Policy Paper

CRS Report for Congress
Prepared for Members and Committees of Congress

The LIHEAP Formula: Legislative History and
Current Law

Libby Perl
Specialist in Housing Policy

September 8, 2010

Congressional Research Service

7-5700
www.crs.gov

RL33275

The LIHEAP Formula: Legislative History and Current Law

Congressional Research Service

Summary
The Low Income Home Energy Assistance Program (LIHEAP) provides funds to states, the
District of Columbia, U.S. territories and commonwealths, and Indian tribal organizations
(collectively referred to as grantees) primarily to help low-income households pay home energy
expenses. The LIHEAP statute provides for two types of funding: regular funds (sometimes
referred to as block grant funds) and emergency contingency funds. Regular funds are allocated to
grantees based on a formula, while contingency funds may be released to one or more grantees at
the discretion of the Secretary of the Department of Health and Human Services based on
emergency need.

Regular LIHEAP funds are allocated to the states according to a formula that has a long and
complicated history. (Tribes receive funds based on either their number of federally eligible
LIHEAP households compared to the total number in the state or on agreements with their states,
whereas territories receive a set percentage of total LIHEAP regular funds.) In 1980, Congress
created the predecessor program to LIHEAP, the Low Income Energy Assistance Program
(LIEAP) as part of the Crude Oil Windfall Profits Tax Act (P.L. 96-223). Because Congress was
particularly concerned with the high costs of heating, funds under LIEAP were distributed
according to a multi-step formula that benefitted cold-weather states. In 1981, Congress enacted
LIHEAP as part of the Omnibus Budget Reconciliation Act (P.L. 97-35), replacing LIEAP.
However, the LIHEAP statute specified that states would continue to receive the same percentage
of regular funds that they did under the LIEAP formula.

When Congress reauthorized LIHEAP in 1984 as part of the Human Services Reauthorization Act
(P.L. 98-558), it changed the program’s formula by requiring the use of more recent population
and energy data and requiring that HHS consider both heating and cooling costs of low-income
households (a change from the focus on the heating needs of all households). The effect of these
changes meant that, in general, funds would be shifted from cold-weather states to warm-weather
states. To prevent a dramatic shift of funds, Congress added two “hold-harmless” provisions to
the formula. The result of these provisions is a current law, three-tiered formula (sometimes
referred to as the “new” formula), the application of which depends on the amount of regular
funds that Congress appropriates.

The Tier I formula is used to allocate funds when the total LIHEAP regular fund appropriation is
less than or equal to the equivalent of a hypothetical FY1984 appropriation of $1.975 billion.
Above this level, funds are allocated according to Tier II of the formula, which includes a hold-
harmless level to prevent certain states from losing LIHEAP funds. Finally, Tier III applies to
appropriations at or above $2.25 billion, and includes a second hold-harmless provision, the hold-
harmless rate. Since FY1986, LIHEAP regular fund appropriations have exceeded the equivalent
of an FY1984 appropriation of $1.975 billion in FY2006, when the regular fund appropriation
was $2.48 billion; in FY2008, when appropriations slightly exceeded the trigger; and in FY2009
and FY2010, when Congress directed that $840 million be distributed according to the “new”
LIHEAP formula.

This report will be updated when new formula data are released and when proposed funding
levels change (see Appendix C).

The LIHEAP Formula: Legislative History and Current Law

Congressional Research Service

Contents
Introduction ……………………………………………………………………………………………………………….. 1

Predecessor Programs to LIHEAP ………………………………………………………………………………….. 2
Community Services Administration Energy Assistance Programs………………………………….. 2
Low Income Energy Assistance Program (LIEAP) ………………………………………………………. 5

The LIEAP Formula………………………………………………………………………………………….. 6
Enactment of LIHEAP …………………………………………………………………………………………………. 8

Continued Use of the LIEAP Formula ……………………………………………………………………….. 9
The 1984 LIHEAP Reauthorization: A New Formula …………………………………………………… 9

Formula Discussions …………………………………………………………………………………………. 9
Introduction of a Hold-Harmless Level……………………………………………………………….. 10
Introduction of a Hold-Harmless Rate ………………………………………………………………… 10
LIHEAP Formula Statutory Language ………………………………………………………………… 11

Determining LIHEAP Regular Fund Allotments Using the “New” Formula …………………………. 12
Calculating the New Formula Rates ………………………………………………………………………… 12
Using the New Formula Rates to Allocate Funds to the States ……………………………………… 14

Tier I: Below $1.975 Billion……………………………………………………………………………… 15
Tier II: From $1.975 Billion up to $2.25 Billion …………………………………………………… 15
Tier III: At or Above $2.25 Billion …………………………………………………………………….. 16

Implementation of the “New” LIHEAP Formula ……………………………………………………….. 17

Figures
Figure B-1. Estimated Low Income Home Energy Assistance (LIHEAP) Allocations at

Various Hypothetical Appropriations Levels for Three Types of States …………………………….. 27

Tables
Table 1. Select Energy Assistance Formulas, FY1975-FY1980 ……………………………………………. 4

Table 2. Distribution of Funds Under LIEAP……………………………………………………………………. 8

Table 3. Low-Income Home Energy Program (LIHEAP): “Old” and “New” Allotment
Rates by State, 2010………………………………………………………………………………………………… 17

Table 4. Recent State Allotment Rates Under the “New” LIHEAP Formula …………………………. 20

Table A-1. LIHEAP Estimated State Allotments for Regular Funds at Various
Hypothetical Appropriation Levels …………………………………………………………………………….. 23

Table C-1. LIHEAP Actual State Regular Fund Allotments for FY2006 through FY2010
and Estimated FY2011 Allotments …………………………………………………………………………….. 30

The LIHEAP Formula: Legislative History and Current Law

Congressional Research Service

Appendixes
Appendix A. Estimated Allotments to the States Under Various Hypothetical

Appropriations Levels ……………………………………………………………………………………………… 22

Appendix B. Further Depiction of How State Allotments Depend Upon Appropriation
Levels …………………………………………………………………………………………………………………… 26

Appendix C. Actual LIHEAP Regular Fund Allocations to the States, FY2006-FY2010
and Estimated Allocations, FY2011……………………………………………………………………………. 28

Contacts
Author Contact Information ………………………………………………………………………………………… 34

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Introduction
The Low Income Home Energy Assistance Program (LIHEAP) is a block grant program
administered by the Department of Health and Human Services (HHS) under which the federal
government gives annual grants to states, the District of Columbia, U.S. territories and
commonwealths, and Indian tribal organizations to operate multi-component home energy
assistance programs for needy households.1 Established in 1981 by Title XXVI of P.L. 97-35, the
Omnibus Budget Reconciliation Act, LIHEAP has been reauthorized and amended a number of
times, most recently in 2005, when P.L. 109-58, the Energy Policy Act, authorized annual regular
LIHEAP funds at $5.1 billion per year from FY2005 through FY2007.2

The federal LIHEAP statute has very broad guidelines, with almost all decisions regarding the
program’s operation made by the states. Recipients may be helped with their heating and cooling
costs, receive crisis assistance, have weatherizing expenses paid, or receive other aid designed to
reduce their home energy needs. Households with incomes up to 150% of the federal poverty
income guidelines or, if greater, 60% of the state median income, are federally eligible for
LIHEAP benefits. States may adopt lower income limits, but no household with income below
110% of the poverty guidelines may be considered ineligible. Note, however, that in the FY2009
and FY2010 appropriations acts (P.L. 110-329 and P.L. 111-117), Congress gave states the
authority to raise eligibility limits to 75% of state median income. The most current HHS data
show that an estimated 5.5 million households received winter heating or winter crisis assistance
in FY2006 (the largest share of LIHEAP funds pay for heating assistance).3

The LIHEAP statute provides for two types of program funding: regular funds—sometimes
referred to as block grant funds—and emergency contingency funds. Regular funds are allotted to
states on the basis of the LIHEAP statutory formula, which was enacted as part of the Human
Services Reauthorization Act of 1984 (P.L. 98-558).4 The way in which regular funds are
allocated to states depends on the amount of funds appropriated by Congress. The second type of
LIHEAP funds, emergency contingency funds, may be released and allotted to one or more states
at the discretion of the President and the Secretary of HHS.5 The funds may be released at any
point in the fiscal year to meet additional home energy assistance needs created by a natural
disaster or other emergency.6

The remainder of this report discusses only the history and methods of distributing regular
LIHEAP funds.

1 For additional information on LIHEAP, see CRS Report RL31865, The Low Income Home Energy Assistance
Program (LIHEAP): Program and Funding, by Libby Perl.
2 LIHEAP is codified at 42 U.S.C. §§8621-8630.
3 U.S. Department of Health and Human Services, Administration for Children and Families, FY2006 LIHEAP Report
to Congress, April 22, 2009, p. 21.
4 The formula section is codified at 42 U.S.C. §8623.
5 Depending on how Congress appropriates them, contingency funds may remain available for distribution in more than
one fiscal year or they may expire with the fiscal year for which they were appropriated.
6 The statutory definition of emergency includes a significant home energy supply shortage or disruption, a significant
increase in the cost of home energy, a significant increase in home energy disconnections, a significant increase in
participation in a public benefit program, a significant increase in unemployment, or an event meeting such criteria as
the Secretary determines to be appropriate. 42 U.S.C. §8622.

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Predecessor Programs to LIHEAP
The mid- to late-1970s, a time marked by rapidly rising fuel prices, also marked the beginning of
federal energy assistance funding for low-income households. The first national program to help
low-income households was created in early 1975 to assist families with energy conservation
primarily through home weatherization. This assistance was provided through a new Emergency
Energy Conservation Program (EECP), enacted as part of the Headstart, Economic Opportunity,
and Community Partnership Act of 1974 (P.L. 93-644). The funds were administered by the
Community Services Administration (CSA), the successor agency to the Office of Economic
Opportunity, which was responsible for many of the programs created as part of the 1964 war on
poverty. Beginning in 1977, funds were also made available through the CSA to help families
directly pay for fuel (as opposed to weatherization expenses) via a variety of programs. Each of
these programs had in common a focus on the need for heating assistance (versus cooling
assistance).

Congress continued to appropriate funds for energy assistance programs through FY1980, at
which point a new program, the Low Income Energy Assistance Program (LIEAP) was enacted
as part of the Crude Oil Windfall Profits Tax Act of 1980 (P.L. 96-223). LIEAP, which was
administered by the Department of Health and Human Services (HHS), was funded for one year,
FY1981, before the creation of LIHEAP. Like the CSA programs, LIEAP emphasized heating
over cooling needs. This preference was reflected in both the CSA program formulas and the
LIEAP set of formulas, which used variables that benefitted cold-weather states to determine how
funds would be distributed. The LIEAP set of formulas continues to have relevance for the way in
which LIHEAP funds are distributed. This section of the report describes these predecessor
programs to LIHEAP and their distribution formulas.

Community Services Administration Energy Assistance Programs
On January 4, 1975, President Ford signed into law the Headstart, Economic Opportunity, and
Community Partnership Act of 1974 (P.L. 93-644), which contained funds for a new program,
called the Emergency Energy Conservation Program (EECP). The program was to be
administered by the Community Services Administration (CSA), and its purpose was

to enable low-income individuals and families, including the elderly and the near poor, to
participate in energy conservation programs designed to lessen the impact of the high cost of
energy … and to reduce … energy consumption.

The law governing EECP listed a number of eligible activities in which states could participate,
including energy conservation and education programs; weatherization assistance; loans and
grants for the purchase of energy conservation technologies; alternative fuel supplies; and fuel
voucher and stamp programs. Despite the variety of activities that could be funded through the
program, the first CSA funding notice regarding the program limited eligible activities to
“winterizing” homes and to giving emergency assistance “to prevent hardship or danger to health

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due to utility shutoff or lack of fuel.”7 During the four years the EECP was funded, the majority
of funds were used for weatherization expenses.8

EECP funds were distributed to states via a formula that benefitted those states with high heating
costs. One formula variable in particular, a measure of “coldness” called heating degree days,
benefitted cold-weather states. Heating degree days measure the extent to which a day’s average
temperature falls below 65° Fahrenheit. For example, a day with an average temperature of 50°
results in a measure of 15 heating degree days. Because heating degree days are higher in cold
weather states, including the heating degree day variable in a formula favors states with greater
heating needs. Squaring the heating degree days magnifies this effect.9 The EECP formula took
the number of population-weighted heating degree days in each state, squared them, and
multiplied the result by the number of households in poverty that owned their homes to determine
how funds would be allocated.10 The CSA acknowledged the emphasis on heating needs in its
formula, stating that the FY1975 allocation “was heavily weighted to the coldest areas.”11 In the
three fiscal years that followed the first appropriation for the EECP, from FY1976 through
FY1978, the CSA changed somewhat the way in which it allocated funds to the states; however,
the factors continued to favor cold-weather states through use of either heating degree days or
heating degree days squared.12

The first year that Congress specifically appropriated funds for direct assistance to help low-
income households (those at or below 125% of poverty) pay their energy costs (instead of funds
that went primarily for weatherization and conservation activities) was FY1977. The FY1977
Supplemental Appropriations Act (P.L. 95-26) provided $200 million for a Special Crisis
Intervention Program to be administered by CSA. States could use funds to make direct payments
to fuel providers on behalf of low-income families lacking the financial resources to pay their
energy bills. The CSA directed states to target households where utilities had been shut off (or
were threatened with shut off) and who could prove dire need due to large energy bills.13
Although the law did not reserve funds exclusively for heating costs, the way in which funds
were allocated to the states emphasized heating need. Funds were distributed to the states based
on a formula that used (1) heating degree days squared, (2) the number of households in poverty,
(3) the number of persons above age 65 with incomes below 125% of poverty, and (4) the relative
cost of fuel in the region.14 Congress again appropriated $200 million for crisis intervention in

7 Community Services Administration, “Character and Scope of Specific Community Action Programs: Emergency
Energy Conservation Program,” Federal Register, vol. 40, no. 145, July 28, 1975, p. 31603.
8 See, for example, House Appropriations Committee, report to accompany H.R. 4877, the FY1977 Supplemental
Appropriations Act, 95th Cong., 1st sess., H.Rept. 95-68, March 11, 1977: “The funds in this program are used primarily
to purchase materials to insulate the homes of low-income families.”
9 For example, if a southern state experiences 700 heating degree days in a year and a northern state experiences 7,000,
the northern state has 10 times as many heating degree days as the southern state. However, if both numbers are
squared, the northern state has 100 times as many heating degree days as the southern state.
10 Community Services Administration, “Emergency Energy Conservation Program: Submission of Funding Plans,”
Federal Register, vol. 41, no. 208, October 27, 1976, p. 47096.
11 Federal Register, vol. 41, no. 208, October 27, 1976, p. 47096.
12 See Ibid., pp. 47096-47097.
13 Community Services Administration, “Special Crisis Intervention Program: General Information, Application
Procedures, and Post Grant Requirements,” Federal Register, vol. 42, no. 125, June 29, 1977, p. 33240.
14 The formula was described in the Senate Appropriations Committee report to accompany H.R. 4877, the FY1977
Supplemental Appropriations Act, 95th Cong., 1st sess., S.Rept. 95-64, March 24, 1977. The CSA implemented this
formula, which it described in guidance to the states. See the Federal Register, Ibid.

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both FY1978 and FY1979.15 In FY1978, funds were available to households with the need for
assistance as the result of an energy-related emergency such as lack of fuel, a natural disaster, fuel
shortages, and widespread unemployment.16 In FY1979, funds were made available to assist
families facing “substantially increased energy costs and/or life- or health-threatening situations
caused by winter-related energy emergencies.”17

In FY1980, Congress appropriated a total of $1.6 billion for energy assistance. Of this amount,
$400 million was appropriated for the Energy Crisis Assistance Program (ECAP, a CSA program
similar to the Special Crisis Intervention Program) through two separate appropriations.18 The
remainder, $1.2 billion, was appropriated as part of the FY1980 Department of the Interior
Appropriations Act (P.L. 96-126) to the Department of Health, Education, and Welfare (HEW, the
predecessor to HHS) for cash assistance and crisis intervention due to high energy costs. This
appropriation to HEW is sometimes referred to as Low Income Supplemental Energy Allowances.
Of this $1.2 billion, $400 million was to be distributed specifically to recipients of Supplemental
Security Income (SSI). The rest of the funds appropriated to HEW, approximately $800 million,
as well as the ECAP funds, were distributed to states on the basis of three factors: heating degree
days squared, the number of households below 125% of poverty, and the difference in home
heating energy expenditures between 1978 and 1979. The formula used to distribute the $400
million for SSI recipients used these same factors but also included the number of SSI recipients
in each state relative to the national total.

Table 1. Select Energy Assistance Formulas, FY1975-FY1980

Emergency Energy
Conservation Program:a

FY1975
(P.L. 93-644)

Special Crisis
Intervention Program:b

FY1977
(P.L. 95-26)

Low Income Supplemental Energy
Allowances:c

FY1980
(P.L. 96-126)

(Heating degree days)2 * number
of homeowners in poverty

(Heating degree days)2 ½ (Heating degree days)2 * number of
households below 125% of poverty

Number of households in poverty ½ Difference in home heating
expenditures between 1978 and
1979

Number of persons over age 65 with
income less than 125% of poverty

Relative cost of fuel

Source: For the formula under P.L. 93-644, see Community Services Administration, “Emergency Energy
Conservation Program: Submission of Funding Plans,” Federal Register, vol. 41, no. 208, October 27, 1976, p.
47096. For the formula under P.L. 95-26, see Senate Appropriations Committee, report to accompany H.R.

15 Funds were appropriated through the FY1978 Supplemental Appropriations Act (P.L. 95-240) and in FY1979
through a continuing resolution (P.L. 95-482). In FY1978, Congress called the program Emergency Energy Assistance
Program and in FY1979 called it the Crisis Intervention Program (excluding the word “Special” from the title).
16 Community Services Administration, “Emergency Energy Conservation Program: Funding Requirements for
Emergency Energy Assistance Program,” Federal Register, vol. 43, no. 46, March 8, 1978, p. 9476.
17 Community Services Administration, “Emergency Energy Conservation Program: Fiscal Year 1979 Crisis
Intervention Program, “Federal Register, vol. 43, no. 250, December 28, 1978, pp. 60466-60467.
18 Congress appropriated $250 million for ECAP as part of an FY1980 Continuing Resolution (P.L. 96-123, referencing
the FY1980 Departments of Labor, Health and Human Services and Education Appropriations bill, H.R. 4389), and
appropriated an additional $150 million as part of the Department of the Interior Appropriations Act (P.L. 96-126).

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4877, the FY1977 Supplemental Appropriations Act, 95th Congress, 1st session, S.Rept. 95-64, March 24, 1977.
The formula for P.L. 96-126 is contained within the law.

Note: * Multiplied by.

a. Of the funds appropriated for the Emergency Energy Conservation Program, 90% were distributed via the
formula, while the remaining 10% were divided among the 12 coldest states as measured by heating degree
days.

b. The Special Crisis Intervention Program did not specify a weight for each of the four variables used to
determine allocations.

c. Of the $1.6 billion appropriated for energy assistance in FY1980, $400 million was set aside for SSI
recipients. The formula to distribute those funds was ⅓ heating degree days2 * number of households below
125% of poverty, ⅓ difference in home heating expenditures between 1978 and 1979, and ⅓ SSI recipients
in each state relative to the national total.

Low Income Energy Assistance Program (LIEAP)
In April 1980, Congress replaced the patchwork energy assistance programs of the late 1970s
with one program, the Low Income Energy Assistance Program (LIEAP). LIEAP, the direct
predecessor program to LIHEAP, was established as part of the Crude Oil Windfall Profits Tax
Act of 1980 (P.L. 96-223). The program was introduced in the Senate as the Home Energy
Assistance Act (S. 1724) and was incorporated into H.R. 3919, the bill that would become the
Crude Oil Windfall Profits Tax Act, on the Senate floor. Like the energy assistance programs of
the late 1970s such as the Special Crisis Intervention Program and the Low Income Supplemental
Energy Allowances, LIEAP allocated funds to states in to help low-income households pay
their home energy costs. Also like these predecessor programs, LIEAP allocated funds to states
using a method that put more emphasis on the heating needs of cold-weather states than it did on
cooling needs.

During the 1970s, home energy costs had increased substantially while wages failed to keep up.
According to the report from the Senate Committee on Labor and Human Resources that
accompanied the Home Energy Assistance Act (S. 1724), between 1972 and 1979, heating oil
prices increased by 293%, natural gas prices by 155%, and electricity prices by 91%, while wages
grew by 59% during the same period.19 During 1978, low-income households spent an estimated
18.4% of their income, on average, to pay their utilities, with expenditures in New England by
low-income households exceeding 30% of income.20 The Senate Committee on Labor and Human
Resources held numerous hearings about the need for energy assistance to address the
“dramatically rising cost of home heating.”21

The resulting formula in S. 1724 reflected, in part, the committee’s concern that the problem of
rising energy costs were “most critical in areas with high home heating costs.”22 Although
subsequent changes were made to the LIEAP formula in S. 1724 before it was enacted, the need
for heating assistance continued to be paramount. The formula developed under LIEAP has been

19 Senate Committee on Labor and Human Resources, Home Energy Assistance Act, report to accompany S. 1724, 96th
Cong., 1st sess., S.Rept. 96-378, October 25, 1979, p. 2.
20 Ibid., p. 3.
21 Also discussed at the hearings was “the need for some level of assistance to be provided to certain eligible
households, where excessive heat is a factor in threatening life and health.” Ibid., p. 5. This did not figure prominently
into the formula, however.
22 Ibid., p. 12.

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used to distribute LIHEAP funds as recently as FY2007, so the variables used are important in
understanding the current formula and the way in which it is used to distribute funds.

The LIEAP Formula

When the Home Energy Assistance Act (S. 1724) was introduced, it contained a formula that
would have distributed funds to the states on the basis of half on residential energy expenditures
and half on heating degree days (the heating degree day measure is described in the previous
section “Community Services Administration Energy Assistance Programs”). However, on the
Senate floor, the program formula was amended, resulting in a multi-part formula under which
states would receive funds.

Formula Under P.L. 96-223

Under the final LIEAP formula in P.L. 96-223, states received funds under one of four alternative
formulas used to measure home energy need, depending on which one benefitted a state the most.
Three of the four formulas contained different combinations of several factors: residential energy
expenditures; heating degree days or heating degree days squared; and the number of low-income
households in the state.

• Under the first formula alternative, half of the allocation was based on residential
energy expenditures and half on heating degree days squared multiplied by the
number of households at or below the Bureau of Labor Statistics (BLS) lower
living standard.23

• Under the second formula alternative, one-quarter of the allocation was based on
residential energy expenditures and three-quarters based on heating degree days
squared multiplied by the number of households at or below the BLS lower
living standard.

• Under the third formula alternative, half of the allocation was based on
residential energy expenditures and half based on heating degree days …