State lawmakers want to keep the Lingle administration from spending more than $20 million in federal welfare money next fiscal year to build a reserve in case a downturn in the state's economy forces more people onto welfare.

The state's federal welfare reserve was $111.8 million at the start of the fiscal year but state House and Senate budget analysts believe it could fall into deficit by 2010 if the Lingle administration continues its welfare spending pattern.

Lawmakers do not want to drain the reserve during a slowing economy and cite the closures of Aloha Airlines, ATA Airlines and Molokai Ranch as proof of turbulence in the job market.

But Lillian Koller, the director of the state Department of Human Services, said she believes the administration should spend as much of the reserve as possible to help the poor. If lawmakers impose the restrictions, Koller's department would have to cut spending on programs meant to reduce teen pregnancy, strengthen two-parent families, offer employment training and enhance child welfare.

Koller said it makes no sense to leave money unused in the reserve when lawmakers could wait and see whether the welfare caseload rises before imposing restrictions.

"I think we should be putting all — every dime — of our federal money to work for us," Koller said. "And if we need to access more of this federal money should there be an increase in welfare applicants, then we can reduce at that time, if that should happen, our contracts with the prevention programs and work programs."

PROVIDERS WEIGH IN

Dozens of social-service providers, including The Institute for Human Services, Catholic Charities Hawai'i, Big Brothers Big Sisters of Honolulu and Parents and Children Together, have asked lawmakers not to restrict welfare spending.

But state Rep. Marcus Oshiro, D-39th (Wahiawa), the chairman of the House Finance Committee, and state Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), the chairwoman of the Senate Ways and Means Committee, believe it is too risky to spend down the reserve.

"We're really concerned about the balance and the need to have an adequate reserve," Oshiro said.

Oshiro and Baker said they understand restrictions might be painful for some providers, but they said Koller has unnecessarily alarmed the social-service community by suggesting the cuts are broader than planned.

"Some of these programs are really worthwhile and do good work. I'm not questioning that," Baker said. "But we have to be fiscally prudent."

There also is a level of mistrust because of past disputes between lawmakers and Koller over welfare spending.

"I think the director has not made some good decisions in the past," Baker said.

Oshiro and others have even suggested the administration is spending down the reserve, and earning good will in the social-service community, knowing a new administration would be in power by the time the reserve might fall into deficit.

"That's an accurate observation," Oshiro said. "I share that sentiment with many others here."

State Sen. Suzanne Chun Oakland, D-13th (Kalihi, Nu'uanu), the chairwoman of the Senate Human Services and Public Housing Committee, said she has supported Koller's use of welfare money in the past and she does not share her colleagues' skepticism about her intentions.

"But I can't continue to advocate for that when the reserve is so low," she said.

Hawai'i, like many states, has found new ways to spend federal welfare money as welfare caseloads have fallen because of a five-year time limit on public assistance.

The state receives about $98 million each year in federal welfare money, known as Temporary Assistance for Needy Families. The money can be directed to four main goals: aid to needy families; promoting self-sufficiency through job training, work and marriage; preventing out-of-wedlock pregnancies; and encouraging two-parent families.

Some of the money also can be placed in reserve, but once it reaches the reserve, it can only be used for direct cash assistance to the needy.

SPENDING QUESTIONED

Some social-service providers criticized the Lingle administration and lawmakers in 2005 for keeping a $118 million reserve, saying there were obvious needs in the community.

Koller has been aggressive about putting the money to use but lawmakers and the state auditor have questioned some of her choices. Lawmakers placed caps on the state's welfare spending after Koller used some of the money for the arts and for anti-drug campaigns. The state auditor found in 2006 that the state's welfare spending lacked a strategy and questioned, for example, the emphasis on preventing teen pregnancy when teen pregnancy rates were declining.

The Lingle administration uses a combination of the annual federal welfare grant along with money from the reserve to fund many social-service programs, with about $138 million in welfare spending planned for next fiscal year.

The House version of the budget would reduce that spending to $111 million, a $27 million difference. The Senate version of the budget, which will be up for a vote this week, would reduce spending to $116 million, a $22 million difference.

Koller has said she would spend the reserve down to zero. Oshiro and Baker said they always want to keep a reserve of about $45 million, enough to cover cash assistance to needy families for at least one year.

"To me, it just says we have to be more prudent about how we spend the TANF block grant and more careful about how much is left in the reserve," Baker said.

The budget restrictions would likely lead to cuts in three areas: work and work support contracts; programs to reduce out-of-wedlock pregnancy and maintain two-parent families; and contracts that enhance child protective services.

Koller has told lawmakers that the restrictions would force the department to cut or restructure existing employment and training contracts to providers that help people on welfare become self-sufficient before they reach the five-year time limit. She said it would lead to cuts in contracts for child protective services that help the state manage high caseloads and fund community-based services that are alternatives to state interventions.

DO PROGRAMS HELP?

The restrictions would reduce spending on youth development and after-school programs that Koller believes prevent teen pregnancy and discourage risky behavior such as illegal drug use. These types of programs, however, include some of the most hotly contested uses of welfare money, such as spending on arts and cultural education, robotics, Read Aloud America, the Honolulu Symphony Society and the Honolulu Boy Choir.

"It's giving kids the opportunity to realize that there are enrichments, there are things that you can find that are rewarding in life and worth pursuing, exposing them to hope, to nurturing their own talent, pursuing their dreams," Koller said. "This is the stuff that keeps kids out of becoming self-destructive and unproductive citizens."

Oshiro said such spending needs to be reconsidered. He said the state should concentrate on helping people break out of poverty.

"You have to and you should spend money to help the poor," he said. "But let's spend it in a way that truly enables people to escape poverty."