As Clinton Team Prepares Drafts, States Are Off, Running on Welfare

FOR years, Washington talk has decried the perverse incentives of a welfare system deemed to discourage work, saving, and marriage as it created generations of dependency.

The centerpiece of President Clinton's promised welfare reform -

a two-year time limit on benefits - has yet to vault out of the staff draft-paper stage.

But the states are not waiting around for federal action.

More than two-thirds of them, in fact, have proposed or are making changes that allow welfare families to earn and save more without losing Aid to Families with Dependent Children (AFDC) benefits, according to a recent survey by the National Governors Association (NGA).

Generally, a family receiving AFDC cannot save more than $1,000 or own more than $1,500 equity in their car. In theory, these limits were set to make sure that people on welfare are truly poor and needy. In practice, the limits appear to help make welfare a trap for some. Earnings at some point reduce welfare benefits by a dollar for every dollar earned. And saving for the future can cut off welfare income.

State initiatives

Twelve states have raised their limits on earnings, savings, or car equity, and others will act by the end of the summer. In recent months, Maryland and New Jersey have proposed raising the asset limit to $5,000. The vehicle-equity limit becomes $15,000 in New Jersey and is removed altogether in Maryland for a test group of families.

Raising the earnings limits, in particular, are not universally popular. ``It's sort of a return to the '70s,'' says conservative analyst Robert Rector of the Heritage Foundation. Higher earnings limits failed then, he says, because for every person enticed off of welfare, another person was enticed onto the rolls because they were newly eligible.

The Clinton administration has already made a major federal change in improving the economics of earnings for the poor and near-poor by raising the Earned Income Tax Credit (EITC) last summer. The change substantially raises the tax bonus that low-income families receive for each dollar earned.

The EITC is very nearly universally popular as an effective and humane incentive to work. A couple of states, Michigan and Missouri, are considering ways to pay out the EITC monthly to welfare families, instead of annually as a tax refund.

Many states are pulling absent fathers more firmly into the family equation. At least 29 states in the NGA survey are going beyond federal requirements to draw more support from noncustodial parents. Some steps are get-tough measures such as revoking professional or occupational licenses for parents behind in child-support payments. Some are assistance, such as job-training for noncustodial parents or a higher limit on how much child support a family can receive.

Fathers on the line

Maryland, Missouri, and South Carolina are seeking to require the establishment of paternity for children before a mother can receive AFDC benefits.

AFDC was created in 1935. In recent years, more policymakers are concluding that welfare rules are forcing fathers out of the house.

The NGA reports that 26 states are moving toward changes in rules that break up families. Many states aim to end the ``deprivation requirement'' that requires an AFDC family to have a parent that is continuously absent, incapacitated, deceased, or unemployed.

At least 22 states are considering time limits on welfare benefits, the main event in Clinton's welfare-reform plans. The first such statewide program will begin in Vermont this summer, requiring welfare mothers to enter a paid public or community-service job after 30 total months on welfare within a five-year period.