Money for Welfare Splinters the States

SENATE Republicans agree - they want to turn responsibility for welfare over to the states. Problem is, they're fighting over how to do it.

The dispute pits fast-growing states such as Arizona against slower-growth states like New York. At its center, like so much in Washington, is money - specifically, the block-grant formula for dividing up federal welfare funds.

It's more than a dispute among political friends. For one thing, the fight kept the welfare bill, a primary plank in the Republican agenda, from reaching the Senate floor this week. For another, it portends bigger battles in the future, as the GOP progresses in its effort to turn large chunks of federal power back to the states via the block-grant method.

GOP leaders are turning to block grants for everything from food stamps to anticrime measures. The granddaddy of them all is Medicaid, the health-care program for the poor, which is many times more costly than welfare and is a primary target of GOP budget cutters.

"Our overriding goal as a party is to provide new and better ways to deal with the problems that cause people to have difficulty getting into the economic mainstream," says Sen. Thad Cochran (R) of Mississippi. "This bill moves toward greater flexibility for the states, but short changes those states with a higher percentage of people in poverty."

The Senate welfare bill, like legislation passed earlier in the House, would roll the major welfare programs of the past 60 years into six block grants enabling states to design their own policies. Washington would divide the $16.7-billion pie according to what each state received in fiscal year 1994, and freeze that funding for five years.

The bill establishes an annual $100 million population growth fund to be distributed each year between 1997 and 2000 according to each state's share of the nation's total population growth. It also creates a rainy day loan fund, enabling states to borrow federal funds in periods of sustained unemployment growth.

This formula has lawmakers in the Sun Belt and Western states particularly concerned, because these two regions experience the highest population growth trends and include some of the nation's poorest states.

They are also concerned that the scheme would freeze in inequities.

Northern states receive more federal matching money because they have been able to make higher payments to recipients. Mississippi, for example, receives $331 from Washington per recipient, while New York receives $2,036 per recipient.

If those levels are frozen in block grants, critics argue, and states are no longer required by Washington to put up their share, children in poorer states could face severe consequences during economic downturns.

"The key issue," says David Kass, an analyst at the Children's Defense Fund in Washington, is that if you take away the entitlement status [of welfare], and you don't require a maintenance of effort [by the states], and you don't put in additional money - you're talking about less money."

A bipartisan group of senators, including Senator Cochran, has proposed an alternative scheme. For the block grant replacing Aid to Families with Dependent Children, the primary welfare program, the plan would distribute funds based on the number of children living in poverty in each state, and would provide for annual adjustments in the per-child grant.

This approach would give children in Mississippi, for example, with 50 percent higher benefits than under the bill's current formula. "We think the formula should reflect the obligation states should have to support people in poverty," Mr. Cochran says. "The best formula is based on the number of people below the poverty line."

But if the new funding scheme will assuage the concerns of some Sun Belt senators, many others see problems with flexibility.

The House bill comes with two strings: work requirement and restrictions on using the federal funds to provide benefits to certain families and individuals. The Senate bill removes some of the House restrictions, but still includes work requirements.

Many states would rather design their own work programs. "We are looking for the flexibility we need," says Janice Ploeger of the California Health and Welfare Agency. "That is the most important issue at this time."

Marsten Childers, secretary of the Kentucky Cabinet for Human Services, agrees. "Let us hold to block grants if they are indexed to inflation," he says. "And let us run the system. Take the strings off, and we'll run the system at current expenditure levels."

Sen. Phil Gramm (R) of Texas would be happy to do so. The funding issue, he says, is less important than flexibility.

"These are deeply philosophical issues:" he says. "No. 1, how much of the total programs are we giving back to the states? No. 2, are there really no federal strings attached?"

Senator Gramm faults the Senate bill for not giving states enough maneuvering room: "People are hiding behind the federalism argument."