Kentucky, Montana Move To Protect Welfare Surplus


WASHINGTON - Many states are drafting plans to increase spending on low-income and welfare families, but Kentucky and Montana have announced their new initiatives are a direct result of recent attempts by Congress to cut the federal contribution to welfare and divert those funds to other programs.

Kentucky Gov. Paul Patton of Kentucky announced last week his state is opting to spend more of its federal welfare grant immediately rather than risk losing some of the funds to budget cutters in the U.S. Congress. Kentucky's Cabinet for Families and Children will spend $19 million between now and September 30, 1999 to hire 100 new workers and upgrade housing for welfare recipients.

"It makes us a little nervous to think of giving back that money that had been promised to us," said Cary Willis of the state's Cabinet for Families and Children.

Kentucky is among 33 states that recently fought off an attempt by the U.S. Senate to take back a portion of their federal welfare money. These states and the District of Columbia left $3 billion dollars unspent in their federal welfare accounts in 1997 and 1998, according to the U.S. Department of Health and Human Services. On top of that surplus, all the states and D.C. will receive an additional $16.6 billion in welfare funds this year.

The federal government pays more than half the cost of the nation's welfare programs.

The states must leave their federal welfare money including any funds they had planned to hold in reserve in the national treasury until they actually spend it.

For a Congress struggling to abide by budget caps imposed in 1997, but faced with a host of new spending priorities including an air war over Yugoslavia, the accumulating surplus looks to some like money better spent elsewhere.

Many on Capitol Hill have also argued that, given the size of the surplus and the rapid decline in welfare caseloads nationwide, the states are not prepared to spend the bulk of the money now.

Kentucky had planned to keep $10 million over the next two years in reserve to pay for cash assistance when the economy softens and welfare rolls increase.

"The Congressional action and the information we received subsequently led us to believe this money may not be available," said Sharon Perry of the states' Cabinet for Families and Children. "We did not want to give up the rainy-day fund... We are giving it up, regrettably."

The threat to the states' welfare surpluses emerged last month when Alaska Republican Ted Stevens included language in a Senate emergency appropriations bill to borrow some of the states' unspent federal welfare funds for aid to Central America, among other things. Stevens withdrew his proposal in late March after receiving strong objections from the National Governors' Association, poverty-rights advocates and Democratic Senators Daniel Patrick Moynihan and Charles Schumer of New York the state which stood to lose the most.

In the House, some Republican leaders had wanted to free some of the extra money for other spending priorities. Ohio Republican John Kasich, Chairman of the House Budget Committee, inserted a provision in budget guidelines for next year that would have allowed states to use part of their federal welfare money to hire new teachers and build new schools. The Senate budget blueprint did not include the provision and, in reconciling the two plans, conferees dropped the House proposal.

Kasich lost a battle in 1998 to cut $10 billion from a host of federal domestic programs, including welfare.

According to the U.S. Department of Health and Human Services, Kentucky ended the last federal fiscal year with a $45 million federal welfare surplus, accumulated in part due to a 40 percent drop in the state's welfare rolls since 1996. Kentucky's current caseload of 43,000 families is 19th highest in the nation.

Rather than set aside $10 million for a rainy day, the state has decided to spend that money to hire 100 new staff members to handle child welfare cases. It also plans to spend another $9 million on a long list of initiatives, including housing programs, literacy and parenting classes, transportation for former recipients and grants to former recipients who work. (See sidebar.)

Kentucky's concern echoes an announcement made by Montana's Human and Community Services Division in January. Director Hank Hudson presaged the desire of some in Washington to cut the states' welfare money. He announced Montana would attempt to shield its $46 million surplus by increasing spending on child care and other services for welfare families.

In its recently completed session, the Montana Legislature approved plans for spending all $46 million over the next two years. The largest chunk, almost $30 million, will go to expanding child care services for the state's working poor. The Legislature also approved a rainy day fund of about $8 million. 


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