WASHINGTON (AP) _ A year after a historic welfare law was enacted, families are coming off public assistance in record numbers in nearly every state.

But it is unclear where these families are landing, or what will happen should the economy turn down.

States are forcing recipients to work for benefits and look for private jobs. And dire predictions made a year ago _ a million children slipping into poverty, overrun homeless shelters _ have not come true.

``The debate is over,'' President Clinton declared last week. ``We know now that welfare reform works.''

But many others say the debate is far from over.

``The real test is whether people stay off,'' said Clinton's secretary of Health and Human Services, Donna Shalala. ``Is it too early to tell? You bet.''

Welfare reform began in earnest in the early 1990s, as states got permission to experiment. One year ago Friday, Clinton signed a sweeping bill, crafted by Republicans in Congress, into law nationwide.

Today, a smaller slice of the nation relies on welfare than at any time since 1969. And an incredible 3.5 million people have left over the last three years _ a drop of nearly 25 percent.

The numbers have never dropped so far, or continued to drop for so long.

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Pamelia Ferguson admits she didn't want to leave welfare.

``It can become as addictive as drugs, I'm telling you,'' said the 33-year-old former cocaine addict from Knoxville, Tenn. ``I became dependent on it.''

Then, about a year ago, she was offered work at the clinic that helped her escape from drugs. After three years on welfare, she began as a receptionist and worked up to billing clerk, now making $6 an hour.

She misses the cash welfare payments, she admits, but not enough to return.

``I feel better going through the check-out line in the grocery store, paying cash instead of food stamps,'' she said.

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Do all people leaving welfare find good jobs like Ferguson?

No one can say with certainty why people are leaving. Presumably, many find work, but do they all? State officials don't know.

In Idaho, fewer than half the welfare families reapplied for benefits when a new system took effect July 1. The state has no idea what happened to the rest and is studying the question.

``We're very concerned,'' said Bill Walker of the Department of Health and Welfare.

In Iowa, less than half those pushed off the rolls found jobs. About half had even less money than they did while on welfare.

And in Massachusetts, half those leaving welfare found jobs. Another 11 percent moved out of state. The rest either found other support, no longer have eligible children or are reapplying.

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Welfare reform's toughest tests are yet to come.

No statewide time limits have kicked in yet, so massive numbers of people have not been dismissed at once.

And states have yet to feel real pressure to get people into work. By 2002, states will lose federal money if half of recipients are not working or off the rolls. This year, the target is just 25 percent.

``If this were a baseball game, we're in the first inning,'' said Sid Johnson of the American Public Welfare Association.

The biggest unknown is what will happen when the economy sours. The booming economy _ with its low unemployment rate _ is responsible for 44 percent of the caseload decline, says Clinton's Council of Economic Advisers.

With unemployment low, companies don't have much choice of workers when they hire. Even people without much experience can find work.

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Deborah Rosato-Shaw is running an umbrella company, not a charity, but she's thinking how she might help.

If a welfare client were to apply for a job with Umbrellas Plus, her small firm in Chester, N.J., she'd consider taking a chance _ even if the resume didn't shine so bright.

Rosato-Shaw grew up in the Hispanic South Bronx, where friends and family were no strangers to welfare.

``It's not like `them' over there,'' she said. ``If there was a way to bring some economic opportunity to a larger group, I want to be part of that.

``Companies are going to have to take chances,'' she said, perhaps trying to convince herself.

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Even in a strong economy, moving people off welfare is likely to get tougher. The most employable are moving into work now, leaving those with the fewest skills and deepest problems _ be it drug abuse, domestic violence or lifelong dependence on aid.

Marriott, which runs one of the most successful programs to hire welfare recipients, tried and failed to recruit an entire class with deep troubles.

``We shouldn't have done that,'' said Janet Tully, who runs the program.

Just a handful of the more-disadvantaged remain with the company, compared with high retention rates for other recipients who have gone through, Tully said.

They just had too many problems, she said: Many were regularly moved from one homeless shelter to another, some were fighting domestic violence, their child care arrangements kept falling through.

Now Marriott plans to include a maximum of four difficult cases for each group of 16.

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Saroeun Meas won't feel welfare reform until September, the first month he'll go without $350 in food stamps.

``I don't have any money to buy the food,'' he said through a translator.

But Meas, a 65-year-old Cambodian refugee living in Chicago with five teen-age children, is relieved that disability payments will continue for him and his wife _ $478 a month each.

Clinton last year vowed to restore benefits for immigrants cut off Supplemental Security Income and food stamps. He won on SSI, but noncitizens still will lose food stamps by Sept. 1.

``I plan to apply,'' Meas said. ``If they reject me, I plan to apply again and again.'' And if that fails? ``I don't know what to do.''

He brought his family here 12 years ago, after fighting the Khmer Rouge in Cambodia, then living years in Thai refugee camps. Even without aid, he has no regrets. ``This country is easy, with schools and hospitals. And a lot of people help poor people.''

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Last year's law wasn't easy for Donna Shalala, who saw top aides leave in protest. Liberal allies accused Clinton of abandoning the neediest.

Now Shalala can point to victories _ a new focus on work and plummeting caseloads.

But true success will require much more, she says. She'll look for healthier children with working parents, fewer high school dropouts, less teen pregnancy.

``Have we improved the life chances of American children?'' she asked. ``That's the way I'm going to judge welfare reform.''