IT IS BUDGET time in Virginia and Maryland, and the governors are busily dispensing the bounty of a strong economy. Between them, they have mentioned further tax cuts, increased savings for a rainy day and increased spending for the usual worthy causes -- education, transportation, etc. But conspicuously missing from the Christmas lists have been significant increases for an obligation of state government too easily forgotten in a period of prosperity -- aid to the poor and near-poor.

National and some state statistics suggest that lower-income households have been less than full participants in the economic gains of recent years. Income inequality continues to rise. The eight-plus years of steady growth have helped those at the top of the pile more than those toward the bottom. Meanwhile, largely thanks to welfare "reform," the poor may also be receiving less help from government than in the past. The combination of relatively easy times and tough new rules has caused welfare caseloads to plummet -- in Maryland by more than two-thirds and Virginia close to that. The decline has produced huge savings for the states, particularly because, under the terms of the 1996 welfare deal with the governors, the level of federal aid has remained fixed; under prior rules, it would have fallen with the caseload. Like most states, Virginia and Maryland are thus the current beneficiaries not just of economic growth but of a major welfare dividend. The poor in this sense are significant contributors to the current budget surpluses from which they are not equitably benefiting.

Advocacy groups say that lower-income families should at the least break even -- that money they no longer are getting in the form of welfare should continue to reach them in the form of increased child-care subsidies or to meet other needs as they struggle to make ends meet on spotty wages. The fact that they have left welfare doesn't mean that many of these families are better off. In strictly economic terms, some can be said to be worse off in that they now face added costs, of which child care is only the leading example. Their sources of income have changed, but in some ways their circumstances are even more precarious -- and to keep them from failing and reverting to the rolls, the states arguably have an even greater interest than before in coming to their aid. Instead, the advocates plausibly believe -- without being quite able to prove -- that both states are using what used to be poor people's money for other purposes. That shouldn't happen, and it is not enough for the states to say that they are following the woolly federal maintenance-of-effort rules, which are written in such a way as to sanction the retreat from responsibility they pretend to forbid.

In Maryland, the advocates have proposed what amounts to their own budget for the welfare dividend. They would increase the earned income tax credit whereby the state supplements low wages, ease the state's illiberal Medicaid eligibility rules, restore what amount to some welfare cuts imposed in what looked like tighter times in 1997, etc. Gov. Glendening and his would-be successor, Lt. Gov. Kathleen Kennedy Townsend, should be made to say what they think of these ideas. Gov. Gilmore should be put to a similar test in Virginia. The legislatures, when they convene, should likewise be held to account. State budgets whose net effect when properly understood may be to transfer resources away from the poor in plentiful times are indefensible.