Black, White, and Hispanic Americans experience water utility service differently
Over the past couple of years there’s been a growing recognition that drinking water policy is an environmental justice issue in the United States; my research with David Switzer showed racial, ethnic, and socioeconomic disparities in drinking water quality at the community-level—findings that have since been affirmed by other researchers. Identifying racial and ethnic disparities in drinking water service at the individual level is harder. Do people of different races and ethnicities experience water service in markedly different ways?
A few months ago I posted some findings from a Texas A&M Institute for Science, Technology & Public Policy (ISTPP) national public opinion survey. The survey’s carefully-designed sample of nearly 2,000 individuals is representative of the US population, and so offers an extraordinary look at public perceptions about water service. Earlier posts reported on attitudinal differences between water professionals and the general public, how gender predicts opinion on water issues, and the correlation between income and water service experiences.
Today I’m looking at race and ethnicity.
Water service problems
The ISTPP survey asked respondents to say whether they had experienced specific kinds of problems with their drinking water with a simple yes/no answer:
- The water does not taste good (31.5% yes)
- The water is cloudy or dirty (19.5%)
- Water pressure is low (29.2%)
- The water causes sickness (3.8%)
- Water billing or payment problems (10.2%)
56.7% of respondents reported experiencing none of these problems. It’s important to remember that the survey captures perceived water service problems, not actual problems—for example, we don’t know whether a respondent actually experienced low water pressure, we only know whether a respondent thinks (s)he experienced a problem. Happily, a large majority of respondents said that they had not experienced each of these problems.
Less happily, there were notable racial differences in the “yes” responses across all five items, and ethnic differences in two of them. The graph below shows the percent reporting each type of water service problem for Black, Hispanic, and non-Hispanic White respondents (vertical spikes represent 95% confidence intervals).*
It’s not a pretty picture. A generally ordered relationship emerges, with Black respondents reporting the most water problems, followed by Hispanics, with non-Hispanic Whites reporting the fewest in four of the five categories. Non-Hispanic whites were most likely to report no problems at all.
Black respondents reported experiencing water service problems much more frequently than did respondents of other races across all five categories. The differences between Black and non-Hispanic White respondents were large and statistically significant in all categories. For example, 37% of Black respondents reported experiencing low water pressure, compared with 28% of non-Hispanic Whites. 29% of Blacks reported cloudy or dirty water, compared with just 18% of non-Hispanic Whites.
The disparities between Hispanic and non-Hispanic White respondents were less stark, although significantly more Hispanic respondents reported experiencing water bill problems and illness compared with non-Hispanic Whites.
How much do racial/ethnic patterns just reflect income?
Since race and ethnicity correlate with income in the United States, it’s possible that the racial/ethnic disparities are just artifacts of income disparities I discussed in my earlier post. Statistical modeling can help tease out the degree to which race/ethnicity relates to water service experiences after accounting for income. So I fitted logistic regression models to identify correlates of water service experiences by race and ethnicity, while accounting for income, age, urban/rural location and region. These models estimate the likelihood of experiencing each of the five service problems, or no problems. The graph below shows the results, with estimates of racial/ethnic groups at an annual income of $27,500–a relatively low income where we’d expect problems to be most frequent:
When adjusting for income, age, and region, the racial and ethnic disparities persist, but are less pronounced and in most cases not statistically significant by the conventional standard. So while there are clear racial and ethnic differences in water service experiences in the United States, these data suggest that much–but probably not all–of those differences reflect racial/ethnic income disparities.
*The survey captured only two racial categories (Black & White) and one ethnic category (Hispanic), so we can’t analyze other racial or ethnic groups.
Devils (and angels) in the details, Part 5
In early January the California Water Board (SWRCB) published its long-anticipated draft proposal for a statewide low-income water bill assistance program. I’ve blogged about it over the past few weeks*; in this final (I think) post on the proposal, I’ll look at how the SWRCB proposes to pay for the estimated $606 million annual program.
How to raise 600 million dollars
The SWRCB recommends paying for the new water assistance program through “progressive revenue sources… in order not to burden some of the residents that the program seeks to serve.” To that laudable end, the proposal calls for two new taxes:
- A .25% tax on personal incomes over $1 million; and
- A sales tax on bottled water.
The income tax would generate an estimated $466 million annually, while the bottled water tax would generate $154 million. Under California’s Byzantine pubic finance laws both taxes would require supermajorities in the state legislature. The bottled water tax would also have to pass a ballot referendum.
Progressive taxation is crucial to any low-income assistance program, since the whole point is to transfer resources to people who are short on them. A millionaire’s tax makes sense from that perspective; a person whose income tops $1 million annually likely has little difficulty paying his/her water bill, and it’s doubtful that an additional 0.25% tax will much constrain productivity or lifestyle for people with seven-figure incomes.
The bottled water tax is thornier.
It’s common for those of us who work on American drinking water issues to think of bottled water as a luxury good. Bottled water is orders of magnitude more expensive than tap water, after all. It also carries some severe negative externalities: it’s lightly regulated, uses lots of energy to produce and transport, and empty bottles create a huge solid waste problem. For all those reasons, taxing bottled water would be progressive, in theory.
In practice, the progressivity of a bottled water tax isn’t so clear. Counterintuitively, in America bottled water consumption is negatively correlated with income—that is, poor and working-class Americans drink much more bottled water than do middle-class and wealthier Americans. Study after study after study show that low-income people and members of racial/ethnic minorities are much more likely to drink bottled water.
Why do lower-income people pay orders of magnitude more for bottled water, when affordable tap water is available? From a health and efficiency perspective, that isn’t rational behavior. It might be cultural, it might be taste/odor preferences, it might be about distrust in government, or it might be something else entirely. In some cases, people served by the smallest, poorest communities that suffer from poor water quality might need bottled drinking water. Raising the cost of bottled water might have the perverse effect of pushing low-income households to drink more soda and sugary beverages.
Whatever the reason for the income-bottled water relationship, the distributional effect of the SWRCB’s proposed tax is clear: the poor will bear a disproportionate burden of any bottled water tax. When you consider that a significant proportion of eligible households will never actually participate in the assistance program, a bottled water tax becomes doubly regressive.
So where do we get the other $150 million?
There’s an intuitive political appeal to using a water-related tax to raise money for water bill assistance.† What kinds of water taxes could be progressive? Here are a couple of half-baked ideas (I don’t have the time or data to bake ’em).
- A tax on “luxury” bottled water. Poor folks aren’t buying $5.00 bottles of FijiWater; they’re buying $9.99 cases of Ozarka at Walmart. A sales tax on water that retails for more than $1.00 per liter would spare the lowest-income households, and probably wouldn’t push them into drinking sugary beverages.
- A tax on residential tap water consumption over 12,000 gallons per month. At 50 gallons per capita per day (reasonably efficient indoor use), a family of four uses about 6,000 gallons per month. In the vast majority of situations, residential water consumption beyond 12,000 gallons a month is for discretionary outdoor use. A main drawback to this kind of tax is that it would irritate water utility managers, who don’t want to act as the state’s tax collectors.
A combination of these two taxes could generate significant revenue without putting the revenue burden of low-income assistance onto the people that it’s intended to help.
*In the past few posts, I’ve summarized the proposal, discussed its potentially perverse incentives for ratemaking, pondered its implications for struggling small systems, and options for administering assistance.
†The SWRCB’s carefully avoids alluding to political appeal, but does note that “fees on bottled water or alcohol would have a nexus to water use.”
Devils (and angels) in the details, Part 4
In early January the California Water Board published its long-anticipated draft proposal for a statewide low-income water bill assistance program. In the past few posts, I’ve summarized the path-breaking proposal, discussed its potentially perverse incentives for ratemaking, and pondered its implications for small system consolidation. In this post, I take up that crucial but oft-overlooked dimension of public policy: administration.
Administering statewide water bill assistance
The draft proposal acknowledges that administering a brand new social welfare transfer program will be costly and complicated. The low-income water rate assistance program will need to be advertised, applications processed, incomes and personal data verified, customers enrolled, and so on. Then the benefits themselves would need to be distributed in some way. Participants will need to renew their eligibility periodically, which will require re-verification. Audit procedures will be needed to guard against fraud and abuse, and appeals processes established to provide recourse to those wrongfully denied benefits.
The draft proposal punts on who exactly would do all that administrative work.
Rather than arguing for a specific administrative arrangement, it lays out four potential approaches to benefit disbursement:
- Water bill credits
- Energy bill credits
- EBT (Electronic Benefits Transfer) cards
- Tax credits
The first option might seem most obvious, but the draft report correctly observes that many benefit-eligible households may not receive water bills directly, because they live in multifamily or rental housing and so pay for water service through their rent. Options #2-4 have the potential to reach more households. Options #3 and #4 most closely approximate the received wisdom of welfare research, which suggests that benefits work best when they are received directly by their beneficiaries.
What about everything else?
But there’s much more to a low-income assistance program than handing out benefits. Conspicuously absent from the draft report is discussion of the many other aspects of administering a new assistance program. Here are some options.
Utility administration. Water systems could administer the program on behalf of the state (several California investor-owned utilities already run assistance programs, for example). Utility organizations are, by and large, unaccustomed to administering social welfare programs. Recently I’ve had the opportunity to study a handful of water utilities that administer low-income assistance programs. I found that, when water utilities get into the low-income assistance game, utility staff become de facto social workers. Water customers who apply for assistance often struggle with multiple health, financial, legal, and perhaps cultural problems. It is impossible not to make a human connection in such cases. Laudably, the utility folks I’ve met who administer water assistance programs work hard to do so humanely and responsibly. But welfare administration is, at best, an uneasy fit for many utility organizations. Moreover, the burden of administering an assistance program would be especially onerous for the very small systems that already suffer disproportionately from high prices and poor water quality.
State administration. The California Water Board (or some new agency) could create a new organization to administer the program. This sort of centralized administration could provide economies of scale and help ensure uniformity and fairness across the state. On the other hand, state administration would involve significant new investments in staffing and other administrative infrastructure, all of which would be subject to the vagaries of state politics.
Nonprofit administration. Water bill assistance could be administered through community-based nonprofit community service organizations like the Salvation Army or St Vincent DePaul Society. In addition to providing direct charitable aid, such organizations often are conduits for government assistance programs like LIHEAP. Many of these nonprofit organizations employ sizable, multilingual staffs that include social workers, nutritionists, lawyers, and other professionals who help low-income individuals and families navigate the often confusing and sometimes humiliating process of applying for benefits. These organizations’ expertise, flexibility, and familiarity with target populations offer perhaps the most promising avenue for administration.
The recipient’s administrative burden
Also missing from the California Water Board’s draft proposal—and most of the broader discussion of low-income water bill assistance—is consideration of the administrative burdens that water customers would have to bear in order to receive benefits. Learning about the assistance program, applying, demonstrating eligibility, ensuring receipt, and reapplying are time-consuming and sometimes humiliating processes. These costs may be especially significant for people with low literacy or limited English proficiency. Potentially eligible people may forego benefits if the application process is too burdensome, if they perceive a social stigma associated with public assistance, or if they do not trust government.
Taken together, administrative costs—to the state, to utilities, and to low-income households—are a big part of why I’ve argued that rate structures, not assistance programs, offer the most promising path to water affordability. Low fixed rates and low prices for essential water use make water affordable for everyone. Unlike assistance programs, affordability through rate design doesn’t create new administrative costs, and doesn’t make customers endure intrusive and burdensome application processes. As policymakers grapple with water affordability in California and beyond, they should consider ways to help encourage utilities to price water more affordably alongside bill assistance efforts.