It started with a simple idea to help low-income residents of Jackson, Mississippi, lower their water bills with as little red tape as possible.

Now this has led to federal authorities threatening to cut off all of Mississippi from food stamps.

In February, the U.S. Department of Justice and the Department of Agriculture declared that JXN Water’s plan to automatically $30 off to all SNAP recipients, better known as food stamps, is a violation of the privacy of those receiving these benefits. If the utility went through with its plan, federal authorities threatened to strip the state of access to the Supplemental Nutrition Assistance Program.

Nearly 400,000 people in the state rely on SNAP to pay their monthly grocery bills. The threat of losing one of the most widely used social programs in the state with the highest poverty rate has prompted Mississippi’s attorney general to publicly support the arguments of the federal authorities against the rebate plan.

At the same time, JXN Water, the private water utility created to repair and operate the city’s broken water system, insists that this is ultimately the best way to enable the lowest-income customers to pay their water bills while generating enough revenue to end the city’s long and messy history of water supply problems.

Increasing water prices while reducing bills for some

For at least a decade, water bills in Jackson were often lost or simply incorrect. It seems like everyone in town has a story about a surprise four-figure bill that landed in either their or a family member’s mailbox.

The water system problems reached national proportions in 2022, when the city spent nearly seven weeks without potable drinking waterA federal judge then hired an outside manager, Ted Henifin, to operate and repair the system. To do so, he created JXN Water as the city’s new private utility.

Then he got into the dilemma of the water world.

Water experts often say that to maintain water quality, you have to raise prices for customers. Henifin argues that most people on a middle income can afford the kind of price increase he announced earlier this year. JXN Water estimates that a typical customer will pay about $11 more per month.

But for low-income customers, higher water bills would be the hardest hit. Other cities are trying to solve this problem with income-based rebates, but only a fraction of customers who qualify for the assistance actually receive it because proving income is often difficult.

That’s why Henifin has tied a rebate of about $30 on water bills to SNAP. Recipients of these benefits have already been screened to determine their need. Giving them the rebate automatically means bypassing the crippling bureaucracy that plagues other cities’ programs.

A violation of privacy

To automatically grant the rebate, JXN Water would have needed records of SNAP consumers, which led to objections from the Department of Agriculture and the Department of Justice.

In court filings, the Justice Department said that giving that information to a private water utility would violate people’s privacy. It also said that sharing the data without the recipients’ consent could lead to a loss of trust and fewer SNAP subscribers, as well as fewer enrollments with the utility itself.

The Justice Department “recognizes the good intentions” of JXN Water and its plan, but said it has heard from Jackson residents who distrust the water utility, and sharing that information without the recipients’ consent could lead to even more distrust.

USDA lawyers also pointed out in a filing that many people who receive SNAP do not receive a water bill. For renters, the water bill is often included in the rent.

The plan would also share information on homeless and sheltered recipients without entitlement to benefits.

The USDA said that if the Mississippi Department of Human Services shared these records with JXN Water, the company could be excluded from SNAP funding. In other words, all of Mississippi would be excluded from SNAP.

Manny Teodoro, professor of public affairs at the University of Wisconsin-Madison, believes the USDA’s threat is inappropriate. Teodoro wrote in the Blog post which was the inspiration for JXN Water’s SNAP plan.

“This is a deeply disturbing threat,” Teodoro said. “The idea of ​​a federal agency cutting off welfare benefits to an entire state … is really disturbing.”

But Brooke Floyd, co-director of the JXN People’s Assembly, has serious concerns about a private utility knowing about a person’s government benefits. She fears that a person could lose their SNAP access if their utility and SNAP information don’t match.

A $30 discount on the water bill is also not worth the risk of the state losing the SNAP program, she said.

“It’s not that families are at risk of losing access to food. That’s scary,” she said. “That’s very scary.”

A lack of SNAP does not mean a lack of need

Floyd also does not believe SNAP is a good tool for determining who should receive assistance, since many low-income Mississippians do not receive the benefit.

The USDA estimates that only 62% of people in Mississippi eligible for SNAP benefits actually received them in 2020.

During a recent visit to the food bank at Calvary Christian Oak Forest Baptist Church in Jackson, only one in 11 people in line received SNAP. Some mentioned being caught up in the system’s bureaucracy, while others explained that their income was just above the eligibility limit or that the benefits they received were too small to be worthwhile.

That’s the case with Howard Louis. While he waited in his gray Honda Accord to submit his information for food pantry assistance, Louis said he would only get $15 a month from SNAP, so he didn’t bother.

As for the water bill rebate, he doesn’t think it’s right to tie it to SNAP. And he also agrees that it would be an invasion of people’s privacy to disclose to JXN Water who receives SNAP.

However, the one person at the pantry who supported the rebate was also the only one who received SNAP.

Barbra Magee had no concerns about her status being disclosed and believes it should be public knowledge anyway.

“This should have been known,” Magee said. “It shouldn’t matter.”

She is personally stuck with a $900 credit with JXN Water – one of several residents who said they have received high bills as the utility company tries to charge people for previous invoices that they never received.

“(The $30 discount) would mean a lot to me because my water bill is still high since the (increase) in the summer,” Magee said. “Mine is still at $900. I haven’t gotten it down yet.”

Bureaucracy re-exploited

Henifin said in a previous interview that he believes the SNAP rebate is the best way for his utility company to help the lowest-income people in Jackson.

A federal judge, Henry Wingate, sided with him and ordered the utility company to turn over the records. Both the Justice Department and the Mississippi Attorney General have appealed the ruling.

While that case is still in court, JXN Water customers can still get a discount. They just have to prove they receive SNAP benefits—essentially reintroducing the kind of red tape that this plan was designed to avoid.

This story was produced by Gulf States Newsrooma collaboration between Mississippi Public Broadcasting, WBHM in Alabama, WWNO And WRKF in Louisiana and NPR.