UNEMPLOYMENT INSURANCE AMENDMENTS OF 1966 FRIDAY, JULY 15, 1966 U.S. SENATE, COMMITTEE ON FINANCE, The committee met, pursuant to notice, at 9 a.m., in room 2221, New Senate Office Building, Senator John J. Williams presiding. Present: Senators Long (chairman), Douglas, McCarthy, Hartke, Williams (presiding), Bennett, and Dirksen. Also present: Senator Aiken, of Vermont. Also present: Tom Vail, chief counsel to the committee. Senator WILLIAMS. The hearing will come to order. Our witnesses today are all State administrators. These are the people who administer the unemployment compensation laws and pay out the benefits. The president of the Interstate Conference of Employment Security Agencies, and a committee of that group, is scheduled to be the first witness. I understand that the administrator from Texas who is appearing separately would like to make his statement before the interstate conference. Without objection, that will be done. Mr. Birdwell, would you take the stand. STATEMENT OF W. S. BIRDWELL, JR., COMMISSIONER, TEXAS EMPLOYMENT COMMISSION Mr. BIRDWELL. Thank you, Mr. Chairman. Mr. Chairman, I am W. S. Birdwell, Jr., one of the three commissioners from the Texas Employment Commission. Texas is one of four States that possesses a full-time commission which is composed of one member to represent labor, one member who represents business, and one member who represents the public. In the case of Texas, the member representing the public is always the chairman of the commission. The three commissioners have closely followed the progress of the proposed amendments to the unemployment compensation laws which I will refer to as H.R. 15119. The three commissioners with their director appeared before the House Ways and Means Committee in 1965 and submitted testimony. The Texas Employment Commission volunteered the services of our very capable staff to the Ways and Means Committee during their executive session when they gave studious and generous study in the writing of H.R. 15119. After careful consideration, and feeling the individual responsibility of representing our various interests, the three commissioners of the State Employment Commission of Texas unanimously endorse the updating provisions of H.R. 15119 and feel that the House Ways and Means Committee has done an outstanding job in the writing of this bill. With the chairman's permission, I would like now to put on another hat in which I speak solely as a representative of the employers of Texas. I think that this committee would be interested in knowingand is entitled to know-that the vast majority of the business interests of Texas are willing to accept their responsibility in paying the vastly increased tax to support this program. As you gentlemen know, if the present provisions of H.R. 15119 should become law, the Federal tax on the employers of this country would increase 50 percent the first year, beginning in January 1967: and another 30-percent increase in January 1969, making a total of an 80-percent increase in the Federal unemployment tax in 2 years. Mr. Chairman, in all honesty, I cannot say that the employers of Texas, whom I represent, relish the prospect of an 80-percent increase in their taxes, but they are willing to accept the burden of this expanded program. As you know, this entire program is financed 100 percent by tax on the employers of the Nation. I thank the chairman for this opportunity to present the views of the business community of Texas, as well as the official views of the Texas Employment Commission. Senator WILLIAMS. Thank you, Mr. Birdwell. Mr. BIRDWELL. Thank you, Mr. Chairman. Senator WILLIAMS. Mr. Hill. J. Eldred Hill. STATEMENT OF J. ELDRED HILL, JR., PRESIDENT, INTERSTATE CONFERENCE OF EMPLOYMENT SECURITY AGENCIES; ACCOMPANIED BY CURTIS P. HARDING, RICHARD L. COFFMAN, PAUL RAUSHENBUSH, JACK B. BROWN, HENRY ROTHELL Mr. HILL. Mr. Chairman and members of the committee, my name is J. Eldred Hill, Jr., and I am a commissioner of the Virginia Employment Commission and president of the Interstate Conference of Employment Security Agencies. My appearance here today is on behalf of the interstate conference which is an organization composed of the chief State officials administering the employment security program in the 50 States, the District of Columbia, Puerto Rico, and the Virgin Islands. The basic objectives of the interstate conference include efforts to improve the effectiveness of our unemployment compensation laws and employment service programs and where desirable to propose new State and Federal legislation in the field of employment security. It is the pursuit of this objective that prompts my appearance here today. My statement will be brief and is intended primarily to acquaint you with the role the interstate conference has played in the development of H.R. 15119 and to acquaint you with the present position of the State administrators with respect to this legislation. I will not endeavor to cover the many ramifications of the issues involved, but I will touch on the major improvements contained in the bill and then I will defer to the committee for any questions you may have. I have with me here today several of the Nation's out standing State administrators who, with your permission, will assist me in responding to your inquiries. All of these gentlemen have had long experience in the employment security field and each of them participated in the executive sessions of the House Ways and Means Committee when this bill was formulated. Mr. Chairman, if I may, I would like to introduce these gentlemen to you and to the committee at this time. First, Mr. Curtis P. Harding, administrator of the Utah Department of Employment Security; Mr. Richard L. Coffman, administrator, Texas Employment Com. mission; Mr. Paul Raushenbush, director of unemployment compensation, Industrial Commission of Wisconsin; Mr. Jack B. Brown, executive director, Bureau of Employment Security of Pennsylvania; and Mr. Henry Rothell, director of unemployment insurance, Texas Employment Commission. Mr. Chairman, when the administration's proposal for improving the unemployment insurance program was first presented to the Congress last year the State administrators had not been afforded an opportunity to participate in the development of the measure that was presented. Although the unemployment insurance program has been a Federal-State program since its inception, with the States being the operating arm of this partnership, we were excluded from the discussions and deliberations which produced the original proposal. When this fact was revealed to the Ways and Means Committee during its public hearings last August, several members of that committee requested the interstate conference to submit its recommendations for improving the unemployment insurance program. In response the conference established a working committee of 10 State administrators and after several meetings this special committee agreed upon a num ber of things that might be done to improve the program. Then in January of this year a special 2-day national meeting of the entire conference membership was held and the final recommendations were formulated. Those recommendations were presented to the Ways and Means Committee at a special public hearing on March 15 and 16 of this year. When the Ways and Means Committee commenced its executive sessions, the interstate conference was invited to participate and for 2 months we worked long and hard to produce H.R. 15119, which as you know, promptly won overwhelming approval in the House. H.R. 15119 does not include all of the items recommended by the interstate conference. Some of the things we recommended were modified and some items were included which we had not considered. During the extensive work performed by the Ways and Means Committee, it became apparent that some of the objectives the conference sought could best be obtained in ways different from those we had proposed; and it, likewise, became apparent that some of the things we had proposed would result in inequities among the various States. But we were given the opportunity to work with the committee in a conscientious effort to devise the best possible bill. We believe the bipartisan measure finally reported by the committee and passed by the House is a sound and practical solution. Undoubtedly there are those who will argue that this is a watereddown proposal compared with the original administration bill. They will say this bill does not go nearly far enough. But, Mr. Chairman, H.R. 15119, if enacted in its present form, will entail far more change in the unemployment insurance system than has been previously enacted in all of the bills passed since the birth of the program some 31 years ago. Among other things, this bill would establish a new Federal-State extended unemployment compensation program which would require the States to enact laws, that would have to take effect beginning with calendar year 1969, to pay extended benefits to workers who exhaust their basic entitlement to unemployment compensation during periods of high unemployment. It would extend the coverage of unemployment compensation laws to employers who employ one or more workers in 20 weeks during a calendar year or who pay wages of $1,500 or more in any calendar quarter of a year. It would extend coverage to certain nonprofit organizations and to certain employees of State hospitals and institutions of higher education. It would extend coverage to agricultural processing workers. It would require workers to have intervening work since the beginning of his benefit year to qualify for benefits in his next benefit year, thus outlawing the so-called "double dip." It would prohibit the cancellation of wage credits or total reduction of benefit rights except in cases of discharge for misconduct in connection with work, fraud in connection with a claim for compensation or disqualifying income. It would prohibit the denial or reduction of benefits to a worker because he files his claim or resides in a State other than that in which he earned his wage credits. It would prohibit the denial of benefits to a worker engaged in an approved training course. It allows a State to reduce its tax rate for a new or newly covered employer to not less than 1 percent until that employer has been covered sufficiently long to establish a record for merit rating. It increases the taxable wage base to $3,900 effective with respect to wages paid in calendar year 1969 through 1971 and to $4,200 beginning in 1972 and thereafter. It increases the net Federal unemployment tax rate from 0.4 percent to 0.6 percent effective next year. It extends for 5 years the time within which the States may expend for administrative purposes funds previously returned to them in the form of excess Federal tax collections. And it furnished the States a procedure for appealing decisions of the Secretary of Labor relating to conformance with Federal law to the U.S. court of appeals for a judicial review. No, Mr. Chairman, this is not an anemic little bill. Its enactment will mean real and substantial change. Now, there will be others who will argue that the change is too great that the bill goes too far, too fast. To these people I would simply point out that the changes involved are based on demonstrated need. These improvements have been carefully put together in a period of economic prosperity under the unemotional light of administrative experience. H.R. 15119 does not entail change simply for the sake of change-nor does it hold on to existing concepts simply because they have historically obtained. Mr. Chairman, the item which attracted the greatest publicity and evoked the closest study and attention in the development of this measure was the question whether the Federal law should impose minimum weekly benefit standards upon the States. The administration proposal would have imposed Federal minimum benefit standards eventually requiring each State to pay eligible claimants 50 percent of their average weekly wage up to a maximum of 662% percent of the statewide average weekly wage. The principal argument for a Federal benefit standard centers around the charge that in some States the benefit amount has lagged behind increase in wages. The interstate conference was sharply divided on this issue, but did vote to endorse a Federal benefit standard of 50 percent of a claimant's average weekly wage up to 50 percent of the statewide average weekly wage. Most State administrators would agree that this is a reasonable level for State benefits and many States already maintain this level or a higher one. Senator DIRKSEN. Let me ask you at that point, that was the Phoenix meeting? Mr. HILL. Yes, sir; that is correct. Senator DIRKSEN. How many did endorse weekly benefit standards? Mr. HILL. Well, the vote on the actual issue of the Federal benefit standard there was-as I recall it, 24 States voted for it and 21 against. Senator DIRKSEN. Now, there are no Federal benefits tendered in this bill? Mr. HILL. That is correct. Senator DIRKSEN. I am just wondering whether there was any other explanation for it. It would appear that you and your associates are all for the instant bill without those Federal benefit standards. Mr. HILL. Yes, Senator Dirksen, with the little bit I have left in my statement I explain to you that the State administrators now have been repolled on this measure and will reveal to you that actually 41 States now support H.R. 15119 as it was passed by the House, and actually in the latest poll we have taken, none of the States voted in opposition to 15119. We did have 11 States that did not cast a vote either way. But this change that took place with respect to Federal benefit standards I think should have some explanation. First of all, you must understand that when the conference began to develop its recommendations we had a special committee of 10 State administrators, and those 10 State administrators met on several occasions and we kicked around the various proposals as to what might be done and what ought to be done; and that special committee came to the conclusion that by a vote, as I recall it, eight or nine to one, that no Federal benefit standard could be devised that would truly be equitable, and so we recommended to the entire conference membership when it met in Phoenix, that no Federal standard be endorsed. But in the argument that took place on the floor in Phoenix, the people who favored a Federal standard were persuasive, and a special committee that had studied its report was rejected, and a Federal standard was endorsed. We found in many of the States that the impositon of a Federal standard would mean, in effect, virtually wiping off the books the |