Governor Jerry Brown wants to restrict the length of time families can receive cash grants from four years to two years if they do not work or pursue job training.
H.D. Palmer, with the Governor's Department of Finance, says work participation rates have declined from about 27 percent three years ago to an estimated 23 percent last year.
He says the state could face financial penalties if it doesn't meet federal work participation requirements.
Palmer: "On the fiscal year that begins on July 1st for example, California is going to be paying about $180 million more to pull down federal matching dollars for this program than we otherwise would."
Democratic legislative leaders say given the state's high unemployment rate, it's foolish to train people for jobs that don't exist. So they want to preserve cash grants for needy families.
The governor has until June 27th to act on the spending plan the legislature sent him last week.