The Senate recently considered a bill (S. 3186) to provide $2.5 billion in additional funding for the Low Income Home Energy Assistance Program (LIHEAP) to offset the sharp rise in energy prices this winter. President Bush, however, has threatened to veto the bill, arguing that the additional funding is not needed and that the bill would increase the deficit.
Data on rising energy prices sharply contradict the President’s claim that current LIHEAP funding is sufficient. Without additional funding, large numbers of low-income Americans will suffer extensive hardship this winter. As for the deficit, the White House’s inconsistency on this point is striking: the President complains that a $2.5 billion bill providing energy assistance to poor families will unacceptably enlarge the deficit, yet he opposes efforts in Congress to offset the cost of $64 billion in requested tax-cut extensions; instead, the $64 billion would be added to the deficit.
LIHEAP has bipartisan support from state governors and in Congress, where the recent Senate bill had 52 co-sponsors, including 13 Republicans. Congress and the President need to act on LIHEAP when they return in September.
Home Energy Costs Up 40 Percent This Coming Winter - LIHEAP currently helps 5.8 million poor households, including many elderly, pay their home heating and cooling bills and thereby avoid utility shut-offs. Generally LIHEAP pays only a portion of a household’s monthly heating bill; the household pays the rest. Partly because of funding limitations, LIHEAP assists fewer than one in six low-income households eligible for assistance.
LIHEAP assistance will prove especially critical this winter, given the recent explosion in home heating prices. For a typical LIHEAP recipient, home heating this winter will cost 40 percent more than last winter, 60 percent more than two winters ago, and 90 percent more than four winters ago. But without additional funding to compensate for this year’s increases in energy costs, state LIHEAP programs will have to make the difficult choice between serving fewer households (even though the number of households in need is rising), paying a smaller share of each recipient household’s home energy bill (even though those bills are much higher now), or some combination of the two.
Additional $2.2 Billion or More Needed to Prevent Increased Hardship - Congress has authorized $5.1 billion per year in LIHEAP funding but has never provided this full amount. The fiscal year 2008 funding level is $2.6 billion, a modest increase above the $2.2 billion provided in 2007. For fiscal year 2009, LIHEAP would need $3.4 billion in funding simply to provide the same number of low-income people with the same degree of assistance (measured as a share of their energy bills) as it did last year.
Moreover, even a funding level of $3.4 billion would not prevent substantial hardship. The added funding would suffice only to offset LIHEAP’s share of the 40 percent increase in home heating costs this winter; the household’s share would still rise by 40 percent. To cover both LIHEAP’s and the household’s share of the increase in energy prices so that poor LIHEAP households do not face unaffordable home energy bills this winter, LIHEAP would need $4.8 billion for fiscal year 2009, an increase of $2.2 billion over the 2008 level.
To give an example, the typical poor LIHEAP household was billed about $1,100 for home energy last season, according to the National Energy Assistance Directors’ Association. Of that amount, LIHEAP paid an average of 37 percent ($407), while the household paid the rest ($693). A 40 percent ($440) increase in home energy costs this winter would bring the household’s total bill to $1,540. If LIHEAP’s payment increased by 40 percent to $570, the household’s payment would also have to increase by 40 percent, to $970.
Given their poverty, many households could have difficulty paying these higher costs. To keep the household’s home energy costs from rising, the LIHEAP payment would need to cover the full $440 increase in the home heating bill, by increasing from $407 to $847.
It also should be noted that even at a $4.8 billion funding level, LIHEAP would serve a smaller share of the population needing home heating assistance than it did last year. One reason is that the number of low-income households is rising as the economy weakens and jobs disappear. (The U.S. economy has shed more than 400,000 jobs so far this year.) Another reason is that some low-income families who were able to pay their home energy bills in past winters will not be able to do so this winter because of the rise in energy prices.
The White House’s Flawed Arguments Against Additional Funding - In arguing that LIHEAP does not need additional funding this fiscal year, the President has noted that the program still has $100 million remaining in contingency funds for the year. But this amount is well short of the additional $2.2 billion or more we estimate is needed to prevent increased hardship this winter.
The President has also objected to more LIHEAP funding on the grounds that it would add to the deficit. Yet the President recently signed into law $115 billion in supplemental funding for the Iraq war and other emergency needs, and he continues to request another round of Alternative Minimum Tax relief costing at least $64 billion while insisting that those costs not be offset. Both of these requests add much more to the deficit than the needed LIHEAP increase.
Moreover, additional LIHEAP funding can easily fit within Congress’s current budget resolution, which set aside $5.0 billion for additional needs in 2008.
Congress Needs to Act in September to Ensure Adequate Help This Winter - Congress is on course to enact a continuing resolution in September that will fund appropriated programs through February or March, generally at last year’s funding levels. Freezing LIHEAP funding through most of the winter — as a continuing resolution would normally do — would impose serious hardship on millions of vulnerable families.
Congress consequently needs to act this fall to provide sufficient LIHEAP funding to protect low-income households from steep increases in home energy costs this winter. It could do so either by enacting separate legislation (such as the recent Senate bill) or by increasing the LIHEAP funding portion of the continuing resolution well above a “freeze level.”
End Notes:
[1] These figures are based on Department of Energy historical data and its recent projections of energy prices, as well as the typical home energy needs of LIHEAP recipients.
[2] This $4.8 billion figure assumes that only four-fifths of LIHEAP funding will cover home energy payments. The remaining one-fifth covers administrative costs and weatherization. Price increases in these latter areas may be about 3 percent this year, in line with non-energy inflation.
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