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The Labor Department (in addition to its proposed limitation to 13 weeks postponement) has proposed that benefits in disqualification cases not be charged to employers' accounts.

The purpose of disqualification is to channel benefits where they belong and to protect the integrity of the system-not to reward employers. It is the responsibility of employers to advise the administrators of the causes of separation. Without employer cooperation it is almost impossible to administer this program. Experience in the States where the noncharging idea has been tried indicates that this practice has a tendency to minimize employer cooperation. Without such cooperation, the whole program could well fall into disrepute.

Furthermore, experience rating operates only through the charging of benefits against employers' accounts. If these benefits are not charged to the accounts of the individual employers, then they become a cost to industry at large and this amounts, in effect, to asking one employer to pay the benefits for an employee who has been discharged for some reason by another employer.

In summary, our manufacturers continue to have confidence in the State governments, which should have the primary responsibility for unemployment compensation.

The States have made steady progress toward building sound longrange programs, and many of us have worked for years in the States toward this end. We expect the States to make further improvements in the future, and manufacturers will continue to work to that end.

We believe many of the provisions of S. 1991 are unsound and unnecessary and that the overall effect of this bill would be to undermine the State systems.

While we would have preferred a somewhat different approach to some of these problems, we are not advocating any amendments to the House bill at this time. As a total package, we view H.R. 15119 as an acceptable compromise which we support.

The CHAIRMAN (presiding). Thank you for your statement, Mr. Cotabish.

As I understand the House bill which I take it you are prepared to support

Mr. COTABISH. Yes, sir.

The CHAIRMAN (continuing). As I understand it, the two principal things the House bill does is to raise the tax rate, and to raise the base.

I would assume that is going to bring a lot of additional money into the fund, part of it for administration at the Federal level and part of it for State administration.

Do you anticipate that the States will receive additional money and that they will use that to expand and increase benefits under their existing States programs?

Mr. COTABISH. As I understand it, Senator, there will be moneys available for State improvement of their employment programs. I imagine there are other bills-I am familiar with the employment service bill which, I believe, contemplates some of the use of these administrative funds. I expect that this would be passed along to the States through the Federal channels.

The CHAIRMAN. Here in our blue sheet which was prepared for the committee by our staff with the assistance of the Labor Department

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we will show it to you-on page 40 is chart 22, which indicates that present maximum weekly benefits are relatively much lower than earlier levels. A comparison of the years 1939 and 1966 shows that the ratio of maximum weekly benefit amounts to State average weekly covered wage has declined due, I would assume, to the depreciation in the value of our currency more than to any other single factor.

Now, if we were merely trying to put this ratio closer to where it was when the program started, would you say that the House bill does that by making additional revenue available to the States with which they could do this?

Mr. COTABISH. Well, the House bill makes no change in the benefit levels, is my understanding, sir. But the States themselves have been making changes in benefit levels and these, of course, come up every time the State legislatures are in session, and we anticipate the same activity in our own State legislature in Ohio.

The CHAIRMAN. Does not the House bill make available to the States more money with which they can increase benefit levels if they are so disposed?

Mr. COTABISH. I believe the House bill has the financing divided between the provisions for building up an extended benefits fund, which would be your recession benefits, and then increases in the administrative expenses.

The CHAIRMAN. Well, now the State taxable base goes up from $3,000 to $4,200. Applied against that greater tax rate, would not that make available larger amounts of money to the States to increase levels of benefits or to provide additional benefits beyond what they are pres ently providing if the States were so disposed?

Mr. COTABISH. I do not believe it follows that the State has to increase its own revenues.

Now, they can, if they take this measure as far as the State funds are concerned.

The CHAIRMAN. You say the State does not have to, but unless the State moved to find ways to keep this tax from applying, as it would under their existing law, wouldn't the increase of the base to which the tax is applicable cause the States to have a very substantial amount of additional money available with which they could increase benefits if they wanted to?

Mr. COTABISH. That would apply, sir. We had the experience in Ohio, prior to the 1963 session of the legislature, where our fund was down from over $600 million to down to $67 million, which was nearly a bankrupt condition in the Ohio employment fund, and without changing the taxable wage base we revised the rate schedule in Ohio, going from a maximum of 3 percent to a maximum of 4.2 percent, and this has built the Ohio fund up in less than 3 years to nearly $400 million where a minor-well, I won't say minor-but any revision that produces that much additional revenue is certainly a contributing factor in there. So that it can be accomplished in either direction by increasing the taxable wage base or by increasing the tax rate.

The CHAIRMAN. You see, when Congress started this program Congress did not set the standards for the States. The Congress passed a tax. We gave the States a 90-percent credit against that tax if the States wanted to get into the field and to do a job here. The States, in general, were not made to do it, but because of lack of prior

experience the States felt they would like to see some sort of a model statute, and most of them patterned their laws after a model statute that was sent out from Washington.

It has been modified in many respects since that time.

In some respects this House bill does follow and in some respects we might consider simply following the precedent that has existed for some time. We could say to the States this is what we think is desirable. We will be making more money available to you, and we would hope that you would use that to provide more adequate benefits. At the same time, we would not try to set your standards for you, do it the way you want to do it. I just wonder if that approach is not already in the House bill and yet, that might not be the approach that this committee should adopt if it wanted to go a step beyond what the House did, and I was just seeking your reaction to that. Mr. COTABISH. I see.

I believe that our feeling is that the actual funding of State programs can be accomplished by either means or by a combination of both of them, and really the revenue-producing factor in the State programs has not been a deterrent to the increasing of benefits. It has been essentially a judgment of the legislature as to what the proper benefit level should be, sir.

The CHAIRMAN. What I am getting at is: Doesn't this House bill that was passed mean that more funds will be made available to the States with the expectation that the States are going to provide greater benefits than they have at the present time? In the main, in general, States will increase benefits.

Mr. COTABISH. My understanding, Senator, is that the revenue produced by the House bill would provide for the creation of a recession fund which would be held by the Federal Treasury, and for an increase in Federal taxes which would be then available for improvements in the administration of the program and for certain training of the employment service people.

The CHAIRMAN. Well, when the States come into conformity on their tax base, doesn't that give them more funds with which they can provide additional benefits in the event they are disposed to do so, without raising taxes?

In other words, when they tax wages up to $4,200 as contrasted to the present $3,000, they are taxing $1,200 more of the wage base than they were before. Unless they are going to act to reduce their tax rate, doesn't that provide them with additional funds with which they could provide benefits?

Mr. COTABISH. Yes, sir.

The CHAIRMAN. Thank you very much.

Senator WILLIAMS. Isn't it also important, though, that the States use some of this additional funds to build up their reserve against the possibility that we will have a recession, where there would be heavier withdrawals such as you had in Ohio a few years ago?

Mr. COTABISH. It would be important that all of them are adequately funded for their primary obligation which is, of course, the payment of benefits for the first 26 weeks or some of the States, I believe, have gone beyond 26 weeks now.

Senator WILLIAMS. And in establishing those rates they have to take into consideration the possibility that the unemployment rate can be substantially higher than it is today?

Mr. COTABISH. Yes, that would be true.

Senator WILLIAMS. No further questions.
The CHAIRMAN. Senator Talmadge.
Senator TALMADGE. No questions.
The CHAIRMAN. Senator Bennett.
Senator BENNETT. No questions.

The CHAIRMAN. Thank you very much for that very fine statement, Mr. Cotabish.

The next witness is Mr. Marion Williamson of the Georgia Employment Security Agency.

Senator TALMADGE. Mr. Chairman, it is a pleasure indeed to welcome to our committee a constituent and friend for more than 30 years. We are happy to have you here.

Mr. WILLIAMSON. Thank you, sir.

The CHAIRMAN. May I say, Mr. Williamson, that is a very fine recommendation.

Mr. WILLIAMSON. He used to be my boss down there.

The CHAIRMAN. What is that?

Mr. WILLIAMSON. He used to be my boss.

The CHAIRMAN. He is a mighty good boss.

STATEMENT OF MARION WILLIAMSON, DIRECTOR, EMPLOYMENT SECURITY AGENCY, GEORGIA DEPARTMENT OF LABOR

Mr. WILLIAMSON. Mr. Chairman and honorable members of the committee, for the record I am Marion Williamson, since 1944 director of Georgia's Employment Security Agency. I have served the Interstate Conference of Employment Security Agencies as president and in other capacities, but am honored to accept your invitation to appear before you as one who is impelled by an intense and increasing concern for the preservation and continuing deveopment of an effective, constantly improving, and soundly financed unemployment insurance system based on insurance principles and attuned to local conditions.

I approach you today in support of H.R. 15119, the "Unemployment Insurance Amendments of 1966," which the House of Representatives approved by the overwhelming majority of 374 to 10 after having wisely rejected the drastic proposals in H.R. 8282.

I might say that some of them thought it went too far in this bill. H.R. 15119 is the product of diligent, thorough study and vigorous debate, and in my judgment is a measure that is reasonable and sound in its objectives.

It commendably amends fundamental statutes to provide for broader coverage of workers, an extension of payments for limited periods to those who have exhausted regular payments during periods of high unemployment, a moderate increase in the wage base and tax rate, and a statutory process for State use in obtaining judicial review of findings by the Secretary of Labor. In my opinion, gentlemen, the architects of H.R. 15119 have constructed a bill that is progressive, fair, workable, and in keeping with those principles which are necessary to preserve the present State-Federal partnership with its sound and proven concepts.

H.R. 15119 properly rejects the concept of those who would impose ever increasing Federal controls and standards on the theory that all

things good and constructive must be directed from Washington. This philosophy of central Federal control, if applied to the job insurance program as proposed in S. 1991, which is identical to H.R. 8282, would undermine its very foundation and make the program a continuing national political issue. This would surely destroy it as an insurance program.

Gentlemen, the application of increased Federal standards and controls must be denied if the program is to survive and continue to serve the best interests of our country. H.R. 15119, by retaining the autonomy of systems under State laws, does not diminish the State role in the State-Federal system and will permit the States to continue to provide a sound job insurance program for the involuntarily unemployed within the broad framework of the Social Security and Federal Unemployment Tax Acts. A federalized system as proposed by S. 1991 would permit abuse and actually encourage those without work to remain idle for prolonged periods rather than to accept suitable employment or enter training programs. Tremendous tax costs would be added at a time when various other measures have already increased the mounting tax on payrolls.

S. 1991 also ignores the studied advice of the job insurance system's original designs and the successful experience of 31 years by providing for a federalized program that would impose Federal standards as to duration, weekly insurance amounts, and disqualifications, virtually destroy experience rating, and drastically corrupt the system through provisions for a confused mixture of insurance and welfare.

H.R. 15119 wisely rejects the notion that job insurance should be stretched or perverted into just another welfare program. Rejected also is the idea that the heavy Federal hand should clamp down on State programs which have succeeded so well throughout the years of peace and war, recession, and prosperity, normal times and depression.

Similarly discarded is the thesis that Federal bureaucrats should oust the discretion of State governments and State administrators and pull the reins from Washington as to weekly insurance amounts, eligibility and disqualification requirements, and the duration of regular payments. H.R. 15119 thus preserves basic principles that have worked well for many years.

In enacting the social security law, the Congress gave heed to the Economic Security Committee's sage advise that the States be vested with broad discretion to provide the type of unemployment insurance program appropriate to economic and social conditions prevailing at the grassroots level. The fixing of job insurance amounts, duration, eligibility, disqualification, and similar matters of intensely local significance was left to the States.

Congressional wisdom in enacting a State-Federal system has wrought rich rewards throughout the years. The cooperative partnership has resulted in extensive improvements in the insurance payments to job seekers who, for temporary periods, were involuntarily unemployed. The record of these improvements is impressive. The States have substantially increased the average weekly insurance amounts, greatly elevated maximum insurance payable, significantly liberalized duration requirements, and reduced waiting periods.

A worker who qualifies for job insurance today receives more payments sooner for a longer period and can buy more real goods with

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