The District has won a $20 million federal reward for reducing the number of births out of wedlock, the U.S. secretary of health and human services announced yesterday.

The 1996-97 out-of-wedlock birth rate in the District was 3.7 percent less than the 1994-95 rate. Among the states, only California did better.

Alabama, California, Massachusetts, Michigan and the District each will get a $20 million bonus under a special provision of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The law, known as the national welfare reform act, required all states to develop strategies for reducing births out of wedlock as part of their local welfare reform plans.

"The welfare reform law transformed the welfare system not only by requiring work and parental responsibility, but also by focusing on reduction of out-of-wedlock and teen births," HHS Secretary Donna E. Shalala said yesterday. "This is an important way to help reduce the risk of welfare dependency."

Under the 1996 law, $100 million was earmarked for the five states most successful at cutting the proportion of out-of-wedlock births to total births. California came in first, with a 5.7 percent reduction between 1994 and 1997. The District came in second, reducing its rate by 3.7 percent. The rate dropped 3.4 percent in Michigan, 2 percent in Alabama and 1.5 percent in Massachusetts during the same period.

HHS calculated the rate based on data collected by the National Center for Health Statistics, HHS spokesman Michael Kharfen said.

In order to qualify for the $20 million bonus, the states and the District also had to show a decrease in the local abortion rate between 1995 and 1997. The abortion rate is measured as the number of abortions divided by the number of births.

In the District, the number of abortions dropped by 11.4 percent between 1995 and 1997, Kharfen said.

Officials said yesterday that they could not make definitive conclusions about how the decreases in out-of-wedlock births were achieved. HHS officials said more evidence is needed to fully understand the factors that contributed to the decrease.

The federal welfare reform act covered only the final year of the four years considered for the incentive program. Even before the law went into effect, some states began encouraging parental responsibility under welfare reform waivers that the Clinton administration granted to 43 states.

Both nationally and in the District, the out-of-wedlock birth rate has been dropping for several years, said Jearline Williams, director of the D.C. Department of Human Services.

Williams said that as part of its welfare reform efforts, the city stepped up efforts to combat out-of-wedlock births. DHS launched an aggressive public education campaign targeting teenagers in Wards 7 and 8, where the teen pregnancy rates are the highest in the city, she said.

"We still have a lot of work to do," she said. "We will look into investing dollars in programs and initiatives that assist families to become or remain self-sufficient, and that includes investing in additional programs to reduce the out-of-wedlock birth rate even further."

The $20 million bonus will be added to the $92.6 million the city receives from the federal government for its welfare program.

Mayor Anthony A. Williams (D) called the incentive program a "powerful new tool to expand our efforts to help our young people reach their full potential in life."