And when it comes to what the President says, I want to say here that while I, and I am sure others, believe in and want to study the things the President says as being most sincere and wholehearted, this Congress and this committee is going to write this law. Regardless of what the President says, I believe this committee has the brains and the ability on both sides to write a law that will solve the problem. And I for one do not propose to choose up sides on what the President says or did not say, but hope that we can reach an agreement based on the facts that we have presented here. I certainly want to add my commendation for the kind of testimony you have given us. Thank you, Mr. Chairman. Mr. MACHROWICZ. Just one matter, here. I believe Mr. Kendall testified he is opposed to grants to States without their having to pay the money back. Mr. KENDALL. Correct. Mr. MACHROWICZ. May I ask you, Mr. Kendall: Are you opposed to the present program, under which the Federal Government grants 100 percent of the States' administrative costs? Mr. KENDALL. As far as I am concerned, if we could collect the three-tenths and pay our own way, I would be quite happy. We like to paddle our own canoe. Mr. MACHROWICZ. You are satisfied if the Government makes an outright grant for the administrative costs, but not for the others? Mr. KENDALL. You misunderstand me. I say, as far as I am concerned, if we had 100 percent offset, I would take the three-tenths percent and pay our own administrative cost in North Carolina. We are granted about 52 to 78 percent of what we pay in with the threetenths. We get back about 72 cents on the dollar that we are paying in. Mr. MACHROWICZ. But some States get the money even though they receive more than 100 percent of collections in that State. Mr. KENDALL. I am speaking for North Carolina with reference to that point. Mr. MACHROWICZ. I have not heard any administrators yet oppose the grants for administrative costs. Mr. KENDALL. That is an entirely different matter from what we are considering today. It has been discussed for 20 years. I have been in the program 14 years, and no two people Mr. MACHROWICZ. What about the Reed Act? You spoke quite favorably of that act. Under that act excess funds are distributed to all States. Are these not State grants? Mr. KENDALL. No; let me say this to you. It is grants; but my feeling is that the people who paid them are the covered employers in each State. It does not come from general revenue. There was a three-tenths of 1 percent tax assessed at the beginning of the program. They collected too much. There was somewhere up to $1 billion excess collected. The employees realize that. The employers do. The Reed Act put it back into proper proportions, so that what is collected for unemployment insurance tax is used for unemployment insurance. Mr. MACHROWICZ. It is a grant, is it not? Mr. KENDALL. It is earmarked, and you might say Congress has the power to set how much you grant. If Congress does not grant it, we get the pro rata back. Mr. MACHROWICZ. You are going to oppose all grants and not just some? Mr. KENDALL. Any grant that I term a real grant. I do not term that a real grant. Mr. MACHROWICZ. That is all. The CHAIRMAN. Any other questions? Gentlemen, let me ask of you, for my own information, just a few questions. You have said, I believe, Mr. Morrison, that there are no administrative problems incident to the redefinition of the term "employer" to provide for coverage of one or more at any time, as suggested by the Under Secretary of Labor on Tuesday? Mr. MORRISON. Ñone that are insurmountable, sir. There are 17 States, I think, who now have coverage of less than 4 or more, passed by their own legislatures. The CHAIRMAN. In those instances it has been my understanding that there were no insurmountable problems in administration. Actually, as a matter of fact, this suggestion might even simplify in some respects some aspects of the administration program. Is that true? Mr. MORRISON. It could be. Certainly there would be no question as to whether or not an employer fell within the definition of having 4 or more for 20 or more weeks. The CHAIRMAN. Now, your organization has not taken, as I understand it, any position with respect to extension of coverage to employees of so-called nonprofit organizations. Mr. MORRISON. I think I am correct in saying that we have not, sir. The CHAIRMAN. It has been my understanding that you had not. Are there any administrative problems-insurmountable administrative problems, say-that you can anticipate in connection with the recommendation of the Under Secretary on Tuesday in that area? Mr. KENDALL. Mr. Chairman, I was not here, but I might say it has puzzled me. Maybe it can be clarified by someone. How can we enforce collection of taxes against a religious organization or a hospital? We would be certainly unpopular to sell them out to collect that tax. If we cover them, we have got to collect the tax and make them pay their freight. And I have often wondered what kind of a proposition you would have on your hands of getting a judgment against their property and selling it as we do now if an employer does not pay his tax. I was not here yesterday, but I wondered about that when I read of that provision. The CHAIRMAN. If it is found that we do have, or the States do have a right and can do so legally, I am thinking more in terms of the problem of administration of the program. Do you anticipate any serious problems of administration should that be done? Mr. MORRISON. Insofar as handling the claims load from workers terminated by those institutions, I presume that it would be handled almost identically with the present load, and as a result would present no problems that I can foresee at the moment. The CHAIRMAN. Thank you, sir. You would not anticipate any administrative problems under title 15, if we should extend coverage to these Federal instrumentalities that were suggested, such as the Federal Reserve bank, the Federal credit unions, the Federal land banks? Mr. MORRISON. No; this has been urged on various occasions by the conference. The CHAIRMAN. That could be done fairly easily, in your opinion, could it not? Mr. MORRISON. Yes, sir. The CHAIRMAN. Is there any problem in connection with the extension of coverage to the employees of American aircraft outside the United States? They must, of course, land in the United States occasionally. Mr. MORRISON. I do not think there is anything there that could not be overcome. The CHAIRMAN. You have suggested, and I think I understood your thought, that it would be perfectly proper for the Congress, and perhaps even your suggestion might have led me to believe that the Ĉongress should, provide for an increase in the three-tenths of 1 percent to four-tenths of 1 percent, to take care of rising administrative costs of the program and to make available funds for loan purposes. Do you suggest that that can be done and perhaps should be done by increasing the overall maximum rate from 3 percent to 3.1 percent? Mr. MORRISON. This, in my opinion, would be much more preferable than increasing the wage base. The CHAIRMAN. Well, this rate change solved what I frankly thought was the primary purpose for the wage base suggestion when the Under Secretary appeared before us on Tuesday. I could be wrong, but I took it to be that a primary need, at least, for this change lies in the fact that administrative costs are rising and are at such a level and there is so little left to put into the so-called Reed fund for loans to States that we may find ourselves making appropriations out of the general Treasury before long to supply the needs of States for loans. Mr. MORRISON. We accept that premise. The CHAIRMAN. There would be, in your opinion, nothing that you could see that should cause us any concern, then, about the rate suggestion? Mr. MORRISON. No. I think not. The CHAIRMAN. Let me ask you now about the suggestions made on last Tuesday by the Under Secretary for improving the financing of the employment security program. And in that connection, he was thinking in terms of the so-called Reed Act. Are you acquainted with his suggestions for amendment in that area? Mr. MORRISON. Somewhat; yes. The CHAIRMAN. Do you concur in those suggestions, or are there any particular points that you would call to our attention? Mr. MORRISON. As mentioned here by my associates, we would certainly differ with regard to that feature, in which grants, rather than loans, would be provided. We believe that the Reed bill providing for loans has been able to meet the situation up until recently, and it has failed only because we did not anticipate the total amount of withdrawal or loaning from the funds. The CHAIRMAN. Actually, what I had in mind particularly was the change in the eligibility of a State for receipt of a loan. As I understand, if your balance, as of a given day, is less than the amount that you have paid out in benefits over the previous 12 months, under the Reed Act the State is immediately eligible for a loan. Now, the Under Secretary of Labor would amend that so that you would qualify if at a given time your reserve had depreciated to the point of equaling the amounts that you had paid out in the past 6 previous months, as I understand. Mr. MORRISON. Yes. This would tighten up the requirements for obtaining a loan, and I think it is good. The CHAIRMAN. Do you think that is to be desired? Mr. MORRISON. Yes. The CHAIRMAN. Would we so tighten it, however, in your opinion, as to create a situation wherein a State might not be able to qualify for a loan, when actually there was need for additional funds in order for the fund to remain solvent? Mr. MORRISON. No, I do not think so. The CHAIRMAN. Those are basically the recommendations that we received the other day from the Under Secretary, and, as I take it, then, your group, by and large would be in accord with those recommendations, except for the change in the tax base from $3,000 to $4,200, and you have suggested the alternative that was discussed on Tuesday in lieu of that, so that really all the points that were covered by the Under Secretary in your opinion could be resolved legislatively one way or the other, with the approval of your group. I think that is your statement. Mr. MORRISON. Yes, I think it is. Mr. TEETS. Mr. Chairman, I have not had a chance to study them. I probably would come to the same conclusion, although I do not know I would. Would it be possible, if I came to a different conclusion, to file a statement? The CHAIRMAN. I would like to have any of you to feel free to file additional statements on this point I am raising. You may do so, if you so desire, at this point in the record. (The following table was subsequently filed with the committee:) How maximum unemployment compensation benefit entitlement in each State has been increased from mid-1939 to 1959 (including legislation pending in 1959 1) 1 The entitlement shown is computed from benefit levels which will result from enactment of pending legislation in California, Florida, Michigan, Missouri, Nebraska, Texas, and Wisconsin. Indicates States where further increases are possible, since action on legislation has not been completed. +Indicates States where dependency (and higher qualifying wages, in Illinois and Michigan) will yield higher benefits. The CHAIRMAN. I know your views have been quite well stated in answers to questions propounded by Mr. Machrowicz and others with respect to this matter of Federal standards. But let me look beyond that for just a moment to see whether or not it is desirable, actually, for states to establish the pattern which is suggested here for Federal standards. Mr. Kendall, in the State of North Carolina, would it be your thought that it would be advisable for the payments to be based upon a minimum of 50 percent of the worker's weekly wage, not to exceed two-thirds of the average wage? If you think so yourself, not talking about a Federal standard, is there any reason why that would not be desirable action to be taken by the State of North Carolina? Mr. KENDALL. Not having thought through it as well as I possibly should have, I would say this, Mr. Chairman: We have a peculiar situation in our State, or peculiar to not too many States. We have 40,000 seasonal workers that work in tobacco. It is, as you know, a heavy tobacco State, in processing and redrying and preparing tobacco for storage. As I mentioned this morning, that is work that goes on for only a limited number of weeks. There has not been found additional work for those individuals, other than to work in the |