House GOP Seeks Sweeping Overhaul of Welfare System : Congress: Reform plan would expand state control, slash federal spending by $40 billion over five years. It deviates from course set by ‘contract with America.’

House Republicans unveiled a reworked welfare reform initiative Thursday that would roll scores of programs into a few block grants, give state governments broad power over the safety net for poor Americans and slash federal spending by $40 billion over five years.

The plan represents a significant shift away from the welfare reform proposal contained in the “contract with America,” the campaign manifesto of House Republicans, which prescribed tough new restrictions on benefits but left control in the hands of Washington officials.

The new blueprint, which would amount to the most extensive restructuring of the federal safety net for poor families since the modern welfare system was created in the 1960s, would strip many welfare programs of their protected status as federal “entitlements” and let states tailor the programs to their own needs.

The plan, however, must pass both houses of Congress and be signed by President Clinton--or passed over his veto--before it becomes law.

“We want the American people to know we are going to be tough,” said House Ways and Means Committee Chairman Bill Archer (R-Tex.), whose panel has jurisdiction over welfare.

“We are totally revolutionizing the whole welfare system in this country,” added Rep. E. Clay Shaw Jr. (R-Fla.), a Ways and Means subcommittee chairman who was involved in crafting the proposal.

In an unexpected parting of the ways with House Speaker Newt Gingrich (R-Ga.), the principal architects of the GOP welfare plan said their initiative calls for denying benefits to legal immigrants who are not citizens. Gingrich has expressed personal reservations about such a provision, and many lawmakers expected that it would be dropped from the reform plan. Gingrich did not comment on the plan Thursday.

The GOP initiative would require states to limit most welfare recipients to two years of benefits as well as deny cash assistance to minor mothers and their children and to families in which the father has not been identified.

States would be forbidden from increasing benefits to families on welfare when they have additional children. Beyond those guidelines, states would be given the flexibility to design their own programs--deciding who is eligible, how much assistance they should receive and in what form.

Under the plan, states could impose even stricter rules than those prescribed by the federal government--for example, by limiting assistance to less than two years.

“There are going to be people who are going to be hurt. We know that,” Shaw said. But the pain is necessary, he said, to change a system that has fostered a class of Americans who are mired in poverty and dependent on taxpayers.

Under the proposal, a myriad of existing federal programs, including many child-care, nutrition and child-welfare programs--some now designated for particular minority groups--would be abolished. Funding for the existing programs would be combined, reduced and given to states, which would decide what kind of programs to fund and for whom.

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The Clinton Administration and congressional Democrats argued that forcing states to deny benefits to some families and to remove others from the welfare rolls after two years without guaranteeing them jobs could result in millions of destitute children.

Bruce Reed, an adviser to the President on welfare and other domestic issues, said the Administration’s welfare proposal, which would keep more of the federal safety net in place, “would have all of the positive consequences” of the GOP reform “without the enormous and unpredictable downside of throwing a lot of people out on the street.”

Denying benefits to teen-age mothers, he said, “may discourage some” teen-agers from having babies, “but it could have all kinds of terrible consequences for others,” including encouraging young pregnant women to get abortions.

Shaw and Archer, however, contended that unless there is a definite cutoff of welfare aid, people who have grown accustomed to depending on federal handouts will not become self-sufficient. And unless the government makes a clear stand against teen-agers becoming mothers, the problem will continue, they said.

The shift from the federally run program outlined in the GOP’s campaign contract to the turn-it-over-to-the-states approach in the plan announced Thursday resulted from heavy lobbying by governors as well as the perception among Republicans who worked on the plan that last November’s election results proved Americans are tired of big government in Washington.

Some Republican governors who have been negotiating with their allies in Congress to replace the federal welfare system with block grants to states were cautiously optimistic about the House plan, which is likely to set the agenda for the welfare debate in Congress.

“It’s an excellent starting point for negotiations,” said Michigan Gov. John Engler. But he added that “conservative micro-management is only slightly better than liberal micro-management,” stressing that he and other governors would continue to fight to remove the “strings” from the block grants so that they can craft programs without federal directives.

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House Republicans stressed that they do not want to give states complete flexibility. They pointed out that the federal government collects the taxes that would pay for the programs and that it is a federal responsibility to make sure welfare does not create dependency or encourage teen-agers to have babies.

Senate Republicans have yet to present their proposal to overhaul the welfare system, but many senators support the idea of transferring most, but not all, control to the states.

“You can’t do it from Washington and get any level of efficiency. But the federal government still needs to keep its finger in the pie to make sure the money is spent on the purposes it’s sent for,” said Sen. Rick Santorum (R-Pa.), a freshman senator who was a leader on welfare reform when he served in the House.

Some of the $40 billion in the projected savings over five years would come from ending the entitlement status of food stamps and the Aid to Families With Dependent Children program and from combining many funding streams into just a few. Ending the entitlement status could mean that not necessarily all people who qualify for aid would get it.

The amount of the block grants to states would be set under a yet-to-be-determined formula. States would have to shrink benefit levels or deny benefits to some people if welfare rolls grew because of economic recessions or other reasons. The GOP estimates that without changes, the dozens of current aid programs would cost at least $1.5 trillion over five years.

But the biggest chunk of the projected savings would come from the $22 billion saved by denying benefits to legal immigrants.

State and local governments in California, Florida, New York, Texas, New Jersey and other states with large immigrant populations are worried that costs for supporting many of these immigrants would be shifted to them.

Los Angeles County, more than almost any other place, would feel the impact of this policy change. For instance, more than 160,000--or 20%--of the people receiving AFDC in Los Angeles County in 1993 were legal immigrants, according to figures compiled by the Los Angeles County Chief Administrator’s Office and obtained by The Times.

“That’s a problem. I expect to hear from your governor about it,” Shaw said.

But both Shaw and Archer said they are undeterred by local officials’ protests and Gingrich’s recent expressions of reluctance on the matter.

“I’m uncertain what he meant by his comments,” Archer said. “We’re going to proceed with what we think is right.”