The state is expecting a major windfall -- between $360 million and $600 million a year -- because the federal budget deal would ease restrictions on aid to legal immigrants that had been enacted into last year's welfare-reform law.
The bipartisan agreement will also inject an additional $200 million a year into the state's existing child health-care program.
But as the president and members of Congress were congratulating one another, governors and local welfare commissioners were furious about a lapse in the budget talks that threatens to create an administrative and fiscal nightmare about welfare reform.
Brandishing a veto threat, President Clinton forced embarrassed House Republicans to drop their drive to require former welfare clients to perform public-service workfare without guarantees of minimum wages, overtime and Social Security tax payments.
Clinton had ordered that those worker protections, accorded by the 1938 Fair Labor Standards Act to all regular wage-earners, also apply to citizens in a transition from welfare to work.
Rep. Clay Shaw, R-Fla., chairman of the House Welfare Subcommittee, obtained House passage of an amendment to the budget bill that would vacate Clinton's order.
In addition, Shaw's bill wanted food stamps and federal housing assistance to be counted against minimum wages paid under workfare, thereby reducing the pay that former welfare clients receive.
The Senate failed to approve similar legislation, and Clinton's negotiators faced down House Republicans in the final hours of the budget talks.
So the issue was, according to a senior Senate Finance Committee source, "simply laid on the table so the budget negotiations could proceed."
A spokesman for Shaw said he will ask the House to pass the restrictions in a freestanding bill this fall.
Erie County welfare officials said the impasse is going to cause "an absolute nightmare" in trying to meet federal standards for accounting for the proportion of a locality's welfare load that has been moved to employment, public service chores, or job training.
No resolution of the deadlock will be possible until Sept. 3, at the earliest, when Congress returns after its August recess.
In the meantime, state and local welfare agencies will exist in a kind of administrative limbo.
Aides to Gov. Pataki said Wednesday that failure to resolve the welfare/workfare issue could wind up costing New York State as much money as it hopes to get from relaxing curbs on aid to legal immigrants.
Federal budget negotiators set aside $12 billion for aid to legal immigrants over five years, and New York State expects to receive 15 to 25 percent of that national total.
Catholic Charities USA called the deal on aid to immigrants an "astonishing reversal" of the 1996 welfare-reform bill that barred Supplemental Security Income and Medicaid benefits to half a million poor legal immigrants.
Erie County Social Services officials, who asked not to be quoted by name, said local and state taxpayers would have had to support the immigrants under the Home Relief or other non-federal programs. Half the cost of that would have been borne by the counties. The budget deal, then, represents a substantial windfall for state and local coffers.
Legal aliens, refugees and those claiming asylum who were in the United States at the time of the welfare bill's enactment last August will be "grandfathered," made eligible for SSI and Medicaid for seven years, after which time they would be required to become citizens.
The budget would also provide an added $3 billion over four years to help long-term welfare recipients find and keep jobs. New York's share of this could not be immediately determined.
The agreement also provides $1.5 billion over five years to help jobless, able-bodied 18-to-50-year-olds who could be cut off from food stamps because of the three-year time limit.
Negotiators also tried to breathe life into the embattled national passenger railroad system, Amtrak.
The system would receive $2.3 billion in new money from the budget agreement, but only if Congress approves a complicated, and highly divisive, bill to reform the national railroad passenger system.