Proposed AFDC Cuts Would Save Little, Study Says : Budget: Gov. Wilson’s carrot-and-stick program would create more disincentives than incentives for recipients to work, analysts conclude.

Gov. Pete Wilson’s carrot-and-stick approach to cutting welfare costs would result in “minimal” savings for the state because of “strong disincentives” for welfare recipients to work, budget analysts told lawmakers Wednesday.

A legislative analyst’s report on the massive Aid to Families With Dependent Children program found that the AFDC grant structure, both in its present and proposed forms, “offers little incentive for recipients to work. In fact, in many cases there are strong disincentives to work.”

Wilson’s plan, which proposes to cut grants by 8.8%, allows welfare recipients to earn money by working and not lose as many benefits as is now the case. The analyst’s report said a recipient who took a job would be able earn enough to make up for the reduction but would take home no more than under the present system.

The assessment came in a report analyzing the impact of Wilson’s proposed AFDC budget proposal. After it was presented to the Assembly Human Services Committee, Democratic lawmakers roundly criticized the governor’s plan.

Assemblyman Tom Bates (D-Oakland), chairman of the committee, said Wilson’s program basically tells welfare recipients, “Your grant is being reduced but if you get a job it won’t be reduced.”

The problem, he said, is that “there just aren’t any jobs out there.”

At issue is a provision in Wilson’s proposed $55.7-billion state budget that calls for the reduction in basic AFDC grants. It would cut $61 from the maximum $694 given monthly to a family of three. The proposed benefit cut is part of Wilson’s effort to close a $7-billion to $10-billion budget gap over the next 17 months.

The AFDC cut would save the state $225 million in immediate costs, but Wilson hopes for more significant long-term savings by offering what he considers incentives to make work a more attractive alternative to welfare.

Along with the call for a cut in the basic grant, Wilson is proposing changes in AFDC work rules to allow welfare recipients to keep more of their earned income if they find jobs. Kim Belshe, deputy secretary in charge of programs and fiscal affairs for the state Health and Welfare Agency, told lawmakers during the hearing that Wilson’s program seeks “to encourage AFDC recipients to rejoin the work force, to convert welfare checks, if you will, to paychecks.” She also challenged Bates’ assertion about jobs, saying, “job opportunities do exist.”

Under present rules, if welfare recipients work, they risk losing their AFDC grants if they earn too much. The threshold at which benefits are cut off is set on an individual basis depending on how much is earned, the existing grant and the number of children in the family. Allowances are made for the costs of work-related expenses such as transportation, child care, and taxes.

AFDC recipients with outside incomes also could lose food stamp benefits and access to free medical services and pay higher taxes. Analysts said it would cost $250 to $300 a month to replace the medical benefits alone that are given to AFDC recipients under the Medi-Cal program.

The rules are so tough that “there is relatively little incentive for an AFDC recipient to work,” Chuck Lieberman, an analyst who helped write the report, told legislators.

The report said that under present rules if a welfare recipient gets an $800-a-month job, he or she would be “better off” by only $100 because of offsetting grant reductions. It said that if the job pays $1,200 a month, the entire grant would be lost. When cuts in food stamps, higher taxes and increased work-related costs are considered, the recipient would be “worse off by $150.”

Wilson would relax those rules, but not by much. The authors of the report said a family of three, which would see its monthly benefit drop from $694 to $633 under Wilson’s plan, would lose about $42 a month in spendable income when a $19 increase in food stamps is factored in. A recipient could make up the difference “by taking a minimum-wage job for a few hours a week,” the report said.

Assemblywoman Marguerite Archie-Hudson (D-Los Angeles) assailed what she called the underlying assumption of the program: that jobs are readily available and all that is needed is an incentive.

“You cannot make an assumption in this budget that if you reduce the payment that that will increase the work incentive,” she said. “That only works if you assume that as the incentive goes up the opportunity to work goes up.”

She cited statistics presented by the Wilson Administration, which show that the “average” stay of a person on welfare is 17 months, and argued that it shows most AFDC recipients want to get off the rolls as quickly as possible.

BACKGROUND

The Aid to Families With Dependent Children provides cash grants to more than 2 million poor Californians who need financial assistance to pay for rent, food, utilities and other living expenses. Women and children receive most of the aid. During the 1980s, the number of AFDC recipients grew substantially faster than the population as a whole and California’s program grew at a rate three times greater than the national average.