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The effects of a policy as complex and decentralized as welfare reform are hard to predict. But according to one study of the probable effects in Los Angeles--a major laboratory for looking at this policy--reform may prove dire at both a human and an economic level.


Profound L.A. Effect Seen From Welfare Reform

Research: Thousands could plunge deeper into poverty and economy could lose up to $1.5 billion a year, study says.

By Carla Rivera
The Los Angeles Times, April 10, 1997

The recently enacted overhaul of the nation's welfare system will have a profound impact on the social and economic fabric of Los Angeles County, plunging thousands of recipients deeper into poverty and indirectly affecting middle-class and affluent communities, according to a comprehensive new study prepared by two USC researchers.

In a best-case scenario, the county economy would lose more than $127 million a year and more than 60,000 county residents would lose some or all of their benefits. Under the most dire circumstances, in which more than 200,000 of the county's legal immigrants would lose their public assistance and the state would not pick up the burden of other federal cutbacks--welfare reform could generate a social and fiscal earthquake in Los Angeles.

More than 500,000 county residents would lose benefits in the worst-case scenario, while the Los Angeles economy would lose as much as $1.5 billion per year and nearly 50,000 jobs due to curtailed consumer spending. Hunger, child abuse, homelessness and crime would also rise significantly as the safety net for the poor unravels.

"The number of county welfare recipients who will slide deeper into poverty because of welfare reform could equal the entire population of Long Beach, the county's second-largest city," said USC professor of geography Jennifer Wolch, a social policy expert and principal author of the report.

Scheduled for release at a news conference today, the study sets forth the first in-depth estimates of the 1996 federal welfare law's cumulative effects on the county, based on the legislation, potential changes in state programs and studies of past welfare caseloads.

Using a computer model that incorporates federal census and regional economic data, the authors also assess for the first time the indirect impacts of the new welfare measures.

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The worst-case scenario presents a bleak picture as economic tremors ripple through the most hard-hit communities of Central and South Los Angeles and portions of the San Fernando and San Gabriel valleys: tenants too poor to pay rents and neighborhood commercial strips rendered into ghost towns.

"[It] will translate to downward mobility for many people and businesses with no links to welfare . . . and deterioration of public services in middle class to affluent communities typically seen as far removed from 'inner city' problems," concludes the report titled "Los Angeles in an Era of Welfare Reform: Implication for Poor People and Community Well-Being." The study, co-authored by Heidi Sommer of USC's Southern California Studies Center, was commissioned by the Southern California Inter-University Consortium on Homelessness and Poverty.

The authors said the report is not meant to criticize welfare reform or the importance of work.

"To say welfare reform is going to have negative impacts isn't to say that work is not critical," said Wolch. "But at the same time, the way you go about achieving that may or may not, in the aggregate, make sense."

Other researchers said Wednesday that the study's figures seem to be on target.

"Certainly the impacts are within the range of numbers we've looked at," said Jean Ross, executive director of the nonpartisan California Budget Project, a Sacramento-based group that studies fiscal policies in the state. "It sounds like they were very thorough and sophisticated in the methodologies they used."

If anything, Ross said, the study's best-case scenarios may be overly optimistic.

"What we find most troubling is how you move [about 250,000] people from welfare to work that quickly and what it means when you are looking at a very tight labor market," she said.

Wolch reports that the harshest impacts of the overhaul could be cushioned substantially if legal immigrants were allowed to retain health and food stamp benefits and if the state picked up the burden of other looming federal cutbacks.

But even under the best-case scenario, tens of thousands of residents would be affected during the next six years. Among the findings:

The sweeping new welfare law signed by President Clinton in August abolishes Aid to Families With Dependent Children, replacing it with annual lump sum payments to the states known as block grants. Adults will be required to get a job within two years, and the lifetime limit on benefits for any recipient will be five years.

The federal law tightens eligibility for the federal Supplemental Security Income program, which provides cash assistance to the aged, blind and disabled. Most legal immigrants and some disabled children will lose SSI coverage.

Legal immigrants will also lose their food stamps, as will single adults who do not find work.

The study assumes that the county would receive $9 million to $380 million in additional federal and state funds. But the authors conclude that the county will realize virtually no significant savings from expanding the state's main workfare program, GAIN.

"Studies suggest that it costs money to provide GAIN services," said Wolch. "When you compare how much money is saved from reduced welfare payments and people paying slightly more taxes, it's almost a wash."

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The report concludes that the welfare overhaul could jeopardize Los Angeles' fragile economic recovery as the level of public assistance dollars flowing into the region drops. Because of reduced welfare benefits, people will have less money to spend on food, clothing, housing, medical services and other consumer purchases.

Supermarkets and smaller food stores would be strongly affected because of their reliance on food stamps. Overall losses targeted at food purchases could range from $60 million to $330 million countywide, the study concludes.

Supporters of the welfare overhaul dispute such findings.

"I hope we do not believe that the L.A. economy is based on a large welfare system," Assemblyman George Runner (R-Lancaster), said.

State Sen. Cathie Wright (R-Simi Valley), who has also supported welfare reform measures, agreed that most economic losses will be short-lived. But she also agreed with the study that the implications of welfare changes on legal immigrants are huge.

"There are some areas where the federal government is going to have to give waivers to those states who have unique problems, and California is going to have to be one of them," she said.

Indeed, the study concludes that welfare recipients will face huge obstacles finding work.

The 250,000 county recipients expected to find work must compete for about 75,000 jobs alongside 363,000 unemployed workers.

The study urges the state to create a public sector jobs program.

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