Experience rating provides an incentive to employers to furnish State unemployment compensation agencies information needed to operate their programs effectively. A State agency can administer its program properly only if it has available to it complete information regarding separations from work, offers of work, and other data which can be provided only by covered employers. A system in which all employers paid a uniform unemployment compensation tax rate would tend not to enlist and sustain employer interest. Benefits paid, whether properly or improperly, would not affect an individual's business' unemployment compensation tax rate, and without an added financial incentive to motivate him, any efforts a businessman might expend to stabilize his employment and help assure proper benefit payments would be less diligent than might otherwise be the case. If employers generally were no longer concerned with the validity of benefit claims, benefit costs would be bound to rise. Without full employer cooperation, unemployment compensation agencies simply wouldn't have adequate means of policing the program. It is true that S. 1991 does not mandate that States discontinue experience rating. But great pressures would be brought to bear to cause States to set rates on a flat, uniform basis if the law is changed to permit it. It is possible that even some employers might favor a flat rate at first. But because experience rating has proved its desirability-in providing automatic balanced financing and in maintaining a high degree of employer interest in the program, which is so vital to the program's success, nothing should be done at the Federal level which would encourage States to discontinue individual employer experience rating. The Indiana State Chamber of Commerce believes that to restore the provisions on Federal benefit standards and other provisions which were deleted by the House would be to cause the several States, partners in the Federal-State program, to become little more than disbursing agents. We believe, further, that there are provisions in H.R. 15119 that could be improved upon. Recognizing, however, that rarely can any piece of legislation be wholly satisfactory to all who may be involved, we are reconciled to the supposition that there must be some give and take in the measure under consideration. We urge, therefore, the passage of H.R. 15119 without change. (The prepared statement of Mr. Alvord follows:) STATEMENT OF OSCAR ALVORD ON BEHALF OF INDIANA STATE CHAMBER OF COMMERCE My name is Oscar Alvord, and I am Director of the Social Legislation Department of the Indiana State Chamber of Commerce. The membership of the Indiana State Chamber is composed of more than 5,500 member business firms and professional people, located in all parts of Indiana. The Indiana State Chamber of Commerce believes that certain features of H.R. 15119 could be improved upon, or even deleted. Nevertheless, H.R. 15119 is a substantial improvement over the original proposal (H.R. 8282, S. 1991). COVERAGE Because of the administrative problems involved, the Indiana State Chamber suggests that the broadening of coverage under state unemployment compensation programs might better be left to the individual states. Already, 21 of the 52 jurisdictions cover workers in firms with one or more employees, and 4 states cover employees in firms with 3 or more. There is no reason to believe the trend will not continue as additional states reach the point where they feel administratively equipped to handle the increased burden. There is also a grave question as to whether the Congress should use the threat of loss of Federal offset credit to force states to extend coverage to employees of state institutions. Although Congress lacks power to tax units of state governments, Section 104(b) of H.R. 15119 brings employees of certain state institutions into the U.C. program through that doubtful method. ADDITIONAL REQUIREMENTS While the provisions required to be included in state laws by Section 121(a) of H.R. 15119 have relatively little effect on the Indiana Employment Security Act, the Indiana State Chamber believes, as it always has, that additional Federal standards are unnecessary and unwise. The Indiana State Chamber firmly believes that the proper governmental level to administer a program is that one nearest the people which can afford effective and efficient administration. We believe that the states have adequately demonstrated their ability to administer their unemployment compensation programs and to adjust their laws to changing conditions, and categorically oppose any effort to bring about the setting of any additional Federal Benefit Standards. EXTENDED BENEFITS The Indiana State Chamber of Commerce is not persuaded that there has been a clearly demonstrated need, in Indiana, for a benefit duration in excess of the 26 weeks now permitted by Indiana law. However, the extended benefit program under H.R. 15119 is certainly superior to that contained in H.R. 8282 and S. 1991. Whereas in the original proposal the extension was for 26 additional weeks regardless of economic conditions, in H.R. 15119 the extension is limited to an additional 13 weeks and is geared to recession periods. Even under the present proposal, we would have preferred that the states be left free to determine the "trigger-point" for state recessionary benefits, with Congress confining itself to a national “trigger” for a national recessionary benefit program. FINANCING Title III of H.R. 15119 addresses itself to the financing of the unemployment compensation program. Although less onerous than H.R. 8282 and S. 1991, H.R. 15119 still relies on increasing the taxable wage base rather than tax rate increases for additional revenue. The need for increases in state taxable wage bases has not been demonstrated. Indiana's Benefit Fund (as of June 30, 1966) was $203.1 million, some 240% of the amount expended from the Fund in the highest cost 12-month period of its existence. The following two tables show that Indiana employers will be subjected to a substantial U.C. tax increase under the revised bill, and under S. 1991 the increase would be enormous: Effects of S. 1991 on maximum tax payable by employers, per employee (using selected experience rates for State unemployment compensation tax) Effects of H.R. 15119 on maximum tax payable by employer, per employee (using selected experience rates for State unemployment compensation tax) It is noteworthy that the heaviest percentage of tax cost increase is borne by those employers who, by providing steady employment, have earned more favorable rates. BENEFIT STANDARDS The House Ways and Means Committee, after exhaustive study, chose (we believe wisely) to delete from the measure before them the Federal benefit standards relating to state U. C. eligibility, benefit duration and the amount of weekly benefits which are contained in Section 209 of S. 1991. The Indian Employment Security Act, enacted as the "Unemployment Compensation Law" by the Special Session of the 79th Indiana General Assembly and approved on March 18, 1936, declared that economic insecurity due to unemployment is a serious menace to the health, morale and welfare of the people of the state. It further declared that protection against this hazard of our economic life can be provided in some measure through the payment of benefits to persons unemployed through no fault of their own. It thus was not contemplated that unemployment benefits replace an individual's entire wage loss, or that persons unemployed through their own volition should be compensated under this program. In the more than a quarter-century since original enactment, the Indiana Legislature has made sweeping amendments to the Employment Security Act in fourteen different sessions, including the 1938 special session. There have been but two sessions (1949 and 1961) in which no changes were made. Proposed amendments to the Employment Security Act have always been aired in extensive public hearings, with representatives of labor, employer groups and the U. C. Agency being heard at length. The whole area of unemployment compensation was carefully studied for two years by a study committee created in 1961 by the Indiana Legislative Advisory Commission, and for another two years by a similar committee created in 1963. During the 1965 session of the Indiana Legislature, numerous discussions on unemployment compensation were held among legislative leaders, the Governor's office and interested groups. The U. C. bill was recalled to committee three times. The final version was unanimously approved by both houses of the General Assembly and signed by the Governor. No legislation has ever had more thorough consideration-it having been the 13th bill introduced in the House of Representatives (on January 12, 1965) and not receiving its final vote until March 1, just a week before adjournment. The 150 members of the Indiana General Assembly, who enacted the current version of the Employment Security Act, and the Governor of Indiana, who signed the measure into law, were elected by the people of the state and had had ample opportunity to feel the pulse of their constituents. The inescapable conclusion must be that the legislature has provided for a system of unemployment insurance in Indiana reflecting the needs and desires of the people of the state as communicated to the legislators by these people, and to arrive at another conclusion is simply to charge that the state is unable to govern itself at the local level, which is clearly not the case. EXPERIENCE RATING Deleted, also, from the original proposal was a provision which would have encouraged the states to eliminate experience rating from their U. C. tax structures and substitute a uniform tax rate. This provision is contained in Section 208 of S. 1991. Experience rating-basing individual employers' unemployment compensation tax rates on factors bearing a direct relationship to their experience with unemployment, has proved to be an eminently satisfactory method of providing automatic balanced financing. Rates based on experience are certainly not unique in insurance-oriented programs. Experience rating provides an incentive to employers to provide steady work and thus cut their tax costs. Certainly, it must be recognized that stabilization of employment is more difficult of attainment in some instances than in others, but it is not unreasonable that those who create high benefit costs be required to bear a greater share of the cost than others whose employment is more stable. Experience rating provides an incentive to employers to furnish state U. C. agencies information needed to operate their programs effectively. A state agency can administer its program properly only if it has available to it complete information regarding separations from work, offers of work and other data which can be provided only by covered employers. A system in which all employers paid a uniform U. C. tax rate would tend not to enlist and sustain employer interest. Benefits paid, whether properly or improperly. would not affect an individual business's U. C. tax rate, and without an added financial incentive to motivate him, any efforts a businessman might expend to stabilize his employment and help assure proper benefit payments would be less diligent than might otherwise be the case. If employers generally were no longer concerned with the validity of benefit claims, benefit costs would be bound to rise. Without full employer cooperation, U. C. agencies simply wouldn't have adequate means of policing the program. It is true that S. 1991 does not mandate that states discontinue experienc rating. But great pressures would be brought to bear to cause states to set rates on a flat, uniform basis if the law is changed to permit it. It is possible that even some employers might favor a flat rate at first. But because experience rating has proved its desirability—in providing automatic balanced financing and in maintaining a high degree of employer interest in the program, which is so vital to the program's success, nothing should be done at the Federal level which would encourage states to discontinue individual employer experience rating. CONCLUSION The Indiana State Chamber of Commerce believes that to restore the provisions on Federal Benefit Standards and other provisions which were deleted by the House would be to cause the several states, partners in the Federal-State program, to become little more than disbursing agents. We believe, further, that there are provisions in H.R. 15119 that could be improved upon. Recognizing, however, that rarely can any piece of legislation be wholly satisfactory to all who may be involved, we are reconciled to the supposition that there must be some give and take in the measure under consideration. We urge, therefore, the passage of H.R. 15119 without change. |