Gov. Evan Bayh said last week the state will eventually be able to eliminate a quarter of its annual $215 million welfare budget under a dramatic reform plan that will get underway next year.

The Department of Health and Human Services approved the Indiana reform initiative last week, waiving federal welfare mandates in the state for seven years and paving the way for what Bayh called "the most aggressive and comprehensive welfare reform program in the United States."

Under the new system, many recipients will be limited to 24 months on the welfare rolls while they are looking for work. And the state is instituting a "family cap" that would deny recipients benefits for children born more than 10 months after they go on the program.

It will take a few years for the state to reap dramatic savings because the program will not cut recipients from the welfare rolls immediately, said Steve DeMougian, assistant secretary for the Indiana Family and Social Services Administration.

DeMougian said the plan will be fully implemented at the July 1 start of fiscal 1996, and will actually cost about $860,000 the first year because of computer reprogramming needs. But he said the program will save the state $54 million in the seventh year.

It is unclear whether the federal waivers will be extended beyond the seven-year experimental phase, DeMougian said.

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