State Plans Banking On Congress Enacting Welfare-Reform Bill

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Although it is far from certain that a federal welfare-reform law will be enacted this year, some states are already banking on the short-term financial windfall they would get under the leading plans to give states control over welfare.

Some of the reforms state officials want to implement have gone forward under a waiver process. But several states have incorporated projected dividends from a federal welfare-reform overhaul into their current budget proposals, which could complicate state finances should the federal reforms fail to become law.

"What is tricky and problematic is that those states have assumed block grants and budgeted for those savings," said Jodie Levin-Epstein, a policy analyst at the Center for Law and Social Policy, a Washington-based research group with a liberal orientation. "States have to operate under a balanced budget, so ultimately something could come home to roost."

The fate of federal welfare legislation is tied in to presidential politics in this election year. Republican congressional aides say that party leaders are evaluating whether to blame President Clinton for his veto in January of the GOP-backed welfare-reform bill or to pass a bill the president can sign and tout their achievement during the fall campaigns.

Republican leaders in Congress are now negotiating over how much of a plan submitted recently by the National Governors' Association could be included in a welfare bill that lawmakers may take up later this month. (See Education Week, March 20, 1996.)

The NGA plan, like the earlier Republican bill, would transfer control of most welfare programs to the states through block grants and end guaranteed benefits. Republicans touted their proposals as a way to cut welfare costs, and the revised plans might save money in the long run.

But funding for many of the lump-sum payments would be fixed at the level states received in fiscal 1994, when welfare caseloads were larger than they are today in many states. As states would get more money for fewer welfare recipients, the proposed plan could mean a short-term financial boon for some states, welfare experts say. States could also decide to cut benefits or alter eligibility rules to save more money.

Counting the Cash

States are planning to use such additional funds to finance their own welfare-reform programs and help reduce budget shortfalls.

Gov. John Engler of Michigan, who is anticipating a federal dividend of $200 million over what the state would otherwise receive in the current fiscal year, has introduced a budget that would put $150 million into job training and creation of a new state infrastructure to run welfare programs, while banking $50 million to cover future costs.

In California, Gov. Pete Wilson has called for a 4.5 percent cut in state spending on welfare grants, anticipating that increased federal funding would allow the state to maintain current benefit levels.

And Gov. George E. Pataki of New York is proposing to close the state's $4 billion budget deficit partially by relying on more than $2 billion in short-term federal windfalls from reforms in Medicaid and welfare programs.

"We do anticipate getting these changes from Washington," said John Signor, a spokesman for Gov. Pataki. However, he claimed that the New York budget includes a contingency plan to find revenue and savings from other sources should the federal funds fail to come through.

Too Late To Retreat

But even if the financial dividends don't materialize, experts say that states have pushed through too many reforms of public assistance to retreat now.

Since President Clinton took office in 1993, 37 states have received a total of 54 federal waivers allowing them to try new welfare-reform strategies, said Michael Kharfen, a spokesman for the U.S. Department of Health and Human Services.

According to the NGA, 15 states have adopted a "family cap," which bars women from receiving increased benefits if they have more children while receiving welfare payments; seven states now require that teenage parents live at home and stay in school if they are on public assistance; and many states have established work requirements for welfare recipients.

"The activity is not going to stop," said LaDonna Pavetti, a research associate at the Urban Institute, a Washington think tank, who monitors state welfare-reform efforts. "States aren't going to go backwards."

But the biggest changes some states want to make would be stymied if welfare remains a federal entitlement program that guarantees benefits to all eligible applicants. Federal officials have not approved waivers, for example, that would allow states to cut off all benefits to recipients who do not find a job in a specified amount of time. The plan adopted by the Wisconsin legislature last month, for example, would limit benefits to five years.

"A lot of the things we want to do are now prohibited by federal legislation," said Karen Smith, a spokeswoman for Michigan's Family Independence Agency.

Vol. 15, Issue 29

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