(b) During the 12 months ended February 28, 1959, the Louisiana Employment Security Division's published records show a total of $32,855,713 paid in benefits. This represents an increase of more than 30 percent in dollars for the last 6 months over the first 6 months. This is the result of the increased amount and duration of benefits since the weeks of compensated unemployment decreased in the last 6 months by 10,626 weeks. Lousiana business gages the degree of employment security increased by a decrease in number of weeks compensated and not by the amount of money paid out. Louisiana Employment Security Divisions' published figures show that 63 percent of all new claimants are eligible for the maximum amount. An analysis of these figures shows that with 37 percent not eligible to the maximum and with a $31 average weekly benefit, it follows that the approximate average weekly benefit amount of this large group of 37 percent is $24. This would mean average weekly earnings of $37 in their highest quarter. This benefit then represents 65 percent of gross average weekly wage for this group. Federal benefit standards propose 50 percent, which would mean a 15-percent reduction in weekly benefit amount for this group. (c) Proposed Federal standardization would force Louisiana to enact almost immediately a $52 maximum weekly benefit amount and provide an escalator maximum geared to any average wage that the Federal agency in any manner chose to determine each year, since even now that agency prescribes the method for State reporting and determining average wage. (d) Proposed Federal standardization would force Louisiana to adopt uniform duration of 39 weeks for all claimants eligible for any benefit. According to the Louisiana Agency's published statistics, about 50 percent of all current claimants are eligible for the maximum duration of 28 weeks. These Federal standards would make all claimants eligible for 39 weeks. (e) Since Federal standardization would require no more than $1,560 earned in a year to obtain $2,028 in benefits for a year, the proposal before your committee is to force Louisiana to pay $1.30 in benefits for $1 earned. (f) Since under the Louisiana statute some $37 million annually is being currently paid in benefits, summation of the dollar effect of the foregoing proposed Federal standards can be conservatively reduce to: (1) A minimum of 48 percent increase in average weekly benefit amount. (2) A minimum average increase of 40 percent in duration. (3) A minimum composite average increase of 75 percent in benefit cost; yielding (4) Anticipated annual outlay of $60 million in benefits. (g) Tax effect on Louisiana business would be as follows: Present average Louisiana Employment Security Tax Rate, 1.1 percent (yield annually, $16,775,000). Anticipated minimum average tax rate brought about by 1958 legislative amendments (yield annually, $21,350,000), 1.4 percent. Present fund balance, $140 million. Proposed Federal standardization would absorb this balance in approximately 3 years. Louisiana's current annual taxable payroll (6-30-58), $1,525 million. Average rate required to pay $60 million annually in benefits, 3.9 percent. Increase necessary in average tax rate if Federal standards were adopted by Louisiana, 2.5 percent ($1,525 million X2.5 percent=$28,125,000 annual tax increase to Louisiana business representing a tax increase of 178 percent). It would be difficult to believe that the Louisiana legislature would voluntarily and in its considered judgment enact such a tax increase, even if such measure did not require a two-thirds majority vote as its constitution now provides. (h) As bait to get the States to adopt Federal standards by July 1, 1960, the proposals provide for continuation of the credit of State taxes against the Federal tax of 3 percent. For those States which do not adopt these Federal standards by July 1, 1960, business would pay the full 3 percent tax to the Federal Government and would also have to pay the State tax. In Louisiana this would mean an additional tax on business of $41,175,000 on its payrolls annually. (Presently the Federal tax is 0.3 percent on $1,525,000,000 or $4,575,000. The new tax would be 3 percent on $1,525,000,000 or $45,750,000 annually, or an increase of 900 percent.) For this, Louisiana would receive nothing and would further be obliged to pay its own annual administrative cost of about $3,000,000. This new tax money would go into the Federal Treasury and could be used to increase grants or loans to the States which accepted the bait. Alternatives in the proposals before your committee then are: (1) Force the State of Louisiana to increase its State employment security tax rate by a minimum of 178 percent, thus destroying much of the incentive to work and discouraging stable employment by the destruction of experience rating, or (2) Penalize Louisiana business $44,175,000 annually for a Federal tax from which Louisiana will receive absolutely nothing. VII. Louisiana business is opposed to increasing the tax base for the Federal unemployment tax as this is equivalent to a system of experience rating in reverse. Where hourly rates are the same, the annual wages will be the smallest in the industries in which there is heavy unemployment. Consequently, broadening the tax base has the effect of penalizing stable employers without increasing the taxes of unstable employers. The State of Louisiana, during its 23 years of employment security activities, has received administrative funds from the Federal Government amounting to only slightly more than half of the amount of the net Federal tax of 0.3 percent which Louisiana business has paid to the Federal Government. A change in the tax base is intrinsically a change in Federal standards and Louisiana business is irrevocably opposed to any such change. Moreover: (a) Recommendations of the Federal Advisory Council concerning the taxable wage base in 1956, as reported in the 45th Annual Report of the U.S. Department of Labor, were: "The Council adopted the report of a committee recommending against increasing the maximum wage taxable under the Federal unemployment tax from $3,000 to a higher figure. Reasons given for retaining the present taxable wage base were: (1) State tax schedules would have to be readjusted and such readjustment would operate unequally; (2) An increase is unnecessary to finance benefits in most States; (3) It is not needed in order to secure adequate funds for Federal purposes; (4) There is no rationale for equating the tax base with that for old-age and survivors insurance; and (5) There is no evidence that the present base is a deterrent to increasing benefits." (b) Excerpt from report of the Administrative Financing Committee of the Federal Advisory Council, following the Committee's meeting November 24, 1958 reads: "With respect to the alternative methods of benefit financing, the Committee unanimously concluded that because of the different incidence of unemployment and its costs resulting from differences in wage levels composition of industries, etc. in the various States each State must determine for itself the financing methods appropriate for that State." 52 (c) The Federal Advisory Council had this to say in 1956 in its unanimous report with respect to equating the tax base for unemployment insurance and OASI: "From a program standpoint there is no sound rationale for equating the tax base for unemployment insurance and old-age and survivors insurance. The programs are for different purposes. Unemployment insurance is a short-range program in which there need not be a connection between taxable wages and wages used for benefits; in a long-range program such as old-age and survivors insurance there is more justifiaction for using the same wage base for taxes and benefits since all taxable wages are used in determining benefits. Also in OASI there is no experience rating.. Finally under OASI there are employee contributions on the wages used to determine benefits." VIII. Louisiana business is unalterably opposed to any and all amendments to the Federal Unemployment Act of 1935 no matter how innocuous they might appear. The Louisiana employment security law (formerly unemployment compensation law) was adopted with full faith in the guarantee and minimum standards presented to it in the Federal Social Security Act of 1935. The Louisiana Legislature has sincce most adequately discharged its responsibility in encouraging continuity and stability of employment and establishing standards of unemployment benefits and eligibility which in view of its close knowledge of the State's economy and the nature of its own labor market are just to business and to those unemployed through no fault of their own. Louisiana business respectfully urges the House Ways and Means Committee to reject any bill which would impose Federal standards on Louisiana and thus deprive the Louisiana Legislature of its responsibility and duty to its citizens with respect to employment security. Coordinated endorsed and respectfully submitted by: American Sugar Cane League of U.S.A. Inc. Automotive Wholesalers Association of Louisiana. Construction Industry Association of New Orleans, Inc. Louisiana Bankers Association. Louisiana Building Materials Dealers Association. Louisiana Delta Council. Louisiana Lanudry & Cleaners Association. Louisiana Manufacturers Association. Louisiana Motor Hotel Association. Louisiana Motor Transport Association, Inc. Louisiana Oil Marketers Association. Louisiana Restaurant Association, Inc. Louisiana Retailers Association. Louisiana Wholesale Grocers Association. Louisiana Wine & Spirits Foundation, Inc. Mid-Continuent Oil & Gas Association (Louisiana-Arkansas Division). Shreveport Chamber of Commerce. Shreveport Wholesale Credit Men's Association, Inc. The Waterfront Employers of New Orleans. Tri-State Bakers Association. I hereby certify that the position of Louisiana business, as outlined in the foregoing, has been endorsed by the associations named above. SAM B. DUNBAR, Manager, Louisiana Manufacturers Association, APRIL 11, 1959. Hon. WILBUR MILLS, WESTERN OIL & GAS ASSOCIATION, Los Angeles, Calif., April 15, 1959. Chairman, Committee on Ways and Means, MY DEAR CONGRESSMAN: The purpose of this communication is to express the position of the Western Oil & Gas Association regarding certain bills now being considered by the Committee on Ways and Means of the House of Representatives on the subject of unemployment insurance. This association is composed of oil producers, refiners, and marketers in the six Western States of Alaska. Arizona, California, Nevada, Oregon, and Washington. Our member companies produce 86 percent of the oil, have 96 percent of the refining capacity, and SS percent of the wholesale market of petroleum products in these States. We are opposed to many measures now under review, such as H.R. 3457, which are designed to impose Federal benefit standards on the unemployment compensation programs of the various States. The ultimate effect of these bills would be to create another bureaucracy in the Federal Government which would eliminate State authority in this field. The only reason for such legislation would be State inaction or failure to meet responsibilities. The record, viewed objectively, shows that the States have done a commendable job since 1935. Benefits and duration of benefits have been extended as rapidly as the economy of each State has permitted. For example, in 1937 California law provided $15 for 20 weeks on a $300 maxiNow California pays $40 maximum for 26 weeks, a total of $1,040. And the present legislature is certain to increase benefits this year. mum. The California State government is far better qualified to determine the needs of its unemployed and far closer to the working and living conditions of its people than a Federal agency. Furthermore, the State government is closer to the financial climate in its region and to the general status of its economy. The same can be said of every other State. There can be no doubt that some of the measures proposed would either force some State unemployment trust funds into either bankruptcy or compel the States to become completely dependent on Federal grants. No present emergency exists which warrants such drastic Federal interference with established State authority. It has been the expressed policy of the present administration that the traditional place of State government with power, authority, and responsibility should be preserved. We sincerely hope this policy will be continued and emphasized by the rejection of these ill-advised proposals to inject Federal benefit standards into the unemployment compensation program. Respectfully yours, FELIX CHAPPELLET, Vice President and General Manager. Hon. WILBUR D. MILLS, STANDARD OIL CO. OF CALIFORNIA, Chairman, Committee on Ways and Means, DEAR SIR: We take this opportunity to express our deep concern over certain legislative proposals for changes in the Federal law on the subject of unemployment compensation. We refer particularly to the bill introduced by Congressman Karsten, of Missouri (H.R. 3547), although our views are equally applicable to any other bills which would make similar changes. The primary purpose of H.R. 3547 is to provide for Federal minimum benefit standards throughout the various States. This has long been the goal of certain liberal political groups who desire eventually to displace the State unemployment compensation systems with a single, overall national system featuring uniform benefit provisions and taxing provisions. It is our view that the Federal Government under the fundamentals of our American system should move into a new area of legislative compulsion only when there is a well-established need for Federal action and a proven failure on the part of the States. From a purely objective point of view, the evidence is clear that the States have a good record of performance under their unemployment insurance laws and have lived up to their responsibilities. The fact that three or four States may have lagged behind the majority in establishing what the proponents of federalization regard as proper standards is no reason for condemning the entire program. Actually, benefits have increased steadily since the unemployment insurance laws were first enacted, and this year many State legislatures have acted to increase them still further. The amount and duration of unemployment benefits should be left to the discretion of the various State governments because of widely varying living, working, and economic conditions in the different States. The States have first-hand knowledge of local needs and problems and are best able to make the necessary adaptations to their respective situations. The benefits standards provisions of H.R. 3547 and similar measures would force all States to pay greatly increased benefits and might well force some States into insolvency unless tax revenues were increased. The financing provisions of these bills invite the States to so conduct their own financing as to make "free" Federal cash available to them to meet the greatly increased benefit costs. Under the present law, States with depleted reserves are permitted to secure "advances" on a repayable basis. The new proposals repeal this feature of the present law and provide that States with depleted reserves would be given outright Federal grants with no obligation to repay. Thus, States have no financial responsibility for building and maintaining reserves to finance their own benefit payments and at the same time would be induced to deplete their reserves so they could qualify for "free" Federal money. This could cost the Federal Government billions of dollars, and, of course, would have the effect of eliminating individual experience rating for employers, since the new proposals permit the States to assign a uniform reduced tax to all employers. There can be little doubt that the States would take advantage of this "permission" in order to reduce their reserves and be able to qualify for Federal money. At the present time, States may assign reduced tax rates only on the basis of the unemployment risk of an individual employer. An employer does not receive a rate lower than the maximum 2.7 percent unless he has stable employment. Thus, he has à basic financial interest in reducing manpower turnover and in the sound administration of the unemployment compensation program. Once the employer is given a flat rate, he will have no greater interest in the administration of this program than in any other which is financed at a flat rate. In our opinion, the loss of experience rating would transform unemployment insurance from a plan to stabilize employment into another purely welfare program which was never intended by its original proponents or drafts men. Another feature of the proposed amendments would be to extend coverage under the Federal Unemployment Tax Act to all employers having one or more employees, whereas the present law covers employers of four or more. The objective is, of course, to force the States to make similar extensions of coverage under their present unemployment compensation laws which would bring about 2 million more employees under coverage. Some States, like California, have extended coverage to employers of one or more already and have found little difficulty in administering the program. There may be other States, however, where such an extension would be extremely burdensome to the small businessman and where paying benefits to a very small number of claimants would not justify the added costs of administration. Again, we say, this is not a question to be decided by a Federal agency or by Federal standards. It is a matter which should be left for determination by each State legislature in accordance with local economic conditions. While there are numerous other objections which could be presented to H.R. 3547, the foregoing alone should cause anyone seriously interested in the unemployment insurance program to question the wisdom of such legislation. Yours very truly, G. J. O'BRIEN. STATEMENT ON BEHALF OF CALIFORNIA EMPLOYERS IN OPPOSITION TO FEDERAL UNEMPLOYMENT INSURANCE STANDARDS (H.R. 3547) This statement in opposition to current proposals for a series of Federal standards in the field of unemployment insurance is respectfully submitted on behalf of the Inter-Association Unemployment Insurance Committee. The Inter-Association is composed of a broad and diversified group of California employers and employer associations whose members offer employment to over 60 percent of the wage earners covered by this program in California. The specific organizations here represented are as follows: Agricultural Producers Labor Committee. Aircraft Industries Association of America, Inc. Building Owners & Managers Association of Los Angeles. California Association of Employers. California Electric Power Co. California Land Title Association. California Pacific Title Insurance Co. California Manufacturers Association. California Metal Trades Association. California Portland Cement Co. California Retailers Association. California Trucking Association, Inc. California Western States Life Insurance Co. |