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OCTOBER 3, 2000


Good morning, Mr. Chairman and members of the Committee. I am Olivia Golden, Assistant Secretary for Children and Families within the Department of Health and Human Services. I appreciate the opportunity to appear before you today to talk about the Low Income Home Energy Assistance Program (LIHEAP) and how it helps millions of Americans maintain a safe, comfortable, and stable home environment. The topic of this hearing - the effect of the energy crisis on low-income families - takes us back to the beginnings of the LIHEAP program. The program grew out of a series of emergency programs generated by the energy crises of the late 1970s. It took on its current form with the realization that there needs to be a continuing Federal role in ensuring that low income families and individuals have adequate home energy balanced with State flexibility in designing the best program approach to meet their needs.

The LIHEAP program continues to fulfill its dual responsibility to provide ongoing assistance where it is most needed and to respond to emergency situations such as extreme weather conditions, supply disruptions, or price spikes. I will discuss LIHEAP emergency contingency funding and the Leveraging Incentive Program a little later, but first, I would like to tell you more about the basic, underlying program.

LIHEAP Block Grant Program

In FY 1999, LIHEAP provided winter assistance to about 3.6 million households. Forty-seven percent of those households included children; thirty-five percent included at least one elderly person; sixty percent received food stamps; and thirty percent received Supplemental Security Income (SSI). Twenty-four percent of families receiving LIHEAP assistance did not receive benefits under any other public assistance program, or reside in subsidized housing.

The basic appropriation for FY 2000 was $1.1 billion, the same level as in FY 1999. In its FY 2000 appropriations cycle, Congress enacted an advance appropriation of $1.1 billion for FY 2001, as requested by the President.

LIHEAP Grantees

Funds are allocated to States based on a statutory formula established when the program began based on low income population, home energy expenditures by low-income households and cold weather. Almost two-thirds of the funds go to Northeastern and Upper Midwestern States. State and Federally recognized tribes may request direct funding from the Department of Health and Human Services, and about 130 tribes and tribal organizations do so. A very small amount goes to the territories. When I speak of States today, I really am referring to all LIHEAP grantees.

Types of Assistance

The LIHEAP statute defines "home energy" as a source of heating or cooling in residential dwellings. All States run a heating assistance program. Each LIHEAP grantee also has a method to deal with households facing crisis situations -- generally a shut-off notice or an empty fuel tank. Most States deal with crises in a separate component that operates apart from, and sometimes at different times than, the heating assistance component.

Help in paying winter heating bills can mean the difference between self-sufficiency and financial disaster. An elderly person, a family moving from welfare to self-sufficiency, or a working parent may be able to make ends meet most of the year. A LIHEAP benefit to help with the major heating bill can make it possible for the elderly person to stay in her home, for the family on welfare to move toward self-sufficiency, and for the working parent to avoid having to seek other forms of public assistance.

For example, according to a study on the relationship between utility termination and homelessness, 32 percent of homes in Philadelphia where electric service was discontinued were abandoned within one year, as were 22 percent of the homes where residential gas service was terminated. A study of the effect of unaffordable home energy bills in Missouri found that more than half of frequent movers claimed unaffordable heating bills were an important factor contributing to their most recent move. In this way, LIHEAP assists low-income families with meeting their total housing costs.

You'll be hearing a little later from Jerry McKim, the administrator of Iowa's Energy Assistance Program, about his state's recent study that found that households faced with unaffordable energy bills were going without basic necessities such as food and medical care, or falling behind in paying their rent or mortgage in order to pay their heating bill. We are impressed time and again by the resourcefulness of LIHEAP staff in State and local agencies to use LIHEAP funds to provide meaningful help to families facing a home energy crisis. These workers on the front lines generally resolve or avert the crisis by telephoning the energy vendor, who maintains or restores service based on an assurance that a LIHEAP benefit is to be paid. If the household's arrearage is higher than the maximum benefit amount, local workers often can find other sources of assistance to supplement the LIHEAP benefit. They can also refer the household to other forms of assistance they might need.

For example, Federal LIHEAP staff told me about one letter they received from a man whose power had been disconnected. He also was facing eviction because a motorcycle accident had left him unable to work. The federal staff referred the case to the State LIHEAP program. The local community action agency caseworker not only helped the man get LIHEAP benefits, but also helped him find a job and worked out a payment arrangement with his landlord.

A LIHEAP crisis benefit obviously means a warm home (or sometimes a cool one). But it also often means the difference between a family staying in their home or having to move, with all the disruption that entails. Having to move because there's no heat can mean that a person can't get to his job, that a child has to change school or leave a Head Start program, or that child care arrangements must be changed.

LIHEAP funds also can be used to provide cooling assistance in the summer, but block grant funds are not often used for that purpose. While Only a few States have programs that offer either heating or cooling assistance, very few have separate cooling components under the block grant program.

Many States take advantage of the opportunity to use as much as 15 percent of their LIHEAP funds for weatherization and other low-cost energy-related repairs. Under certain circumstances, a State can ask for a waiver to use up to 25 percent for weatherization. The flexibility to use a small portion of LIHEAP funds in this way allows States to help households make their energy bills more affordable.

States can change their programs during the year simply by amending their State plans. They do not need approval from us to do so. This often happens when States receive emergency contingency funds, but they can make changes at other times as well.

Eligibility Requirements

Grantees may set their maximum income eligibility level as low as 110 percent of the poverty level or as high as the greater of 150 percent of the poverty level or 60 percent of State median income.

Legislative changes in 1994 made it possible for grantees to look less at absolute income levels and more at need. In setting eligibility levels, States may give priority to households that pay a large percentage of their income for home energy or that include members who have the greatest energy need because of age or health. We are engaged in a continuing process with our grantees to give States the tools they need to make their targeting more precise and to develop performance measures.

You will note that flexibility is a common theme in my testimony on the LIHEAP block grant. I can't emphasize enough the importance of the flexibility that the statute gives States to develop their own programs. Clearly, the needs of Maine are very different from the needs of Florida, or even Connecticut. Florida, undoubtedly, is a lot warmer than Maine, but Florida also has about 12 times more low-income households than Maine. Connecticut and Maine both have a lot of cold weather, but Maine is a much more rural State than Connecticut. In Maine, small "Mom and Pop" vendors, as opposed to large, commercial vendors, provide about half of the fuel oil and kerosene for energy to low income households. Even though all three of these states are heavy users of fuel oil for heating, the different circumstances of each state require that they negotiate different pricing arrangements with vendorsnegotiating this type of energy for low-income families requires different approaches. Small, local vendors present more of a challenge for low-income families in Maine than in much more For example, more urban States such as Massachusetts or Connecticut can negotiate lower prices for LIHEAP recipients because where the the larger commercial vendors in these states can absorbnegotiated prices for this population the reduction in price for this population. The small, local vendors in Maine, by contrast, are less able to offer discounted prices. States have wide flexibility to adjust their programs to account for such local differences.

A number of States have been successful in negotiating reduced rates for LIHEAP households. For example, Massachusetts and Connecticut have very sophisticated pricing mechanisms that allow them to pay a fixed rate over the price of fuel oil in the harbor, thus realizing substantial savings for their clients. Minnesota negotiates specific discount rates with each of its fuel vendors.

Because the funding formula isvery heavily weighted by cold weather patterns, the Northeastern and upper Midwestern States receive LIHEAP funding that is proportionately greater than States in the South or West. When it comes to LIHEAP, one size definitely does not fit all.

Emergency Contingency Funds

In the 1994 LIHEAP reauthorization bill, Congress authorized an annual emergency contingency fund. Funds appropriated for this fund are available for immediate release in emergency situations outlined in the statute, generally when there has been unusually hot or cold weather or when there are supply disruptions and/or sharp increases from normal home energy prices. The number of States that receive funds, the amount released, and the distribution among States depends on the nature of the emergency situation.

This past fiscal year (FY 2000) saw emergency releases that ran the gamut of emergency situations. Last winter, the President exhausted the $300 million contingency fund appropriation in three releases responding to very sharp increases in the price of home heating oil and liquefied petroleum gas (or LPG). These price increases affected all States, but primarily those in the Northeast that have the largest proportion of fuel oil users. For that reason, the bulk of these funds went to the Northeastern States - with $215 million allocated based exclusively on the impact of high fuel oil and LPG prices on individual StatesStates, weighted by the number of low income households in each State.

The President previously had released $5 million of FY 2000 emergency funds to New Jersey to help with the energy-related needs arising from Hurricane Floyd.

In July, Congress enacted a supplemental appropriation that included an additional $600 million in contingency funds, as the President had requested. So far, the President has released approximately $445 million of the available funds.

During the summer, a number of Southern states experienced a heat waves that broke records for severity and duration.. The President released $35 million tothe 10 eight States most severely impacted by the heat. He also released a little over $9 million for two more localized crises in Alaska and California.

Finally, last week the President released $400 million so that States could prepare for significant increases anticipated in winter heating bills for users of fuel oil, LPG, and natural gas. Half of this funding was allocated based on the normal block grant formula and half based on the block grant formula weighted by household use of these three fuels.

By releasing these funds now, the President made it possible for States to plan ahead on how best to address price increases in the fuels that their residents use. I can assure you we will continue to monitor weather, supply and prices as the winter progresses and respond appropriately.

Leveraging Incentive Program

In addition to the block grant and contingency funding, Congress enacted a Leverage Incentive Program that rewards grantees that successfully develop non-Federal resources to help low income people meet their home heating and cooling needs. The first grants under this program were made in FY 1992.

In FY 2000, we awarded $20.6 million to 37 States and 29 Tribal grantees that reported 491 countable leveraging activities worth a total of $624.5 million. Examples of leveraging activities include utility and fuel discounts, donations of materials such as air conditioners or weatherization supplies, and State or tribal funds added to the program.

This program has been very successful in increasing the assistance available to help low income households keep warm during the winter.


In conclusion, let me just reiterate that LIHEAP is a program that works. Through the normal funding mechanisms, it works to help millions of America's most needy families maintain a healthy temperature in their homes. Through the emergency contingency process, this program is able to respond to crisis situations such as supply disruptions, price spikes or extreme weather conditions. We can all be proud of the way LIHEAP has worked to serve those most in need, including many hard-pressed working families. This program is an excellent example of the Administration, Congress, and the States working together to design and continue to support a critical program.

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