McCarthy Urges Welfare Cut for New State Residents

Lt. Gov. Leo T. McCarthy, a Democratic candidate for the U.S. Senate, proposed Monday to reduce welfare benefits for new state residents as part of a broader “middle-class protection and job creation” program.

“We must create jobs and we must protect the middle class. I would like California leaders to shout that like a mantra,” McCarthy declared in outlining a plan that he said could help revive California’s recession-damaged economy.

The proposed reduction in welfare benefits--similar to one part of a welfare cuts package outlined earlier by Republican Gov. Pete Wilson--would “ease the burden on California taxpayers,” McCarthy said.

As for his job-creating proposals, McCarthy would like to provide financial incentives for California companies to receive state contracts and purchase orders, provide credits to firms that create new jobs, and speed up the implementation of public works bond projects that will put Californians to work.

The lieutenant governor did not provide estimates of the costs or savings of his proposals. He said he will ask certain legislators to carry bills to implement his program.

The idea to reduce benefits received by new residents from the $5.6-billion-a-year Aid to Families with Dependent Children program was first proposed by Wilson in a sweeping welfare reform initiative that the governor hopes to pass through the Legislature or qualify for the November general election ballot.

McCarthy told reporters he opposes the Wilson initiative, which would significantly reduce benefits for all AFDC recipients, but could support some of its elements.

McCarthy would not go as far as Wilson in reducing welfare benefits. The Democratic officeholder would put a one-year cap on welfare payments for new residents that would limit the financial aid to the national average of all states. Thus, a family of three would receive $383 a month, instead of the $663 they receive now.

Wilson is proposing that new residents receive the same level of aid they were getting in the states they left during their first year in California. Last year, 7% of those receiving welfare payments lived in another state within 12 months of receiving aid in California. Wilson believes that California is a magnet drawing recipients from other states because its benefits are among the highest in the nation.

In addition to reduced benefits for new residents, McCarthy also supported another Wilson idea--a proposal to provide a $50-a-month payment to teen-age parents as an inducement to keep them in high school or get them back into school if they have dropped out.

Bill Livingstone, Wilson’s press secretary, said he was delighted that McCarthy was supporting at least some of the governor’s welfare plan. “A year ago, Pete Wilson was a lone voice in proposing welfare reforms,” Livingstone said.

To protect California jobs and help stimulate an economic recovery, McCarthy would penalize foreign firms competing for state business on public works projects.

McCarthy would like to give a “10% cost advantage” to American-owned companies competing for construction and capital improvement projects built with state tax funds. An aide said that if the proposal became law, foreign firms would have to underbid American firms by at least 10% to get a contract. An additional 5% cost advantage would be given to California-owned companies.

McCarthy predicted that the proposal “could create thousands of new jobs in the construction, manufacturing, design and support industries.”

Also, the lieutenant governor said he would like to see legislation giving a tax credit to employers who increase their net number of employees earning over $18,000 a year. The credit would equal 5% of the salary of the new job, not to exceed $2,500 a job. The credit would remain in effect as long as the unemployment rate stays above 6%. Otherwise, the credit would be limited to two years.

“With more than 1 million Californians unemployed, we have to make sure that the tax money we pay here for public works creates jobs here,” he told reporters during a Capitol news conference.