White House Won’t Challenge Court Ruling on Welfare : Law: Administration dismisses Wilson’s concern that appellate decision would harm California reform program.

In a move certain to anger Gov. Pete Wilson, the Clinton Administration decided Friday not to challenge a federal appeals court ruling that halted an effort by California to shift money from one welfare program to another.

Wilson had pressed the Administration to request a rehearing on the issue, which he says has huge financial implications for the state and threatens welfare reform experiments across the nation.

After studying the ruling by the 9th Circuit Court of Appeals in San Francisco, however, Secretary of Health and Human Services Donna E. Shalala declared that it will have no financial impact on the state and that it will not significantly affect welfare reform programs in California or elsewhere.

Wilson has already petitioned the court for a rehearing, but the Clinton Administration’s decision not to join in that request could reduce the likelihood that it will be granted, according to Clare Pastore, an attorney for the Western Center on Law and Poverty, which sued the state and federal government in the case.

At issue is a 1992 waiver granted to the state by the Bush Administration as part of a nationwide effort to give states more flexibility in dealing with welfare. President Clinton also supports greater flexibilty and experimentation by states.

Wilson had argued that the court ruling would limit the federal government’s power to allow states to change welfare programs to encourage people to work and take responsibility for supporting their children. “The impact of the 9th Circuit’s decision is not limited to my state,” Wilson said in a letter to Shalala. “Welfare reform efforts in 15 states across the nation will be placed in jeopardy.”

Administration officials insisted Friday that the ruling does not support Wilson’s fears.

“Rest assured, the President would not have allowed this decision not to seek a rehearing to have been made if it had any implications for welfare reform in California or elsewhere,” Avis LaVelle, an assistant secretary of health and human services, said. “The Administration is strongly committed to state flexibility in welfare reform and the use of waivers.”

Clinton told a meeting of governors last week that he would work with them to respond to the court decision: “I am determined not to permit that court decision to become an excuse to slow down the dramatic increase in experimentation we have at the state level in health care and welfare reform,” Clinton said in a speech to the National Governors Assn.

In announcing its decision not to join California in seeking a rehearing, the federal government said the ruling applied only to a waiver of existing federal rules so that California could increase Medi-Cal spending and reduce the size of cash benefits under Aid to Families With Dependent Children, the main welfare program for poor families.

Federal regulations permit Medi-Cal increases only if the state maintains AFDC benefits at 1988 levels--unless a waiver has been granted. California reduced the size of AFDC benefits from $633 per month in 1988 to $607 per month for a family of three, but never increased Medi-Cal.

The court ruled that the administrative record regarding this specific waiver did not demonstrate that the federal government had taken into account public comment opposing the waiver and that the department must now reconsider the waiver in light of those objections.

Shalala concluded that the ruling only requires California to create an administrative record to support its previous decision and does not, as Wilson said in a letter to Shalala, “jeopardize all of the innovations” in the state’s welfare system, including a program that gives teen parents rewards for staying in school and another that encourages work by allowing working welfare recipients to keep more of their cash assistance.

Pastore, in an interview, agreed that the ruling does not immediately invalidate the state’s welfare cuts but, he contended, it could eventually force the state to increase welfare benefits to the 1988 level.

A Wilson spokesman said the governor had just received Shalala’s letter late Friday afternoon and was withholding comment until he had time to consider it.