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Monday, February 27, 2012

The LIHEAP Formula: Legislative History and Current Law

Libby Perl
Specialist in Housing Policy

The Low Income Home Energy Assistance Program (LIHEAP) provides funds to states, the District of Columbia, U.S. territories and commonwealths, and Indian tribal organizations (collectively referred to as grantees) primarily to help low-income households pay home energy expenses. The LIHEAP statute provides for two types of funding: regular funds (sometimes referred to as block grant funds) and emergency contingency funds. Regular funds are allocated to grantees based on a formula, while contingency funds may be released to one or more grantees at the discretion of the Secretary of the Department of Health and Human Services based on emergency need.

Regular LIHEAP funds are allocated to the states according to a formula that has a long and complicated history. (Tribes receive funds based on either their number of federally eligible LIHEAP households compared to the total number in the state or on agreements with their states, whereas territories receive a set percentage of total LIHEAP regular funds.) In 1980, Congress created the predecessor program to LIHEAP, the Low Income Energy Assistance Program (LIEAP) as part of the Crude Oil Windfall Profits Tax Act (P.L. 96-223). Because Congress was particularly concerned with the high costs of heating, funds under LIEAP were distributed according to a multi-step formula that benefitted cold-weather states. In 1981, Congress enacted LIHEAP as part of the Omnibus Budget Reconciliation Act (P.L. 97-35), replacing LIEAP. However, the LIHEAP statute specified that states would continue to receive the same percentage of regular funds that they did under the LIEAP formula.

When Congress reauthorized LIHEAP in 1984 as part of the Human Services Reauthorization Act (P.L. 98-558), it changed the program’s formula by requiring the use of more recent population and energy data and requiring that HHS consider both heating and cooling costs of low-income households (a change from the focus on the heating needs of all households). The effect of these changes meant that, in general, funds would be shifted from cold-weather states to warm-weather states. To prevent a dramatic shift of funds, Congress added two “hold-harmless” provisions to the formula. The result of these provisions is a current law, three-tiered formula (sometimes referred to as the “new” formula), the application of which depends on the amount of regular funds that Congress appropriates.

The Tier I formula is used to allocate funds when the total LIHEAP regular fund appropriation is less than or equal to the equivalent of a hypothetical FY1984 appropriation of $1.975 billion. Above this level, funds are allocated according to Tier II of the formula, which includes a holdharmless level to prevent certain states from losing LIHEAP funds. Finally, Tier III applies to appropriations at or above $2.25 billion, and includes a second hold-harmless provision, the holdharmless rate. Since FY1986, LIHEAP regular fund appropriations have exceeded the equivalent of an FY1984 appropriation of $1.975 billion in FY2006, when the regular fund appropriation was $2.48 billion; in FY2008, when appropriations slightly exceeded the trigger; in FY2009 through FY2011, when Congress directed that $840 million be distributed according to the “new” LIHEAP formula; and in FY2012, when Congress directed that $497 million be distributed according to the “new” formula.

Date of Report: February
14, 2012
Number of Pages:
Order Number: R
Price: $29.95

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