LIHEAP Purchasing Power Continues to Decline

by Mark Wolfe

The average grant to a homeowner from the Low Income Home Energy Assistance Program (LIHEAP), the most comprehensive federal program for helping low-income families pay their energy bills, will cover about 43.4% of the cost of home heating next winter, according to estimates. This number is down from 46% last year and almost 50% during the winter of 2010–11. The cause of this decline in purchasing power is related to two factors: (1) program funding has been reduced from $5.1 billion in FY’10 to $3.3 billion in FY’13, and (2) the cost of home heating rose during the past winter to $922 (up from $880 in 2011–12). Although the cost of home heating remains lower than it was three years ago, the cuts in program assistance over that time have been far greater than the reduction in energy prices.

The increase in the cost of home heating last winter varied by the type of fuel used. For those using heating oil, the cost increased by 17 percent, reflecting its continued high cost versus natural gas and electricity, which had lower overall increases in cost.

The reduction in federal appropriations not only resulted in a reduction in LIHEAP’s purchasing power but also in cuts to the number of households served. Between 2010 and 2013 the number declined by close to 1.4 million households (from about 8.1 million in 2010 to 6.7 million in FY’13).

Of additional concern is the president’s FY’14 budget request for LIHEAP. It calls for deep cuts to the program and would reduce the appropriation from $3.32 billion (after the sequester) to $2.97 billion. The number of households served would decline by about 1 million (from 6.7 million to 5.7 million). This dramatic drop comes during a period of continued high rates of poverty, when LIHEAP’s services are needed to avert shut-offs and payment arrearages.

The president’s budget also includes $50 million for competitive grants to help reduce energy burdens for LIHEAP households that “rely on persistently high-cost systems.” This would suggest that the administration is considering proposing a weatherization and education component for LIHEAP.

Despite the above setbacks, LIHEAP continues to enjoy strong support in Congress. Rather than call for cuts, a letter to President Obama signed by 127 members of Congress called for $5.1 billion in funding for FY’14, and a similar letter circulating in the Senate is calling for $4.7 billion. Although there is no question that achieving an increase in program funding in the current political environment will be challenging, these letters indicate strong support for LIHEAP heading into the FY’14 budget debate.