Rather than steadfastly opposing any change in the Unemployment Programs, we believe the Senate Committee would render both business and responsible members of the labor and white collar force a positive service by rejecting S. 1991, and in the alternative, adopting provisions comparable to those in the House approved bill. Recognizing the stimulus value and need of incentives to all, we feel the retention of experience rating, the perpetuation of State and not Federal Administration of the program, and the non-interference with assistance payments which certain proposals would attempt to convert to rewards is a necessary and equitable compromise between the proponents of unlimited assistance and the financial realism of the business community. We find most of the provisions of House bill to be acceptable, however, as spokesman for a distribution industry, primarily composed of small businessmen, we must object to the increases in the tax base, both under S. 1991 and H.R. 15119. We believe the necessary funds for financing the new provisions can be raised by an increase in the tax rate alone rather than expanding both the rate and the wage base. Should the Committee conclude that an increased tax rate and wage base is essential to the economic soundness of the unemployment programs, we urge a less aggressive escalation of the wage base. Specifically, from the present $3,000 base to $3,400 in 1969, and $3,800 in 1972. A gradual increase will be more easily managed in the competitive economics of the building materials distribution industry. As employers, our members often find new or broadened taxes to be cumbersome to absorb in the marginal profit structure. This is due to the erratic cyclical nature of our particular industry. Specifically, the present decline in the homebuilding and related industries, such as the dealers, has critically affected many of our members. Some of them would be unable to manage the added tax burden created by bills such as S. 1991. The Senate's acceptance of the House measure with our recommended change in the wage base would ease the burden on the members of our industry and achieve more rational objectives than those sought in S. 1991. AMERICAN COUNCIL ON EDUCATION, Hon. RUSSELL B. LONG, Chairman, Committee on Finance, Washington, D.C. DEAR SENATOR LONG: Although the American Council on Education did not ask to testify before your committee in connection with H.R. 15119, we hope very much that the enclosed statement may be made a part of the record. Institutions of higher education, coming as they will for the first time under the provisions of the Unemployment Compensation Act, are naturally concerned at the impact this will have on institutional finances. We are in sympathy with the objective of providing economic security for those who need it, and we are, therefore, in general support of the bill. We do believe, however, that non-profit institutions are sufficiently different from profit institutions as to warrant special treatment. In passing the bill the House of Representatives concurred with most of our suggestions. We shall be very grateful for any consideration your committee can give to our additional requests. Sincerely yours, JOHN F. MORSE, Director of the Commission. AMERICAN COUNCIL ON EDUCATION-STATEMENT ON H.R. 15119 The American Council on Education wishes to signify its general support of H.R. 15119, as opposed to those provisions of H.R. 8282 which pertained to institutions of higher education. The Council, a voluntary, non-Governmental body, is the principal coordinating agency for higher education in the United States. It has a membership of 1194 colleges and universities and 230 education organizations. We are not opposed to the concept that workers employed by non-profit institutions should be accorded the same degree of employment security as they would enjoy if they worked for profit enterprise. We would argue, however, that employment in non-profit enterprise is far more stable than in profit enterprise and, therefore, that special consideration should be given to our situation. Specifically, H.R. 15119 recognizes the following special considerations: (a) Institutions of higher education are exempt from the .55 per cent Federal tax. (b) Those engaged in the capacity of "instructional, research, or principal administrative capacity" are excluded from coverage. (c) Students employed by their institutions are excluded from coverage. (d) Institutions will be allowed the option of reimbursing the State for benefits paid out on behalf of their former employees instead of paying the State unemployment insurance contribution. We have three concerns that are not taken into account in H.R. 15119 and we hope that they may be given the committee's earnest consideration: 1. We would strongly urge that student spouses be exempt from coverage. The reason for this request is a purely practical one. In general, educational institutions go out of their way, often at the sacrifice of considerable efficiency, to employ student wives simply as a way of providing additional student financial aid. Such employment is, of course, temporary and when the student graduates and moves on to his career elsewhere, his wife goes with him and new employees must be found and trained. But we have believed that the assistance provided in this way to students is so important that it outweighs all disadvantages. There seems to us a strong probability that many student wives may claim unemployment compensation after leaving college employment and that these claims may be upheld. This could be true even if they had no intention of continuing their employment after their husbands had received their degrees. If this were the case, we fear that our present policies would be prohibitively expensive and that they would have to be abandoned. Then we would be faced with the problem of finding new sources of funds for student aid or see large numbers of students discontinue their education. 2. We would urge that all administrative and professional personnel be exempt from coverage. The phrase contained in H.R. 15119, which exempts principal administrative personnel, unless far more clearly defined, may lead to great confusion in shaping State legislation. 3. We would urge that colleges and universities not be charged for benefits paid for unemployment not directly caused by these institutions. We strongly endorse the provision in Section 104 (b) which provides a form of self-insurance for non-profit organizations. However, under the bill as it is now written, such institutions would be liable for the payment of benefits to former employees who might voluntarily terminate employment in order to accept new employment in profit enterprise and then involuntarily be released from this new employment. We believe the House intended to relieve institutions of higher education of the responsibility for compensating for unemployment not attributable to them. If this is the case, we believe the Act should stipulate that such institutions are responsible only for compensation benefits paid as a result of the direct actions of the non-profit employer. Re: unemployment tax legislation. Hon. RUSSELL B. LONG, U.S. Senate, Washington, D.C. AMERICAN ELECTRIC POWER CO., INC., DEAR SENATOR LONG: The Finance Committee is now holding hearings on two unemployment tax bills, H.R. 15119, recently passed by the House of Representatives, and S. 1991. I am writing you in behalf of the American Electric Power System companies to urge that H.R. 15119 be the vehicle for the new law rather than S. 1991, and in particular, that "experience rating" should be retained. S. 1991 is similar to H.R. 8282. introduced in May 1965, for which, after lengthy hearings and careful consideration, the Ways and Means Committee substituted H.R. 15119. The House passed H.R. 15119 by an overwhelming vote. H.R. 15119 represents a realistic overhauling, the first since the 1930's, of the federal provisions relating to the combined federal-state unemployment taxes. This bill raises, in future years, both the federal tax rate and the maximum taxable wage base (which will lead to higher state wage bases); extends coverage to additional workers; provides for an extended benefit period, up to 13 weeks, in time of recession, with the federal and state government each paying one-half; and provides, for the first time, for court review of adverse decisions by the Secretary of Labor as to whether a state unemployment compensation system conforms to the requirements of federal law. Most important, H.R. 15119, unlike H.R. 8282 and S. 1991, would not tamper with the present long-established system of "experience rating", under which, by virtue of Sections 3302(b) and 3303(a)(1) of the Internal Revenue Code, an employer may receive credit for state tax against the federal tax up to a maximum 2.7% rate of state tax, even though he pays state tax at a "reduced" rate less than 2.7%. This "additional credit" is now allowable only if the "reduced" state rate paid by the employer is due solely to his good record of employment stability. Experience rating is not only fair and equitable, but a strong financial incentive for employers to make every effort to maintain stable employment, and to keep layoffs and terminations of employment to a minimum. I attach a copy of a July 28, 1965 letter which I wrote to The Honorable Wilbur D. Mills, Chairman of the Ways and Means Committee, when that Committee was considering H.R. 8282, urging, as I am doing now, the retention of experience rating. I am sending a copy of my letter to you, with its attachment, to all members of the Finance Committee. Sincerely yours, DONALD C. Cook. Re H.R. 8282, unemployment taxes. Hon. WILBUR D. MILLS, House of Representatives, AMERICAN ELECTRIC POWER CO., INC., DEAR MR. MILLS: I am writing in behalf of the American Electric Power System companies to urge the deletion of those provisions of H.R. 8282, the unemployment tax bill on which the Ways and Means Committee will shortly hold hearings, which would eliminate or reduce experience rating as a factor in determining the rate of state unemployment tax paid by an employer. Unemployment taxes are imposed to provide, through regular contributions, the moneys to pay benefits to individuals who are currently unemployed and to create and maintain a reserve from which payments may be made to those who become unemployed in the future. The moneys for this purpose are obtained through taxes on employers. An employer has up to now been paying state unemployment taxes at rates determined by the amounts of unemployment compensation, in relation to the size of his taxable payroll, paid in the past to his former employees, which in turn have formed the basis for estimating the future drain on the state fund which might be caused by future terminations of employment with him. An underlying concept of unemployment compensation laws has been that to the extent feasible, an employer is to furnish, in a regular and systematic manner, the moneys for paying benefits to individuals who worked for him before they became unemployed. Consonant with this concept, unemployment laws have always given recognition to the principle of experience rating—that the rate of unemployment tax paid by a particular employer should reflect his past and current record of employment stability. This principle recognizes that an employer who has a heavy turnover of employees, which gives rise to large relative unemployment compensation payments to individuals who no longer work for him, pays a higher tax rate, as a per cent of taxable wages, than an employer who, again on a relative basis, has few terminations of employment and whose former employees therefore draw little unemployment compensation and make a small drain on the state fund. This is a salutary and just principle and operates to encourage stability of employment. Present federal law not only recognizes but emphasizes the meritorious nature and the importance of experience rating. Section 3302(b) of the Internal Revenue Code allows "additional credit" against federal tax for state tax up to a maximum 2.7% state rate, even though the employer actually pays a "reduced" (lower) state rate, provided the state law is certified by the Secretary of Labor. 1 Only in a small minority of states do employees also contribute to the fund. American Electric Power System employees do not pay unemployment tax in any state. Section 3303 (a) (1) now provides that an additional credit with respect to a reduced state rate of contributions shall be allowed only if the Secretary of Labor certifies that no reduced state rate is permitted to the employer "except on the basis of his *** experience with respect to unemployment or other factors bearing a direct relation to unemployment risk during not less than the 3 consecutive years immediately preceding the computation date". Section 208 of H.R. 8282 would amend Section 3303(a) of the Code to permit the additional credit against federal tax if state law permits a reduced rate of contributions, defined as a rate lower than 2.7%. In direct conflict with the salutary principle of encouraging and giving recognition to stability of employment, this proposed change in the law would eliminate experience rating as a prerequisite for additional credit against federal tax without substituting any other specific test. Against the background of other provisions in H.R. 8282 which would increase the cost of state unemployment compensation plans, elimination of the present federal requirement that additional credit will be allowed only where the reduced state rate is attributable to a good employment record would have the inevitable tendency of causing states to reduce the present wide differences in rates which turn upon the demonstrated unemployment risk, or even to impose a flat rate of tax on all employers. Section 208 of H.R. 8282 would not eliminate the incentive to states to permit a rate somewhat less than 2.7%, since they would still have an interest in qualifying employers within the state for "additional credit" against federal tax. The necessity of collecting sufficient unemployment taxes to meet the increased benefit costs which would be caused by H.R. 8282 would create pressure on the states to shrink greately the present differences in rates based on experience rating. The American Electric Power System companies pay unemployment taxes in eight states. They have had a very stable employment record. High benefit payments were made from many of the funds in these eight states in the recent past, and some of these funds are not yet back to a satisfactory level. Nevertheless, the taxes paid in these states last year by the AEP System companies reflect the stable employment record of our companies. For the year 1964, state unemployment taxes paid by AEP System companies totaled $162,281. If our companies had paid a rate of 2.7% in each of the eight states, applied to the maximum taxable wage base, $3,000 in most of such states and with a high of $3.600, our state unemployment taxes would have been $959,097, or almost six times the taxes actually paid. Unemployment is a matter of national concern, and in this connection the maintenance of as stable an employment record as possible by individual employers is of great importance. Present Section 3303(a)(1) has furnished employers a very real financial incentive to strive for an increasingly smaller number of lay-offs and other terminations of employment. Section 208 of H.R. 8282 would remove this incentive. The elimination of experience rating would be detrimental to the national objective of reducing unemployment and employee turnover. It would be unfair to those employers who have striven to maintain stable employment. It would be a sharp and undesirable departure from the principle hitherto followed of furnishing a financial incentive toward that end. Section 208 of H.R. 8282 should not become law, and we urge its deletion from the bill. Very truly yours, DONALD C. COOK. ESSEX-WEST HUDSON LABOR COUNCIL AFL-CIO, Hon. RUSSELI. B. LONG, Washington, D.C. DEAR MR. LONG: We urge your support for a strong U.C. Reform Bill and propose that your Committee revise the weak House Bill that has been passed. We need your immediate cooperation and support to approve the U.C. Reform Bill recommended by the AFL-CIO H.R. 8282. May we request that our letter be printed in the record of the Committee hearings. Sincerely yours, MATTHEW J. STEVENS, Executive Secretary-Treasurer. Hon. RUSSELL B. LONG, Chairman, Committee on Finance, U.S. Senate, Washington, D.C. MAINE STATE FEDERATED LABOR COUNCIL, DEAR SENATOR: I wish to take this opportunity to go on record concerning a matter of great significance to the working men and women of the State of Maine. As President of the Maine State Federated Labor Council, unemployment compensation is an area in which I have always taken a great interest. After extensive research and thirty-one years of legislative experience, I find that there are limitations and inequities in the Maine Employment Security Act which indicates to me a need for federal standards and broad reforms if the law is to realistically serve the purpose for which it was originally intended. The Maine State Legislature is not qualified to delve into and solve problems encountered in unemployment compensation legislation. They have neither the personnel nor the research staff and facilities to act upon legislation concerning unemployment compensation, yet the legislative juggling continues and the ball is being dropped. Constantly. The recommendations of the Maine Employment Security Commission and the legislation based upon those recommendations are too one sided and do not adequately protect the worker. The worker needs fairer consideration and only uniform federal standards will give it to him. The Social Security Act of 1935 made each state responsible for its own unemployment insurance program. After reviewing the record, I was astounded to find that not only Maine, but every state has a smaller weekly benefit, relative to wages, than was the case in 1939. At that time benefits received by the unemployed worker in Maine amounted to 70% of his wage. Today the figure is closer to 30%. This seems grossly incompatible with the needs of the people. After twentyseven years it seems we should have made more progress than that in protecting the earnings of our workers. The need to stop the competition and apply federal standards for the amount of weekly benefits is obvious. A further glaring inequity may be found in the duration of benefits received. In 1959, 20%, or 6415 unemployed workers in the State of Maine exhausted benefits. This was an increase of 134% over the previous year. The 20% exhaustion rate of 1959 continued until the 1964 upsurge of the economy. Although benefits in Maine presently cease after a maximum of twenty-six weeks, valid complications cause many workers to remain unemployed after the cut off period. The only alternative has been the relief rolls. We need federal standards for the duration of weekly benefits and an additional twenty-six weeks of federal benefits if we expect to adequately meet the needs of the unemployed worker and his dependents. In speaking and corresponding with rank and file union members I have obtained information which I feel should illustrate some of the personal disaster suffered by individuals in the State of Maine, due to the present standards of disqualifications. What is distressing is not only the number of disqualifications, but the reasons. In one instance a pipefitter from Norway, Maine, was disqualified for simply telling the truth. Unemployed, the worker was referred to work in Bucksport. Unable to leave his wife, a victim of emphysema for fifteen years, he declined. When applying for unemployment compensation, the worker answered truthfully when asked if he had been offered employment. He was disqualified. Although the individual had good personal cause, his truthfulness disqualified him. The present law has undoubtedly made liars out of good men who are fearful of a similar occurence. In Skowhegan, Maine, a young woman working for a supermarket chain wrote me asking what she could do about being disaqualified. She had re-located, at the request of the company, in Augusta. After two weeks, due to her childs illness, she had to resign and return to Skowhegan. She was disqualified. Some of the letters I have received express not only the hardships imposed upon disqualified workers, but the workers inability to comprehend why the people who need it most are denied this compensation. They feel unemployed poor personally discriminated against and too often for good reasons. |