Mr. MACHROWICZ. Second, is it not necessary for a person to be able to receive unemployment compensation to hold himself out and accept employment in most States?

Mr. LOESCH. Oh, certainly.

Mr. MACHROWICZ. That is all.

Mr. FORAND. If there are no further questions, we thank you for your appearance.

Next on the calendar is the Interstate Conference of Employment Security Agencies with about five names here, Mr. John Morrison, Mr. William Farmer, Mr. Bernard Teets, Mr. Henry Kendall, and Mr. Curtis Harding.

Are you all appearing together?

STATEMENT OF JOHN MORRISON, PRESIDENT, INTERSTATE CONFERENCE OF EMPLOYMENT SECURITY AGENCIES; ACCOMPANIED BY WILLIAM H. FARMER, CHAIRMAN, LEGISLATIVE COMMITTEE; BERNARD E. TEETS, MEMBER, EXECUTIVE COMMITTEE; HENRY E. KENDALL, MEMBER, LEGISLATIVE COMMITTEE; AND CURTIS P. HARDING, MEMBER, EXECUTIVE COMMITTEE

Mr. MORRISON. Yes, sir.

Mr. FORAND. For the purpose of the record will you identify yourself, Mr. Morrison. Is it your intention that you are to deliver the statement for the group, or is everybody supposed to say something?

Mr. MORRISON. Mr. Chairman, my name is John Morrison. I am the executive director of the Employment Security Agency, division of the State labor department, in Kansas, and appear before you here today in the capacity as president of the Interstate Conference of Employment Security Agencies.

I will be supported and we will attempt to divide the subject between the five parties here on this occasion.

Mr. FORAND. You will introduce each one as you get to them?
Mr. MORRISON. Yes.

Mr. FORAND. You may proceed.

Mr. MORRISON. First I say that I hope the committee will excuse our inability to prepare a formal statement for presentation to the committee. Frankly, some of our group did not arrive until last night and didn't have that opportunity, and this was due to the legislative pressures at home in which they were trying to amend and otherwise improve their State programs. Along with my associates here we will present the conference viewpoint from notes and will welcome questions if necessary to clarify for the committee or to supply information on any point we may have overlooked.

These men have long experience in the field of employment security, some of them starting with the program in its inception. They have been prominent in developing the program at State and Federal levels. They are thus able to discuss the technical as well as the practical aspects of the program and the effect of the proposals under consideration in the Karsten bill, H.R. 3547.

For the record I might explain that the conference is an association consisting of 52 States in jurisdiction, is responsible for the adminis

tration of unemployment insurance and employment service programs. It was organized in 1936 and has the following objectives.

These objectives are to improve the effectiveness of unemployment compensation laws and employment service programs and to promote employment security through the placement of unemployed workers, the stabilization of employment, and the payment of unemployment benefits; to further promote the study and development and use of proper and efficient methods of administration of the program; also to encourage the cooperation of the several employment security agencies in the conduct of fundamental research in the basic causes of unemployment, and to determine in what fields employment opportunities are increasing and what types of industries and trades are responsible for bringing about the hazards of unemployment.

Through study and research we propose new legislation, both State and Federal, in the basic field of employment security, and we have appeared before your committee on many occasions for these very purposes. The officers consist of a president and an executive committee consisting of vice presidents from each of the 13 regions elected at annual meeting of our conference.

As its principal officer, the president of the conference is responsible for taking the necessary action to carry out the program of the conference and to present to any interested party the conference position as determined by action at the annual meeting or as a result of interim polls on any specific issue. Pursunt to this code the States were requested to express themselves on the subject of Federal minimum benefit standards as proposed in the many bills now pending before Congress and under consideration here today.

Of the 51 jurisdictions eligible to vote, 44 States responded to that poll. Thirty-one of the States indicated opposition to the enactment of Federal minimum benefit standards, six indicated approval, while seven took no position.

The CHAIRMAN. Would it be at this point, Mr. Morrison, a violation of your practices and understanding with the members of the Interstate Conference for you to tell us the names of the States which did approve and the names of the States which opposed by inserting that information in the record.

Mr. MORRISON. I regret, Mr. Chairman, that I am prohibited by our constitution and code from revealing the names of the States.

The CHAIRMAN. That is understandable and perfectly acceptable. Mr. MACHROWICZ. Would we be able to tell, though, what percentage of the work force these States represent? Do you have that figure?

The CHAIRMAN. That is actually what I was trying to determine. Mr. MACHROWICZ. I think the number is important as to the percentage of the work force that they represent.

Mr. MORRISON. I think we could obtain that for the record.

The CHAIRMAN. That would serve my purpose too, Mr. Morrison, and if you could put that in the record at this point it will be helpful to us.

Mr. MORRISON. Be glad to.

Mr. MACHROWICZ. Is there any chance to get that today before the day is over?

Mr. MORRISON. Yes, I am advised that we can.

(The material referred to follows:)

PERCENT OF TOTAL COVERED WORK FORCE IN STATES REPRESENTED BY THE STATE EMPLOYMENT SECURITY AGENCIES VOTING FOR AND AGAINST FEDERAL BENEFIT STANDARDS IN THE 1959 POLL TAKEN BY THE INTERSTATE CONFERENCE OF EMPLOYMENT SECURITY AGENCIES1

1

The 31 States whose employment security agencies voted against Federal benefit standards in the 1959 poll conducted by the Interstate Conference of Employment Security Agencies have 48.9 percent of the total covered work force. The six States whose employment security agencies voted for Federal benefit standards in the same poll have 17.6 percent of total covered work force.

The CHAIRMAN. Pardon the interruption. You may proceed. Mr. MORRISON. The officers of the conference have appeared before this committee on numerous occasions representing a similar majority viewpoint. Again we present this expression of opinion in opposition to the enactment of any further standards by Congress for the State operated program of unemployment insurance.

My associates with me are prepared to discuss these views, but I should like to speak for a moment on a particular phase of Federal standards proposed yesterday by a spokesman for the labor department. As I understand it, this proposal would increase the tax base provided for by the Federal Unemployment Tax Act from $3,000 to $4,200. This, I understand, was primarily to provide additional funds for the administration of the program at the Federal and State levels, and just incidentally to increase the tax yield to the States.

I believe the total of the Federal and State tax resulting from this adjustment is estimated at $396 million and would be for the year 1961, $72 million to the Federal Government for appropriation, for administrative purposes, and $324 million for the various jurisdictions.

For discussion we can assume that increasing administrative costs plus the creation of a larger loan fund and an administrative trust fund is necessary and we accept this premise. It would appear, however, to be much simpler to increase the Federal portion of the tax from three-tenths of 1 percent to four-tenths of 1 percent, thereby making a total Federal unemployment tax of three and one-tenth percent rather than 3 percent at the present time.

This could be done for such time as is necessary. I think this could be expected to increase the amount of money available for administrative purposes to approximately $120 million rather than the $72 million as contemplated by the labor department proposal. This would permit an earlier establishment of the loan fund at the levels deemed necessary as well as the trust fund.

Noted also is the fact that under the proposal the States would obtain an additional $324 million in taxes if State rates were not adjusted downward. It is claimed that many States need these funds to increase their revenue and reserves, and obviously some States do need this increase. There is no assurance, however, that States which need the additional revenue would not adjust their rates downward.

This seems like a rather ineffective manner of increasing State revenue for an employment security program. If, for example, Michi

1 Covered work force represents workers covered by the State unemployment insurance and the unemployment compensation for Federal employee programs as of March 1958.

gan has 10 percent of the covered workers in the Nation, and we then assume that they would increase their revenue by $32 million or the equivalent of a month's benefits under their heavy workload of last year, it would not have relieved the situation in that State nor the necessity of that State for obtaining funds through the loan provisions.

Furthermore, this measure would cause nearly every State to make adjustments in its financing problems. Presently experience rating is related to taxable wages. Many States have their reserves adjusted as a percentage of total taxable wages. These are very delicately balanced and it would be extremely difficult to make the changes necessary and at the same time avoid inequities.

It would require State legislative action to make such changes. For example, tax rates in Kansas are related to the amount of reserves stated as a percentage of taxable wages. By increasing the taxable wage base, the same dollar amount automatically becomes a smaller ratio and tax rates would increase, despite the fact that present rates have been adequate and were established following careful actuarial study.

Furthermore, they have proven sound for Kansas. It has been correctly noted that additional income is necessary in States which have recently experienced heavy drains against the reserves. I submit to you, however, that the remedy for the insolvent condition of these States rests with the lawmakers of the respective States rather than the Congress.

They presently have the freedom to increase the tax base or the tax rate or both if considered necessary. In fact 17 States with 50 percent of the covered work force presently have maximum tax rates in excess of the standard 2.7, while five others have expanded the tax base in excess of the $3,000 maximum.

The Interstate Conference established a benefit financing committee for the purpose of studying the tax problem from the point of view of benefit costs. The eminent economist, Dr. E. J. Eberling of Tennessee, a member of the staff of the agency there, is chairman of that committee.

He has been associated with this program for many years and is an authority in the field of benefit financing and cost. He is assisted by associates from other States and the actuaries in the unemployment insurance section of the Federal Bureau of Employment Security.

I believe this committee could do well to be guided by the results of this study, which we hope will be forthcoming before the end of the year. Reference is frequently made to recommendations of the Federal Advisory Council on various matters pertaining to unemployment insurance. As might be expected, there is frequent disagreement on matters pending before the Council because of the differing views of labor, management, and the public representation. Here is something they are in agreement on.

The Advisory Council is recorded in opposition to increase the taxable wage base in October 1954 by a vote of 34 to 1 and again on October 3 and 4, 1956, unanimously. As recently as 1958 the Committee on Benefit Financing of the Federal Advisory Council concluded that each State must determine for itself the financing methods ropriate for that State.

It is my candid opinion that a tax increase of one-tenth of 1 percent on taxable earnings would be preferable to an adjustment in the tax base, that more funds would be obtainable, and that fewer adjustments would be necessitated by the several States.

Furthermore, States should have the freedom of determining the best method of financing their unemployment insurance programs. This completes my presentation, Mr. Chairman, and I will yield to questions now, or introduce our next speaker, Mr. William H. Farmer, the chairman of our legislative committee.

The CHAIRMAN. We will conclude the testimony of the entire group before we ask questions.

Mr. MORRISON. Thank you.

Mr. Farmer, of the Texas agency, is chairman of our legislative committee and will adress himself to the general subject.

Mr. FARMER. Mr. Chairman, my name is William H. Farmer, administrator of the Texas Employment Commission and chairman of the legislative committee of this conference.

I think for just a moment we should look at some of the fundamentals in this program. In 1935 the Congress decided that unemployment had reached such proportions that there was a national interest in it.

There was a national interest in this matter due to the volume of unemployment and Congress enacted the Social Security Act, which so to speak, as our charter, as our Magna Carta. Certainly this Congress could change it, but in 24 years I have heard very little objection to this basic law.

Now, what were the principles enunciated there? One, that in order to get a national system there were a few Federal requirements. As a matter of inducements to the State there was a system of tax offsets, a provision that the money would be deposited in Washington in a trust fund. Otherwise the Congress at that time felt that the major issues in this program should be left to the determination of the States.

There were no benefit standards. Benefits could have been $1 or $51. There were no standards with respect to tax except with respect to additional credit experience rating. That was left to the States. Why? Because it was felt that those closer to the problem were in a better position to determine the needs of their communities.

There were different wage levels, different employment patterns, different economic situations. I think that is the crux of this whole issue. I think that is basic to our concept of Government-local responsibility for local problems. If that fundamental and original philosophy is to be changed it would seem that there should be some good and impelling reason to change it.

This bill being considered in its public policy declarations states this: "That the Congress finds that the system of unemployment compensation as now constituted throughout the several states are failing to carry out the purposes of the Social Security Act."

I would infer from that that each Member of the Congress would be compelled to find that his State was failing, or if not his State, he would have to point the finger at some other State. To correct this supposed failure of the State this bill proposes to intervene in