Better federal water bill assistance with this one weird trick

When Congress created a new $638 million federal Low Income Household Water Assistance Program (LIHWAP) last December, it was part of a massive COVID relief bill. In March, Congress added another $500 million to the program as part of the American Rescue Plan. Nearly nine months after the program’s creation, LIHWAP has yet to send a dime to a single water or sewer customer. That’s not an indictment of leadership at the Department of Health & Human Services (HHS) the agency charged with administering LIHWAP. Building and running assistance programs is really hard—especially for water. HHS and their state and tribal partners have spent the past several months setting up administrative procedures. The legislation that created LIHWAP virtually guaranteed that its implementation would be slow.*

For political purposes, LIHWAP was packaged as an emergency measure to aid a nation reeling from a public health disaster. But many of LIHWAP’s legislative champions envision a permanent, ongoing federal program similar to LIHEAP. I’m hearing rumblings from city halls, state agencies, and Capitol Hill that Congress is looking to build an ongoing LIHWAP into the federal budget currently under development.

But before committing to making LIHWAP a permanent part of the federal assistance landscape, we ought to consider a different agency and different approach to providing water and sewer assistance. Rather than building a permanent LIHEAP-style program under HHS, what if we leveraged a long-standing, successful program under the U.S. Department of Agriculture (USDA)?

What if we allowed participants in USDA’s Supplemental Nutritional Assistance Program (SNAP—formerly known as Food Stamps) to use SNAP benefits to pay for their water/sewer bills?

Food Stamps → SNAP

SNAP’s origins trace to the Food Stamps program in 1939 as part of Franklin Roosevelt’s New Deal. Income-qualified individuals and families were issued coupons that could be exchanged for approved grocery items. The Food Stamps program expired at the end of World War II, but was reintroduced in the 1960s and has been operating ever since. The program is administered by the USDA in cooperation with state agencies.

In the 1990s, USDA stopped issuing paper coupons, renamed the program SNAP, and began providing benefits through electronic benefit transfer (EBT) cards. These EBT cards look like any other credit or debit cards, reducing the stigma that had been associated with using Food Stamps. Eligible households are issued EBTs, which are loaded with benefits each month. The benefit amount depends on household size and income. SNAP benefits may be used to buy a wide range of food items. SNAP cannot be used to buy alcohol, tobacco, household supplies, or restaurant meals. In 2020, SNAP provided more than $79 billion in benefits to households with incomes below 130% of federal poverty rate. With low administrative costs and a strong return on social investment, the program is one of America’s most successful federal anti-poverty programs.

Most importantly for present purposes, currently SNAP benefits can be used to buy bottled water; they cannot be used to pay for a water utility bill. A 2016 study found that roughly 1.2% of SNAP expenditures are for bottled water. Although that is small in percentage terms, it equates to nearly $950 million annually in bottled water paid for by the federal government.**

SNAP-H₂O?

Rather than building a cumbersome and complex system of bill assistance to provide benefits through tens of thousands of water utilities, what if we simply channeled the envisioned billions in federal water assistance through USDA and allowed SNAP recipients to pay for their water bills with their EBT cards?

A single sentence in federal law could make water bills eligible for payment through SNAP. There are good reasons to think that doing so will result in dramatically higher participation, much wider reach, and with far greater administrative efficiency than we would see with a permanent LIHWAP program.

• Higher participation. LIHWAP is modeled on LIHEAP, which after 40 years of operation has an average participation rate of just 16%. A recent review of assistance programs run by the nation’s largest water utilities finds similarly low participation rates.
  
  By contrast, SNAP achieves an astonishing 84% participation by eligible households. Extending SNAP benefits to water would immediately help the 40 million people already enrolled in the program—without having to learn about, consider, apply for, or be screened for participation in yet another assistance program.
  
  
• Wider reach. A perennial problem for water bill assistance programs is helping “hard-to-reach” customers—that is, people who receive water service, but do not pay a water bill directly. Typically that means renters, for whom water and sewer costs are built into their leases. It’s difficult for water utilities to craft assistance programs to help low-income renters without inadvertently providing a benefit to landlords.
  
  SNAP sidesteps the hard-to-reach problem. SNAP recipients who pay their own water bills can use their EBT cards to pay the bill. SNAP recipients who pay for water through their rent can use the increased benefit associated with water assistance to pay for food items. Assessments of SNAP benefits indicate that the allotted benefits still fall short of basic nutrition needs in most of the country, so the higher benefit will go to good use.
  
  
• Cheaper, faster administration. One of SNAP’s greatest advantages is speed of administration. “SNAP benefits are one of the fastest, most effective forms of economic stimulus because they get money into the economy quickly during a recession” according to the nonpartisan Center on Budget & Policy Priorities. SNAP’s qualification, distribution, and audit processes are well established and work. Remember how long it’s taking to get LIHWAP up and running? Thanks to EBT cards, SNAP funds appropriated by Congress can be channeled from USDA, through state agencies, and into the pockets of low-income households in a matter of weeks or even days. 
  
  From an administrative perspective, extending SNAP benefits to water/sewer bills would be a matter of adding water utilities as approved vendors in each state. SNAP adjustments for utilities bills may need to be modified in some states. These processes will take some time, but far less time that setting up LIHWAP administrative procedures. State agencies and utilities will not need to hire staff to manage assistance. More importantly, making water utilities eligible to receive payments through SNAP puts no new administrative burden on low-income customers. 
  
  SNAP is also efficient: 92% of the program’s costs pay for food for low-income families, with just 8% spent on administration. That’s lower than the roughly 9-10% costs for LIHEAP administration and the 15% administrative cost built into LIHWAP. 

Making it work

If Congress wants to provide the greatest water affordability relief to the most people at the lowest cost, then SNAP H₂O is a promising path. SNAP beneficiaries are already spending nearly a billion dollars a year on bottled water. Increasing SNAP funding and expanding the program’s scope can help people pay their water bills instead.^†

*That’s why I preferred formulaic, categorical grants for emergency relief, rather than building a whole new program from scratch. Alas, there’s not much of a lobby for efficient administration.

**After accounting for administrative costs, LIHWAP’s first tranche of funds ($967 million) is comparable to the amount that SNAP recipients spend on bottled water each year.

†Customers who pay for their water bills with SNAP should be exempt from utilities taxes.