NEWS ANALYSIS : Is Wilson’s Math Right on Welfare? : Budget: In demanding major cuts in benefits, the governor assumes that the rolls will continue rapid growth. But an upturn in the economy may slow that trend, some experts say.

Gov. Pete Wilson says welfare costs are growing so fast that the program for poor families soon will crowd out spending for education, health and prisons unless the Legislature reduces grants by as much as 25%.

But Wilson’s ominous prediction assumes that the recent rapid surge of poor people seeking aid will continue after the economic recession ends--an assumption that many lawmakers and welfare experts say is wrong.

And even if the Republican governor is right about the potential for prolonged, explosive growth in welfare cases, his portrayal of the program as a beast gobbling up the state budget may be exaggerated.

To put the size of the welfare program in perspective, consider this: For every dollar the state government spends this year, a little more than a nickel will go to welfare. That percentage has changed little in 10 years.

Wilson’s critics argue that the governor’s proposals would devastate many poor families while delivering little fiscal relief to the state. Wilson and his aides concede that the growth in welfare is only one part of the state’s chronic budget problem, but they believe that it is a central reason that the state has not been able to keep its expenses in line with its revenue.

“Unless we make dramatic reforms, our children will suffer,” Wilson said in a recent speech. “State spending for education and preventive health programs will be sacrificed to state spending for public assistance.” The state will have to release dangerous felons from its prisons, he added.

That scenario for the coming decade differs markedly from what has happened in the past 10 years.

Since 1982-83, when spending on the Aid to Families With Dependent Children program stood at $1.4 billion, the size of the program has doubled. But as a share of the state’s general fund budget, AFDC has barely changed. Ten years ago, it was 6.3%. Today it stands at 6.5%.

During the same period, two of the programs Wilson says are most threatened by the growth in welfare--education and prisons--continued to grow, in dollars and as a share of the budget. Kindergarten through 12th-grade programs climbed from 36% to 37.5% of the budget. Prison spending--the fastest-growing part of the budget--rose from 3.3% to 6.2%.

In the 1991-92 fiscal year, the state expects to spend $2.8 billion to $3 billion for welfare--out of a $44-billion general fund. That compares to $16.4 billion for K-12 education; $5.5 billion for community colleges and higher education; $4.5 billion for Medi-Cal and $2.7 billion for prisons.

Wilson Administration officials say that the trend in welfare spending over 10 years obscures the dramatic growth in caseloads that began in 1989.

“Whatever it was in the past . . . if you have a program that’s growing very dramatically, you have to ask: ‘Is it the right public policy?’ ” said Health and Welfare Secretary Russell Gould. “Would you rather spend it there or would you rather direct it to health, education and other areas where there may be a higher priority?”

The Administration forecasts that the number of AFDC cases will grow by 10.6% in the fiscal year that begins July 1, 10% in the year after that, and 9% the next year. Thereafter, the Administration predicts that the program will grow at 8% a year through the end of the century. And, they add, unlike the growth of welfare through most of the past decade, the pace will not be matched by available funds to pay for it.

Wilson’s projections rest on the assumption that the recent surge in welfare cases has little to do with the downturn in the economy and will hardly abate even after the economy turns around.

As evidence, the Administration points to changes in caseload growth over the past two decades.

From 1970 until 1981, the dependency rate--the number of single-parent welfare cases per 10,000 women ages 15 to 44--tracked closely with the unemployment rate. That link snapped in 1981, when the dependency rate leveled off even as a deep recession sent the unemployment rate to 10%.

Then, in the mid-1980s, as the unemployment rate declined steadily, the welfare dependency rate began climbing again. In 1989, the growth in welfare cases exploded, even before the recession began.

After nearly a decade of growth averaging about 3% a year, the number of welfare cases climbed 7.1% in the 1989-90 fiscal year, according to the Department of Finance. The growth rate was 8.3% the next year and is in the 11% to 12% range this year.

This caseload growth, Gould said, has less to do with the economy than it does with such factors as teen-age pregnancies and the number of unwed mothers. A public assistance system that “rewards welfare over work,” Gould argues, has bred a generation of people dependent on the dole.

Only 6% of the single-parent families who go on welfare do so because the parents become unemployed, Gould said. The overwhelming majority seek welfare because of divorce or separation or because a non-working single woman has a child.

Wilson’s answer is to give welfare recipients and the poor not yet on aid more incentive to work and less incentive to have additional children. The governor would do that by cutting welfare grants 10% immediately and another 15% after six months for most families with an able-bodied adult. In turn, recipients would be allowed to keep more of the income they earn from work before losing their eligibility for welfare.

Wilson’s plan, which he has proposed to the Legislature and also written in the form of an initiative for the November ballot, also would reward teen-age mothers who stay in school and penalize those who drop out or move away from home. It would deny aid to children conceived after their mother went on welfare.

But the Administration’s critics charge that Wilson is using a sledgehammer where a scalpel would do. They say that Wilson and his aides are guilty of shoddy research at best and at worst are deliberately misrepresenting the numbers to make the situation appear worse than it is.

The chief criticism is that Wilson has ignored the effect of important changes in federal welfare law in 1981. Those changes, which sharply limited the amount of money that welfare recipients can earn and remain on public assistance, knocked hundreds of thousands of people off the rolls nationwide, a congressional study has found.

This occurred as the recession of the early 1980s was sending the unemployment rate to 10% and helps explain why the welfare rolls did not explode even as the economy contracted.

“You had to be slightly more desperate in order to get on welfare,” said Patricia Ruggles, a senior researcher for the Urban Institute in Washington. “There were a lot of people right on the margin who might not have qualified and a recession like the one we’ve had can knock them right back on the rolls.”

Others complain that the Administration has failed to consider the effect of single mothers going on welfare not because they lost their employment, but because the people they were living with were laid off, or their ex-husbands lost their jobs and quit paying child support.

Wilson’s harshest critics contend that the Administration’s projections for welfare growth were designed to scare the Legislature and the public into adopting the governor’s welfare proposal.

“It’s the general view that their forecasts are politically motivated,” said Robert Greenstein, director of the Center on Budget and Policy Priorities, a liberal-leaning Washington think tank. “They’re indefensible.”

In a more muted critique, the Commission on State Finance, citing the impact of the recession and an expected slowdown in the growth of the number of women of childbearing age, concluded that the increase in welfare cases will be significantly less than the Administration has forecast.

The commission, whose members include Democratic state Treasurer Kathleen Brown and Controller Gray Davis, concluded that 16% of women ages 15 to 44 would be on welfare in 2001, up from 11% today. Based on Wilson’s projections, in contrast, 25% would be on welfare as the next century begins.

But even if Wilson is right, he is talking about a program that would grow from $3 billion today to $7.5 billion in the 2000-01 fiscal year, when the general fund budget is expected to reach $76 billion. At the same time, the cost of kindergarten through 12th grade education, which unlike welfare is protected by the state Constitution, is expected to grow more than $20 billion to a total of $38.4 billion.

The Administration has not fully analyzed how much its proposed changes in AFDC would save over the long term. First-year savings would amount to about $678 million. Here is how it breaks down:

* Reduce grants for everyone by 10%, and cut benefits another 15% after six months for most families that include an able-bodied adult: $527 million.

* Deny aid to children conceived after their mothers go on welfare: $16 million.

* Limit benefits to new California residents for 12 months to the level they would have received in their former state: $13 million.

* Deny grants to women pregnant with their first child. They would be eligible for benefits after the baby is born: $38 million.

* Require teen-age mothers to stay at home unless they can prove in court that they are vulnerable to abuse: $40 million.

* Reduced level of welfare dependency because of behavioral changes prompted by the cuts: $75 million.

* Reward teen-age mothers who stay in school and penalize those who drop out: cost, $16 million.

* Provide voluntary job search aid to welfare recipients: cost, $15 million.

Wilson expects the savings to grow over time as more people leave aid and find jobs, and as more children born to women on welfare are denied benefits. In theory, if fewer people are on welfare, there will be fewer people on Medi-Cal and more people paying taxes.

But the controversial welfare cut by itself, even if the projected savings tripled over the next eight years to $2 billion, would do little to erase the $20-billion deficit Wilson warns that the state is confronting.

“Welfare only represents a small part of the budget,” said Democratic Assemblyman Tom Bates of Oakland, a champion of the AFDC program. “We’re not going to be able to balance the budget by hurting these people. It’s a symbolic act.”

State Spending

All income, sales and corporate taxes go into the general fund of the state budget, which pays for most state programs, including health and welfare, prisons and the state’s contribution to education. Here is the percentage of the state’s general fund spent on major programs:

PROGRAM 1982-83 % OF 1991-92 % OF IN MILLIONS GENERAL IN MILLIONS GENERAL FUND FUND K-12 education $7,814 35.9% $16,420 37.6% Medi-Cal $2,606 12.0% $4,497 10.3% Higher education $2,077 9.6% $3,746 8.6% AFDC $1,367 6.3% $2,841 6.5% Prisons $717 3.3% $2,727 6.2% Aged, disabled aid $1,141 5.3% $2,369 5.4% Community college $1,059 4.9% $1,814 4.2% Other programs $4,970 22.8% $9,304 21.2% Total $21,751 $43,718 general fund

SOURCE: 1982-83 figures from state budget documents; 1991-92 figures are January estimates from Department of Finance