In the 100th Congress, she led a successful bipartisan battle to extend to Congressional employees the same civil rights protection available to most other American workers. In the 101st Congress, she co-chaired the Bipartisan Ethics Task Force set up to review standards of official conduct for Members of Congress.

Martin's career in politics began in 1972 when she was elected to the Winnebago County board, where she served for four years. She then served in the Illinois House from 1977-79 and in the Illinois Senate from 1979-81.

Lynn Morley Martin was born in Chicago, Illinois on December 26, 1939. She graduated Phi Beta Kappa from the University of Illinois in 1960 and taught high school economics, government and English. She has two daughters, Julia and Caroline, and is married to the Honorable Hardy Leinenweber, U.S. District Judge for the Northern District of Illinois.

UNEMPLOYMENT FUNDING NEEDS

Senator HARKIN. Madam Secretary, thank you very much for that statement and for pointing out the goals of the Labor Department. We concur in those goals. We will do everything we can to help you achieve them.

I just have a few questions to start off with. The first one-the one I mentioned in my opening statement-has to do with the difference between the request and the stated need for unemployment services, the supplemental funding for unemployment offices to speed up the processing. You asked for $100 million-I made a mistake earlier. Iowa had a 25-percent increase in new claims. I guess the national average has been about 22 percent. And they tell me the worst is yet to come. I guess there is a lag in the recession. Unemployment lags are supposed to come up later as demonstrated by this chart here.

Where is the chart? I have charts.

The chart people have been busy. There are the charts.

First of all, you have to tell me. Where did this data come from— oh, the Department of Labor. [Laughter.]

Í did not know if it came from us or not. But evidently, you can see the January-to-March, April-to-June figures are going to go up-projected to go up considerably.

And I guess I have two questions. One, why did you not request the $201 million, which is what the Department indicates is the amount needed to make up the entire shortfall; and second, why did you not request it as an emergency, which then avoids any possibility we might have to pay for it by cutting other domestic programs. Because this is an emergency, you know, under the rules that we now have to work under. If it is listed as an emergency, we are exempted from taking it out of other domestic programs, which you indicated are already pretty tight right now, job training and other things like that.

So those are basically my first two questions.

Secretary MARTIN. Well, first of all, those are Department of Labor statistics, and the good news is that April-to-June is the high. If you had continued the chart, you would have seen it begin to go back the other way. I am sure that is not why the chart was stopped there, but the later data not shown is a good thing to know. And we will be happy to give you those figures if you would like them, Mr. Chairman.

And now to your question, which I think is really a three-part question. Part one is, do you think the money is enough?

With the carryover, and with the $100 million supplemental, we believe it is enough, with the assumption that the unemployment numbers stay the same. Virtually all of the private forecasters and almost all the public forecasters are suggesting that this is a relatively mild recession and indeed may have or is shortly to bottomout.

For a moment, let us not use OMB, since that sometimes raises a red flag in legislative halls. Even using the CBO estimate of $200 million, which includes the carry-over, the $100 million supplemental should be enough.

Now again, if something happens and unemployment goes up, which none of us want to happen nor believe will happen, then those numbers would change.

I have to add a caveat here, Mr. Chairman. There are some States-few, but some-whose systems are not as up-to-date as they should be. Just giving them more money will not change the fact that their systems have flaws.

LACK OF MODERNIZATION IN STATES

Senator HARKIN. That there is waiting lines and things like that, is what you are saying.

Secretary MARTIN. Well, some States just are not as modern as they should be. I am sure Iowa is not one of them, but there are some States where even if we gave them more money, we would continue to see some of the same problems until the States themselves make corrections. I might add, some of the Governors are determined to make those changes.

Senator HARKIN. But you are talking about processing time.

Secretary MARTIN. Yes; that is what the money is for. Remember, this is money for administration only. We are not talking about money for benefits for the unemployed. This is money that goes for the administration of the programs in the States to make sure that the unemployed get their money: The clerks, the counselors, and the other workers there. And if the system is flawed within that State, you can give it more money, but the system is still flawed.

The third part of your question is, why is it not now an emergency. The Congress, in its wisdom, passed the Budget Act of 1990 and made the definition for emergencies very strict indeed. I believe that in this particular case, it is not yet time to make it an emergency.

I would like to sit here and say we can do everything. But if we are able to get the $100 million and put that with the carryover of about $100 million, we think that will be enough. And, if the Senate or the House chooses to make this an emergency, that would be a big decision. It is not one that the Department would recommend at this time. If, however, you want to increase the $100 million supplemental, since we propose and you dispose, we will accept the dollars.

UNEMPLOYMENT INSURANCE ADMINISTRATIVE NEEDS

Senator HATFIELD. Yes, certainly. Senator, I would like to associate myself with these concerns. Madam Secretary, as you indicate,

none of these funds pay for the benefits, but this is also a trust fund in which I believe there is about $2 billion out of money in that trust fund.

Now in my State, what is happening-and I think in other States as well-where they feel that they are underfunded, they are in the process, and in the practice of diverting employer tax revenues, before they get to the trust fund to backfill the shortfalls in State's allotments for unemployment insurance administration.

Do you think this is a healthy trend? I would not want to see you in any way reduced or diminished in your leverage to get the highest efficiency in the operations and in the process. But nevertheless, what is happening, is the diversion, before you ever get control of that money. And I am not sure that I think that is a healthy trend.

How do you respond to that?

Secretary MARTIN. In two ways: One, I was not aware of that particular practice in your State. We should look into it. We are certainly hearing from the States and the States Governors. And I have talked to a number of the Governors on this issue. In regard to the trust fund-the problem is not expressly limited to this fund. There are always demands you can hear it in transportation and in other areas. But since I am not familiar with what specifically your State is doing, I will be happy to examine it and get an answer back to you.

APPROPRIATE UNEMPLOYMENT INSURANCE FUNDING LEVEL

Senator HATFIELD. The State legislature has been asked by the Governor to divert $6 million from employer tax revenues, in order to have sufficient resources to backfill, and be able to operate because of the shortage of support for employment security activities that is coming through the normal process.

Now you are talking about process, and I am concerned that a problem may be arising. Remember in the supplemental, the administration requested $100 million. But the estimates from the States, ranged from $150 million to $200 million. Now is it just process, or are there different bases of estimates and evaluations? Are we comparing apples and oranges? I am concerned about a process in which the States are forced to override you, or so to speak, circumvent the administration's request for funding.

Secretary MARTIN. There are two things: One, we are picking up about $100 million in carry-over; and, two, we are fully funding 1992 for the next fiscal year. So we are talking about a relatively brief period of time here.

Again, no one on this side of the table is familiar with the particular instance of which you speak. And so we will examine that quickly to see what effect it has.

There is still going to be a gap, because the supplemental is not going to pass today. It is not even going to be in the process line for a while. So part of what States are doing is waiting for all of us to get the supplemental, whatever the amount. I certainly cannot tell, perhaps you could tell me, what the time line is on the supplemental. We would like the supplemental to get moving as quickly as possible.

Mr. JONES. Senator, I think that both comments are actually true. The figure of $100 million or $200 million are fixed figures, in terms of the needs of the system. There is no question about that. It is based on the projected unemployment rates and workloads that the States have across the base. The differential comes in two things: How much carry-over the State might have had; and Second, how they process their claims, a highly variable issue from State to State, as well as how much is in staff, how much is in mechanization, and other kinds of things.

The third point you raise, that States tend to make things fungible, is, in fact, both a positive and negative. The answer is yes, all States do it to some extent. It is an appropriate thing to do. The laws have been designed, in fact, to allow that flexibility to occur from time to time. If it were to occur on a long-term basis, it would be counterproductive, obviously, because the employment services staff is needed to assist people getting back to work.

Senator HARKIN. But you are addressing this diversion?

Mr. JONES. Yes, sir; we keep a very close line on exactly what each State does.

Senator HARKIN. Because my information indicates that the State of Oregon, since 1988-in 1988 it was almost $4 million; another $4 million in 1990; and this year it is $6 million. So there is a trend line, that I would think that would concern the Department here, for at least one State. And I do not-I just do not understand the process that clearly to know whether it is a flaw in the system, or whether it is a valve to let off some special steam at a moment of time and need, and maybe it is acceptable.

But it seems to me there is a cause and relationship between the level of funding that we appropriate, and the growing tendency of a State to compensate, and at the same time, not meet the inefficiencies of the process that the Secretary is trying to leverage, maybe, in limiting that total. I do not know.

PERCENTAGE OF UNEMPLOYMENT INSURANCE CONTINGENCY FUNDED

Secretary MARTIN. Let me add something here, as long as you promise not to get too angry at the messenger.

We are not going to fund administration at 100 percent under the supplemental. We will be funding it at 75 percent. Now, if you are on the Federal level, you may look at that and say, well that is appropriate, because it is allowed under the law. We are in deficit. It makes some sense and you can understand the philosophical underpinnings.

If you are a State official, however, you want everything funded at 100 percent. So when you hear from your State officials, part of the comments that they will be making is that the Department is not fully funding the program. And that is true.

Under the decisions made for this budget, funding will be at 75 percent under the supplemental. And I do not want to have you blind-sided by that.

REDUCED STATE UNEMPLOYMENT INSURANCE STAFF

Senator HATFIELD. If I could just add one more brief question on that, do not forget, Madam Secretary, we are dealing with two

trend lines at this moment. We have had about a 25-percent reduction of staffing levels, and we have had an increase in the unemployment insurance claims workload, as your charts show.

So I think we would have to consider those two trend lines as

well.

Secretary MARTIN. I heard the second trend line-a 25-percent decrease?

Senator HATFIELD. A 25-percent reduction in staffing, as I have my information here. Just prior to this period, State unemployment staff levels dropped by 25 percent, from 57,000 to 43,000.

Secretary MARTIN. There is no disputing the numbers. If the dollars are not enough, where one gets it is an extraordinarily difficult decision.

Senator HATFIELD. I'm sorry, Mr. Chairman, I did not mean to intrude.

Senator HARKIN. Did you have any followups on this one area of questioning?

I have a little followup on this area, too.
Secretary MARTIN. Please.

PROPOSED ADMINISTRATIVE FUNDING CHANGES

Senator HARKIN. Unemployment benefits are an entitlement. But the staff and resources needed to deliver them are not an entitlement. A number of State employment security agencies have suggested to us that we include appropriations bill language, to automatically trigger additional funding for processing unemployment claims if workloads run above some anticipated level.

Another idea relates to this contingency issue. Now this subcommittee has established contingency reserve appropriations for social security offices, and Medicare claims processing, to allow OMB to release extra funds in the event of some large workload that happens.

Would you support establishing a similar reserve fund for State unemployment offices?

Secretary MARTIN. The Department is looking into this. We are examining alternatives. We are not ready to take a position on them yet. But we are looking at alternatives to the system. The goal of the Department of Labor, under any stewardship, is to have the most efficient system possible for an entitlement. If an entitlement is there, it should move as quickly as possible.

Senator HARKIN. Are you speaking mostly about a contingency reserve, or are you speaking of an automatic trigger? Secretary MARTIN. The automatic trigger.

Senator HARKIN. You are looking at everything, right?

Secretary MARTIN. Yes; however, we feel that the automatic trigger would not necessarily make the system work better and the contingency fund would affect the process. So we are looking to be

sure.

I have to add a little anecdotal comment here. I represented the congressional district that had the highest unemployment in the country in 1982. So I am very familiar with what unemployment can do to people and with the incredible negative effects it has if