NEW YORK (CNNMoney.com) -- Home heating bills are expected to rise dramatically this winter and there is growing concern that the government program aimed at helping poor families cope with energy costs may not be able to meet the needs of cash-strapped households.

The Low Income Home Energy Assistance Program (LIHEAP) is a federally funded program that gives money to states to help low-income households, the elderly and the disabled cope with the financial strain of high heating bills.

This year, however, the program could be squeezed by a projected 20% average increase in heating bills nationwide and an influx of people applying for assistance due to sour economic conditions, high gas prices and a weak labor market.

"This could be the worst winter ever for low-income folks," said Jerry McKim, who oversees Iowa's LIHEAP program for the state's Bureau of Energy Assistance.

While heating oil and natural gas prices have fallen from recent highs, they remain well above last year's level and still pose a significant threat to poor and fixed-income Americans.

"Anything over $2.50 a gallon for low-income family is a budget buster," said Richard Moffi, who manages Vermont's LIHEAP program.

Heating oil prices are expected to reach $4.34 a gallon nationwide this winter, according to estimates from the Energy Information Administration.

A growing number of families in need: In addition to the run-up in fuel prices, the slowdown in the economy has led to an increase in the number of households that qualify for assistance.

In Vermont, there has been a 20% rise in the number of people applying for LIHEAP benefits, Moffi said. With a larger number of people to assist, many LIHEAP programs could be forced to reduce the amount of money they provide to eligible households.

Although some states contribute to the fund, the bulk of the money for LIHEAP is provided by the Federal government.

Moffi said Vermont's LIHEAP was able to provide an average benefit of $1,362 last year, which covered roughly 54% of an average household's heating costs for the year. This year, based on current numbers with no additional money from Washington, the average benefit will be less than half last year's amount.

What's more, many low-income families are still behind on payments for last year's heating bills.

Facing a cold winter: The National Energy Assistance Director's Association (NEADA) recently reported that more than 15 million households are currently facing utility shutoffs because they can not pay their energy bill. That's an increase of nearly 10% over the comparable period in 2007.

Mark Wolfe, executive director of the NEADA, said that low-income energy assistance programs usually focus on families that make roughly $31,000 a year. Now, more middle-class families, including those that earn up to $50,000 a year, could be in need of assistance, he added.

"The real tragic thing is that there's not much out there for the lower side of middle income," said David Fox, executive director of the National Low Income Energy Consortium. "And that's most of America right now."

To cope with higher energy prices, many low-income households have cut back on other essential expenditures.

A recent survey by the NEADA showed that 70% of low-income households said they reduced spending on food as a result of high energy and gas costs. That was followed by 31% that said they have cut back on purchases of medicine and 19% that curtailed spending on education.

Some families are even considering moving in with relatives to cope with the cost of heating, Wolfe said. "These are things we haven't seen since the Depression era," he said.

But before resorting to such drastic measures, consumers should contact their heating oil supplier or local utility to discuss their options, said John Maniscaoco, executive vice president of the New York Oil Heat Association.

"Suppliers will try to make amends," Maniscaoco said. "Nobody wants to shut off anybody," he said.

Many utilities offer payment programs aimed at softening the blow of high energy prices. And heating oil prices vary from dealer to dealer, which means households may have some bargaining power.

While lawmakers have expressed concern over the issue, Congress has yet to make a decision on how much money will be dedicated to the program, which has prompted some concern among state LIHEAP managers.

"We can only count on less federal dollars," McKim said.

LIHEAP's budget for fiscal year 2008, which ends in September, was almost $2.57 billion in federal dollars. For fiscal year 2009, President Bush has issued a budget request of $2 billion for the program, which is a decrease of 22%.

Senate Democrats made a push in July to provide additional funding for LIHEAP but Republicans opposed the bill because it did not include provisions for increased offshore drilling and it failed to pass.

A spokesman for Sen. Bernie Sanders, I-Vt., who sponsored the bill in July, said expanding LIHEAP's budget is a "top priority" for the Senator and that the issue will be revisited when Congress returns from recess next month.

Other lawmakers have hinted that additional LIHEAP funding could come this year as part of a second economic stimulus program.

The issue of home heating assistance has "a lot of bipartisan support," Wolfe said. And he is cautiously optimistic that Congress will ultimately come through with additional funding as the public becomes more aware of this "potentially very serious problem."

The question is: Will Washington act in time to make a meaningful difference?

"The government is better when disaster strikes," Wolfe said. "It's not as good when we say the disaster is coming."

Home heating bills are expected to spike this winter as high gasoline prices are already straining household budgets. Are you planning to do anything different in order to reduce your heating bills? Are you cutting back on things to get by? Share your story with iReport.