Governor Schwarzenegger’s proposed state budget requires more work hours for adults receiving state welfare assistance, cancels a cost of living increase for the program scheduled for later this year… and proposes a new cap on the length of time that some families are eligible to receive cash payments designed to help their children.

The proposals were outlined this afternoon in an administration conference call with reporters.

Bottom line, the changes to the state’s welfare-to-work program known as CalWORKs would reportedly save the state a total of $464.7 million. The state could face a budget deficit of some $5.5 billion in the 2007-08 fiscal year.

The largest savings, almost $176 million, would come from forcing more adult recipients to work at least 30 hours a week to keep receiving assistance. That’s a federally mandated standard, and one that the Schwarzenegger administration estimates is currently met by only 25% of CalWORKs recipients.

The governor’s budget advisers say their proposal to raise that percentage will help avoid penalties that the federal government will soon impose on California for having such a low percentage of recipients working those hours. The federal penalties, which would kick in next year, could total some $149 million. A recent report from the nonpartisan Legislative Analyst’s Office concludes that 46% of California adults on state assistance will have to work more hours, in order for the state to avoid the federal penalties.

Another significant part of the governor’s welfare savings ($160 million) come in a proposed five-year cap on cash aid to children. Not only does that time limit not currently exist, but existing policies have allowed CalWORKs cases that began as help for adults to transfer to help for their children, once the adults’ eligibility expired.

“As more adults reach the time limit,” says the recent LAO report, “the adult caseload is decreasing, while the child only caseload is increasing.” Governor Schwarzenegger’s plan would certainly seem to scale back that growth in child assistance.

As such, it may be one of the more politically controversial proposals in the Legislature. The reaction from Senate President Don Perata (D-Oakland) in a written statement: “It’s ironic that the governor is proposing health care for poor kids, while taking away their breakfasts. Even Republican Governor Wilson– at the time he negotiated welfare reform– agreed that children should not suffer for the behavior of their parents.”

And a pointed reaction, too, from Assembly Speaker Fabian Nunez (D-LA): “At a time when our state is enjoying unprecedented prosperity, we will not balance the budget on the backs of our most vulnerable citizens. This is a punitive and unproven approach that will hit struggling families hard, particularly single mothers.”

We’ll get a look at the governor’s full budget proposal on Wednesday.