Welfare Bills Could Cost State $7 Billion, Study Says : Budget: Report warns that a proposed ban on funds for legal immigrants would create staggering expenses and shift burden to counties.

The Legislature was warned Tuesday that proposed federal welfare reforms that prohibit aid to legal immigrants threaten local governments in California with potentially staggering new costs, particularly in financially beleaguered Los Angeles and Orange counties.

In a draft report, the state Senate Office of Research estimated that the Senate and House versions of welfare reform bills could, over five years, result in a loss to California of up to $7 billion in aid that would have gone to needy legal non-citizens.

Assuming that the Legislature and Gov. Pete Wilson agree that the cash-strapped state could not afford to maintain health and welfare services at current levels, the burden would fall to the counties’ general assistance programs as the legally designated providers of last resort, the report said.

A congressional conference committee is seeking to reconcile differences in the two bills, both of which shift the emphasis of caring for the nation’s poor from Washington to the states.

Both bills propose limiting public assistance not just to illegal immigrants but to legal non-citizens as well, although the House version under the new Republican leadership of Speaker Newt Gingrich is more severe. The immigrants are defined as legal permanent residents who were admitted to the United States because they had valuable job skills or strong families ties here.

“The move to curb benefits to legal immigrants marks a new direction in American social policy and raises new questions for the state,” said the 18-page state Senate analysis, which may be made public today.

“No state would be affected more by the proposed changes than California,” because of its immigrant population of 4 million legal non-citizens, with more arriving each year, the report said.

Bankrupt Orange County and financially troubled Los Angeles County, home to 500,000 of the 1 million legal immigrants who have arrived in California so far this decade, “would absorb the brunt of the cutbacks,” the Senate researchers said.

The report, citing various federal and state studies, did not list specific sums that each California county would be expected to offset. But a position paper by Los Angeles County estimated that the version passed by the House would increase its general assistance welfare costs by $508 million a year because of cutbacks in Aid to Families With Dependent Children and the Supplemental Security Income program for the aged, blind and disabled.

“The county strongly supports retaining current laws which treat legal immigrants the same as citizens for purposes of receiving federal-funded services, including public assistance,” the statement said.

The county warned that curbing federal benefits to legal immigrants would result in a major shift in costs to local taxpayers because the recipients would still remain eligible for locally financed general assistance cash grants and health care.

The state report said Congress may have the legal authority to discriminate against the “law-abiding foreign born,” but that California lawsuits could be expected if state and local governments did the same, “even if authorized by Congress.”

The House version of the bill, the report noted, would deny non-citizens aid through programs including Aid to Families With Dependent Children, Supplemental Security Income, food stamps and non-emergency Medi-Cal health services. Current recipients would become ineligible one year after the bill became law.

The Senate bill would deny supplemental income assistance to newly arrived non-citizens even if they became disabled after arrival. Current non-citizen recipients would be cut off Jan. 1, 1997.

The Senate legislation also would prohibit “needs-based” assistance to legal non-citizens during their first five years in the United States, including AFDC, food stamps, student loans, family planning services and housing. Emergency medical services, child nutrition programs, disaster relief, foster care services and the Head Start education program for preschoolers would be exempt from the prohibition.

Wilson has endorsed the House bill. Leslie Goodman, Wilson’s communications director, said the governor would step up enforcement of rules requiring sponsors of legal immigrants to be financially responsible for them. But she said Wilson would not provide public funds as a substitute.

Goodman said the governor could not comment on the state Senate report because he has not seen it yet.

Times staff writer Dave Lesher contributed to this story.