Households Still Have Not Received Aid from New Federal Water Bill Assistance Program

By Brett Walton, Circle of Blue – November 10, 2021

Last December, spurred by household financial distress due to the pandemic, Congress authorized the first-ever federal program to help low-income residents pay overdue water bills. Lawmakers provided $638 million to set up the program and assist households with their water debt.

Four months later, in March 2021, federal lawmakers doubled down on the approach. They added $500 million to the pot, an addition that brought total funding to more than $1.1 billion for the Low-Income Household Water Assistance Program, or LIHWAP, as it came to be called.

Today, households are still waiting. No LIHWAP funding has been delivered to customers. The U.S. Department of Health and Human Services, which is in charge of the program, told Circle of Blue it has distributed $855 million to states. But states are merely an intermediary. Once they have the funds, states then work with community agencies or individual utilities to identify eligible households and get them to apply for aid. Approved households will see a credit on their utility bill. That has not yet happened.

Those versed in the workings of federal benefits programs and water utility operations knew that starting a new initiative, even one modeled after a federal aid program for energy bills, would not be a quick and simple task.

Alexandra Campbell-Ferrari, executive director of the Center for Water Security and Cooperation, a research group, identified many of the hurdles to overcome. Neither federal agencies nor states nor utilities had much data on the size of customer water debts or which households were in financial distress. Those information gaps left them without the basis for understanding who needed the money. What’s more, new relationships between government and local agencies had to be formed.

“None of these pathways had been created so it made it difficult to get a new program off the ground,” Campbell-Ferrari told Circle of Blue.

Observers also knew of other shortcomings. Even though there is limited national data on customer water debt, the few existing data points indicated that the funding would not be sufficient for the scale of the problem. The Michigan Department of Health and Human Services, for instance, notes $252 million in residential water debt in the state. Yet Michigan’s LIHWAP allocation is just $36 million.

Slow Roll Out

Forty-nine states, the District of Columbia, five territories, and 103 Native American tribes are eligible for LIHWAP funds. North Dakota decided not to join the program because it was using other federal funding sources for customer water debt relief.

Though LIHWAP was allocated more than $1.1 billion, not all of that money will help people in need. Because it is a new program an entire administrative apparatus must be constructed — things like staff, databases, and report tracking. The law allows no more than 15 percent of LIHWAP funds to be spent on these support structures.

There are other overhead expenses, too. Outreach to eligible customers to inform them about the program, reviewing applications, and chasing down missing application paperwork do not count as “administrative costs.” States can also apply their share of the LIHWAP funds toward these activities.

In the end, there will be far fewer dollars available to needy households than the $1.1 billion headline figure suggests. California was allocated $116 million in LIHWAP funds. The state’s work plan, which has been approved by the Department of Health and Human Services, maps out projected spending. Fifteen percent will go toward administration, and 10 percent toward outreach and determining eligibility. Only three-quarters of the state’s allocation, or $87 million, will reach individual households.

The California Department of Community Services and Development, which is administering the state’s program, says it still has additional steps to take before households see a benefit. The department will release draft program guidelines in December for public comment. Among other things, the guidelines will determine how funds will be distributed within the state. Once the guidelines are approved, money will be sent to local partner organizations, which will make payments to utilities on behalf of customers. That is likely to happen early next year, the department said.

In the meantime, California lawmakers stepped in with their own water bill assistance program. A budget act signed into law in July allocated $985 million in federal American Rescue Plan Act funds to that purpose. The money is intended to help residents pay off past-due water bills that accumulated in the pandemic period of March 4, 2020 to June 15, 2021.

Based on data collected this summer, the State Water Resources Control Board estimates that total residential and commercial water debt is $324 million. That is far less than a $1 billion estimate that the board published in January. Blair Robertson, a board spokesperson, said the change reflects customers who paid off debts and utilities doing a more thorough analysis.

The State Water Resources Control Board is in charge of the state debt forgiveness program. Unlike the federal program, the board is not using community agencies as intermediaries. Instead it is sending funds directly to utilities, which will credit customer accounts and waive late fees. Those distributions began this month. The Los Angeles Department of Water and Power, the entity with the greatest need, received $285 million. (Allowances for administrative costs are much smaller for the state program. Utilities can use 3 percent of their funds or $1 million, whichever is less.)

The relative speed of this approach casts a light on the slower development of LIHWAP. For a program that was pitched as emergency relief for pandemic-induced financial pressures, waiting more than a year from congressional action to household benefit strikes some as too much red tape.

Kristina Surfus is the managing director of government affairs for the National Association of Clean Water Agencies, a trade group for wastewater utilities. NACWA supports a federal water bill assistance program and Surfus has been tracking the progress of LIHWAP.

Surfus told Circle of Blue that NACWA’s members are concerned at the slow pace. “There’s frustration at the moment for funds not going out,” she said.

Manny Teodoro of the University of Wisconsin, Madison, said that such delays should have been expected, especially when Congress gave so little guidance on the design of the program. The U.S. political system, which involves coordination with states, tribes, and territories, and the sheer number of water utilities — nearly 50,000 by one estimate — add more layers of complexity.

“Creating a new means-tested program from scratch is just really hard in this country,” said Teodoro, who studies water utilities and public policy. Even a long-running existing program like LIHEAP, the energy bill assistance program set up four decades ago, has limited reach. It provides aid to about one-sixth of eligible households.

Teodoro said that instead of establishing a new program during the pandemic, a faster option would have been grants to states, as is done with the Community Development Block Grant.

Down the road, Teodoro said, a federal water bill assistance program could piggyback on existing platforms, such as those used to distribute food aid. Incorporating water bill assistance into the SNAP system, he said, would fix several deficiencies with the current LIHWAP approach: it would cut down on administrative costs, reach more people, and deploy funding faster.

There are other concerns about LIHWAP’s management. Campbell-Ferrari and colleagues at the Center for Water Security and Cooperation reviewed 28 state LIHWAP plans. They found that where a person lives determines their access to funds and that households where water has been shut off may not necessarily be first in line for funding. States determine who is eligible for the program, what documentation they need, how to prioritize the distribution of funds, and how much money households can receive. Michigan, to cite one example, will cap funding at $1,000 per household. For California, the cap is $2,000 per household.

Campbell-Ferrari is also alarmed at the absence of publicly available data from the Department of Health and Human Services about how the states are implementing LIHWAP. “The lack of transparency is problematic,” Campbell-Ferrari said. “There’s no real opportunity to understand how the program is achieving its purposes.”

Future Moves

The long-term prospects for federal water bill assistance are unclear. LIHWAP does not have permanent authorization and there are debates in Congress about the best approach after December 31, 2023, the date by which states are required to hand out their allocations. The Department of Health and Human Services may have laid the foundation for a building that will be knocked down in two years.

Clues to the future can be divined in the infrastructure bill that is now headed to President Biden’s desk. In that behemoth piece of legislation Congress authorized a water bill assistance pilot program run by the U.S. Environmental Protection Agency. However, no funding was included and a nationwide water affordability needs assessment must first be completed, to understand the scale of the problem.

Separately, the Build Back Better Act, the president’s social spending bill, allocates to the EPA $225 million in fiscal year 2022 to help low-income households pay water debts or reduce their bills.

Those two legislative moves, Surfus said, indicate that sentiment in Congress is shifting toward the EPA as the home for a permanent water bill assistance program, if one is eventually created. There are pros and cons. The EPA has existing relationships with water utilities, but it does not have much experience running benefits programs like the Department of Health and Human Services.

But even if funding is appropriated for an EPA program, the agency will face a task similar to that of the LIHWAP architects: starting a new program. Though some of the foundations of LIHWAP could be transferred, an EPA program would also require staff and paperwork and would not immediately begin handing out assistance.

“It’s not going to happen overnight,” Surfus said.