flooding. putting off the adoption of the flood maps is a disservice to

the citizens, property owners, rescue workers who in the end risk losing their homes and their lives we recommend adopting a nonpolitical balance and process for updating the maps. third, improve the take up rates. thus the insurance mechanism works best and is the most affordable when everyone participates in the program. currently, only 20%-30% of individuals exposed to flood hazards purchase insurance. they have to properly pool the flood risk and achieve financial soundness. fourth, discourage repetitive lost properties. according to the cbo, there's currently 71,000 nfip insured repetitive lost properties that represent just 1.2% of the nfip ported folio and represent 30 pocket of the total claims paid

between 1978 and 2008. something needs to be done for this issue. american taxpayers should not be forced to sub subsidize policyholders who continue to rebuild in high risk areas. finally, improve the management and correct operational inefficiencies. the nfip has to have quality information regarding policyholders to operate efficiently. we need a institute, clear procedures for claims record, esksively communicating with lenders and triggering enforcement actions. we believe these reforms are necessary and achievable. i have including more detail policy proposal for each of the five key objectives in my written testimony, and as the process moves forward, we stand ready to work with the subcommittee to address the inefficiencies in the current program. again, thank you for the opportunity to speak here today. >> thank you and ms. jallick.

>> [inaudible] >> i think you need to turn on the mic or move it closer. >> thank you. thank you, thank you for the excellent draft legislation on flood reform. the proposed changes address many of the major flaws in the current program. thank you also for considering it in a timely fashion. 5.6 million people depend on this program to protect their homes and businesses, and thank you for the bipartisan leadership you have demonstrated on flood reform over the last several years. my name is donna jallick, vice president of harleysville insurance. harleysville is a member of the property casualty property association of america and write your own flood insurance coalition. i have been working with the federal flood program for 15 years. last year, congress allowed the

nfip to expire four times for a total of 53 days. there has been ten short term extensions in less than three years. it hurt consumers and millions of real estate professionals, and our business. private write your own ensures have been leaving the program in drones in part the because of the lack of stability in the program and confusion for consumers. when the program lapses, insurers have to decide whether to keep collecting flood premium, and whether we can afford to put our name behind a program that may or may not be continued in the same form by congress. it creates significant liability and vulnerabilities for all stake holders. the lack of program stability also makes it difficult to administer the program and to explain it to consumers.

our disconcerning message must be buy flood insurance because we think the program will be renewed, and we have a guess as to what we think the rates might be when it gets extended retroactively. we already require agents to spend months training to understand and explain the nfip to consumerrers. lapses and short term extensions increase this expense. five years is a good proposed extension. the available amount of protection for consumers under the flood program has not been increased for 17 years. the draft would up dex flood coverage for inflation. that's a good start. federal flood rates which are currently a fraction of what the private market would consider even for low-risk properties

would be appropriately increased under the draft legislation. rates for coverage in many high lofts and environmental sensitive area would particularly be increased to closer expected lost cost. this still leaves a government subsidy, but it's a good start on reducing the subsidy, and it's a proposal that we strongly support. we also applaud the proposal to consumers by adding living expenses and business interruption to the available coverage. people forced from their homes need immediate cash for shelter. the proposal makes the federal flood coverage more near private coverages that protect individual and business consumers and help them move forward quickly. just as important as the good provisions in the bill is streamlined operations.

the number of private insurance partners serving consumers in the flood program has dropped from 150 to 70 that are actively writing flood insurance over the last six years. while harleysville worked hard to provide our policyholders with affordable preace, for many insurers program revenues have been outweighed by growing administrative costs. they are leaving the nfip. the draft does not add too many additional requirements to the nfip. please keep the bill streamline to ensure the program will remain standing. thank you for the bipartisan committee draft which addresses the critical vulnerables in the ff and will greatly strengthen flood protection for million of consumers. the write your own flood writer support you and hope you can keep a straightforward bill with

long term extension and no further lapses. harleysville and tci stand ready to be of any assistance desired. >> thank you. we recognize mr. rutenberg for five minutes. >> ranking member, members of the subcommittee, thank you for the opportunity to testify today. i'm a home builder from gainesville, florida. we commend the subcommittee for addressing reform in the nfip program. builders support a five year program reauthorization as the best way to provide a steady foundation on which to build program revisions and ensure the nfip is effective. in sever years, the short term extensions created a high level of uncertainty in the program causing severe problems in already troubled housing markets. during these periods, there were

delays or canceled closings due to the inability to obtain flood insurance. oven, new home construction was shut down due to the lack of flood insurance approval creating unneeded delays and job losses. this reauthorization will ensure the markets operate smoothly and without delay. the availability and affordability of flood insurance gives local governments the ability to plan and zone communities including floodplains. this allows homeowners to live a a home and location of their choice. home builders depend on nfip to be predictable, universally available, and fiscally viable. the nfip creates a strong partnership in which states and localities enact and enforce floodplain management measures including building requirements to design and ensure safety and reduce future flood damage.

the partnership depends on flood maps and a financially stable federal component that allows local communities to direct development to the needs of the consumers. unfortunately, the losses and devastation suffered with the 2004 and 2005 hurricanes in the 2008 midwest floods has severely taxed and threatened the solvency of the nfip. taxed and threatened the involven sy of the while these have exposed shortcomi shortcomings, we believe reforms must not be an overreaction to the historic circumstances. the nfip is not just about flood insurance premium and payouts. it is a broad program that guides future development and mitigates future losses. the financially stable nfip is in all of our interests and congress' efforts have the potential to greatly impact housing affordability and the ability of local communities to control their growth and development options.

a key tool in the nfip's implementation, rate maps or firms, have been recognized by congress to be inaccurate and out of date. fema has been successful in digitizing mauve of the firms, but many are not using the updated data. because of this large discrepancies remain. we believe continued congressional oversight is necessary. we commend the proposal to establish the technical mapping advisory council and hope it will foster more collaboration. beyond fixing the maps, nfip supports increasing coverage limits and offering various insurance options for consumers and even a possible minimum deductible increase. the nfip must continue to allow state and local governments, not the federal government, to dictate local land use policies and make decisions on how private property may be used. fema must also better coordinate its activities with other federal agencies who have oversight of other federal programs. in my written statement, i discuss fema's recent

requirements of compliance for certain property owners. additionally, before any reforms are enacted to change the numbers, location or types of structures required to be covered by flood insurance, fema should first demonstrate that the resulting impacts on property owners, communities, and local land use are more than offset by the increased premiums generated and hazard mitigation steps taken. nfip urges congress to ensure construction requirements remain tight to the 100 year standard. should congress change the hazard area from 100 years to 250 years, it would require more homeowners to purchase flood insurance and would impose mandatory construction requirements that increase costs and impact resale values. significantly. this would also affect fema by requiring modifications to ordinances and policies all at a time when fema has admitted its lack of resources to provide current services. i thank you for today.

nahb looks forward to working with this committee on this valuable program. >> thank you so much. unfortunately, if you look at the clock, and you see those two white dots up there, that means we have votes and we have got about seven minutes left for voting. so and these floor votes may take 45 minutes to an hour depending on how long it will be, but we do want to have the opportunity to ask questions and i hope all the members will come back briefly. so the subcommittee stands in recess and we'll convene immediately following the floor votes. [inaudible conversations]

commissioner margaret hamburg testified on her agency's budget before a house appropriations subcommittee. the food and drug administration is asking for $1 billion more in 2012 compared to 2010. the budget includes additional food regulation and food safety initiatives. it's about two hours and 15 minutes. >> we are pleased to have the commissioner dr. margaret hamburg and patrick garrey, the commission for budget of 58 and

you have a whole team behind you, i know that coming and we are looking forward to your testimony although we have read it, you submitted and are welcome to summarize it. i wanted to make a few notes of paramount concern right now. because exempted from the president's freeze but you still have a 16% increase and in some of the areas. i don't know that the senate is going to go along with that and i'm not sure that you have targeted it that we were not and that was a concern of mine. also wanted to comment on a couple of other things.

you approve them faster than europe and i.t. that's great. we are glad to hear this committee has heard so many times over the years about slow fda drug approval on medical device approval. you are still up there and moving along which is good and positive so we are glad to see that. i'm interested in the fda track that allows the six the acoustical doors and witnesses to work with you to get quarterly progress reports on items of interest and that something very good. you also have saved americans $140 billion a year in generic drugs which i think is of interest. you have questions on terms of

what you could accomplish in terms of the model the was rushed through in december even though it was a lot of hearings, there were some hearings, but the last two years were marked by the lack of bipartisan inclusion and i would say that piece of legislation fell in that category as much as anything else, for example the health care bill. so i think this congress is going to keep a very close eye on that. what is your number on that? >> $382 million for that. >> 218 million in discretionary. and keep in mind the money we are talking about for your entire budget in many respects of the 100 per cent borrowed for every dollar we spend right now in america 40 cents of it is

borrowed and if you look at the money that we spend interest on the national debt over $200 billion a year and put retirement health care and national security that's about all the budget that's paid for which would be about 60%. spending is a bipartisan problem. it's something both parties have their fingerprints all over and we need to come to the reckoning about it. i was glad the president appointed a commission on it. we want to work with the president throughout this process, so so much of the context right now as we look at various programs in the way you or any other agency spends this money is going to be in that prism of what is the best bank for the dhaka, what is our want and need and the duplication the gao report was significant that underscore a lot of duplication so those are some of the things

on my mind and i want to yield to the ranking member. >> thank you very much mr. chairman and dr. hamburg for being here. i also want to thank you for meeting with a leafy green marketing folks from my district. they were very impressed with the opportunity to talk to you. you have i think in your testimony one phrase that really struck me and i think in light of the german's remarks by the way that a bill that's passed is passed by two-thirds, it wasn't partisan. you say the fda must do its job well because there is no other agency to fall back on. no one to back up. our role is unique and fda must fulfil the unique role completely and responsibly and

as we go through the budget we can help you do that responsibly there's too much at risk by doing it kind of less than mediocre. so i don't have a lot of comments to make other than you're add a new turning point in american food safety history with the inaction of the bill and the implementation of the bill and a lot of agriculture out there has their eyes on you because they don't know whether the people in your department know anything about agriculture. they know you know a lot about safeguarding drugs, prescription drugs and other kinds of programs.

it's a new era but one that is critically important. i would tell you mr. chairman i saw firsthand we had this equals contamination but spinach. it came from my district. the recall is voluntary so they asked anybody who had anything to with spinach with you driving get on the trucks, planting fields, in the refrigerator at home, get rid of it matter where it was grown because nobody knew where it started. today, americans don't consume as much spinach as they did before that recall. it had a devastating effect. people lost hundreds of millions of dollars and they didn't get covered by insurance. so it is extremely important that we and your agency be the good cop but it also has to be smart so we don't lie about industries. i appreciate coming today and looking forward to talking to

you. >> thank you. we have been joined by chairwoman emmerson and i'm aiing to recognize her. after to summarize your testimony if that's okay with you there's another committee hs tohair.eering. the floor is yours. chairman, rankingrman thank yo, members, and congresswoman. i appreciate this opportunity to present the president's fiscal year 2012 budget for the food and drug administration to discuss our priorities for the coming year. this year and comes at a critical moment for our country and for our agency. we must be prepared to meet and capture the scientific challenges and global realities of our modern world, and the stakes for patience, consumers, our economy, and our global economic competitiveness have never been higher. we are charged with an extremely significant task to promote and

help the help of the american people, including insuring the safety, effectiveness, and wholesomeness of products that the american people rely on in fundamental and sometimes life- saving waste. drugs, vaccines, medical devices, our nation's food supply, and more. it also includes working practically to foster the scientific innovation that will lead to tomorrow's new breakthrough products. both roles are essential to delivering to the american people, and both roles impact our economy by encouraging consumer confidence, growing key industries, and creating jobs. thanks to the support of the subcommittee, we have been able to see tangible evidence of that impact over the past year. this year we approved dozens of new drugs, vaccines for seasonal and pandemic flu, and medical devices for hearing and vision loss, severe asthma, and to perform three-dimensional mammography screening.

we traced foodborne illness outbreaks, which lost a new system to identify 100 safety problems in its for seven months of operation. we cooperated with the national oceanic and atmospheric administration to perform tests to assure seafood safety and reopen the gulf coast fisheries after the deepwater horizon of oil spill. that is just a snapshot of what we have done the past year. the fda is charged with enormous and unique set of tasks. as was mentioned, if we don't do our job and do it completely, there is no other agency or entity out there to back stopped us. that is why i'm here to ask for your support of the fiscal year 2012 budget for the fda. that includes $4.4 billion and identifies four priority initiatives -- transforming food safety and nutrition, advancing medical countermeasures,

protecting patients, and fostering fda regulatory science and innovation. compared with fiscal year 2010, the fiscal year 2012 budget represents an increase of $1.1 billion, $382 million in budget authority, and $694 million in user fees, which includes 60 million with three new user fees the fda is proposing. in addition, to contribute to deficit reduction, we will undertake $30 million in contract and administrative savings across the agency. these four initiatives are critical to our mission to protecting the public's health and also represent important opportunities for our food and medical product industries to grow and strengthen our economy. they will provide great return on investment, and for products, people, and most importantly for the public health. but me explain how.

first, transforming safety and a trustee -- safety and nutrition initiatives builds a stronger, more reliable food safety system that will protect american consumers. we will use these resources to aggressively implement the food safety modernization act that congress passed in december. this landmark legislation provides fta with the tools established to prevention focused food safety system, of placing the prime responsibility for prevention on the food producers and processors and leveraging the valuable worked of fda's state and local partners. we'll also make sure that american families have the information they need to make more healthful food choices for menu and vending machine labeling. for the advancing medical countermeasures initiative, the fda proposes $70 million. it includes drugs, vaccines, diagnostic tests, and medical equipment needed to detect and

respond to the leopard -- to deliberate threats, as well as emerging infectious disease threats. all of these threaten the lives and safety of the american people. this investment will help accelerate the development of countermeasures that we truly need to meet critical national- security and public health needs. third, protecting patients. this initiative for which we're proposing an increase of $123.6 million will allow the fda to provide date pathway for biologically similar products, which could provide a substantial savings for the private industry and government. this enhances the safety of the increasingly complex drugs, medical devices, and biological. at fourth, the regulatory sites and facilities initiative contains an increase of $48.7

million to strengthen the core capacity that support all elements of the fda's mission and will enable us to truly streamline and modernize regulation by applying the best possible science, especially as we address more advanced therapies, complex devices, and emerging technologies. it will also allow the fda to outfit and occupy the center for biological and center for drugs biodefense laboratory complex, which will play a critical role shaping our strategies in response to pandemic, emerging infectious diseases, and the. biological threats. even in these difficult times, the 2012 budget is essential to our ability to take meaningful, science based action on behalf of the american people. with these investments, and with your support, i am confident that we can build on our past successes and better ensure our nation's health.

thank you for the opportunity to testify, and i am happy to answer any questions you may have. >> thank you very much, dr. hamburg. we'll both sides of the aisle truly appreciate the time you have given us. we appreciate the ongoing dialogue. with that, what to recognize the chairman of the full committee, how rogers. >> thank you, mr. chairman, and congratulations on your elevation to this chair. >> well, thank you for your role in that. >> we think you'll do a great job, and you already are. i like to focus my comments and questions on the fda's role regulating prescription drugs, particularly opium and narcotics. undoubtably, these drugs to make a world of difference for patients suffering from cancer or other terminally ill diseases

which cause pain, but the abuse and diversion of these drugs is not our country's leading drug problem. in the last decade, there has been a 400% increase in those reporting abuse of pain pills. in kentucky, we're losing almost three people a day to prescription drug overdose in. -- overdoses. people around the country are doing their part recognizing that we need a multifaceted approach to knock out abuse. law enforcement, treatment programs, and education will all be crucial, but regulatory agencies need to do their part. efta has an altogether upon role in this. in 1995, fda approved what you thought was the next merkel drug for cancer patients, a controlled release pain

reliever, oxycontin. the active ingredient in oxycontin is twice as potent as morphine. the immediately undertook an aggressive campaign to sell as much of their drug as possible. they chased primary-care doctors and doctors in remote areas who may not have been as adequately trained in pain management as perhaps others. they under played at the drug's addictive tendencies. within five years, oxycontin had become the most prescribed brand-name car caught medications for treating moderate to severe pain. they were bringing in the money. that is about the time people in my district started showing up in emergency rooms. in 2001, frank wolf and i

testified before the fda, asking that this powerful drug, twice as potent as morphine, only be made available for the treatment of severe pain, where it can have the most positive impact on patient comfort and care. our pleas fell on deaf ears. and the rule continued to be that oxycontin could be prescribed for moderate to severe pain. you have a sore toe? have some oxycontin. highly addictive, terribly difficult to shake. perdue was all to the refined in criminal court $600 million but for its unscrupulous marketing practices, and several executives even faced criminal charges. they had to reformulate oxycontin. you have recently approved the new version. they still sold $3 billion worth of the drug last year, and its

generic spinoffs are not far behind. i will let you decide if justice has truly been served. what can be done? there is a thing called a fleming go role, where there are more pill kirk's operating clinics in broward county, fla., ben mcdonald drive- throughs. people and other parts of the country are hired by drug pushers to get on the bus, go to florida with them. but they all go through the pain clinics, come back with a barrelful of oxycondone and other prescription medicines, or they are sold for 10, 15, 20 times what they paid for them. it and people are dying. because they are too easily

obtained. fda has to be a partner in this fight. despite positive efforts in recent years through additional labeling requirements, collaboration with partner agencies, and increase communication with physicians, prescribes, dispensers, and patients still are woefully under informed about the risks associated with these products. fda has to be fully aware of the implications of these drugs before they go to market, which is why congress instituted the requirement for extended release pain drugs in 2007. these programs must be more careful the classified. -- these potent drugs must be more carefully classified. it is reckless, irresponsible, and it is why prescription drug overdoses are killing more americans now in car wrecks.

that about that. -- killing more americans now than car wrecks. think about that. that is why we have filed a bill to stop oxy abuse, which will moderate and change the moderate to severe qualifications to be prescribed for oxycontin to just severe pain only. i would like your reaction to that. i am going to leave several questions for the record, mr. chairman, if that would be ok. >> without objection. >> a congressman from florida has a bill that would reclassify all hyper code known drugs, vicodin and others, as schedule ii drugs, which are more difficult to obtain. i will leave that for the

record. second, congress required evidence that the benefit of a drug outweighs its potential risk. i have heard real concerns that fda is allowing drug companies producing extended release pain medication to develop a one size fits all product. considering each medication is has unique risks,nd how will this one-size-fits-all approach encourage innovation and risk management? and finally, what is fda doing to incentivize and speed up the development of more tamper resistant or peace-resistant formulations of these drugs? dr. hamburg, i appreciate your time being here today to answer these questions.

i am very focused, in my own way, on the drug abuse problem that is afflicting the country and killing young people even as we speak. today and kentucky, three people will die from drug overdoses that could have been prevented. i think the fda needs to join the fight. thank you, mr. chairman. >> thank you. dr. hamburg? >> thank you very much, congressman rogers, for your very powerful statement about the problem our nation faces with the abuse of prescription drugs. it takes a devastating toll on individuals, families, communities, on our nation, and its impact is very severe and far reaching. successful, meaningful, and did during solutions to it, as you also point out, require true partnerships, because there are

many players who need to play a role. fda has a critical role and we care deeply about it and i am personally very committed to helping lead the agency to engage more deeply on these issues with our counterparts in government and in other sectors, and to look carefully at where we have responsibilities and where our activities and policies can make a difference. we are, as she said, looking very carefully at how we can more effectively use the authorities and tools that we have in terms of warnings and indications for use. we have also mounted a major initiative around the use of prescription drugs, and it is critically important and the area that focused on. it is a key component. there is also an

administration-wide effort focused on it. that is key, to engage law enforcement, to engage educators, to engage the dea, which is involved in the reclassification. >> broward county, fla., nine out of 10 prescriptions for oxycodone in the country are coming from broward county, fla. nine out of 10. it is still hasn't. there are thousands of them there. -- it is pill heaven. there are thousands of them there. we have asked the state for drug prescription monitoring program, which he has refused, although some 40 states already have the system in place. where do why turn? can you change the rules by which these medicines are prescribed for just severe pain?

why not do that? >> i think these are important issues, and as you have pointed out, that involve many different agencies coming together. we reviewed and approved medical products for certain indicated use, and that concern to be part of the consideration. they're also very important activities that have to do with the oversight of the providers and how they're doing their prescriptions, the trading of providers, and enforcement activities. >> it is really simple. it is really simple. this drug, oxycontin, was built, designed, constructed for severe pain, right? it is a 12-hour release pill. that is wonderful for those in severe pain, a terminal cancer cases and others, for example,

but it is so easily dispensed and is so easily taken. it is such a wonderful drug to be abused that young people especially are crushing the 12- hour release into instant release, and you imagine the pleasure it gives and it is irresistible, but it is killing people. can't you change that formula, simply leave out moderate? >> in how we are approaching the warning labels, the indications for use, we are mindful of those concerns. you also raised another important point, which is how we can bring better science to bear to make products that are safer subject to abuse. we neveneed to address the currt

problem and also pursue those avenues as well. i am happy to hear about your work in this area and the bills you are proposing. we are eager to work with you. it sounds like maybe i should visit broward county and learn more. >> i will pay your way. at that i don't know if that would be allowed. know that it't would be allowed. >> i agree with you, i am just getting off a broken arm, and the first drugs they threw at me were oxycontin tight drugs. while i was in a lot of pain, i was not in severe pain. i was afraid to take the drug because i did not note -- i know the effects are dramatic. go forsingle time i would a follow-up, the need more of this drug? i took four advil, which did the

trick for me, but there were just throwing the stuff at maine. -- at me. anyway, it is very troubling to me, just recently six weeks ago, i dealt with the same problem. >> it is incredibly import issue with huge ramifications. we are eager to work with you. we are involved in activities in this domain. there is more we can do. i think the partnership in terms of this administration-wide effort to score to make a real contribution. i would be eager to sit down with you, visit, flamingo road, did you call that?

and also to it really lay out in more detail where we as the fda can make a targeted difference. >> that is why i am here today, have you answer the question. if you strike out the word moderate, people who are on scrupulouslyhe people who are making zillions of dollars on the the guys that they are prescribing this for moderate pain. this is done every second of the day. if you only allow them to prescribe for severe pain, we could prosecute and go after the unscrupulous doctors at the pain clinics that are killing our people. it is pretty simple. >> i think as you point out, targeting for appropriate use is actually see -- is absolutely

key, and we're trying to do that. it is hard, i don't think you'd be satisfied with the results by simply addressing that change in the indicator. >> it is a start. >> it is the broader abuse that is happening that i think is causing this serious national problem. it is how you define moderate and severe, i think we need to have a concerted effort that is targeted at many levels to address the problem, that is cross cutting, that involves what are the kinds of drugs available, how are they prescribed, what are the oversight and restrictions on the use and abuse of those drugs, and how that is enforced. >> mr. chairman, i appreciate

the indulgence with the time. that is what we have to do in our district. the state newspaper came out with a story that ran six weeks, screaming headlines that that area was the pain prescription capital of america. which prompted me to start an organization called the night. recall that unite. we have 2600 undercover agents who do nothing but arrest people selling drugs. they have put in jail 3700 pusher selling these drugs from the flamingo road the source. we have kids in hospitals every day. kids dying every day in emergency rooms. we have built treatment centers. i go to graduations for people who have kicked these things and here wonderful tales.

it is a pervasive, deep, widespread problem, killing more people than automobiles, yet you sit there and say we will not talk about changing the prescription rules for this killer drug. and i won't rest until we see an answer, ma'am. >> i am happy to continue to examine these questions and go back with our expert team. my point is if we really want to make a meaningful and enduring difference, it is a different problem than simply changing the indication. whether it is an indication for severe or moderate, to prescribe. this ultimately making the decision -- the prescribedr is ultimately making the decision, and i am not confidence that it will change the behavior on

flamingo road. >> it is a chance to prosecute people who are prescribing the medicine for other than severe pain. what could stop the problem at the source. you are in charge of the steering wheel. i expect some movement on this issue. if you don't do it, we will do it for you. i cannot be much more plane than that. i don't mean to be blunt, but this is beyond a minor issue. this is a killer in my district, killing my constituents, and all around the country, and you could make a difference. >> i am eager to make a difference. i appreciate the severity of the problem and its huge ramifications on people. i feel we have a critical role to play it and we will engage fully. it to be successful, it needs to

be a broader partnership, and i am committed to engaging in those partnerships to make measurable progress in this domain. >> thank you. >> i share your concern, and i think you also have to go upstream and look at the manufacturers and sales. my cousin is a doctor and he says most of the information they get about drugs is from the sales person who tells them you all to use this for this and that. if there is that much supply going to doctor's offices, there has to be something to the with the message is given to doctors. i think we need to look at that as well. i think this conversation really goes to the point of how important your agency it is, the food and drug administration, and how difficult it will be to manage these critical issues if

congress cuts your budget. a couple things i'd like to see if we could get better bang for the buck. one is in the area of medical countermeasures. as you know, medical countermeasures initiative was framed in the course of 2000, based on the fact that we put a lot of money into the flu pandemic. i think mr. rogers played a major role in pointing out that was real serious. what happened last year was hhs shifted money from their account to your account to cover the new medical countermeasures initiative, but you need, as i understand it, language to expand to other types of copter measures that could work on. the idea that if we have the infrastructure to do that, we

could look at countermeasures for other emergencies that might come from biological weapons or other things that could break out, contamination that could break out, pathogens, influenza. that we have to isolate this work to one countermeasure, and i wonder if he could speak to how important that is to keep the money, how important it is to get the language that you need to be able to have those other countermeasures. >> thank you, this is a very important area for the health and security of our nation. we face a set of serious biological threats, such as pandemic flu or something like or an as yet unrealized.

it. we're also increasingly foldable to intentional -- we are also increasingly vulnerable to potential release of biological terrorism and the health of individual impact would be enormous. also, the huge dislocation to our society, the disruption in life as we know it, the impact on the economy, public trust and confidence in government and critical institutions, international security at its corporate that -- at its core. we want to provide medical countermeasures necessary to rapidly detect and respond to an emerging threat and to treat and contained a threat should it occur. anyway, it is a form of deterrence to be better prepared and to also limit the damage that can occur.

>> my understanding is you have the money to do the work, you just don't have the authority to look at these other countermeasures? >> exactly right, the secretary of health and human services, kathleen sebelius, began a new countermeasure last summer, and the fda was given resources to begin imports of work from the moneys that had originally been appropriated for pandemic response. >> we need to put that one which in our legislation, but it did not get into latest version. >> right, to be able to expand these activities to address not just pandemic threats but continuing biological threats before us, we need additional language. it is a no cost proposal that would allow for the use against this broader set of very important potentially devastating biological threats.

we would be very appreciative if you could look at that. i think would make a huge difference to our ability to move forward in critical ways. there are important gaps in key areas. we don't have a treatment for acute radiation sickness, such as what would occur after a terrorist attack using a radiological device. we don't have antiviral drugs to treat a number of critical potential microbial threats. we don't have the diagnostics that we need to rapidly detect and diagnose the emerging problems to treat them appropriately. >> yes or no, can we assume if these are not provided in the budget amendment that there is very little or no chance that he could find these -- you could fund these activities within the appropriation in hr-1?

>> that is the case. this is a program where we are building new capacity. these targeted additional dollars are essential in fulfilling the mission of ensuring we have the medical countermeasures that we need. in the present fiscal year we are also asking for money is to continue those programs that we are beginning to put in place now. it will make a difference. interestingly, as this broader initiative was being developed, one of the things that emerged was the role of the fda was absolutely crucial to the success, but it involves all the components of government, but the fda's role in being able to review and approve for safety

and effectiveness these medical countermeasures was the linchpin of success. we very much appreciate you taking a serious look at this and helping to support efforts that will make such a difference to our nation and our security. >> thank you. >> the gentleman's time has expired. >> thank you for being here in the job you do. i know you share my concern about counterfeit drugs entering the united states, in the supply chain, whether from within the that the states or abroad, yet the potential for this corruption of the system and a reward for doing so is growing. it is really interesting and frightening to see how sophisticated some of the methods that counterfeiters are using. last year in connecticut, $76

million of drugs were stolen. a year before, $5 million of drugs were stolen in virginia. this illustrates the fact that this is a problem bigger than mere counterfeiting. the stolen drugs that are removed from the supply chain or simply lost, before we appearing, and that could possibly be here and could also appear as treatment for us. last year the committee included language asking fda to examine methods and technologies by which these drugs could be tracked within supply chain from manufacturer to the patient, with a minimum of cost to either party or anyone in between. i wanted to follow-up on that request for the new standard, just to gauge your opinion on the possible role for the fta, as well as to ask you -- for the fda, as well as to ask you if

you see a national system safe and affordable? >> you raise a critically important issue. increasingly in our globalized world, we need to be thinking about drugs coming from many parts of the world and complex supply chains that the drugs go through, with webs of producers, manufacturers, suppliers, we packagers, exporters, importers, and all along the way there is the opportunity for the potential introduction of problems, sometimes unintentional, and sadly we know deliberate. counterfeiting is an increasingly significant criminal enterprise. because the penalties for trafficking in counterfeit drugs are much less than in illegal drugs, there is concern that organized crime is increasingly entering this space as well. we know the impact on people are huge. he mentioned drug diversion.

there was a recent case where insulin was stolen, disappeared from the marketplace, and then reappeared, but the only way we found that it reappeared as we started getting reports that diabetic patients were taking insulin, they were depending on this drug for a very serious medical problem, and it was having no impact. we determined that this insulin was from the stolen. the ability to track and trace is essential. we would very much welcome the chance to work with congress, to look at the opportunities for new legislation. i know there is a bill that has been introduced that would give additional authorities to fda to

help us secure the safety of the supply chain and address these global challenges. >> california has a standard which is set to be implemented in 2015, and even with the best possible state model, the think a state-by-state approach is more effective, or is it more sufficient to have one single, national approach to the problem? >> i think this is a problem that crosses state borders and crosses international borders, and the goal of the standards are harmonized is important. it is important government and industry, as they think about how that would implement this and the cost of implementation. >> can you estimate the pervasiveness of the counter

that problem? >> we need better data. it is a worldwide problem. we don't fully know the nature and scope of the counterfeiting. in some parts of the developing world, as much as between 30%- 50% of the drugs on the market place for serious diseases are a factor for it. in the united states, we have a much more closed system, and the fda is working every day to ensure that the drug supply is safe and when you go to your pharmacy, what you get is what is purported to be. but we know the problem is real here as well, and that we need to be proactive and aggressive and we need to be very cognizant of the fact that as the world becomes more globalized and more drugs are coming from being

manufactured overseas -- >> the gentlewoman's time has expired. >> i look forward to working with you, and thank you for allowing me to go early. >> thank you. >> thank you, mr. chairman. thank you, dr. hamburg, for being here. i would like to focus on the drug avastin. as i understand it, the fda granted accelerated approval for avastin for the treatment of breast cancer in 2008, and now the fda is looking at withdrawing that approval. it is my understanding correct? >> there is an expedited approval mechanism that is enabled on the basis of fairly early data on the drug's safety and effectiveness to grant a

modified form of approval, expedited approval, and then require additional studies to be done, and then a decision is based on the broader set of data whether the drug should get full formal approval. in this case, after additional studies were done and an advisory committee of experts was brought in to review the data, a decision was made not to give avastin full approval. i should say that we are in the process of working within the legal framework of this approval, regulatory mechanism -- we have granted the company that makes avastin a hearing, a public hearing with the fda,

making their case. because we are in the middle of that process, i actually cannot comment any more deeply about this drug. >> you cannot tell me -- you approved it then, and you are putting it on hold now. you cannot tell me, what is the problem? >> the additional data that was collected and examined both by the fda scientists and reviewed by this panel of outside experts did not support the full approval for the indication. however, as i said, because we are in the middle of the legal process and i ultimately will be reviewing all of the data, under this system of public hearings, and a subsequent decision, i am

really not at liberty to have a full discussion of the matter ough. >> it is my understanding that this drug does not cure breast cancer, but it does prolong a woman's life. the initial indications might be as long as five, seven months, and now it may only be three, five months. because it did not do what we originally thought. >> if i could, because i am in a difficult legal situation, because there is a legal process with a hearing, and ultimately i need to be the final decision maker, and so i need to be at a distance from this. if i could asked our centre director to speak to these issues? >> think.

i am janet woodcock, the head of the drug center. avastin is approved for multiple cancers. the regional trial showed an effect on what is called progression-free survival, which does not have anything to do with living longer. it has to do with how long before your x-rays show the disease has progressed. the subsequent trial did not show the same effect. it was a much smaller effect on how long it took the x-rays to worsen. there is not a claim that avastin improves revisal in this setting of life. the dispute was over the length of time it takes to progress want to have the disease. it does that make sense? >> i may have said it wrong. initially, it was thought to be

five-seven months. it since it is shorter, you are saying let's pull it? >> the initial was a surrogate. that is why it is called accelerated approval. progression-free survival was generally in this case that your x-rays don't get worse. it is considered a surrogate for having some actual benefit to people, say, not developing pain or fractures, or actually living longer. the subsequent trial showed a smaller effect on x-rays not getting worse, which are advisers and ecologists did not feel it -- which are advisers and cancer doctors did not feel would help reduce pain, reduce progression, or longer life. >> thank you very much, mr. chairman. i would like to take a different tact and began with the

statement, the obvious assertion that america will experience economic recovery when people get jobs and go back to work. i follow with interest to continue outsourcing of u.s. jobs, including by pharmaceutical companies, making medicines and devices everyplace else in the world and moving jobs outside of our country. every day i asked myself, how could we make goods in america again so people can go back to work? there are some who believe that we can fix what is wrong with our economy not by creating jobs in our country but by simply cutting back on public health and safety, as is evidenced in hr-1, the continuing resolution offered by the majority party. cuts inspectors for food safety. i want to turn to questions i have asked in the past