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Friday, April 12, 2013

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 emergency 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. This report focuses on the way in which regular funds are distributed.

Regular LIHEAP funds are allocated to the states according to a formula that has a long and complicated history. (Tribes and territories receive funds through set asides.) 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 (this is sometimes referred to as the “old” LIHEAP 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 what had largely been a focus on the need for heating assistance). The effect of these changes meant that, in general, some funding would be shifted from cold-weather states to warm-weather states. To prevent a dramatic shift of funds, Congress added two “holdharmless” provisions to the formula. The percentage of funds that states receive under the formula enacted in 1984 is sometimes referred to as the “new” formula.

The result of these provisions is a current law, three-tiered formula, the application of which depends on the amount of regular funds that Congress appropriates. When appropriations are at or below the equivalent of a hypothetical FY1984 appropriation of $1.975 billion, states receive the “old” formula percentage of funds. If appropriations exceed this level, then funds are allocated according to the “new” formula percentage of funds, with certain states held harmless at the level of funds they would have received at an appropriation of $1.975 billion in FY1984. Finally, when appropriations are at or above $2.25 billion, there is a second hold-harmless provision in place, a hold-harmless rate that ensures that certain states receive a set percentage of funds.

For many years after the enactment of the “new” LIHEAP formula, appropriations did not exceed the equivalent of an FY1984 appropriation of $1.975 billion, so funds were distributed according to the “old” formula percentages. However, in FY2006, and in FY2009 through FY2013, regular fund appropriations have ranged from $2.5 billion to $4.5 billion, and the “new” formula has been incorporated into the way in which funds are distributed to the states.

Date of Report: April 3, 2013
Number of Pages: 36
Order Number: RL33275
Price: $29.95

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