Montgomery County Executive Charles W. Gilchrist launched a $520,000 pilot program yesterday to provide education counseling, child care, transportation and other services to help chronic welfare recipients become economically self-sufficient.

The Family Independence Project, a modified workfare program that is the first of its kind in the area, will target about 100 residents who have been continuously on the rolls of Aid to Families with Dependent Children (AFDC) for more than two years or who are AFDC teen-age parents. About 900 of 2,700 AFDC families in the county are considered chronic welfare recipients, Gilchrist said.

The new project, spurred by cuts in federal funding for social services, is expected to reduce costs to the county by "a substantial amount" as participants leave the welfare rolls, Gilchrist said. The county's average payment to an AFDC family who also receives food stamps is about $7,000 a year, he said.

"I believe that the vast majority of public assistance recipients, if given the choice, would prefer to work and be economically independent," Gilchrist said. County officials estimate that it will take one to two years to get each participant off the welfare rolls.

Developed by the county's Department of Family Resources, the project will receive $410,000 in county funds and a $110,000 grant from the Maryland Department of Human Resources.

Participants will receive "bonus payments" up to $250, which can be used for food, rent, utility payments and other bills approved by project case workers. Participants become eligible for incremental payments -- up to $750 over two years -- by completing high school, obtaining a job, or keeping a job for six months.

Welfare recipients who volunteer for the program will be able to switch from Medicaid to private health care insurance.

Cynthia Johnson, a 22-year-old single Rockville parent with two young children, said that the health assistance plan motivated her to volunteer for the project. "One of the major reasons I've never tried getting a job is I don't have a way to pay for medical care and child care," said Johnson, who said she has been receiving AFDC payments for about three years. She and 10 other families signed up for the program when it began operating last week.

The Center for Prepaid Health Care Research, a Rockville nonprofit firm, will help participants get coverage with a health maintenance organization at a group rate. Premiums will be paid by funds from the participant, the county, foundations and corporate contributors. As clients become more self-sufficient, they will assume a greater part of the health costs, officials said.

Similar projects, funded by the state, are under way in Baltimore city and six other counties, but none includes the health care plan offered in Montgomery.