Introduction The K-12 teacher workforce is relatively largeâeach year, nearly 4 million teachers are employed in U.S. elementary and secondary schools. Turnover in these schools is high relative to earlier periodsâabout 1 in 10 teachers left his or her job in 2018. This figure follows federal statistical trends that show a steady growth in teacher attrition since the 1980s. The problem of teacher turnover raises a number of recruitment and retention issues of interest to policymakers. The Higher Education Act (HEA) is the main federal law containing policies designed to address these issues. Title II of the HEA authorizes grant support for schools that prepare new teachers. Title IV of the HEA authorizes financial support to encourage people to stay in the teaching profession in the form of loan forgiveness and other benefits. The HEA was last comprehensively amended in 2008 by the Higher Education Opportunity Act (HEOA, P.L. 110-315 ). Although the authorities have expired, the associated programs continue to receive appropriations. Congressional consideration of potentially reauthorizing the HEA is ongoing, with the introduction of numerous bills to amend current law and address teacher recruitment and retention. This report describes (1) the history of federal teacher recruitment and retention policy, (2) current policies in this area, and (3) related issues that may arise as Congress considers reauthorizing the HEA. Legislative History6 Teacher recruitment and retention have been the focus of federal policy since the HEA was first enacted in 1965. This section briefly describes the history of federal policy in this area. Teacher Corps and Teacher Centers The HEA was originally enacted by the 89 th Congress and signed into law on November 8, 1965 (P.L. 89-329). Title V authorized the Teacher Corps program, which recruited interns for teaching in high-poverty areas of the country. These interns, directed by experienced teachers, taught in participating K-12 schools while also taking higher education courses to secure teaching certificates. The program was initially funded in FY1966 and phased out in FY1981 under the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ). In 1967, Title V became the Education Professions Development Act (EPDA, P.L. 90-35), which reauthorized the Teacher Corps program and authorized a number of new teacher development programs. Among these programs were efforts to attract low-income persons to teaching and a fellowship program for enhancing the skills of higher education faculty training elementary and secondary school teachers. In general, EPDA programs were funded beginning for FY1969 or FY1970. The Education Amendments of 1976 ( P.L. 94-482 ) repealed all of the EPDA with the exception of the Teacher Corps program. The Education Amendments of 1976 ( P.L. 94-482 ) renamed Title V as Teacher Corps and Teacher Training Programs, extended the Teacher Corps program authorization, and authorized a new Teacher Centers program. Teacher Centers, first funded for FY1978, were operated by local educational agencies (LEAs) or institutions of higher education (IHEs), and provided in-service training to the elementary and secondary school teaching force. The Omnibus Budget Reconciliation Act phased out the program in FY1981. Paul Douglas Teacher Scholarships and Christa McAuliffe Fellowships Initially enacted in 1984 under the Human Services Reauthorization Act ( P.L. 98-558 ), the Paul Douglas Teacher Scholarships provided annual $5,000 postsecondary education scholarships, for up to four years, to outstanding high school graduates (candidates in the top 10% of their high school graduating class, among other criteria). Recipients were required to teach for two years at the K-12 level for each year of scholarship assistance they received, an obligation that could be reduced by half for those teaching in geographic or subject areas that were experiencing shortages. Federal funds were allocated by formula to states. The Paul Douglas Teacher Scholarships were first funded for FY1986 and last funded for FY1995 (when the program authority was terminated). Also initially authorized under the Human Services Reauthorization Act, the National Talented Teacher Fellowships, later-renamed the Christa McAuliffe Fellowships, provided one-year awards to outstanding, experienced public and private elementary and secondary school teachers for sabbaticals. Following sabbaticals to develop innovative teaching projects, recipients had to return to their prior place of employment for two years. The federal appropriation was allocated by formula among the states. The Christa McAuliffe Fellowships were first funded for FY1987 and last funded for FY1995. Mid-Career Teacher Training and Minority Teacher Recruitment The Higher Education Amendments of 1986 ( P.L. 99-498 ) rewrote Title V as Educator Recruitment, Retention, and Development. These amendments not only extended and renamed the scholarship and fellowship programs enacted in 1984, but also added two new programs intended to recruit new teachers to the profession: Mid-Career Teacher Training and Minority Teacher Recruitment. Mid-Career Teacher Training provided grants to IHEs for the establishment of programs to prepare individuals leaving their current careers in order to teach. Eligibility was limited to individuals with a baccalaureate or advanced degree who had job experience in education-related fields. Two fields are specifically cited in the authorizing statute: preschool and early childhood education. IHEs were initially to receive a planning grant of not more than $100,000 to be used in the two fiscal years following selection; however, the program was funded for two years (FY1990 and FY1991). Minority Teacher Recruitment awarded grants to partnerships between an IHE and either a State Education Agency (SEA) or an LEA to recruit and train minority students, beginning with students in 7 th grade, to become teachers. The program also awarded grants to IHEs to improve teacher preparation programs and to support teacher placement in schools with high minority student enrollment. It was initially funded for FY1993 and received its last appropriation for FY1997. Teacher Quality Enhancement Program The Higher Education Amendments of 1998 established a new federal teacher program in Title II, the Teacher Quality Enhancement Grant program. Part A of Title II authorized three types of competitively awarded grants: State Grants, Partnership Grants, and Recruitment Grants. State Grants and Partnership Grants were each authorized to receive 45% of the appropriation for Title II-A and Recruitment Grants were allocated the remaining 10%. Funds for these grants were first appropriated for FY1999 and have been continued to the present day under new authority described below. State Grants and Partnership Grants funds were to be used for activities including the improvement of teacher pre-service preparation, accountability for teacher preparation programs, the reform of teacher certification requirements (including alternative routes to certification), and in-service professional development. Recruitment Grants funds were to be used for the recruitment of highly qualified teachers (Partnership Grants could also be used for this purpose). Specific recruitment activities described in Title II include teacher education scholarships, support services to help recipients complete postsecondary education, follow-up services during the first three years of teaching, and activities enabling high-need LEAs and schools to recruit highly qualified teachers. In 2008, HEA Title II-A was renamed the Teacher Quality Partnership program under amendments made by the HEOA, which remains current law. Current Programs The HEA, as amended by the HEOA, addresses current K-12 teacher issues through programs supporting the improvement of teacher preparation and recruitment. Title II of the HEA authorizes grants for improving teacher education programs, strengthening teacher recruitment efforts, and providing training for prospective teachers. This title also includes reporting requirements for states and IHEs regarding the quality of teacher education programs. Title IV of the HEA authorizes Teacher Education Assistance for College and Higher Education (TEACH) Grants to encourage more students to prepare for a career in teaching and student loan forgiveness for individuals teaching in certain high-need subjects. Teachers may also be eligible for loan relief through the Title IV Public Service Loan Forgiveness program. Teacher Quality Partnership Grants Title II, Part A of the HEA authorizes Teacher Quality Partnership (TQP) grants to improve the quality of teachers working in high-need schools and early childhood education programs by improving the preparation of teachers and enhancing professional development activities for them, holding teacher preparation programs accountable for preparing effective teachers, and recruiting highly qualified individuals into the teaching force. Eligible Partnerships To be eligible, partnerships must include a high-need LEA; a high-need school or high-need early childhood education program (or a consortium of high-need schools or early childhood education programs served by the partner high-need LEA); a partner IHE; a school, department, or program of education within the partner IHE; and a school or department of arts and sciences within the partner IHE. The TQP statute requires that a high-need LEA must have either a high rate of out-of-field teachers or a high rate of teacher turnover and meet one of the following three criteria: 1. have at least 20% of its children served be from low-income families; 2. serve at least 10,000 children from low-income families; or 3. be eligible for one of the two Rural Education Achievement Programs. Partnership Activities Partnership grant funds are authorized to be used for a Pre-Baccalaureate Preparation program, a Teacher Residency program, or both. Funds may also be used for a Leadership Development program, but only in addition to one of the other two programs. Activities authorized by the HEOA amendments are described below. Pre-Baccalaureate Preparation Program Grants are provided to implement a wide range of reforms in teacher preparation programs and, as applicable, preparation programs for early childhood educators. These reforms may include, among other things, implementing curriculum changes that improve, evaluate, and assess how well prospective teachers develop teaching skills; using teaching and learning research so that teachers implement research-based instructional practices and use data to improve classroom instruction; developing a high-quality and sustained pre-service clinical education program that includes high-quality mentoring or coaching; creating a high-quality induction program for new teachers; implementing initiatives that increase compensation for qualified early childhood educators who attain two-year and four-year degrees; developing and implementing high-quality professional development for teachers in the partner high-need LEAs; developing effective mechanisms, which may include alternative routes to state certification, to recruit qualified individuals into the teaching profession; and strengthening literacy teaching skills of prospective and new elementary and secondary school teachers. Teacher Residency Program Grants are provided to develop and implement teacher residency programs that are based on models of successful teaching residencies and that serve as a mechanism to prepare teachers for success in high-need schools and academic subjects. Grant funds must be used to support programs that provide, among other things, rigorous graduate-level course work to earn a master's degree while undertaking a guided teaching apprenticeship, learning opportunities alongside a trained and experienced mentor teacher, and clear criteria for selecting mentor teachers based on measures of teacher effectiveness. Programs must place graduates in targeted schools as a cohort in order to facilitate professional collaboration and provide to members of the cohort a one-year living stipend or salary, which must be repaid by any recipient who does not teach full-time for at least three years in a high-need school or subject area. Leadership Development Program Grants are provided to develop and implement effective school leadership programs to prepare individuals for careers as superintendents, principals, early childhood education program directors, or other school leaders. Such programs must promote strong leadership skills and techniques so that school leaders are able to create a school climate conducive to professional development for teachers, understand the teaching and assessment skills needed to support successful classroom instruction, use data to evaluate teacher instruction and drive teacher and student learning, manage resources and time to improve academic achievement, engage and involve parents and other community stakeholders, and understand how students learn and develop in order to increase academic achievement. Grant funds must also be used to develop a yearlong clinical education program, a mentoring and induction program, and programs to recruit qualified individuals to become school leaders. Enhancing Teacher Education Programs The HEOA amendments established five new programs in HEA, Title II, Part B, Enhancing Teacher Education: Subpart 1, Preparing Teachers for Digital Age Learners; Subpart 2, Hawkins Centers of Excellence; Subpart 3, Teach to Reach Grants; Subpart 4, Adjunct Teacher Corps; and Subpart 5, Graduate Fellowships to Prepare Faculty in High-Need Areas. None of these programs has received funding. TEACH Grants The College Cost Reduction and Access Act ( P.L. 110-84 ) established the TEACH Grants under Subpart 9 of HEA, Title VI-A to provide aid directly to postsecondary students who are training to become teachers. The program provides grants to cover the cost of attendance of up to $4,000 per year ($16,000 total) for bachelor's studies or $8,000 total for master's studies to students who commit to teaching high-need subjects in low-income schools after completing their postsecondary education. Both undergraduate and graduate students are eligible for the grants and must agree to serve as full-time mathematics, science, foreign language, bilingual education, special education, or reading teachers in low-income schools for at least four years within eight years of graduating. Current teachers, retirees from other occupations, and those who became teachers through alternative certification routes are also eligible for TEACH Grants to help pay for the costs of obtaining graduate degrees. An individual who fails to complete the agreed-upon service in low-income schools and high-need subjects is required to pay back his or her TEACH Grant as an Unsubsidized Direct Loan, including interest from the day the grant was made. Debt Relief from Student Loans Relief from repayment obligations under federal student loan programs has been available to teachers since before enactment of the HEA. The National Defense Education Act of 1958 (NDEA, P.L. 85-864) included a loan forgiveness component of the National Defense Student Loan (NDSL) program that was intended to increase the number and quality of teachers in U.S. schools. The NDSL program was incorporated into the HEA through the Education Amendments of 1972 (P.L. 92-318) and was later renamed the Federal Perkins Loan Program by amendments made through the Higher Education Amendments of 1986 ( P.L. 99-498 ). Under current HEA provisions, qualified teachers may receive relief from up to 100% of their Perkins Loan balance, depending on years of service; although new Perkins Loans are no longer being made. Loan forgiveness for teachers was expanded to include loans made under the Federal Family Education Loan and Direct Loan programs by the Higher Education Amendments of 1998 ( P.L. 105-244 ). For individuals who teach for five years on a full-time basis in eligible low-income schools, up to $5,000 may be canceled. Forbearance is available to borrowers during their five years of qualified teaching. Only individuals who are new borrowers on or after October 1, 1998, are eligible for this loan forgiveness benefit. The Taxpayer-Teacher Protection Act of 2004 ( P.L. 108-409 ) increased the maximum amount of loan forgiveness to $17,500 for special education teachers and those teaching mathematics or science in secondary schools. Teachers may also qualify for student debt relief under the Public Service Loan Forgiveness (PSLF) program, enacted by the College Cost Reduction and Access Act of 2007 ( P.L. 110-84 ). Under the PSLF program, individuals may qualify to have the balance (principal and interest) of their Direct Loans forgiven if they have made 120 full, scheduled, monthly payments on those loans, according to certain repayment plans, while concurrently employed full-time in public service (which can include teaching). HEA Reauthorization Issues The 116 th Congress is expected to consider reauthorizing the HEA. Thus far, numerous bills have been introduced to amend current law and address teacher recruitment and retention. This section discusses issues that may arise as the potential reauthorization process unfolds. The policy issues discussed here are based on existing and prior legislative proposals and are intended to provide some context for their consideration. These issues include modifying the Title II grant partnership structure, targeting support to specific teacher shortage areas or non-instructional staff, expanding teacher preparation program accountability requirements, reforming administration of the TEACH Grant program, and expanding or consolidating teacher loan forgiveness programs. Title II Grant Partnership Structure Currently, IHEs are a required partner in the TQP program and often serve as the sponsor of a partnership. With the rise of alternatives to traditional routes into the teaching profession, some proposals would eliminate the requirement that IHEs be a partner by allowing non-IHE-based teacher preparation providers to serve as TQP grantee sponsors as well. Current law defines a "partner institution" as a four-year IHE. Policymakers may consider amending this definition to allow two-year IHEs or other nonprofit teacher preparation programs to serve as a TQP partner institution or partnership sponsor. To be a partner in a TQP grant, LEAs and schools must be designated as "high-need" according to definitions in Title II of the HEA. Those definitions attempt to direct support, in part, toward low-income LEAs and schools. Some feel the thresholds set by the HEA are too low and that funds should be reserved for very low-income LEAs and schools. Targeting School Staff Current federal teacher recruitment and retention programs often direct support to certain instructional areas that are considered hard-to-staff, such as mathematics, science, and special education. Some feel these provisions should be broadened to include additional subject areas (e.g., English language learner instruction) or certain hard-to-staff schools (e.g., rural and/or Native American schools). Others have proposed that the targeted position types should be broadened to include non-instructional staff such as school counselors, librarians, literacy specialists, and coaches. There are also proposals focused on staff who serve in leadership roles (e.g., establishing principal residency programs similar to the current teacher residencies). Some have pushed for Title II amendments that would support teacher advancement into leadership through the creation of career ladders and incentives for master teachers. Still others would like to allow the Secretary to set aside Title II funds for a state grant for leadership training activities. Preparation Program Accountability Under current HEA provisions, IHEs that operate teacher preparation programs are required to report information on their performance including pass rates and scaled scores on teacher certification exams. States are required to report these data in aggregate as well as the results of program evaluations and any programs designated as "low-performing." Thirty states have never identified a program as low-performing and fewer than 3% of all programs nationwide have ever been identified as low-performing or at-risk of such designation. Some policymakers have argued that current accountability provisions are inadequate. Some have asserted that non-IHE-based programs in particular are not sufficiently scrutinized. Others think that all teacher preparation programs should be subject to outcome measures beyond passage of certification exams and that programs should be judged by their graduates' professional readiness, ability to find employment, and retention in teaching, as well as the performance of their students. TEACH Grant Program Administration The TEACH Grant program has reportedly encountered significant administrative challenges and has been the subject of increasing congressional scrutiny. Changes that have been suggested to alleviate these issues include providing grant recipients additional time to complete the service requirement, the option to pay back part of their grant if they are unable to complete the service requirement in full, and a better process by which to appeal the conversion of their grant to a loan. Some observers are concerned that students in the first year or two of college are not fully aware of what profession they want to go into, and they have advocated that TEACH Grants be made available to student in their junior and senior years of college and/or to master's degree candidates. Others have sought to limit TEACH Grants to programs with a proven ability to prepare individuals effectively for the teaching profession. Loan Forgiveness Teachers may access several separate loan relief options under current federal law. In many cases, these options serve similar purposes, but benefit requirements may conflict with or not complement one another (i.e., exercising eligibility for one program may nullify or forestall eligibility for another). The existence of multiple programs may lead to borrower confusion as well as administrative complexity. Policymakers might consider consolidating programs or targeting them to a narrower set of borrowers. Some argue that the requirements teachers must meet to qualify for loan relief are too difficult to understand and/or fulfill. These requirements caused the loan forgiveness programs to encounter administrative problems similar to those in the TEACH Grant program. Policymakers may consider whether to simplify these requirements to improve the effectiveness of loan forgiveness as a teacher retention tool.


Introduction The National Flood Insurance Program (NFIP) is the primary source of flood insurance coverage for residential properties in the United States, with more than five million policies in over 22,000 communities in 56 states and jurisdictions. The program collects about $4.6 billion in annual revenue from policyholders' premiums, fees and surcharges and provides over $1.3 trillion in coverage. The NFIP was established by the National Flood Insurance Act of 1968. The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The Federal Emergency Management Agency (FEMA), which administers the NFIP, is planning to introduce Risk Rating 2.0 , which represents the biggest change to the way the NFIP calculates flood insurance premiums since its inception. The new rates are scheduled to go into effect on October 1, 2021, for all NFIP policies. The price of insurance is generally based on three components: (1) the average annual loss, which is the expected loss per year; (2) the risk, which depends on the variability or uncertainty in loss estimates; and (3) expenses. These rating factors are used to calculate the premium that is sufficient to cover expected losses. The methodologies used to estimate these components, particularly the average annual loss and the risk, have changed over the decades that the NFIP has been in operation. This report will outline how the NFIP currently rates risks and sets premiums to cover losses, and how these are expected to change with the introduction of Risk Rating 2.0. The NFIP's Current Rating Structure How the NFIP Currently Determines Flood Insurance Premiums The NFIP's current rating structure follows general insurance practices in effect at the time that the NFIP was established and has not fundamentally changed since the 1970s. The current NFIP rating structure uses several basic characteristics to classify properties based on flood risks. Structures are evaluated by their specific flood zone on a Flood Insurance Rate Map (FIRM), occupancy type, and the elevation of the structure relative to the Base Flood Elevation (BFE). In addition, the premium structure includes estimates for the expenses of the NFIP, including servicing of policies. FEMA uses a nationwide rating system that combines flood zones across many geographic areas. Individual policies do not necessarily reflect topographical features that affect flood risk. FEMA calculates expected losses for groups of structures that are similar in flood risk and key structural aspects, and assigns the same rate to all policies in a group. For example, two properties that are rated as the same NFIP risk (e.g., both are one-story, single-family dwellings with no basement, in the same flood zone, and elevated the same number of feet above the BFE ) , are charged the same rate per $100 of insurance, although they may be located in different states with differing flood histories or rest on different topography, such as a shallow floodplain as opposed to a steep river valley. In addition, two properties in the same flood zone are charged the same rate, regardless of their location within the zone. Risk Modeling FEMA's current efforts to model risk consider only the potential for coastal storm surge and fluvial (river) flooding. The NFIP expresses flood risk in terms of the expected economic loss due to inundation and the probability of that loss. Information about the flood hazard is determined through NFIP flood studies, the vulnerability of the structure being insured, and the performance of certain flood protection measures. This is incorporated into a flood risk assessment, which yields an estimate of the average annual loss. The insurance rate is determined from this loss after adjusting for expenses, deductibles, underinsurance (because not all structures are insured to their full value), and other factors. In inland areas, NFIP flood studies focus on a river's watershed, the topography along the river and adjacent floodplain where structures are located, and the hydraulic characteristics of the river and floodplain. In coastal areas, the studies also assess the effects of storm surge and wave action. Models of relevant physical processes are coupled with statistical models of weather events to compute flood depths and velocities, and their likelihood of occurring. The model prediction results are summarized in reports and portrayed on FIRMs which show water surface elevations, floodplain boundaries, and flood zones. An area of specific focus on the FIRM is the Special Flood Hazard Area (SFHA). Properties in an SFHA are subject to the mandatory purchase requirement, which requires owners of properties in the mapped SFHA, in a community that participates or has participated in the NFIP, to purchase flood insurance as a condition of receiving a federally backed mortgage. Within the SFHA, there are two broad flood zones, the A zone and the V zone. V zones are distinguished from A zones in that V zones are subject to wave action (i.e., coastal flooding). Geographical and Structural Variables To calculate the premium, the current rating system considers the flood zone , the building occupancy type, the foundation type, the number of floors, the presence or not of a basement, whether the property is entitled to a subsidy, whether or not the property is a primary residence, prior claims, and the structure's elevation relative to the BFE. The amount of coverage and the deductible will also affect the premium. Premium Subsidies and Cross-Subsidies Except for certain subsidies, flood insurance rates in the NFIP are directed to be "based on consideration of the risk involved and accepted actuarial principles," meaning that the rate is reflective of the true flood risk to the property. FEMA determines full-risk rates by estimating the probability of a given level of flooding, damage estimates based on that level of flooding, and accepted actuarial principles. However, Congress has directed FEMA not to charge actuarial rates for certain categories of properties and to offer subsidies or cross-subsidies to certain classes of properties in order to achieve the program's objectives so that that owners of certain existing properties in flood zones are able to afford flood insurance. There are three main categories of properties which pay less than full risk-based rates: 1. Those built or substantially improved before FEMA published the first post-1974 flood insurance rate map (FIRM); 2. Most properties newly mapped into a SFHA on or after April 1, 2015, if the applicant gets flood insurance coverage within a year of the mapping; and 3. Those that had flood insurance on the property that complied with a prior FIRM, but the property was remapped into a different rate class (a practice known as "grandfathering"). Pre-FIRM Subsidy Pre-FIRM properties are those which were built or substantially improved before December 31, 1974, or before FEMA published the first FIRM for their community, whichever was later. By statute, premium rates charged on structures built before they were first mapped into a flood zone that have not been substantially improved, known as pre-FIRM structures, are allowed to have lower premiums than what would be expected to cover predicted claims. The availability of this pre-FIRM subsidy was intended to allow preexisting floodplain properties to contribute in some measure to pre-funding their recovery from a flood disaster instead of relying solely on federal disaster assistance. In essence, flood insurance could distribute some of the financial burden among those protected by flood insurance and the public. As of September 2018, approximately 13% of NFIP policies received a pre-FIRM subsidy. Historically, the total number of pre-FIRM policies is relatively stable, but the percentage of those policies by comparison to the total policy base has decreased. Newly Mapped Subsidy The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) established a new subsidy for properties that are newly mapped into a SFHA on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date. Certain properties may be excluded based on their loss history. The rate for eligible newly mapped properties is equal to the Preferred Risk Policy (PRP) rate, but with a higher Federal Policy Fee, for the first 12 months following the map revision. After the first year, the newly mapped rate begins to transition to a full-risk rate, with annual increases to newly mapped policy premiums calculated using a multiplier that varies by the year of the map change. As a result of the increases to the multiplier, premiums for newly-mapped policies are increasing 15% per year. As of September 2018, about 4% of NFIP policies receive a newly mapped subsidy. Grandfathering FEMA allows owners of properties that were built in compliance with the FIRM which was in effect at the time of construction to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. This practice is colloquially referred to as grandfathering, and is separate and distinct from the pre-FIRM subsidy. A property can be grandfathered due to a change in its flood zone or a change in its BFE. Zone grandfathering is the most common form of grandfathering. An example of zone grandfathering would be a property that is initially mapped into a flood zone and is built to the proper building code and standards, and is later remapped to a higher-risk flood zone. If the policyholder has maintained continuous insurance coverage under the NFIP, the owner of this property can pay the flood insurance premium based on the prior mapped zone. Elevation grandfathering occurs when a new FIRM increases the BFE, but the property itself does not change flood zones. For example, a property that was initially mapped as being four feet above BFE but is now, under the revised FIRM, only one foot above BFE, would still be allowed to pay the premium associated with a property four feet above BFE. FEMA does not consider the practice of grandfathering to be a subsidy for the NFIP, per se, because grandfathered properties are within a class of policies that are not subsidized for the class as a whole; instead, the discount provided to an individual policyholder is cross-subsidized by other policyholders in the NFIP. Thus, while grandfathering does intentionally allow policyholders to pay premiums that are less than their actuarial rate, the discount is offset by others in the same rate class as the grandfathered policyholder. As of September 2018, about 9% of NFIP policies were grandfathered. Premium, Fees, and Surcharges In addition to the building and contents premium, NFIP policyholders pay a number of fees and surcharges mandated by law. Paid by All Policyholders The Federal Policy Fee (FPF) was authorized by Congress in 1990 and helps pay for the administrative expenses of the program, including floodplain mapping and some of the insurance operations. The amount of the Federal Policy Fee is set by FEMA and can increase or decrease year to year. Since October 2017, the FPF has been $50 for Standard Flood Insurance Policies (SFIPs), $25 for Preferred Risk Policies (PRPs), and $25 for contents-only policies. A reserve fund assessment was authorized by Congress in the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) to establish and maintain a reserve fund to cover future claim and debt expenses, especially those from catastrophic disasters. Since April 2016, FEMA has charged every NFIP policy a reserve fund assessment equal to 15% of the premium. All NFIP policies are also assessed a surcharge following the passage of HFIAA. The amount of the HFIAA surcharge is dependent on the type of property being insured. For primary residences, the charge is $25; for all other properties, the charge is $250. Paid by Most Policyholders The NFIP requires most policyholders to purchase Increased Cost of Compliance (ICC) coverage . This is in effect a separate insurance policy to offset the expense of complying with more rigorous building code standards when local ordinances require them to do so. The ICC policy has a separate rate premium structure, and provides an amount up to $30,000 in payments for certain eligible expenses. Congress has capped the amount that can be paid for ICC coverage at $75. ICC coverage is not required on condominium units and content-only policies. Paid by Some Policyholders In April 2019, FEMA began charging a Severe Repetitive Loss premium equivalent to 5% of the premium on all severe repetitive loss properties. If a community is on probation from the NFIP, all policyholders in that community will be charged a probation surcharge of $50 for a full one-year period, even if the community brings its program into compliance and is removed from probation. Proposed Rating Structure Under Risk Rating 2.0 How the NFIP Will Determine Flood Insurance Premiums As proposed, NFIP premiums calculated under Risk Rating 2.0 will reflect an individual property's flood risk, in contrast to the current rating system in which properties with the same NFIP flood risk are charged the same rates. This will involve the use of a larger range of variables than in the current rating system, both in terms of modeling the flood risk and also in assessing the risk to each property. Risk Modeling The current rating system includes only two sources of flood risk: the 1%-annual-chance fluvial flood and the 1 %-annual-chance coastal flood . In contrast, Risk Rating 2.0 is designed to incorporate a broader range of flood frequencies and sources, including pluvial flooding (flooding due to heavy rainfall) , flooding due to tsunami, and coastal erosion outside the V zone. Risk Rating 2.0 is expected to use a multi-model approach to support the development of the new rates, with data from multiple sources including existing NFIP map data, NFIP policy and claims data, United States Geological Survey (USGS) 3-D elevation data, National Oceanographic and Atmospheric Administration (NOAA) SLOSH storm surge data, and U.S. Army Corps of Engineers data sets. According to FEMA, Risk Rating 2.0 will also use three commercial catastrophe models to estimate future loss potential. The use of catastrophe models to estimate potential losses caused by events such as hurricane wind, storm surge, inland flooding, tornadoes, earthquakes, and wildfires has become a standard risk management practice in the insurance industry. Catastrophe models were initially developed to address the shortcomings inherent in using historical data to project potential losses from infrequent, severe events that impacted many properties that were not geographically diverse. While each peril model reflects factors specific to the peril being modeled, catastrophe models generally have similar components, including modules simulating (1) the probability of the particular catastrophe occurring; (2) the intensity of the catastrophe; (3) the damage to structures; and (4) the allocation of the amount of the loss among those responsible for payment. The first stage of catastrophe modeling is to generate a stochastic event set, which is a database of simulated events. Each event is characterized by a probability of occurrence (event rate) and geographic area affected. Thousands of possible event scenarios are simulated, based on realistic parameters and historical data, to model probabilistically what could happen in the future. The hazard component of catastrophe models quantifies the severity of each event in a geographical area, once the event has occurred. An event footprint is generated, which is a spatial representation of hazard intensity from a specific event. For example, a model could calculate the peak wind speeds at each location affected by hurricane winds. Property vulnerability is modeled using mean damage ratios (MDRs), which are losses expressed as a percent of value, for a given hazard level (e.g., hurricane wind speed) and location. MDRs give the average percentages of damage that are expected for a structure with the characteristics input into the model. Finally, a financial or insurance module quantifies the financial consequences of each event from various financial perspectives. The policy terms such as deductibles, limits, and reinsurance are applied to the damage from each insured property from the vulnerability model to calculate the allocation of the loss amount. In the first stage of Risk Rating 2.0 modeling, FEMA is to conduct probabilistic flood risk analyses, in which structures are assigned specific annualized probabilities of being impacted by flood, and to validate these results with NFIP historical data. The next step is to compare the results of this analysis with the output of commercial catastrophe models. Finally, FEMA is to generate average annual loss values for certain geographies, focusing particularly on leveed areas and complex flooding hazards. Geographic and Structural Variables Geographical variables to be used in Risk Rating 2.0 are to include the distance to water and the type of water (e.g., river, stream, coast), the elevation of the property relative to the flooding source, and the stream order, which is a measure of the relative size of streams and rivers. The structural variables which have been identified by FEMA for use in Risk Rating 2.0 include the foundation type of the structure, the height of the lowest floor of the structure relative to BFE, and the replacement cost value of the structure. Replacement Cost Value In the current NFIP rating system, rates are based on the amount of insurance purchased for a structure rather than the replacement cost of that structure. For most actuarially-rated structures, the NFIP classifies the first $60,000 of building coverage for single-family residences ($175,000 for businesses) and $25,000 of contents coverage as the basic limit. It charges higher rates for coverage below this amount, because losses are more likely to occur in this range. Rates for additional coverage above the basic limit are lower. The basic and additional rates are weighted to account for the average tendency to buy less insurance than the replacement value. For example, a post-FIRM single-family property in Zone A with no basement would currently pay a basic rate of 1.1% per $100 coverage on the first $60,000 and an additional rate of 0.3% per $100 of coverage over $60,000. The two-tiered rating structure was used by the NFIP for two reasons. First, it ensured that the premium collected is sufficient to cover the typical claim, even if a policy is under-insured; according to FEMA, most NFIP claims are below $60,000. By charging a high rate for coverage up to $60,000, a policyholder's premium is likely to be sufficient to cover a typical claim. Secondly, it encouraged policyholders to insure their structure fully. By charging a low additional rate, policyholders are encouraged not just to insure a typical claim, but to insure against the unlikely but possible higher claim. For much of the NFIP's existence, the two-tiered rating structure operated with minimal inequity. However, as the range of replacement values widened, particularly through the 2000s, the potential for inequity caused by rating based on coverage instead of structure value grew. Two groups are most subject to inequity. First, structures whose value is closer to the $60,000 basic limit pay more than they would if their rate was based on their structure value because their entire rate is mainly comprised of the higher basic rate. Second, structures whose value is above $250,000 pay less than they would if their rate was based on structure value, because their rate is based on an average structure value that is much less than their actual structure value. In addition, high-valued structures can produce much higher claims than lower valued structure with the same intensity of damage. If replacement cost value were to be used in setting NFIP premium rates, it is anticipated that those structures with higher replacement costs than current local or national averages would begin paying more for their NFIP coverage than those structures that are below the average, which would pay less. How much more, or how much less, is undetermined. Mitigation Credits in Risk Rating 2.0 Risk Rating 2.0 is to initially provide credits for three mitigation actions: 1. installing flood openings according to the criteria in 44 C.F.R. Â§60.3 ; 2. elevating onto posts, piles, and piers; and 3. elevating machinery and equipment above the lowest floor . FEMA has not yet given any information on how these credits will be applied to individual property premiums. Currently the only mitigation activity for which the NFIP gives premium credit is elevating a structure, so Risk Rating 2.0 could encourage individual policyholders to do more to mitigate the flood risk for their property. Risk Rating 2.0 and Flood Zones Flood zones are to no longer be used in calculating a pro perty's flood insurance premium following the introduction of Risk Rating 2.0; instead, the premium are to be calculated based on the specific features of an individual property. However, as proposed, flood zones will still be needed for floodplain management purposes ; for example, all new construction and substantial improvements to buildings in Zone V must be elevated on pilings, posts, piers, or columns. T he boundary of the SFHA will still be required for the mandatory purchase requirement . The FIRM map appeal process will still exist, but once Risk Rating 2.0 begins, map appeals are not to have any effect on the premium that a policyholder pays. Although FEMA has not yet given any details of how grandfathered properties will be affected by Risk Rating 2.0, other than to say that "all properties will be on a glide path to actuarial rates," the implication of the fact that flood zones will no longer be used to set premiums appears to indicate that zone grandfathering, at least, will no longer be relevant. Maximum Premium Increases under Current Statute FEMA has statutory authority to set premium rates. The limitations on annual premium increases are also set in statute, and Risk Rating 2.0 will not be able to increase rates annually beyond these caps. HFIAA set maximum rate increases for primary residences at 5-18% per year. HFIAA permits individual property increases of up to 18%, but limits the rate class increases to 15% per year. In other words, the average annual premium rate increase for primary residences within a single risk classification rate may not be increased by more than 15% a year, while the individual premium rate increase for any individual policy may not be increased by more than 18% each year. Other categories of properties are required to have their premium increased by 25% per year until they reach full risk-based rates: this includes non-primary residences, non-residential properties, business properties, properties with severe repetitive loss, properties with substantial cumulative damage, and properties with substantial damage or substantial improvement after July 6, 2012. However, FEMA does not consider everything that policyholders pay to the NFIP to be part of the premium and therefore subject to these caps. When premium rates are calculated for compliance with the statutory caps, FEMA only includes the building and contents coverage, the Increased Cost of Compliance coverage, and the reserve fund assessment. Other fees and surcharges are not considered part of the premium and therefore are not subject to the premium cap limitations, including the Federal Policy Fee, the HFIAA surcharge and, if relevant, the 5% Severe Repetitive Loss premium and/or probation surcharge. Table 1 shows the effects of a maximum statutory increase on the national average premium for a Standard Flood Insurance Policy (SFIP) which pays the full $75 for Increased Cost of Compliance (ICC) coverage. According to FEMA, the national average premium for an SFIP is $700. The reserve fund assessment for this policy would be $105 and the ICC premium would be $75, for a total premium of $880. For an SFIP primary residence, the maximum 18% increase would be calculated on this premium of $880, leading to an increase of $158.40 and a new premium of $1038.40. However, an SFIP primary residence would also pay an FPF of $50 and a HFIAA surcharge of $25, so the total amount due to the NFIP after an 18% increase would be $1113.40. An SFIP for a non-primary residence would be subject to a 25% increase on the initial premium of $880, leading to an increase of $220 and a new premium of $1100. Costs for such a policy for a non-primary residence would also include an FPF of $50 and a HFIAA surcharge of $250, so the total amount due to the NFIP after a 25% increase would be $1,400. Risk Rating 2.0 and NFIP Cross-Subsidies The current three categories of properties which pay less than the full risk-based rate (pre-FIRM, newly-mapped, and grandfathered) are determined by the date when the structure was built relative to the date of adoption of the FIRM, rather than the flood risk or the ability of the policyholder to pay. As proposed, the new rating system will not eliminate the three categories, nor the process of phasing out subsidies which began with BW-12, but rate changes will not necessarily be uniform within each category. Premiums for individual properties will be tied to their actual flood risk rather than the flood zone, but the rate at which the subsidies will be phased out will continue to be constrained by law. In general, Risk Rating 2.0 is expected to lead to the reduction of cross-subsidies between NFIP policyholders, and the eventual elimination of premium subsidies and cross-subsidies once all properties are paying the full risk-based rate. However, certain non-insurance activities of the NFIP are funded by cross-subsidies from NFIP policyholders' premiums. For example, through a program called the Community Rating System (CRS), FEMA encourages communities to improve upon the minimum floodplain management standards that are required to participate in the NFIP. Policyholders in communities which participate in the CRS can get discounts of 5% to 45% on their flood insurance premiums. These discounts are determined by the activities carried out by the community to reduce flood and erosion risk and adopt measures to protect natural and beneficial floodplain functions. The National Research Council estimated that the CRS program provided an average 11.4% discount on SFIP premiums across the NFIP. The CRS discount is cross-subsidized into the NFIP program, such that the discount for one community ends up being offset by increased premium rates in all communities across the NFIP. An average 11.4% discount for CRS communities is cross-subsidized and shared across NFIP communities through a cost (or load) increase of 13.4% to overall premiums. It is not yet clear how Risk Rating 2.0 will affect the CRS cross-subsidy. In addition, as much as 42% of the funding for flood mapping and floodplain management is collected from NFIP policyholders in the form of the FPF. About 66% of the resources from the FPF are allocated to flood mapping, with floodplain management receiving about 19% of the overall income from the FPF. Again, it is not yet clear how Risk Rating 2.0 might affect funding for floodplain management and flood risk mapping. Concluding Observations FEMA believes that the more transparent and accurate flood insurance pricing in Risk Rating 2.0 will lead to better risk communication and an increase in flood insurance take-up rate. However, Risk Rating 2.0 is not designed to increase or decrease revenue for the NFIP. According to FEMA, Risk Rating 2.0 will not be allowed to create a shortfall relative to the amount of premium income under the current rating system. If the new rates lead to a shortfall, the rating plan will be revised. FEMA is carrying out an actuarial analysis and cannot give any information at the time of writing about the number or percentage of properties which will see their premiums change under Risk Rating 2.0. However, certain types of properties may be more likely to be affected, either positively or negatively. These may include zone-grandfathered properties, properties which are currently on the border of flood zones, properties currently outside the SFHA at risk of pluvial flooding, and properties with above-average or below-average replacement cost values. For example, the use of distance to water, rather than flood zone, may mean that premiums for properties at the landward boundary of an SFHA could go down, while premiums for a property at the water boundary could go up. Concerns about premium increases in the past have focused on certain subsidized properties, but under Risk Rating 2.0 all types of properties may be subject to higher rates of increase than at present. For example, as of April 1, 2019, the premium for pre-FIRM properties increased by 7.3% and the premium for newly mapped properties increased by 15%. Premiums for post-FIRM V zone properties increased by 6%, post-FIRM A zones increased by 4%, and X zone properties increased by 1%. These properties could face higher premiums under Risk Rating 2.0. Risk Rating 2.0 is may lead to premium increases for some NFIP policyholders, which could raise questions of affordability. When the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) went into effect, constituents from multiple communities expressed concerns about the elimination of lower rate classes, arguing that it created a financial burden on policyholders, risked depressing home values, and could lead to a reduction in the number of NFIP policies purchased. Similar concerns may be expressed with Risk Rating 2.0. Although risk-based price signals could give policyholders a clearer understanding of their true flood risk, charging actuarially sound premiums may mean that insurance for some properties is considered unaffordable, or that premiums increase at a rate which may be considered to be politically unacceptable. FEMA does not currently have the authority to implement an affordability program, nor does FEMA's current rate structure provide the funding required to support an affordability program. However, affordability provisions are included in the three bills which have been introduced in the 116 th Congress for long-term reauthorization of the NFIP: the National Flood Insurance Program Reauthorization Act of 2019 ( H.R. 3167 ), and the National Flood Insurance Program Reauthorization and Reform Act of 2019 ( S. 2187 ) and its companion bill in the House, H.R. 3872 . As Congress considers a long-term reauthorization of the NFIP, a central question may be who should bear the costs of floodplain occupancy in the future and how to address the concerns of constituents facing increases in flood insurance premiums.


Introduction The National Security Space Launch (NSSL) program aims to acquire launch services and ensure continued access to space for critical national security missions. The U.S. Air Force implemented the original program in 1995âEvolved Expendable Launch Vehicle (EELV)âand awarded four companies contracts to design a cost-effective launch vehicle system. The DOD acquisition strategy was to select one company and ensure that NSS launches were affordable and reliable. The EELV effort was prompted by significant increases in launch costs, procurement concerns, and the lack of competition among U.S. companies. A major challenge and long-standing undercurrent of concern over U.S. reliance on a Russian rocket engine (RD-180), used on one of the primary national security rockets for critical national security space launches, was exacerbated by the Russian backlash over the 2014 U.S. sanctions against its actions in Ukraine. Moreover, significant overall NSSL program cost increases and unresolved questions over individual launch costs, along with legal challenges to the Air Force contract awards by space launch companies, prompted legislative action. In the John S. McCain National Defense Authorization Act (NDAA) for FY2019, Congress renamed the EELV to the NSSL program to reflect a wider mission that would consider both reusable and expendable launch vehicles. The origins of the NSSL program date back to 1995, after years of concerns within the Air Force and space launch community over increasing cost and decreasing confidence in the continued reliability of national access to space. The purpose of EELV was to provide the United States affordable, reliable, and assured access to space with two families of space launch vehicles. Initially only two companies were in competition: Boeing produced the Delta IV launch vehicle, and Lockheed Martin developed the Atlas V. Overall, the program provided critical space lift capability to support DOD and intelligence community satellites, together known as National Security Space (NSS) missions. The EELV program evolved modestly in response to changing circumstances, and the Air Force approved an EELV acquisition strategy in November 2011, further revising it in 2013. That strategy was designed to (1) sustain two major independent rocket-powered launch vehicle families to reduce the chance of launch interruptions and to ensure reliable access to space; (2) license and stockpile the Russian-made RD-180 heavy-lift rocket engine, a critical component of the Atlas V; (3) pursue a block-buy commitment to a number of launches through the end of the decade to reduce launch costs; and (4) increase competition to reduce overall launch costs. The Air Force and others viewed the overall EELV acquisition strategy as having successfully reduced launch costs while demonstrating highly reliable access to space for DOD and the intelligence community. Others in Congress and elsewhere, however, argued that the program remained far too costly and was not as competitive as it should be. The NSSL program is managed by the Launch Enterprise Systems Directorate of the Space and Missile Systems Center, Los Angeles Air Force Base (El Segundo, CA). The NSSL program consists of four launch vehicles: Atlas V and Delta IV Heavy (both provided by United Launch Alliance [ULA] of Denver, CO) and Falcon 9 and Falcon Heavy (both provided by Space Exploration Technologies Corporation [SpaceX] of Hawthorne, CA). NSS launches support the Air Force, Navy, and National Reconnaissance Office (NRO). More specifically, the Atlas V has launched commercial, civil, and NSS satellites into orbit, including commercial and military communications satellites, lunar and other planetary orbiters and probes, earth observation, military research, and weather satellites, missile warning and NRO reconnaissance satellites, a tracking and data relay satellite, and the X-37B space plane (a military orbital test vehicle). The Delta IV has launched commercial and military communications and weather satellites, and missile warning and NRO satellites. The Atlas V and Delta IV Heavy launch vehicles are produced by ULA, which was formed in 2006 as a joint venture of The Boeing Company (of Chicago, IL) and Lockheed Martin (of Bethesda, MD). In addition to the launch vehicles themselves, the NSSL program consists of an extensive array of support capabilities and infrastructure to permit safe operations of U.S. launch ranges. ULA operates five space launch complexes, two at Cape Canaveral Air Force Station, FL (Space Launch Complex-37 and Space Launch Complex-41), and three at Vandenberg Air Force Base, CA (Space Launch Complex-2, Space Launch Complex-3F, and Space Launch Complex-6). A large number of key suppliers for ULA are spread throughout 46 states. DOD certified SpaceX to compete for NSS launches in 2015. The Falcon 9 flew its first NSSL mission on December 23, 2018, which delivered the Global Positioning System (GPS) III to orbit. SpaceX developed a more capable launch capability in the Falcon Heavy, which DOD certified in June 2018 and later awarded NSS missions under Phase 1A of the NSSL program. SpaceX maintains three launch sites, one at Cape Canaveral Air Force Station, FL (Space Launch Complex 40); one at Kennedy Space Center (Launch Complex 39A); and one at Vandenberg Air Force Base, CA (Space Launch Complex 4E). On October 10, 2018, the Air Force awarded three Launch Service Agreement (LSA) Other Transaction Authority (OTA) agreements to space launch companies. The LSA OTA agreements are "public-private partnerships [that] leverage industry's commercial launch solutions to ensure those systems meet NSS requirements." They also "facilitate development of three NSSL launch system prototypes and maturing those launch systems prior to selecting two NSS launch service providers for launch service procurements beginning in FY2020." The Air Force released request for proposals (RFP) in May 2019 for Phase 2 of the NSSL program, with plans to award two separate Launch Service Procurement (LSP) contracts in the summer of 2020. The selected companies will be responsible for launching national security satellites through 2027. However, the Air Force acquisition strategy of down-selecting no more than two launch providers may mitigate short-term risk but could have second- and third-order effects for resiliency in the future. Congress may consider whether the strategy's cost-benefit analysis warrants further research. Should no more than two launch providers be chosen for LSP contracts in Phase 2, the companies not selected would lose the LSA funds received from the Air Force and could potentially be faced with (1) the choice of abandoning NSSL development to focus on competing in the commercial launch sector or (2) investing vast company reserves to continue development on its own. Furthermore, DOD investment in only two launch providers could mean fewer options for an increasingly diverse range of national space security missions and possibly limit competition, once again, in the launch market. Evolution of the EELV 1990s-2011 By the early 1990s, the U.S. space industrial base supported the production of a number of launch vehicles (i.e., Titan II, Delta II, Atlas I/II/IIAS, and Titan IV) and their associated infrastructure. Although launch costs were increasing and operational and procurement deficiencies were noted by many decisionmakers, no clear consensus formed over how best to proceed. Congress took the initiative in the National Defense Authorization Act for Fiscal Year 1994 (NDAA; P.L. 103-160 , Â§213) by directing DOD to develop a Space Launch Modernization Plan (SLMP) that would "establish and clearly define priorities, goals, and milestones regarding modernization of space launch capabilities for the Department of Defense or, if appropriate, for the Government as a whole." The recommendations of the SLMP led DOD to implement the EELV program as the preferred alternative. The primary objective of the EELV program was to reduce costs by 25%. The program also sought to ensure 98% launch vehicle design reliability and to standardize EELV system launch pads and the interface between satellites and their launch vehicles. Congress supported these recommendations through the FY1995 NDAA ( P.L. 103-337 , Â§211), directing DOD to develop an integrated space launch vehicle strategy to replace or consolidate the then-current fleet of medium and heavy launch vehicles and to devise a plan to develop new or upgraded expendable launch vehicles. Congress recommended spending $30 million for a competitive reusable rocket technology program and $60 million for expendable launch vehicle development and acquisition. The original EELV acquisition strategy, initiated in 1994, called for a competitive down-select to a single launch provider and development of a system that could handle the entire NSS launch manifest. In 1995, the Air Force selected four launch providers for the initial competition: Lockheed Martin, Boeing, McDonnell Douglas, and Alliant Techsystems. After the first round of competition, the Air Force selected Lockheed Martin and McDonnell Douglas to continue. When Boeing acquired McDonnell Douglas in 1997, Boeing took over the contract to develop an EELV. Soon thereafter, however, the Air Force revised the EELV acquisition strategy, concluding that there was now a sufficient space launch market to sustain two EELV providers. Throughout the acquisition process, DOD maintained that competition between Lockheed Martin and Boeing was essential. At the time, the Government Accountability Office (GAO) reported that sufficient growth in the commercial launch business would sustain both companies, a premise that, in turn, would lead to lower launch prices for the government. But "the robust commercial market upon which DOD based its acquisition strategy of maintaining two launch companies [throughout the life-cycle of the program] never materialized, and estimated prices for future contracts, along with total program costs, increased." Retaining two launch providers, however, did provide DOD with some confidence in its ability to maintain "assured access to space." This confidence soon collapsed, when in the late 1990s, the United States suffered six space launch failures in less than a year. These failures included the loss of three national security satellites in 1998-1999, at a cost of over $3 billion. One, a critical national security communications satellite (MILSTARâMilitary Strategic and Tactical Relay), was lost on a failed Titan IV launch in 1999. That satellite capability was not replaced until 2010 with an AEHF (Advanced Extremely High Frequency) satellite, which experienced substantial acquisition challenges and frequent changes in both design and requirements. The other two losses were an NRO reconnaissance satellite and a DSP (Defense Support Program) satellite. In addition to the cost, schedule, and operational impacts of these lost missions, including a classified national security loss in coverage with MILSTAR, these failures significantly influenced the transition to the EELV program, which had an initial goal to make national security space launches more affordable and reliable. President Clinton directed a review of these failures and sought recommendations for any necessary changes. The subsequent Broad Area Review (BAR) essentially concluded that the U.S. government should no longer rely on commercial launch suppliers alone to provide confidence and reliability in the EELV program. Instead, the BAR recommended more contractor and government oversight through increasing the number of independent reviews, pursuing performance guarantees from the launch providers, and greater government involvement in the mission assurance process. Although these additional oversight activities eventually proved to significantly increase EELV costs, they also eventually led to notable improvements in launch successes. The early 2000s saw considerable turmoil within the Air Force space community and among the EELV launch service providers due to competition in the shrinking space launch industrial base, cost increases, and the growing need for reliable access to space. During this time, the poor business prospects in the space launch market drove Lockheed and Boeing to consider leaving the market altogether. Therefore, to protect its objective of assured access to space, the U.S. government began to shoulder much of the EELV program's fixed costs. To further protect the United States' ability to deliver NSS satellites into orbit, the George W. Bush Administration conducted a number of internal reviews that culminated in the 2004 National Security Policy Directive (NSPD)-40. This directive established the requirement for "assured access to space" and obliged DOD to fund the annual fixed launch costs for both Lockheed and Boeing until such time as DOD could certify that assured access to space could be maintained without two launch providers. DOD thus revised its EELV acquisition strategy because of the collapse of the commercial launch market and the ongoing erosion of the space industrial base. GAO wrote that "in acknowledging the government's role as the primary EELV customer, the new strategy maintained assured access to space by funding two product lines of launch vehicles." In 2006, The Boeing Company and Lockheed Martin announced plans to consolidate their launch operations into a joint ventureâULA. The companies argued that by combining their resources, infrastructure, expertise, and capabilities, they could assure access to space at lower cost. DOD believed that having two launch vehicle families (Atlas V and Delta IV) under one entity (i.e., ULA) provided significant benefits that outweighed the loss of competition. In October 2006, the Federal Trade Commission granted ULA antitrust clearance allowing the new company to form on December 1, 2006. As a result, "unparalleled EELV mission success" ensued, and the tradeoff over increased costs and reduced competition outside ULA was largely deemed acceptable. 2011-Current Status Since 2006, the Air Force has procured space launches from ULA on a sole-source basis. The former EELV program focused primarily on mission successânot cost control. GAO reported, however, that by 2010 "DOD officials predicted EELV program costs would increase at an unsustainable rate" due to possible instabilities in the launch industrial base and the inefficient buying practice of purchasing one launch vehicle at a time. In 2009, SpaceX, a new entrant to the space launch industrial base, became the first private company to successfully develop a liquid fuel rocket that delivered a commercial satellite to orbit. However, SpaceX was not certified to compete for national security missions until 2005. In response, DOD recognized a need to again reorganize the way it acquired launch services. Additional studies and internal reviews evaluated alternatives to the EELV business model, which in turn led to a new EELV acquisition strategy adopted in November 2011. The new acquisition strategy advocated a steady launch vehicle production rate. This production rate was designed to provide economic benefits to the government through larger buys, or block-buys, of launch vehicles, providing a predictable production schedule to stabilize the space launch industrial base. The new EELV acquisition strategy also announced the government's intent to renew competition in the program. In addition to revising its acquisition strategy, DOD undertook significant efforts to obtain greater insight into ULA program costs in advance of contract negotiations. In May 2011, DOD solicited a Request for Information to prospective launch providers. In March 2012, DOD issued a sole-source solicitation for the block-buy to ULA, and in April 2012, the EELV program incurred a critical Nunn-McCurdy cost breach. In December 2013, DOD followed through on its new EELV strategy, signing a contract modification with ULA committing the government to buy 35 launch vehicle booster cores over a five-year period, along with the associated infrastructure capability to launch them. DOD viewed this contract modification as a significant effort on its part to negotiate better launch prices through improved knowledge of ULA contractor costs. DOD officials expected the new contract to realize significant savings, primarily through stable unit pricing for all launch vehicles. However, some in Congress, and some analysts outside government, strongly disputed the DOD estimates of cost savings. DOD announced that it would add up to 14 additional NSS launches to broader competition. However, in the FY2015 budget request, the Air Force announced that the number of EELV launches open to broader competition through FY2017 would be reduced from 14 to 7. Some Members of Congress, and SpaceX officials, raised questions about how many launches would ultimately be openly competed. Perhaps resulting from turmoil associated with the Nunn-McCurdy cost breach, as well as the perceived instabilities mentioned above, the EELV acquisition strategy proceeded to a three-phased approach: Phase 1 (FY2013-FY2019) would consist of the sole-source block-buy awarded to ULA to procure up to 36 cores and to provide 7 years of NSS launch infrastructure capability. Phase 1A (FY2015-FY2017) emerged as a modification to Phase 1 that would consist of opening up competition for NSS launches to new space launch entrants (such as SpaceX). The Air Force said it could award up to 14 cores to a new entrant over 3 years, if a new entrant became certified. Phase 2 (FY2018-FY2022) envisioned full competition among all launch service providers. The operational requirements, budget, and potential for competition are currently being worked on. Phase 3 (FY2023-FY2030) envisioned full competition with the award of any or all required launch services to any certified provider. The Air Force's strategy appeared to fulfill the mandates to maintain assured access to space and introduce competition into the space launch market. To date, the NSSL program has launched more than 70 successful missions in support of the Air Force, the National Reconnaissance Office, and the U.S. Navy. ULA's Delta IV and Atlas V launch vehicles (which are older than the NNSL program) have performed over 90 consecutive successful missions, whereas SpaceX has performed five successful NSS launches. Factors That Complicated EELV Acquisition Strategy Several interrelated factors created uncertainty over the Air Force's ability to continue with the three-phased EELV acquisition strategy. These included ongoing concerns over program and launch costs, U.S. national security vulnerability from dependence on a Russian component in the EELV program (the RD-180 main engine), legal challenges to the acquisition strategy, and legislation that could change the EELV program. Cost Growth in the EELV In March 2012, the EELV program reported two critical Nunn-McCurdy unit cost breaches, which resulted in a reassessment of the program. The cost of the newly restructured program was estimated by GAO in March 2013 at $69.6 billion. This amount represented an increase of $34.6 billion, or about 100%, over the program's estimated cost of $35 billion from a year earlier. GAO identified several causes for this cost growth, including an extension of the program's life cycle from 2020 to 2030, an increase of the planned number of launch vehicles to be procured from 91 to 150 (an increase of 59%), the inherently unstable nature of demand for launch services, and instability in the industrial base. These causes related to changes in the scope of the program and reflected the industrial-base conditions under which the program was being undertaken; they did not appear to imply poor performance by the Air Force or the industry in executing the program. Even so, the overall increase in estimated program costs complicated the Air Force's challenge in funding the program within available resources without reducing funding for other program priorities. It also contributed to focusing attention on modifying their EELV acquisition strategy. In addition, the costs of individual launches themselves came under renewed scrutiny. SpaceX and others asserted that the launch costs charged by ULA were significantly higher than what SpaceX would charge the U.S. government once it was certified by the Air Force to conduct NSS launches. Part of the challenge in verifying these claims, however, is that much of the detailed cost data are proprietary, not readily comparable, and some are speculative to the extent that there is little empirical data on which those costs are provided. Although the Air Force, GAO, ULA, and SpaceX have provided some launch cost data, it is not apparent the data are directly comparable or are calculated using the same cost model assumptions. In addition, because SpaceX has limited data directly related to NSS launches, its cost figures are not likely based on a long history of actual cost, performance, and reliability. Thus, the issue of reliable and consistent cost data for comparative purposes has been a source of frustration for many in Congress. Reliance on the Russian RD-180 Main Engine The original impetus for licensing the Russian RD-180 as the main engine for the Atlas V launch vehicle grew out of concerns associated with the 1991 collapse of the Soviet Union. At the time, the CIA and others expressed serious concern about the potential export and proliferation of Russian scientific and missile expertise to countries hostile to U.S. interests. These concerns in turn spurred a U.S.-Russian partnership to acquire some of Russia's heavy lift rocket engine capabilities, thus expanding upon existing Cold War civil space cooperation. Initially, this took the form of a license agreement between Energomash NPO and RD Amross (of Palm Beach, FL) for the coproduction of the RD-180 engine as part of the EELV acquisition strategy. This later changed in an acquisition revision to simply purchase and stockpile roughly two years' worth of the engines for the Atlas V, an approach that was then viewed as highly cost-competitive. The existing license agreement for purchasing RD-180 engines extends to 2022. In subsequent years, some Members of Congress and policy experts occasionally expressed concern over the potential vulnerability of the EELV program based on reliance on a single critical Russian component. For instance, the FY2005 defense authorization act ( P.L. 108-375 , Â§912) directed DOD to examine future space launch requirements. The resulting 2006 RAND study concluded that "the use of the Russian-manufactured RD-180 engines in the Atlas V common core is a major policy issue that must be addressed in the near term." Similar concern was noted by GAO in 2011: "the EELV program is dependent on Russian RD-180 engines for its Atlas line of launch vehicles, which according to the Launch Enterprise Transformation Study, is a significant concern for policymakers." In the FY2013 defense authorization act ( P.L. 112-239 , Â§916), Congress directed DOD to undertake an "independent assessment of the national security implications of continuing to use foreign component and propulsion systems for the launch vehicles under the evolved expendable launch vehicle program." None of these concerns, however, led the Air Force to change its EELV acquisition strategy or to seek a change in legislation governing that strategy. After Russian incursions in Ukraine triggered U.S. sanctions in 2014, Russian backlash against those sanctions heightened alarm over the potential vulnerability of the EELV program and catalyzed the desire for change. In March 2014, the United States imposed sanctions on various Russian entities and persons, including Deputy Prime Minister Dimitry Rogozin, the official overseeing export licenses for the RD-180 rocket engine. In retaliation, Rogozin announced that "we can no longer deliver these engines to the United States unless we receive guarantees that our engines are used only for launching civilian payloads." Precise details of what Rogozin meant, and whether any changes would be implemented, were unclear. Many observers in the United States were increasingly concerned, however, that Russia could suddenly ban all exports of the engine to the United States, or ban exports for military use to some degree. To many outside of the Air Force and ULA, that uncertainty raised serious questions about the longer-term viability of the EELV program, and pointed to a need to completely shed U.S. reliance on the RD-180 as soon as practicable. Congress has since taken steps in each of the past several defense authorization bills (described below) to end this reliance and develop an alternative, domestic-produced U.S. main engine. Although the Air Force committed in principle to this ultimate outcome, some in Congress questioned if Air Force efforts were proceeding at an acceptable pace. As the Air Force pursues the congressional mandates to eliminate dependence on the RD-180 engine and continue to transition to a truly competitive launch market, it foresees major challenges. These include ULA's recent retirement of the Delta IV Medium in August 2019, the fact that SpaceX is currently the only other space launch provider awarded NSS mission requirements, and restrictions on acquisition of the RD-180 engine during this interim period that affect the Atlas V launch schedules. Legislative and Industry Options to Replace the RD-180 In spring 2014, DOD formed a commission to bring together various experts to examine the risks, costs, and options for dealing with the potential loss of the Russian RD-180 rocket engine in the EELV program. The 2014 Mitchell Commission recommended accelerating purchases of the RD-180 under the existing licensing agreement to preserve the EELV Phase 1 block-buy schedule and to facilitate competition in Phases 1A and Phase 2. The commission did not recommend coproducing the RD-180 in the United States, but instead recommended spending $141 million to begin development of a new U.S. liquid rocket engine to be available by 2022, to coincide with the end of Phase 2 in the EELV acquisition strategy. Congress has remained supportive of sustaining current space access capabilities while working toward developing a U.S.-made main rocket engine to replace the RD-180. The FY2015 NDAA permitted ULA to use RD-180 Russian engines purchased before Russia's intervention in Ukraine for continued national security space launch missions if the Secretary of Defense determined it was in the national security interest of the United States to do so. The FY2016 NDAA increased this number to nine RD-180s in order to help maintain competitors in the NSS launch market for a longer period, while the market transitions away from the RD-180 and toward a new domestic-produced rocket engine. The FY2017 NDAA increased the number of the Russian RD-180 rocket engines authorized to be used to a total of 18 rocket engines, beginning with the enactment of the FY2017 NDAA and ending on December 31, 2022. The defense bills since the FY2017 NDAA have not amended the total number of Russian RD-180 rocket engines authorized to be used. The NSSL Program Today The Air Force identified four main priorities in NSSL: mission success, innovative mission assurance, transitioning to new launch vehicles, and assured access for future space architectures. DOD expects to achieve cost saving through acquisitions and operability improvements that consist of the use of common components and infrastructure, standard payload interfaces, standardized launch pads, and reducing on-pad processing. To improve acquisitions, the program offers block buys of launch vehicles and competition between certified providers. The competitions are accomplished through two contract vehicles: Launch Service Agreements (LSA) and Launch Service Procurement (LSP) awards: Launch Service Agreement (LSA) awards are a set of three Air Force RDT&E awards intended to facilitate the development of three domestic launch system prototypes. DOD awarded LSA's to ULA, Northrop Grumman, and Blue Origin in October 2018. Launch Service Procurement (LSP) is an ongoing procurement competition that is currently in Phase 2. The second phase is a 5-year procurement of approximately 34 launches starting in 2022. The Air Force plans to select two space launch providers in 2020. United Launch Alliance, Northrop Grumman, SpaceX, and Blue Origin have submitted bids for phase two, with each company proposing their rocket designs: Vulcan, OmegA, Falcon, and New Glenn, respectively. The two companies selected will share the NSSL notional manifest for the next five years. Phase 1 and Phase 1A awards were made to ULA and SpaceX. DOD has identified 18 active contracts for the NSSL program with obligations awarded to six companies (see Figure 1 ). ULA and SpaceX are currently the only space launch providers certified to launch NSS payloads into orbit. The main focus for ULA is on developing a next-generation launch vehicle called the Vulcan. In July 2014, ULA signed commercial contracts with multiple U.S. liquid rocket engine manufacturing companies to investigate next-generation engine concepts. ULA selected Blue Origin (Kent, WA) BE-4 engine to power its Vulcan launch vehicle. Conclusion Although there are important differences in how to achieve it, widespread support appears to exist across the space community and within Congress for the NSS requirement for robust competition and assured access to space. The recurring challenge since the start of the NSSL program has been how best to pursue this requirement while driving down costs through competition and ensuring launch reliability and performance. The Air Force decision of down-selecting no more than two launch providers and award two separate Launch Service Procurement (LSP) contracts in the summer of 2020 is not without potential implications and could have second- and third-order effects. Congress may consider the following: Directing the Air Force to provide a report on the cost-benefit analysis of selecting more than two launch providers. Drafting legislative in the NDAA for FY2021 authorizing additional funds that allows the Air Force to diversify its launch provider options by continuing to provide development funds through LSA awards to launch companies not selected for LSP contracts in Phase 2. Directing the Air Force to provide a report on the cost saving and associated risk using both reusable and expendable launch vehicles for future solicitations. Lastly, efforts to transition away from the RD-180 to a domestic U.S. alternative engine or launch vehicle are not without technical, program, or schedule risks. Even with a smooth, on-schedule transition away from the RD-180 to an alternative engine or launch vehicle, the performance and reliability record achieved with the RD-180 to date would likely not be replicated until well beyond 2030 because the RD-180 has approximately 81 consecutive successful civil, commercial, and NSS launches since 2000.