States Respond to Heating Program Cuts

State officials across the country are making changes to their energy assistance programs that will make it more difficult for poor people to pay their heating bills this winter.

The changes – namely tougher eligibility requirements and reduced aid – are a direct response to the budget Congress passed last month, which slashes the federal program that provides states with such funding, known as the Low-Income Home Energy Assistance Program (LIHEAP) . Now, state officials and advocates for the poor say those who use the program could face a dangerous winter if they’re unable to pay to warm their residences.

“I don’t want to be melodramatic, but you look at the numbers… and there’s a lot to be concerned about,” says Mark Wolfe, head of the association that represents state officials who administer the aid.

As part of the FY 2012 budget finalized last month, Congress cut funding for LIHEAP from $4.7 billion to $3.5 billion. The program was funded at $5.1 billion in FY 2010.

The federal government provides that funding to states, which are now trying to figure how to respond. Many are making changes to their LIHEAP programs that won’t bode well for the indigent this winter. For example, Pennsylvania residents will have a harder time qualifying for aid, and those who do will get less than they have in the past. Utah recently dropped the average benefit by more than 10 percent after an even bigger cut earlier this year. The average Minnesota benefit is down 20 percent. Officials there hope that by making such a big cut, they’ll at least be able to maintain coverage for the same number of residents, but even that may be a stretch.

Officials who administer Massachusetts’ LIHEAP funds in the Boston-area say recipients could run out of aid by the end of January or even earlier.  Two-thirds of LIHEAP users surveyed by the Wolfe’s group, National Energy Assistance Directors’ Association, said that without the aid, they'd keep their homes at unhealthy temperatures. “We’ve got a pretty horrible situation for an awful lot of people,” says John Drew, president and CEO of Action for Boston Community Development, Inc.

The cuts to LIHEAP, which were driven by Congress’ goal of deficit reduction, come at a particularly inopportune time, with both demand for aid and the price of some fuels on the rise.

In FY 2011, about 8.9 million people nationwide received LIHEAP aid. This fiscal year, about 10 million households are expected to apply. Meanwhile, the price of home heating fuel this week is up 13 percent compared to this period a year ago and up 33 percent compared to 2010.

Wolfe says he understands the budgeting challenges facing Congress, but he believes now is not the time to scale back on LIHEAP. Historically, about 10 percent of the population has had trouble paying its energy bills, but today, that figure is closer to 20 percent, he says.

Nationally, the average LIHEAP benefit covers half the cost of home heating for a household, or about $417 per year. But the reductions mean that towards the end of the winter season, some low-income residents will likely have to move in with friends, relatives, or even to a shelter. “You could see next month having some real hardship stories,” Wolfe says.

The program could have had even less funding if President Obama's budget became law. In his 2012 budget request, Obama sought to reduce LIHEAP funds by an even larger margin to $2.57 billion. Ultimately, the cut Congress approved wasn’t quite as dramatic.

Obama justified his proposal by citing an expected decline in energy prices. Since LIHEAP was expanded following energy price spikes in 2008, he reasoned, it made sense to scale the program back down once those prices fell.

But not everyone has seen fuel costs retreat. This fall, the Energy Information Administration projected record winter heating oil prices in the Northeast for the winter. Today, a gallon of home heating oil is, on average, 45 cents more expensive than it was in 2008, according to EIA data. Residential electricity costs have also slightly increased since 2008, though natural gas prices are down.

Officials from the Office of Management and Budget have not yet responded to Governing's questions about the cuts. 

Other critics have questioned the merits of the program altogether, citing a 2010 Government Accountability Office report finding fraud and sloppy record keeping in the program. 

And not all states are fretting. Officials in North Dakota, for example, tell Governing they’re confident they’ll meet their residents’ needs, since their state has had a relatively mild winter and its homes rely mostly on natural gas and electricity, which is now cheaper than heating oil.

But the issue has become particularly thorny in New England, where most of the country’s home heating oil is used. While utility companies in places like Massachusetts are forbidden from disconnecting customers in the winter (instead, residents build up unpaid balances and get disconnected in the spring), home heating oil is only delivered if the supplier gets paid. That makes the program particularly important to Northeastern states.

But it’s unclear whether states will step in and fill in the gap on their own. Vermont officials recently opted to shore up their program with $6.1 million in state funds. But most states are still facing their own budget struggles, and their revenues still haven't returned to pre-recession levels, which will make any effort to shore up the programs a challenge.

Some advocates are hoping that Congress, when it returns from its recess, will restore the missing LIHEAP funding. But considering lawmakers' ongoing focus on spending reduction, and the fact that budgetary issues regularly bring them to loggerheads, it's hard to imagine such a movement will pick up steam.

“There aren’t many words that I have left for what I feel about Congress – particularly the leadership – and maybe the president too,” says a frustrated Drew. “I see it as being very callous.”