Welfare Plan Adds Work Incentives : Reform: Proposal scraps Reagan philosophy. It lets families save more and eases the burden of child care.

Buried in the budget compromise worked out by the governor and state legislators are fundamental changes in the California welfare system that, for the first time in nearly two decades, provide incentives for recipients to go to work.

As the focus of debate shifted this year from welfare cuts to welfare reform, legislators and Gov. Pete Wilson were able to agree on a spending plan that allows recipients with jobs to keep a larger portion of their earnings, helps ease the burden of child care, permits families to accumulate more savings and rewards teen-age mothers who stay in school.

The change represents a major dismantling of the welfare philosophy imposed by former Gov. Ronald Reagan, which discouraged benefit recipients from working by building heavy financial penalties into the system for anyone who earned other income.

“We have completely turned this program upside-down,” said Health and Welfare Secretary Russell Gould. “We have had a program in California that didn’t reward work, and for the first time we’ve put in both the kind of support features and the kind of incentives that really put welfare recipients back to work.”

The new restructuring, legislators said, shows a change in political thinking away from the idea that people who work shouldn’t receive welfare to a recognition that poor families often need to mix welfare and work to survive.

It also reflects, they said, a belief that jobs are ultimately the best way to get off welfare and that adult recipients need to be encouraged to work even if it does not immediately lead to self-sufficiency.

To pay for the changes, legislators approved a 2.7% reduction in the cash grants that poor families receive under the Aid to Families With Dependent Children (AFDC) program, a move that will reduce the average monthly payment for a family of three from $624 to $607.

Although this year’s ADFC reductions were less severe than those in the previous two years, advocates for the poor said the reductions’ cumulative effect on welfare families would still make them more vulnerable to homelessness and hunger.

Casey McKeever, directing attorney for the Western Center on Law & Poverty, said AFDC families will have absorbed a 13% reduction in their grants over three years because lawmakers have used welfare reductions to balance the budget.

He acknowledged that this year’s cuts were softened somewhat by the changes in the system, many of which had long been promoted by advocates for the poor.

“I don’t think, however, that people should have some expectation that this is somehow a transformation of the nature of poverty and public assistance,” he said. “There are just larger dynamics at work that led people into poverty, and these changes do not affect that.”

The changes in the welfare system include:

* Creation of Cal-Learn, a program that uses a system of rewards and punishments to encourage teen-age welfare mothers to complete their educations. The program, a key part of Wilson’s welfare proposals, provides a $100 bonus each quarter or semester for teen-age mothers who maintain at least a C average and a $500 bonus when they graduate. Mothers who have a failing average will have $100 deducted from their grants.

* Expansion of the subsidized child-care system to provide care for teen-age mothers enrolled in Cal-Learn. Parents who work and need child care would have less of their earnings deducted from their welfare grants.

* An increase from $1,000 to $2,000 in the amount of savings that welfare families will be able to accumulate. Families that are putting money aside for their children’s college educations, starting a business or buying a home would be able to save up to an additional $5,000.

* Allowing welfare families to keep a third more of their earnings before welfare grants are reduced.