Two Cheers… or maybe just one
for a federal low-income water bill assistance program
The ink is barely dry on the $2 trillion coronavirus response law, but there are rumblings that a another relief bill will be at the top of the agenda when Congress reconvenes later this month. The latest noises out of Speaker Pelosi’s office indicate that the next bill will focus on immediate relief for families, small businesses, health systems, and local governments.
When it comes to household water affordability relief, the perennial favorite proposal is a federal means-tested assistance program for low-income families modeled after the Low Income Home Energy Assistance Program (LIHEAP). A $1.5 billion LIHEAP-style relief program for water was part of the House proposal for the last COVID-19 relief bill, but it was cut from the final bill and never enacted. The proposal is likely to be resurrected in the next bill.
Over the past week I’ve had several conversations with utility executives, policy experts, and government leaders about how Congress might best provide water relief in this ongoing and rapidly-moving pandemic. This post summarizes thoughts that have emerged from those conversations, and explain why I’m sympathetic but lukewarm on the idea of a federal LIHEAP-style program for water in this moment of crisis.
Redistributive programs come in two basic flavors: means-tested and entitlements.* Means-tested programs provide benefits to individuals and households who demonstrate need and whose resources (income, assets) fall below specific thresholds. People must apply for these benefits, and government bureaucrats evaluate applications to see that they meet program rules. Procedures for auditing and appeals accompany these processes. Those who receive benefits must reapply periodically in order to maintain eligibility. Benefits decline or disappear as incomes grow. Familiar means-tested assistance programs include TANF (“welfare”), SNAP (formerly Food Stamps), Section 8 housing, and LIHEAP.
Entitlement programs provide public benefits to qualifying individuals and households regardless of their need or resources—rich, middle-class, and poor households all may receive assistance. People are not required to demonstrate need or report income and assets to government agencies to get the benefits. K-12 education is a great example at the state/local level. School districts don’t require families to demonstrate financial need before enrolling their children, and millions of wealthy and middle-class kids attend school at the public expense across the country. Medicare and Social Security pensions are the two biggest federal examples: rich or poor, the government provides these programs whether or not their recipients “need” them.
It should come as little surprise that means-tested programs often carry a social stigma and entitlement programs are perennially popular.
LIHEAP for water?
Many local utilities provide some kind of means-tested assistance. With 50,000 community water systems operating across the country, these programs vary widely in design and administration.** No statewide water assistance programs exist, although California is building one. There is no federal low-income household assistance program for water or sewer bills. The closest analog is LIHEAP.
A LIHEAP-style water program is a fine idea in theory: it targets the needy population and helps pay for an essential but often expensive service. The program is familiar to the community advocacy crowd, and a network of state and local social service organizations already exists to help administer the program. But there are at least four big reasons to worry about federal LIHEAP-for-water as a cornerstone of affordability policy.
First, the extreme fragmentation of the water sector makes managing water bill assistance administratively costly in ways that it isn’t for energy. LIHEAP coordinates with the 3,200 electrical utilities and 1,400 gas utilities across the United States. There are 50,000 community water systems, and roughly 40,000 of those are very small, serving fewer than 3,300 people and employing just a handful of staff. Affordability is often most dire in these very small utilities in rural communities. Billing systems in these lightly-staffed utilities are often primitive and poorly-suited to coordinate with social service agencies. Making a LIHEAP-type program work for water will take months and significant investments in administrative systems and organizational capacity on the utility-side.
Second, like all means-tested programs, LIHEAP puts an administrative burden on the very people that it seeks to help. Learning about the program, applying, demonstrating eligibility, ensuring receipt, appealing decisions, 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.
Third, forty years of experience with LIHEAP demonstrates the limits of the program. Historically, LIHEAP has reached an average of just 16% of eligible households. That’s not 16% of all households, that’s 16% of the population that qualifies for the program. The all-time high-water mark for LIHEAP outreach came during the 2009-2010 recession response, when the program helped 22% of eligible households. In other words, at its very best, LIHEAP failed to reach 78% of the people who needed it.
Finally, it is unclear that a LIHEAP-style program would address the immediate need to stop water shutoffs and reconnect every household during a public health crisis. Even assuming the most optimistic administrative scenario, LIHEAP-style assistance will take several weeks or months to work its way from the U.S. Treasury to state governments to social service organizations and finally into water billing systems. After all that, the program’s impact on shutoffs and reconnections will still depend on local practices.
I don’t hate the idea of federal low-income assistance for water. A LIHEAP-style program would surely help many people and could be an important part of a systemic strategy to improve the American water sector. But such a program would do little to alleviate the immediate COVID-19 crisis and could blunt political momentum for more comprehensive and meaningful reform.
Last week I blogged about how the federal government could move swiftly to help keep water and sewer services flowing everywhere during the COVID-19 crisis. My idea is a one-time conditional, formulaic grant program to support water utilities that agree to end residential shutoffs, restore service universally, forgive outstanding penalties, and structure prices to meet affordability standards. It’s an unorthodox and admittedly blunt instrument, designed to tackle a short-term crisis as quickly as possible, with the lowest management costs and least administrative burden on families. Sustainable solutions for the water sector will require more fundamental reforms to the way that we govern, finance, and manage these critical systems after the pandemic has passed.
*Tax expenditures are also redistributive, but I’m trying to keep this post short so I’m leaving them aside.
**To my knowledge, there has never been a systematic study of water assistance program effectiveness over a larger number of utilities.