HARRISBURG - Estelle B. Richman, who has led the state Department of Public Welfare for seven years, is stepping down to take a top post in the U.S. Department of Housing and Urban Development.

Richman will become the agency's chief operating officer Jan. 4, Gov. Rendell announced yesterday.

Rendell called Richman the "most effective" welfare secretary in the history of Pennsylvania.

"For me, this is a very sad moment," he said at a news conference. "My sadness is only tempered by the fact that Estelle is going to go to work for an equally important government mission."

"Our loss is Washington's gain."

Rendell said he had tapped Harriet Dichter, the state's deputy secretary for child development and early learning, to replace Richman at welfare, one of the state's largest agencies, with 19,000 employees and a budget topping $9 billion.

Rendell said Dichter, of Philadelphia, had the perfect blend of "energy, drive, passion, and commitment" to succeed in the job.

In announcing her decision, Richman, 66, recalled how as an African American girl in Lynchburg, Va., she had attended segregated schools until high school, had to watch movies from a theater's balcony, and had to drink from a separate water fountain.

"I never thought, and my parents and my grandparents never believed, that there would be a black president," Richman said. "I see this as a historic administration. And when I was offered an opportunity to be a part of it, I didn't want to say no."

During her tenure, the percentage of foster children finding permanent homes has jumped while the waiting list for mental-retardation services has dropped. The state has rooted out fraud in the food-stamp programs, improved child-support collection programs, and created the first Bureau of Autism - all as a result of efforts overseen by Richman, Rendell said.

"She was a beacon of hope for so many people," he said.

Cost-saving moves Richman helped put in place have saved taxpayers more than $5 billion, Rendell said.

Even so, she was a frequent target of Republican legislators, some of whom believed she was unable to fix problems, such as fraud allegations, that audits identified.

Richman said she had been heavily recruited by the Obama administration, with officials calling her no fewer than five times to set up interviews during the summer.

She was initially offered the post of "homeless czar" in the department, but later officials proposed a new post of chief operating officer, whose job will be to better coordinate senior level activities of the agency.

At the same time, officials with the U.S. Department of Health and Human Services offered her a top post as well.

Through a spokeswoman, HUD Secretary Shaun Donovan said he was "delighted to have Estelle Richman joining HUD's leadership team."

"Estelle brings with her a wealth of management expertise," said Melanie Roussell, a HUD spokeswoman.

Richman was Philadelphia's managing director for Mayor John F. Street before Rendell picked her as a member of his original cabinet in 2003. She was the city's health commissioner when Rendell was mayor in the 1990s.

Richman's departure will leave only two of Rendell's 17 original members: Corrections Secretary Jeffery Beard and Transportation Secretary Allen Biehler.

Richman said she planned to continue living in Chestnut Hill but would try to find an apartment in Washington.

She recently went apartment hunting, only to suffer from what she called a severe case of "sticker shock" from rents in the nation's capital. Yesterday, she quipped to reporters that perhaps she would be the "first person to work for HUD to be homeless."

Contact staff writer Mario F. Cattabiani at 717-787-5990 or mcattabiani@phillynews.com.