States Brace for Welfare Revamp

Some play cautious, some play bold as New Deal programs are phased out

As the New Year approaches, states are bracing for big changes in their welfare systems.

Bit by bit, states are entering the new federal block-grant program, called Temporary Assistance to Needy Families, in which states take a fixed sum of cash from Washington and design their own welfare systems under general federal guidelines. After 61 years, the old federal program guaranteeing aid indefinitely - Aid to Families with Dependent Children - is drawing to a close.

Lifetime limits on aid are now the rule - and in a handful of states, the limits are shorter than the five-year cap now required by federal law. Nowadays, a person seeking cash assistance from a welfare office is more likely to be handed help-wanted ads before an aid application.

But as advocates for the poor watch the transformation with trepidation, state lawmakers and officials are both excited and cautious about the change - excited that radical reform is at hand and cautious about their states' fiscal future.

"We put our state welfare reform in place last May, and it follows the same philosophy as the federal law, so we're in good shape," says state Rep. Jim Gerlach (R), the lead sponsor of welfare reform in the Pennsylvania legislature. "But we're watching the bottom line carefully."

Many states, in fact, are finding that they are financially comfortable, at least for now, and will even get a small surplus of cash from Washington as the new system begins.

States' economies are generally doing well. Welfare caseloads have declined throughout the country in the past few years. And because the new federal welfare block grants are calculated partly on the basis of the 1994 and '95 caseloads, many states will get more money than they need at first.

Some states plan to use the extra cash for programs that will make it easier for welfare recipients to go to work. In Florida, Gov. Lawton Chiles (D) announced the surplus money will be used for job training. Wisconsin will use its extra $25 million for child care for workers who have recently left welfare. Some states are also planning to use the extra cash to help needy legal immigrants, most of whom will lose their right to assistance under the federal law.

Much will be revealed next month about the state budgets for welfare, when state legislatures reconvene. On the table will be supplemental funding bills for the current fiscal year, as well as the opening proposals for the fiscal 1998 budgets.

Overall, states must spend at least 80 percent of their historical spending levels to keep their full federal block grants. Some states have already extracted savings from their welfare budgets by limiting eligibility and putting time limits in place. But actual benefit levels have largely remained steady. According to the National Governors' Association, only five states have changed benefit levels (mostly decreases) for fiscal year 1997.

The bottom line is that the shift from the old Aid to Families with Dependent Children program to the new Temporary Assistance to Needy Families (TANF) will not be immediately visible.

"Because many states are beginning with higher federal funding levels, we may not feel the effects [of the shift] until the next recession," says Mark Greenberg, a welfare analyst at the Washington-based Center for Law and Social Policy.

States are planning ahead by setting budgets that assume economic growth will slow down in the next two years. Those economic projections, plus frozen federal funding, have led states to build "a healthy cushion" into their budgets. Twelve states have more than a 10 percent surplus, the governors' association says.

In addition, states are entering the new TANF program gradually, which will stagger the effects of change. States have until July 1, 1997, to submit their proposals for compliance to the federal government; 38 states plus the District of Columbia have already done so. At that point, they can set the transition date. Georgia, for example, enters TANF on Jan. 1, 1997 - thus starting the clock on its four-year time limit on benefits. Pennsylvania will submit its plan to Washington on Jan. 17, 1997, and will implement TANF on March 3, 1997.

Some advocates for the poor worry that aid recipients aren't being adequately informed of the implications of the new time limits. In Georgia, a letter sent to recipients was "written at the 12th-grade level," says Linda Lowe, a poverty activist in Atlanta.

Ms. Lowe cites the case of a woman who receives a monthly check for only $30. "She might want to go off assistance so that she's not using up her time limit on such a small amount," Lowe says.

Welfare activists also note that even though the changes in cash assistance will be felt gradually, other welfare reforms are kicking in now. Able-bodied recipients of food stamps between the ages of 18 and 50 who have no children stand to lose their food stamps as early as February if they can't find at least 20 hours a week of work. Legal immigrants stand to lose their food stamps as early as April 1, 1997, and can lose most other benefits as early as this week. A few states have elected to spend their own money to continue supporting needy legal immigrants.

Some advocates for the poor worry that aid recipients aren't being adequately informed of the implications of the new time limits.

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