Pay-go rules threaten terror-insurance program

Scrambling to get around their first significant hitch involving pay-go rules, Democrats say they are not considering a Republican proposal to partially pay for a reauthorization and expansion of the Terrorism Risk Insurance Act (TRIA) that congressional scorekeepers say will cost more than $10 billion over 10 years.

{mosads}An amendment offered by Rep. Jeb Hensarling (Texas), a budget hawk who is chairman of the Republican Study Committee, would reduce the cost to taxpayers of the federal backstop to terrorism risk by requiring those insurers covered under the program to pay upfront annual premiums.

The amendment recently was sent to the Congressional Budget Office (CBO) for scoring, fueling speculation among Republican staffers that the Democratic leadership was interested in using it to offset the massive price tag for the bill.

It is unclear who asked the CBO to score the amendment. Hensarling’s staff said it did not send the amendment to the CBO, according to a spokesman for the congressman, Brad Dayspring.

 “Congressman Hensarling’s office became aware that his amendment had been submitted after receiving a call from the CBO yesterday asking for additional details on the amendment,” he said.

Rep. Barney Frank (D-Mass.), the Financial Services Committee chairman, said he was against charging insurers for the program and flatly denied asking the CBO to score the amendment. “Somebody else might have sent it to them. My staff certainly didn’t. Whether somebody in the leadership did, I don’t know,” he said.

Frank added that the budget issues surrounding the TRIA bill go beyond the jurisdiction of his committee. “I’m not the major player, the majority leader is,” he said.

A spokeswoman for Steny Hoyer (D-Md.) also denied that the majority leader was mulling the Hensarling amendment as a way to pay for the bill: “That was not sent by our staff or the Budget [Committee] majority staff. We’re not looking for a Republican fix.”

A staffer for the Rules Committee said amendments to bills received by the committee are not automatically sent to the CBO for scoring.

 The TRIA bill was pulled from the floor last week after the CBO stunned Frank with its massive score. The office said the legislation would cost $3.7 billion over five years and $10.4 billion over 10 years. With no offsets, the bill would have violated pay-go rules.

 Reluctant to waive the budget rules, Frank and the Democratic leadership are rushing to find a way around the problem in order to put the legislation up for a vote next week.

Since TRIA only costs the government a small sum unless there’s a terror attack, Frank is considering altering the bill to include language stating that the legislation will incur no costs to the government. Then, in the case of a terrorist attack, Congress would have to reconvene and appropriate funds to pay for the backstop.

Rep. Gary Ackerman (D), a member of the New York delegation on the committee, said he supports this “after-the-fact” plan as a way to solve the pay-go problem. “Unless there is a terrorist attack, there is no cost to the government whatsoever,” he said.

Ackerman called the idea of charging insurers upfront premiums for terrorism risk coverage “absolutely ludicrous”: “I think that makes as much sense as if you get mugged in the street and the police respond only if you pay a fee.”

Lobbyists for insurers and policyholders are concerned that the CBO score could delay the reauthorization of the federal program, which expires at the end of the year. “The importance of facilitating a private terrorism insurance market to protect policyholders and taxpayers makes TRIA a ‘must-pass’ legislative item and overwhelmingly outweighs the broad assumptions and questionable findings of the CBO analysis,” Brendan Reilly, senior vice president of the Commercial Mortgage Securities Association, said.

The Hensarling amendment received little attention from members of either party before Frank ran into the pay-go issue. According to back-of-the-envelope estimates from Republican staffers to members of the committee, the amendment would generate $450 million annually or $2.25 billion over 5 years. That would offset only part of the cost of the legislation.

Even if his amendment is attached to the bill, Hensarling is unlikely to vote for the TRIA legislation, according to Dayspring: “He believes the TRIA bill is fundamentally flawed for two reasons — the cost to the taxpayers and the increased federal role in the private market.

“The Hensarling amendment was offered to help alleviate the cost to the taxpayer and, if brought to the floor, will make a really bad bill less bad,” he explained.