would wreck the present sound UC system and ultimately compel the Federal Government to take over.

Another section in the bill H.R. 3547 to which we are opposed is the provision for Federal grants, nonrepayable grants, made under certain conditions to each State from the Federal unemployment account. We believe this would encourage financial responsibility and ultimately require the imposition of the "needs test" in unemployment compensation. This is why we are opposed.

Under this section Federal grants would be made whenever a State found that its UC reserve account had declined to a specified level. The only source of revenues for the Federal unemployment account would be the receipts from the three-tenths of 1 percent UC tax on employers. Any excess not needed for administration would be available for these grants. However, the bill also provides for automatic appropriations from the U.S. Treasury to the Federal unemployment account if it needs more funds. Under the bill these appropriations from the Treasury would be repayable by the unemployment account, but the States themselves would not have to repay the grants to the unemployment account. We believe appropriation after appropriation would have to be made from the general funds of the Treasury to replenish this account, with little likelihood of "repayment" from the excess receipts of the three-tenths percent Federal UC tax.

Consider the impact of this on other benefit programs in the Social Security Act. In essence, this bill provides every State with a blank check on the U.S. Treasury to pay tax-free UC benefits. These benefits thus financed in some part by automatic direct appropriations from the Treasury are paid without a means test. This would establish a new precedent. Could Congress long continue a needs test for public assistance payments, also provided for in the overall Social Security Act, and which are financed in part by automatic appropriations from the U.S. Treasury.

Might Congress also find it necessary to establish a needs test in unemployment compensation in order to restrict excessive drafts on the U.S. Treasury? The national chamber is opposed to changes in the present State UC programs that might ultimately necessitate the establishment of a needs test.

However, this arrangement for grants from the unemployment account, with no State required to repay, completely relieves each State of any responsibility for the continuing financial soundness of its UC program.

This fragmentation of authority over eligibility, benefit levels, and duration, and the shifting of financial responsibility from States to the Federal Government, are completely unsound.

We would like to call the attention of the committee to a provision in this bill appearing in lines 17 through 22 on page 3. This provision, subsection 8, section 2, reads as follows:

Compensation shall not be denied to any eligible individual for any week of total unemployment during his benefit year by reason of exhaustion or reduction of benefit rigths or cancellation of his wage credit until he has been paid unemployment compensation for not less than 39 weeks during such year.

We are unable to determine definitely what this subsection means. Will no State be permitted to find a worker ineligible for benefits if he was dismissed from his job for fraud? Does this mean that no

State can deny benefits to workers out on strike? In other words, will an employer find that he will be financing a strike against himself? Just what does this specific section mean?

In connection with the overall proposal that Congress established minimum Federal requirements for some 50 different State UC programs, it is interesting to note what Congress has done in railroad unemployment compensation and in UC for the District of Columbia. In each case Congress writes the entire law.

Congress very properly has not established any standards as to eligibility, benefit amounts, or benefit duration. Examination of the provisions of these two programs shows no similarity between the two, no standards whatsoever for either. Nevertheless, the advocates of H.R. 3547 now urge Congress to set minimum requirements not for 2 programs, but for 50.

We conclude that these proposals in H.R. 3547 would make a complete shambles of the soundly operated State UC programs. Consequently, we believe the Federal Government would ultimately be compelled to take over a function now being performed by the States, by and large in a satisfactory manner.

Mr. Chairman, there is also attached to my testimony appendix A containing our comments indicating that there is no need to raise the taxable wage base and that the States can raise the levels needed since 17 have already done it. There is a typographical error of 12 in the testimony. And, also, comments on the coverage area indicating that the States can increase coverage if they wish. I will not take the time to read those.

Thank you very much, sir.

The CHAIRMAN. That material appended to your statement, Mr. Willis, will also appear in the record without objection.

Mr. WILLIS. Thank you.

The CHAIRMAN. Mr. Willis, I want to commend you on your analysis of this matter and your presentation of it. I am sorry that actually we didn't have time or take time to go through the entire statement, because you have discussed some points that I have been concerned about all the way through this hearing; namely, how we evaluate to see whether or not the States are doing what we would consider to be the maximum within realms of reason to operate this system in a way that carries out the basic objectives that the Congress had initially in creating the system, not only to take care of the people who are presumed to be in need as a result of unemployment but also to perform this counter cyclical service in bringing about economic stability. I am very much interested in your observations with respect to what the States have done and how you measure what they have done. Thank you, sir, very much for coming to the committee.

Mr. WILLIS. Thank you, Mr. Chairman.

The CHAIRMAN. Our next witness is Mr. William L. Batt, Jr.

Mr. Batt, will you identify yourself for this record, please, sir? I think you have been before this committee before.

Mr. BATT. Yes, Congressman Mills.

The CHAIRMAN. Mr. Green.

Mr. GREEN. I would like to present the secretary of labor from the State of Pennsylvania, who is here representing Governor Lawrence. Mr. Batt has been both a personal friend of mine for many years

and he is a very capable member of the Governor's cabinet and doing an excellent job as secretary of labor and industry.

Mr. BATT. Thank you very much, Bill.

The CHAIRMAN. Mr. Batt, your father used to regularly appear before this committee, I believe.

Mr. BATT. In War Production days, sir.

The CHAIRMAN. In connection with extensions of reciprocal trade

area.

Mr. BATT. Reciprocal trades, yes.

The CHAIRMAN. We are glad to have you here and appreciate Mr. Green's comments.

STATEMENT OF WILLIAM L. BATT, JR., SECRETARY OF LABOR AND INDUSTRY, STATE OF PENNSYLVANIA

Mr. BATT. Thank you, sir, and I would like to thank you and the committee, Chairman Mills, for this opportunity to appear before this committee for Governor Lawrence, and I would like parenthetically to thank you for the leadership that you provided in the extension of unemployment compensation last year when we appeared before you in the interest of that temporary unemployment compensation and the action taken this year. This has benefited the people. We had 80,000 people in our State alone on that temporary unemployment compensation extension. Mr. Chairman, it was enormously helpful to these folks to help tide over the recession which still persists. We still have about 10 percent of our labor force out of work, about a half million people.

We in Pennsylvania would like to see Congress pass the KennedyKarsten bills, Mr. Chairman. This action would benefit Pennsylvania primarily in three ways and I must say the ways you mentioned in connection with the entire country.

First of all, as a counter-cyclical measure it would sharpen the effectiveness of unemployment insurance as the most telling weapon we have against unemployment. The counter-cyclical character of unemployment insurance payments, the fact that they increase when industrial payrolls are decreasing, and right in those communities and those families and those industries where the unemployment is greatest, maximized their value to the entire economy.

Industrial States like Pennsylvania, and those industries where the impact of a national recession is particularly acute, benefit more than most from a strong unemployment insurance system. We benefit directly, in that our laid-off workers and their families receive benefits to help tide them over their period of joblessness; our businesses benefit of course from the maintenance of partial purchasing power of our unemployed; and the State benefits from the support to its economy in a time of stress, and the support for thousands of its citizens who, without unemployment insurance would have no recourse but public assistance. Of course public assistance is supported by the State's general fund, which itself is always thrown out of kilter in a national recession by the same factors affecting the Federal budgetincreased demands for expenditures and decreased revenues from taxation. Parenthetically, I like to note there that we have 10 percent of our labor force out of work and we have about 10 percent of the

Nation's unemployment concentrated in our one State. We have probably, as you know, more areas of chronic unemployment than any other State in the Nation.

Pennsylania also benefits indirectly and less obviously from a strong unemployment insurance system. Since we suffer disproportionately from a national recession, we cannot solve our critical unemployment without a national recovery. I suppose this is true of every State. It stands to reason that the more effective the unemployment insurance system is everywhere in the United States, the more effective a countercyclical instrument it will be, and the quicker future national recessions can be reversed.

Second, passage by Congress of this bill will remove unemployment insurance taxes and benefits from the realm of interstate competition. for new industry, which the previous witness talked about. When Congress first permitted the States to institute variable tax rates below the 2.7 percent figure in the name of experience rating it opened a Pandora's box of problems. One was that progressive States had their benefits and tax rates used against them by other States in the competition for new industry that followed World War II and is still in full swing. Passage of this bill will be a great forward step toward removing unemployment insurance from the battle for new industries. No longer can a State say, "Come to our State. Our unemployment insurance benefits are so low that you can save money on your unemployment insurance taxes." Permitting this interstate competition in human need, with the reward going to the States paying least benefits, makes about as much sense to us as removing Federal standards from the social security program. Then States could progressively lower their OASI benefits and taxes, and advertise that fact as an inducement for new industry. "Locate your plant in our State. We pay low benefits to our old folks so we won't charge you as high social security taxes as other States."

Third, the Kennedy bill would help close several serious loopholes in the benefit structure to unemployed workers in Pennsylvania and throughout the Nation. Like the Food and Drug Act, it would require the bottle to contain what was on the label. For instance:

(a) It would raise maximum benefit levels to two-thirds the average weekly wage. Subject to this maximum, each worker's bene-fits would not be less than 50 percent of his weekly wages. This is a standard the President has been urging on States since 1954 with no success. Even in our State, with a $35 maximum benefit, which is very high relative to the rest of the States, 40 percent of our workers, Mr. Chairman, receive less than half their previous earnings.

(b) It would extend the duration to 39 weeks. I would like to say if there is any single provision of the unemployment insurance law that proved utterly inadequate in the current recession, it was the duration provision. This varies all the way from 5 weeks in some States to 30 weeks in Pennsylvania. Congress, on the recommendation of this committee, twice extended duration. And even then in many States these two extensions are proving inadequate. Our uniform duration of 30 weeks came closer to filling the need than any other State's. But even that fell short for thousands of deserving Pennsylvania workers and their families; 208,000 beneficiaries exhausted their benefits in 1958 alone; 3 million exhausted benefits nationwide. I

might say this present duration, Mr. Chairman, is adequate except in a serious national recession; to say that is to beg the question because then of course the unemployment insurance system is needed most in a national recession.

(c) The Kennedy bill would cover all establishments with one or more employees, bringing 1.8 million more workers under unemployment insurance protection. This is another presidential recommendation of long standing. Only seven States do this. Pennsylvania is one. It is difficult for small businessmen in Pennsylvania, particularly in our border cities, to understand why small businessmen across the line do not pay unemployment insurance taxes, while they do.

(d) We are most strongly in favor of the Kennedy bill provisions to end arbitrary disqualifications. It makes little difference how adequate the amount and duration of benefits, if a large percentage of rightful recipients are arbitrarily disqualified. We know of one State, for example, where a worker is ineligible for any benefits if he leaves a job for a better paying one with another company, then shortly afterward is laid off by the second company. I do not have it in this prepared statement but we would like very much to support the reinsurance grants provision of the law. We were one of the States which has had to come in under the Reed bill provisions, Mr. Chairman, for which we are very thankful. I look at Mr. Daniel Reed's picture with thanks. We go to the Reed bill for the first time and for the repayments that come under the Reed bill and the repayments we will have to make for temporary unemployment compensation. We are running up a fairly substantial repayment obligation to the Federal Government, which of course the States that have to go to the Reed bill are at least in a position to pay.

Parenthetically, as you know the Reed bill ran out of money just last week because we just cleaned out the Reed bill fund.

(e) In addition to these Kennedy bill provisions, we are favorably impressed by the administration's proposal to raise the tax base nationally from $3,000 to $4,200. We are about to have an advisory committee examine our unemployment compensation fund and make recommendations to the Governor and to the legislature on how it might be made financially sound. If the Congress were to open up this avenue for additional revenues, making it apply equally to all States, their job would appear easier. This would produce an estimated $65 million in Pennsylvania per year. In 1 year, that one provision of the law. Pardon me. That is not in the law. The provisions of the administration to raise the tax base to $4,200. We see three reasons, then, why we would urge this committee to report favorably on the Kennedy bill:

(1) As the most important single countercyclical weapon in our arsenal against unemployment, and perhaps our most valuable inheritance from the New Deal, it would help us prepare for the next economic recession.

(2) It would remove unemployment insurance taxes and benefits from the interstate competition for new industry.

(3) It would repair serious gaps in amount, duration, and coverage of benefits for unemployed workers across the country. And of course in our own State.