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New Welfare Plan Could Cost State $6.8 Billion in Aid

Finance: Analyst projects net loss of U.S. funds over six years from reform bill Clinton is expected to sign. Most comes from cutoff of assistance for legal immigrants.


SACRAMENTO — California would lose about $6.8 billion in federal aid over the next six years due to welfare reform legislation headed for President Clinton's expected signature this week, the state's independent legislative analyst's office said Tuesday.

About two-thirds of the cuts stem from Congress' decision to drop public assistance for legal immigrants, according to the first official estimate of the impact on California from the nation's massive reform plan. States could continue the programs aiding immigrants at their own cost.

The second-largest reduction--about $1.6 billion over six years--would come from changes in the buying power and eligibility criteria for food stamps, the report said.

"The state's decision on these issues . . . will affect the future shape of California's safety net programs," said the report from Legislative Analyst Elizabeth Hill. "Consequently, the state should proceed deliberately."

California now gets about $13.5 billion a year from the federal government for welfare and other such public assistance programs. Sacramento's debate about how to dismantle and then rebuild its welfare system--a process that began last week with public hearings--has already revealed deep divisions about the federal bill's potential for improvement or damage to California's social fabric.

In that regard, the legislative analyst's report shed little light. Instead, the document focused on the fiscal impact on state coffers.

It said the precise effect on the poor can only be determined after state policy is set and some vagueness in the federal law is interpreted.

The report did, however, identify some changes that might occur if President Clinton signs the bill Thursday, as aides predict, and state lawmakers take no action.

Regarding legal immigrants, the legislative analyst estimated that federal aid reductions will begin in January and be phased in over eight months.

Without state action to make up the difference, the loss of food stamps, cash assistance and nonemergency health care would be immediately passed on to recipients. That would amount to an estimated loss of $282 million between now and next June.

On the other hand, federal aid will increase for some programs. On child care, such as baby sitters and day care, the report estimates that California will receive about $55 million more this year than it anticipated.

The net reduction in federal aid in the state's current fiscal year that ends June 30 is projected to be about $51 million. The report's authors acknowledged, however, that the estimate is based on several volatile assumptions.

The largest and most unlikely assumption is that the state will agree on its massive welfare overhaul plan before November.

The federal legislation requires the state to submit its plan by July 1 at the latest. Only then is it eligible to receive welfare funding in a block grant--ending the 61-year federal commitment to provide cash assistance to every eligible family with children.

State lawmakers could adopt a welfare plan and qualify for the block grant sooner. But analysts are uncertain whether the state would be financially better off with speed or delay.

An earlier implementation would allow the state to cut welfare grants as it has planned for more than a year. The cuts, already passed by the Legislature, have been awaiting federal approval.

Conversely, when the state begins receiving its block grant, it must comply with a strict timetable for moving its welfare population into the work force. If it fails, it could lose federal funds as a penalty.

So far, lawmakers in Sacramento still appear far from agreement on the major issues looming in welfare reform. For now, they are still debating when to discuss the plans.

"At this stage, people are just reading it and trying to interpret it," said Pat Leary, spokesperson for the Senate Budget Committee. "That's a monumental task."

Several lawmakers have suggested that Gov. Pete Wilson call a special session of the Legislature to craft a welfare reform plan. But Wilson officials say their evaluation is incomplete.

Politics also seem to be a major complication in the timing of a debate about welfare reform.

Any discussion before the November election already faces the burden of overcoming charges that it is politically motivated. At the same time, a debate immediately after the election would be held before a lame-duck Legislature. The new Legislature will not convene until December.

For some, the legislative analyst's report indicated a smaller impact on California than had been expected.

Previously, state representatives in Washington worried that as much as one-third of the $55 billion Congress expects to save in the next six years would come from California. The $6.8-billion estimate from the legislative analyst is less than half those previous predictions.

Still, the analyst's report fingered many of the same concerns--particularly regarding legal immigrants.

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