Bill Ties Welfare Reform to Cut in Immigrant Aid : Benefits: Democratic plan would shift costs on care to states for the new, legal arrivals. California likely would shoulder the biggest burden.

An influential group of moderate and conservative House Democrats has crafted legislation that would finance welfare reform by eliminating nearly all benefits from food stamps to medical care for newly arrived legal immigrants.

The bill, scheduled to be introduced in the House today by the Mainstream Forum, is similar to those supported by House and Senate Republicans. By reducing federal benefits to immigrants, it would transfer billions of dollars in immigrant-care costs to the states. California, with its large numbers of immigrants, likely would bear the greatest burden.

That a group of Democrats would make such a proposal signals the breadth of anti-immigrant sentiment in Congress and provides further evidence that a divisive battle is looming over the financing of welfare reform.

“The welfare debate could become consumed in an ugly immigration debate,” said Cecilia Munoz of the National Council of La Raza, a Latino civil rights group.

As a measure of the political delicacy of funding a welfare overhaul by reducing immigrant benefits, some early supporters of the Mainstream initiative have dropped out. The brewing controversy demonstrates how complicated it will be to finance a major welfare reform without raising taxes, as President Clinton has promised.

Administration officials said that, while they disagree with the group’s financing plan, other provisions in the bill are similar to the Administration’s own welfare reform proposal.

Both initiatives would provide job training and placement, as well as child care, to help welfare recipients give up their reliance on the nation’s largest welfare program: Aid for Families With Dependent Children. Both proposals also would establish a two-year limit for benefits and would be directed only at welfare recipients born after 1971.

In a new twist on the President’s proposal however, the Mainstream plan would limit to three years the period in which former welfare recipients could qualify for community service jobs after their welfare payments end.

Critics said that provision potentially could leave many poor Americans without a safety net.

“It signals that there is now a group of Democrats willing to deny the most basic form of assistance to poor children whose parents have complied with every requirement thrown at them,” said Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a liberal Washington-based research institute.

Nevertheless, it is the financing mechanism that is expected to generate the most heated debate and the Administration has indicated that it disapproves of that element of the proposal.

“I think their bill is a serious attempt to make good on the President’s campaign pledge to end welfare,” said Bruce Reed, a domestic policy adviser to the President and a chairman of his welfare reform task force. But “the danger in their financing approach is that it will shift costs to the states and create as many problems as it solves. We’re going to fight those provisions to make sure the financing is balanced and fair.”

In defense of the bill, its chief sponsor, Rep. Dave McCurdy (D-Okla.), said through a spokesman: “It’s a matter of priorities. We believe that American citizens are the priority. The welfare system was not designed to (help) immigrants adjust to their new country.” The Mainstream Forum would pay for the lion’s share of its proposal--$21 billion over five years--by eliminating Medicaid, Aid for Families With Dependent Children, food stamps and supplemental security income for most newly arrived immigrants. Immigrants over 75 would be permanently exempt from the ban on benefits.

The White House plan also envisions diverting funds from immigrant benefits to pay for welfare reform. But Administration officials insisted that their more modest reductions would only serve to shift costs to the families of immigrants and not to local governments. The Administration would extend the time period for considering the income of a sponsor when judging the eligibility of an elderly, blind or disabled immigrant for assistance.

The Hispanic Caucus and liberals in Congress, as well as immigrant advocate groups, are opposed to any reductions in benefits to legal immigrants. They argue that the Administration is trying to use the harsher Mainstream Forum and Republican proposals as a lever to force them to compromise.