[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
MAKING THE WORK OPPORTUNITY TAX CREDIT
A SUCCESS FOR SMALL BUSINESS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS
OF THE
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC
__________
MAY 4, 2000
__________
Serial No. 106-57
__________
Printed for the use of the Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
66-395 WASHINGTON : 2000
COMMITTEE ON SMALL BUSINESS
JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
DONALD A. MANZULLO, Illinois California
ROSCOE G. BARTLETT, Maryland DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey CAROLYN McCARTHY, New York
SUE W. KELLY, New York BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania DONNA M. CHRISTIAN-CHRISTENSEN,
DAVID M. McINTOSH, Indiana Virgin Islands
RICK HILL, Montana ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania TOM UDALL, New Mexico
MICHAEL P. FORBES, New York DENNIS MOORE, Kansas
JOHN E. SWEENEY, New York STEPHANIE TUBBS JONES, Ohio
PATRICK J. TOOMEY, Pennsylvania CHARLES A. GONZALEZ, Texas
JIM DeMINT, South Carolina DAVID D. PHELPS, Illinois
EDWARD PEASE, Indiana GRACE F. NAPOLITANO, California
JOHN THUNE, South Dakota BRIAN BAIRD, Washington
MARY BONO, California MARK UDALL, Colorado
SHELLEY BERKLEY, Nevada
Harry Katrichis, Chief Counsel
Michael Day, Minority Staff Director
------
Subcommittee on Tax, Finance, and Exports
DONALD A. MANZULLO, Illinois, Chairman
STEVEN J. CHABOT, Ohio CAROLYN McCARTHY, New York
PHIL ENGLISH, Pennsylvania RUBEN HINOJOSA, Texas
PATRICK J. TOOMEY, Pennsylvania CHARLES A. GONZALEZ, Texas
GRACE F. NAPOLITANO, California
Philip Eskeland, Senior Professional Staff Member
C O N T E N T S
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WITNESSES
Page
Hearing held on May 4, 2000:..................................... 1
Weller, Jerry, a Representative in Congress from the State of
Illinois................................................... 1
Littlejohn, Roger, Coordinator, Work Opportunity Tax Credit
Program of Tennessee Department of Labor & Workforce
Development................................................ 8
Carroll, Rodney, Chief Operating Officer, Welfare to Work
Partnership................................................ 10
English, Ron, Franchise Owner, Burger King, Abilene, TX...... 11
Kramer, Fred, Director of Community Employment and Training,
Marriott International..................................... 13
APPENDIX
Opening statements:
Manzullo, Hon. Donald A...................................... 26
McCarthy, Carolyn............................................ 27
Prepared statements:
Rangel, Charles.............................................. 28
Weller, Jerry................................................ 32
Littlejohn, Roger............................................ 36
Carroll, Rodney.............................................. 40
English, Ron................................................. 55
Kramer, Fred................................................. 61
Additional material:
CRS Report................................................... 63
Remarks of Rep. Amo Houghton................................. 65
House Resolution 2101........................................ 66
Letter to Manzullo from Carroll.............................. 77
Letter to Manzullo from Signer............................... 78
Letter to Manzullo from Kramer............................... 81
Letter to Manzullo from English.............................. 83
Work Opportunity and Welfare-to-Work Tax Credits............. 85
Instructions for Form 8850 and Form 8850..................... 87
U.S. Department of Labor Form................................ 89
MAKING THE WORK OPPORTUNITY TAX CREDIT A SUCCESS FOR SMALL BUSINESS
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THURSDAY, MAY 4, 2000
House of Representatives,
Subcommittee on Tax, Finance and Exports,
Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 10 a.m., in room
2360, Rayburn House Office Building, Hon. Donald A. Manzullo
[chairman of the Subcommittee] presiding.
Chairman Manzullo. We are going to call this Subcommittee
to order. The first order of business is the testimony of
Congressman Jerry Weller. Congressman Rangel, who has been
working on the African trade bill for many years with
Congressman Crane, is understandably excused from not appearing
this morning because after all the years of work it is finally
coming to the floor. What we are going to do is take
Congressman Weller's testimony and we will put Congressman
Rangel's statement into the record. And if it is not here, we
will leave the record open for at least a week in order to put
it in.
[Mr. Rangel's statement may be found in appendix.]
Chairman Manzullo. Then we will start with Congressman
Weller. If we have any questions, we can ask him. Then after
that, if the ranking minority member, Mrs. McCarthy, has an
opening statement, we will read it at that time. Did you want
to say anything up front, Mrs. McCarthy?
Congressman Weller.
STATEMENT OF HON. JERRY WELLER, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ILLINOIS
Mr. Weller. Thank you, Mr. Chairman, Mrs. McCarthy. I
appreciate the opportunity to appear before your committee
today to testify about an important initiative which has been
working. One message I learned as we worked on enacting the
first real welfare reform in over a generation was whether you
were liberal or conservative on the issue of welfare reform, we
all agreed that if people were going to move off welfare, they
needed a job. Of course the Work Opportunity Tax Credit, which
I am before you to testify on today, enlisted the private
sector to help provide jobs and give those that were on welfare
the opportunity to move up the economic ladder and have a
chance by moving from the welfare rolls to the employment
rolls.
I am very pleased to have this opportunity to talk about a
success story today before your Committee. As you know, the
Work Opportunity Tax Credit was created in 1996 as part of the
Small Business Job Protection Act. This program offered
employers a tax credit for hiring employees which were part of
the following groups: families receiving AFDC or TANF benefits,
veterans participating in the food stamp program, 18- to 24-
year-old members of families receiving food stamps, high-risk
youth, which could be defined as 18- to 24-year-olds, living in
empowerment zones or enterprise communities, at risk-summer
youth, SSI recipients, and economically disadvantaged ex-felons
trying to find work soon after prison release.
Once employees in these categories work 400 hours with a
company, employers can claim a 40 percent tax credit on the
first $6,000 earned in the first year, and for employees
working with a company 120 to 399 hours, the employer can claim
a 25 percent credit. I am proud to report to the Subcommittee
that the Work Opportunity Tax credit has been a success.
According to the Department of Labor, over 600,000 individuals
have been hired under WOTC thus far. Over 80 percent of these
individuals had been on public assistance in the form of
welfare or food stamps. In 1999, the Department of Labor issued
more than 335,000 certifications for WOTC hires. This was
50,000 more than 1998. In my home State of Illinois last year,
over 23,419 individuals went from the welfare public assistance
rolls and were put into meaningful employment through the Work
Opportunity Tax Credit.
These 23,419 individuals will no longer rely on the
Government to support themselves and their families. They have
been able to enter the workforce and learn the job training
skills they need to be successful in today's workforce. Last
year, the Ways and Means committee and the Congress extended
the Work Opportunity Tax Credit for 2\1/2\ years. I am proud to
say this is the longest extension since its creation in 1996.
That is so important. We need that long-term extension if you
are going to encourage more employers to participate so they
have the confidence that the tax code is not going to change if
it is going to have a tax consequence for their bottom line. It
is my understanding that prior to the extension, more than 20
of our Nation's governors and 400 employers contacted the Ways
and Means Committee in support of a multiyear extension of the
program.
At this time, supporters of the Work Opportunity Tax Credit
are discussing possible ways to improve the existing program.
One suggestion I have heard recently would lift the 18- to 24-
year age restriction to qualify for the program if a family is
receiving food stamps. While revenue estimates are not
complete, this may be a way to include more people in the
successful program at this program's relatively low cost. Mr.
Chairman, Mrs. McCarthy, the Work Opportunity Tax Credit
represents a powerful public-private sector partnership
designed to encourage businesses to help individuals enter the
workforce and leave the welfare rolls. This takes these hard-
to-place individuals off the public welfare rolls, and places
them into the working labor pool. Once they enter the
workforce, individuals are trained by employers in basic skills
to make them more employable in the future.
I would note, Mr. Chairman, one thing I have learned in
talking with those that are trying to move off the welfare
rolls is that just by getting a chance, they have the
opportunity to learn some of the basic skills. Of course thanks
to this program, they have the opportunity to gain those basic
skills, enter the job market, and then of course frankly be
more attractive to other employers who are working looking for
workers in this good economy today because they have the
skills, they have a work record, and of course thanks to this
public-private partnership, we give them that opportunity.
I want to thank you and the members of this committee for
the opportunity to speak about this worthwhile initiative which
has proven to be a success. I do want to note that Congressman
Amo Houghton of New York as well as Congressman Charlie Rangel,
we have all worked together in a partnership that has been a
bipartisan effort, one of those success stories we are all
proud to talk about.
[Mr. Weller's statement may be found in appendix.]
Chairman Manzullo. Thank you, Congressman Weller. Could you
explain to us technically how it works?
Mr. Weller. The way the program essentially works is you
have somebody that qualifies, so you have a qualified
candidate. The employer hires them. Of course there is an
approval process, and the employer has to apply for the actual
tax credit. There is a form they need to fill out. Of course
one of the issues we have been working to resolve for the Work
Opportunity Tax Credit is to make it user friendly. Over the
last several years we have tried to improve this program,
minimizing the paperwork and reducing the red tape in order to
encourage more employers to participate.
If an employer hires someone who falls into the various
categories that qualify, they then can hire this individual. Of
course, there is a minimum number of hours this individual must
be on the payroll working for this employer before they qualify
for the tax credit. As I pointed out in my testimony, for
employees working with a company from 120 to 399 hours, the
employer can claim a 25 percent credit and for those that are
working over 400 hours, the employer can claim a 40 percent tax
credit on the first $6,000 earned in the first year.
Now, that threshold was one of the changes we made to the
program in the last budget, or in the last tax package. The
reason that was important, we found in many cases this program
has been successful; and one thing I have found is sometimes
there is a little hesitation by an employer to hire someone off
of welfare. They are concerned about the cost of training this
individual; they are concerned about the work ethics or work
habits, if this person does not have any work experience. Of
course with this incentive, we are encouraging them to hire
these individuals. At the same time employers say, you know, I
have helped train this individual and given them the
experience, in many cases they work less than 400 hours but the
business across the street sees they are a good worker and
offers them a job at a little bit higher wage.
Chairman Manzullo. So an employer can essentially pay
$2,400 less in corporate taxes or personal income taxes if it
is a sole proprietorship based upon 40 percent of the $6,000.
Is that correct?
Mr. Weller. That is correct. If they work over 400 hours,
the employer can have 40 percent of the tax credit on the first
$6,000 in wages. And 40 percent would be about $2,400 in
relief, means that they would pay $2,400 less on their taxes as
a result of that tax credit.
Chairman Manzullo. Is there still, Congressman, a need for
a program like this in light of the low unemployment rate
across the Nation?
Mr. Weller. Mr. Chairman, I think we can all agree we want
this good economy to continue growing. Since 1991, we have been
enjoying a very strong economy over the last 9 years as a
result of our efforts to balance the budget and reduce the tax
burden, particularly on employers as well as on working
families. That has kept our economy moving forward. I believe
there is a continued need to the Work Opportunity Tax Credit,
because regardless of how strong the economy is, there are
still those on welfare. There are still those who need the
opportunity. And because of welfare reform, we have seen almost
7 million Americans who have gone from the welfare rolls to the
employment rolls. The Work Opportunity Tax Credit has helped
make that success.
I would point out that many of those who are hired through
the Work Opportunity tax Credit have no previous job
experience, so essentially this is an incentive for an employer
to give that individual a chance to get off of welfare and
develop some work skills and a work history which helps them
move up the economic ladder. I strongly believe that this
program should continue. But I would also point out that we
should also consider some other ideas.
As I mentioned, one idea that we should consider is lifting
the age ceiling for food stamp recipients and individuals who
reside in empowerment zones and enterprise communities. Right
now that age ceiling is only 18- to 24-year-olds, of those who
can currently participate in this program if they receive food
stamps. Recognizing food stamps are an income supplement, is a
program for those who are in need. This may be a way of
providing help for more individuals to move up the economic
ladder.
Chairman Manzullo. The experience that we have seen in our
congressional district is that welfare rolls have plummeted by
87 percent. In one county, McHenry county, which has 250,000
people there are seven families on welfare. In Winnebago
County, another county I represent, Rock Valley College, a
community college, has an office within the welfare office so
that there is a hand-off as people come off welfare. They are
immediately working in contact with Rock Valley Community
College. Then that college makes the contacts with the
employers. It makes it a lot easier because I could imagine one
of the big problems with people going on employment for the
first time is saying would you hire me and then you have to
ask, well, are you an ex-felon, are you on welfare. I don't
even know if an employer can ask those questions legally. But
with the bridge that the community colleges are providing, that
appears to be working extremely well in our district. Do you
have the same experience in yours, Jerry?
Mr. Weller. I am pretty proud that welfare reform has been
working in Illinois. We have seen statewide in Illinois,
welfare rolls have been cut well over in half. My home county
of Grundy County--and I, of course, live in the county seat of
Morris--we have seen about an 85 percent reduction in the
welfare rolls. Clearly the Work Opportunity Tax Credit has
contributed to that success. I think as I noted earlier, as we
debated welfare reform emphasizing work, family and
responsibility, while giving States flexibility to design
welfare programs that meet the needs of individual communities
and individual States, recognizing that North Dakota and South
Dakota are different than New York or Illinois, by giving that
kind of flexibility, we have succeeded. I am very proud of
that. It took us three times. We passed that legislation three
times before we signed it, but the bottom line is it is
working. I believe that the Work opportunity Tax Credit helped
contribute job opportunities for, in this case, well over
600,000 individuals who now are working rather than receiving a
welfare check.
Chairman Manzullo. Thank you. Mrs. McCarthy.
Mrs. McCarthy. Thank you, Mr. Chairman. I thank you for
calling this hearing. I thank Congressman Weller for his
testimony. One of the things that I had heard is that, most
States when they are going through the work process for the
opportunity tax credit certification, they can complete that
usually in 30 days, but yet we have heard in some States there
is a backlog of anywhere from 6 months to 2 years. Could you
briefly discuss the processing backlog problem with the
Committee. Specifically, what are the costs that a business
experiences when processing is delayed? And if you know, how
many States are experiencing significant backlogs? And is there
anything we can do on the Federal level to help alleviate this
problem?
Mr. Weller. Mrs. McCarthy, what I would like to do is get
back with you on some of the details. We can provide that to
your Committee, some of the details. I am proud to say Illinois
is one of the States that is leading in ensuring the timeliness
of the processing of the paper, paperwork. Let me get back with
you some statistics. There has been an analysis done of the
various States. The bottom line is what we can do here in the
Congress is to minimize the paperwork, to listen to the
employers who want to participate about the potential
roadblocks that have been there. Of course, paperwork has been
one of them. The timeliness of the processing of the paperwork
has been another. I will be happy to provide to the Committee
essentially a ranking of the various States and of course where
they compare.
Mrs. McCarthy. I thank you. I think it is important
especially for the small businesses. Since I have been here
3\1/2\ years, I can't believe the amount of paperwork we ask of
our people, things that we mandate our businesspeople to
respond to. We are doing a better job, but we have to even do a
better job than what we have been doing. I thank you for that.
I will look forward to the information.
Mr. Weller. Mrs. McCarthy, and this is a small business
Committee, of course the more paperwork and more red tape
roadblocks that stand in the way, the harder it is for a
smaller employer to participate. The large employers have
plenty of people to fill out paper, but the small employers do
not. By minimizing the paperwork, by reducing the red tape
wherever we have the opportunity to, we make it easier for a
small employer to step forward and give that welfare recipient
down the street an opportunity through the Work Opportunity Tax
Credit.
Mrs. McCarthy. I thank you for your testimony.
Chairman Manzullo. Congressman Hinojosa.
Mr. Hinojosa. Thank you, Chairman Manzullo. Thank you for
coming to visit with us, Congressman. I would like to ask you
about that last point you made, that some of the businesses
talk about the vast amount of paperwork that has to be filled
out to participate in this WOTC. Will allowing the electronic
filing of the IRS form 8850 help, and should we be considering
reducing the business form to something much shorter?
Mr. Weller. From my personal perspective, I think,
Congressman, that as we move to e-filing of all tax forms, it
simplifies the process, and more and more taxpayers have taken
advantage of that opportunity as are small businesses. We have
wrestled with the issue of electronic filing of Federal
Government-related documents and particularly in the small
business community over the last several years as they have
worked, become more online, as they have worked to be able to
participate more in e-commerce. But I believe that is the
direction that we should head towards, because it does simplify
the process.
Mr. Hinojosa. The second option, should we consider a
shorter form? And you understand, some people just don't find
the computer as friendly as you and I; but for those people,
wouldn't it be advisable to look at a shorter form?
Mr. Weller. I think any way to minimize the amount of
paperwork and bureaucratic red tape is a step in the right
direction.
Mr. Hinojosa. I agree with you. Thank you, Mr. Chairman.
That is the only question I had.
Chairman Manzullo. I have another question. I am at this
point opposed to the bill and will vote against it based upon
the fact that it would allow nonprofits, 501(c)(3)'s, to
participate in the program. Nonprofits pay no income tax.
Essentially, it would allow nonprofits the ability to pay less
in Social Security taxes. Somebody is shaking their head back
here; maybe this is wrong.
Mr. Weller. Mr. Chairman, currently nonprofits such as your
community hospitals or your community colleges do not
participate in the Work Opportunity tax Credit. One of the
things we have looked at in the Ways and Means committee is
finding ways to enlist the nonprofits in a way that they could
also provide work opportunities for those that are currently on
welfare. In communities like my hometown of Morris, our largest
employer in town is Morris Community Hospital. Joliet Junior
college is a major employer in Joliet, as well as the two
hospitals there.
Chairman Manzullo. How do you extend the tax credit to
people who don't pay taxes?
Mr. Weller. The approach that has been looked at is some
way to essentially syndicate the tax credit so that the
employers could use it but they would then sell that to a
private sector employer who could use the tax credit because
they do pay taxes. That is an option that we have explored.
However, the Committee has not approved that idea yet, but it
is something that has been----
Chairman Manzullo. It is presently in the bill. I am just
really troubled because of where this is going to lead. The
earned income tax credit has enough problems in terms of fraud;
I think the GAO has estimated fraud is close to 20 percent in
the EITC program. In terms of what is happening here, I just
have some very serious problems. Perhaps the next panel--I
think we have not-for-profits that may be testifying--would be
able to clear it up.
Mr. Weller. I would point out that the current provision in
the current law is in effect for a period of 2\1/2\ years. So
in about another 2 years this provision will expire; we will
consider extending it. At that point there will be changes
made. What we are discussing today, of course, Mr. Chairman,
is, in fact, law. As for the prospect of nonprofits
participating in a greater way, that is an idea that is being
considered. We would certainly welcome as a member of the Ways
and Means Committee--I can't speak for Chairman Archer--but as
a member of the Committee, I would welcome the input of the
Small Business Committee on what role you feel that nonprofits
can play in participating in the Work Opportunity Tax Credit
and recognizing in many communities they are the largest
employer in town.
Chairman Manzullo. I think our largest employer is the
school district, and that is followed by the three hospitals.
So I could understand that. I will take a fresh look at it. We
obviously have time to work on it. Mrs. McCarthy, did you have
a follow-up question on that?
Mrs. McCarthy. No, actually what you were referring to was
a follow-up question that I was going to have, but I figured we
did have time to try and work it out. I also have a lot of
nonprofits in my district. But I think we are looking at the
larger scope of things, but we have the time to do it. I would
appreciate if we could work on this committee with our
suggestions.
Mr. Weller. I know I would welcome them. I look forward to
working with you. It has been a bipartisan effort with Chairman
Houghton, Mr. Rangel, myself and others have been actively
involved in this issue. The bottom line is we want to give
those who are on welfare an opportunity to move up the economic
ladder. It should be a bipartisan priority. This program works.
If there are new ideas, new approaches that we can be using to
better the program, simplify the program, reduce red tape,
remove the barriers that discourage employers from enlisting in
the program, we would love to hear your ideas and look forward
to working with the Small Business Committee.
Chairman Manzullo. Congressman, as a follow-up to my
question, park districts, municipalities, school districts
presently cannot avail themselves of any revenue benefits as a
result of this statute in its present form. Is that correct?
Mr. Weller. That is correct.
Chairman Manzullo. That is the reason for trying to
experiment with the not-for-profits. That would include local
governments, I presume.
Mr. Weller. There are other programs that provide economic
opportunity that are utilized by municipalities and local
governments and park districts. Summer jobs program is one
example.
Chairman Manzullo. Of course that got wiped out.
Mr. Weller. That is an issue every year. I have always been
a supporter of the summer jobs program. But it is one program
which is important to Chicago and the suburban area that I
represent. When you think of the nonprofits, the nonprofits
that I have looked at in playing a role in trying to find a way
where they can participate in the Work Opportunity Tax Credit
are the hospitals as well as our institutions of higher
learning, such as St. Francis or Lewis University or Olivet
Nazarene University, which are three nonprofit universities in
the district that I represent.
Chairman Manzullo. I appreciate it very much. Thank you for
coming, Congressman.
Mr. Weller. Thank you, Mr. Chairman and Mrs. McCarthy.
Chairman Manzullo. If we could have our next panel please
take a seat at the table.
Good morning. On our next panel is Roger Littlejohn. He is
the coordinator of the Work Opportunity Tax Credit program of
the Tennessee Department of Labor and Workforce Development
from Nashville, Tennessee. I am sure will answer the question I
just posed the last time. Rodney Carroll is the chief operating
officer of the Welfare to Work Partnership here in Washington,
D.C. Ron English is the owner of a small business franchise of
the Burger King Corporation in Abilene, Texas. Finally, Fred
Kramer, director of community employment and training at
Marriott International in Bethesda, Maryland will testify.
Let's start first with Mr. Littlejohn. We are going to get
the clock going to 5 minutes for your testimony. Please stick
to that as much as possible. If you would like to read your
statement or better yet please just like to paraphrase it. Mr.
Littlejohn.
STATEMENT OF ROGER LITTLEJOHN, COORDINATOR, WORK OPPORTUNITY
TAX CREDIT PROGRAM OF THE TENNESSEE DEPARTMENT OF LABOR &
WORKFORCE DEVELOPMENT, NASHVILLE, TN
Mr. Littlejohn. I appreciate being here this morning. I
would like to paraphrase it a little bit. I am a little bit
nervous this morning but not for the normal reasons. I am just
not usually surrounded by so many people that have a different
accent than I do.
I think we have been very successful in Tennessee because
we have seen an increased usage of the WOTC program since day
one. In my prepared statement, which you are more than welcome
to read, we quote some of those figures. Employers use of the
program increases from 5,000 to 7,000 each year. We anticipate
receiving about 32,000 requests for the tax credit this year.
Last fiscal year we finished sixth in the Nation in terms of
the number of tax certifications that we got out the door, and
we are proud of that.
For a State the size of Tennessee to finish sixth in the
nation for tax certifications issued does not mean we have the
market cornered on welfare recipients. We think it is because
we have done a good job of marketing the program to the
employment community. That is one of the things I wanted to
focus on with you today.
We mass market the program to all 105,000-plus employers in
Tennessee through a quarterly newsletter that is tied to our
unemployment insurance program. Although Tennessee employers
are being notified, each month we will get a call from someone
who is just learning about the program for the first time. You
are always going to have that problem. We are finding that
small business employers know about the program, but do not
utilize it because of a reluctance for increased government
involvement. That is a problem that I think we have perpetuated
over the years, but is a big drawback to this program. The only
way to overcome the reluctance is to go out and meet with
employers one on one. That is something we try to do when we
have time.
There are some things, the paperwork burden. I don't think
that it is a burden. There are two forms to fill out, IRS form
8850 and ETA form 9061. They are pretty much a check-the-box
kind of form. I was around in the old TJTC days. Now, that was
a nightmare. I don't know how much simpler the current process
could be. An employer fills out two forms and sends it to us.
In Tennessee, we are lucky, we have computer access to almost
everything. We prove that the person is a target group member
or not. I tell employers all the time, if you spent more than 5
minutes perfecting a tax application under WOTC, you need to
give me a call, I can help shorten just walking you through the
process and making some suggestions.
We do feel there needs to be some changes to the program in
the future, particularly in the ex-felons target group. Right
now the ex-felons, must also be economically disadvantaged.
Well, if you have been locked up for a year, that is almost a
no-brainer. However, I have to spend an inordinate amount of
time proving a negative. Eliminating the economically
disadvantaged criteria from this target group would speed up
the process for us. In the areas of the EZ/EC enterprise zones,
and Empowerment Communities the age criteria does not present a
problem. Should Congress want to adjust the age limits, we have
no opinion.
We are having problems with the HUD EZ EC locator system,
which is the computer system we use to prove that the person's
address is within an empowerment zone. We would like to see the
locator system enhanced because we often know that a person's
address is in an enterprise zone, but we can't get confirmation
from the HUD locator system. Although HUD has made great
improvements to the locator system, we experience the most
trouble with addresses in the rural areas. Hopefully they will
continue to work to improve the system, and that will help. I
know I am running out of time, but, we would like to see a
longer or permanent extension of the tax credit, because the
stop-and-go legislation causes a lot of problems. Employers
hear that the program is over, but they don't necessarily hear
when it is extended. The last extension was signed off on
December the 27th. We started off with a 6-month backlog and
tax time for most employers was right around the corner. That
is a problem.
Some States may be reluctant to invest in computer and data
systems that help make the certification process go faster
because maybe of the inconsistency in funding. If the program
is extended here for a year, a year and a half, some States are
reluctant to make the necessary long-term commitments. This
reluctance also crosses over into the staffing patterns at the
State level. The program has been successful in Tennessee, it
is going to continue to be successful in Tennessee because we
are going to continue our marketing efforts. However, we hope
that Congress would address some of the issues we have raised.
With that, I will be happy to answer any questions you have. I
was sitting in the back earlier wanting to jump up and answer
questions.
Chairman Manzullo. Thank you.
[Mr. Littlejohn's statement may be found in appendix.]
Chairman Manzullo. Mr. Carroll.
STATEMENT OF RODNEY CARROLL, CHIEF OPERATING OFFICER, WELFARE
TO WORK PARTNERSHIP, WASHINGTON, DC
Mr. Carroll. Thank you. Good morning Mr. Chairman and
members of the Subcommittee. My name is Rodney Carroll. I am
honored and delighted to be here. I was a UPS manager for 22
years, but I am on loan to the Welfare to Work Partnership.
Soon after the legislation was passed in 1996, there began this
partnership with five companies: United Parcel Service, United
Airlines, Monsanto, Burger King, and Sprint. The objective of
these companies was first of all to recruit more companies, all
surrounded by the idea of hiring people from welfare to work
without displacing the current workers. Now there are currently
over 12,000 companies throughout the country hiring people from
welfare to work as a part of this partnership. The partnership
is a nonpartisan not-for-profit organization. It is primarily
funded by the private sector through grants to engage this
effort. I was a UPS employee and part of the deal was that UPS
would provide a loaned executive. My job is primarily to talk
to businesses, business to business, and tell them why it is a
good idea for them to get involved in hiring people from
welfare to work. There are several reasons that I tell them.
The first reason I tell them is that hiring people from welfare
is a smart solution for their business. I tell them about the
employees and how they will have a greater retention rate when
they are hiring people from welfare and how they will find that
a lot of the stereotypes and myths are just that, stereotypes
and myths.
And also I talk to employers about how they can receive the
tax credit. I am always amazed that I get two responses. If it
is a large company, they kind of say, okay, tax credits, what
else can you tell me? But the smaller companies are more
interested in the tax credit because sometimes I tell them that
it is true that people that have been on welfare for some time
in some cases need more training or some education and may need
to do something to bring them up to the standard you are used
to. Of course they say, who is going to pay for all this? How
am I going to be able to afford that? Sometimes you are only
talking a few hundred dollars, depending on what the trainee
may need. I say, well, you might be able to take advantage of
this tax credit, because what that would do, you would be able
to invest in the employee, the human capital, in this case
human resources. So it is always an effective tool.
We are not happy as a partnership of how this has been
going as far as small businesses. About 75 percent of the
12,000 companies I mentioned have less than 250 employees and
almost 50 percent have less than 50 employees. So a lot of the
companies are, even though I named a lot of big companies, are
small businesses. We send them out a fax every week and we talk
to them. We are not as happy as we would like to see people
taking advantage of it. I go out and say, why not? Why aren't
you? I am getting a lot of answers. Some of them are that it is
perceived that the form is more difficult than it is; and as
the speaker just before me said, that is not necessarily the
case when you really educate them.
One of the barriers might be because when you hire for
example UPS, a person comes in, this is a large human resources
department, people talk, the person comes on Monday, they might
not get hired until the next Monday or the following Monday. A
lot of processes, background checks and so on. Part of the
checks might be if they were on welfare, an ex-felon, et
cetera. And the form could be filled out at that time. A person
being hired from a small business could be on the spot. One of
the parts of this form is you have to have that, it almost has
to be immediately done, it can't work for a while and then come
back and say, oh, by the way such and such was a welfare
recipient, take advantage of the tax credit. That is one of the
issues.
Also being on welfare, although we have talked about it for
several years, it is still a sensitive topic for employees and
employers. It really has to be a shrewd employer interview in
order to be able to get around that topic at that particular
first interview and find out indeed whether the person was on
welfare or not. We would like to see this continue. We think
that although we have made a lot of progress in the country as
far as reducing the rolls, we still have quite a ways to go. We
think that any incentive that we can give for the business
community would be great, and we perceive this as that, an
incentive to hire people from welfare to work.
There are all kinds of extraordinary programs around the
country that people are doing; they are thinking out of the box
and the tax credit just allows them one more way to be able to
think out of the box and also sell their stockholders in some
cases or even partners and say well, look, besides getting good
employees, we are getting this tax credit. That is why I think
this is a good idea. The Welfare to Work Partnership continues
to move on. We are out in the communities now. We have started
five offices throughout the country in major cities. But our
small businesses are still our primary objective and anything
we can do to help small businesses hire people from welfare to
work, we will certainly agree with that. Thank you very much.
Chairman Manzullo. Thank you.
[Mr. Carroll's statement may be found in appendix.]
Chairman Manzullo. Our next witness is Ron English. Mr.
English.
STATEMENT OF RON ENGLISH, FRANCHISE OWNER, BURGER KING,
ABILENE, TX
Mr. English. Good morning, Mr. Chairman, Congressman
McCarthy, and members of the Committee. My name is Ron English,
and I am a small business owner from Abilene, Texas, which is
an all-American city about 3 hours west of Dallas. I am also
one of the 12,000 business partners of the Welfare to Work
Partnership. We employ approximately 370 people in our Burger
King restaurants. In my community and in the fast food industry
nationwide, I am a vocal advocate for welfare to work programs
because I believe they work for the employee and the employer.
I applaud your efforts to reform welfare. From my vantage point
as an employer and taxpayer, welfare reform has plugged the
drain on a failed program that depleted our communities of
trained workers and customers.
The welfare system also depletes our Nation of children who
grow up with a healthy respect for the value and dignity of
work, education, business and labor. I had a more selfish
interest in the welfare to work programs initially. The
motivation was not incentives like WOTC. However, I have
quickly learned that the WOTC is a vital part of any successful
welfare to work program for small businesses like mine. At the
beginning, my primary interest was simply finding employees,
employees that I desperately needed in my business and I know
are needed nationwide in the restaurant industry. In the fast
food business, turnover often runs as high as 300 percent. A
new source of potential employees is extremely necessary.
I soon learned that the biggest challenge to participating
in the welfare to work program was not the paperwork but the
workforce, the quality of the workforce. It takes a lot of time
and expense to turn a typical WOTC eligible person into a
productive employee. When we hire former welfare recipients, we
have to do much more than train them in the nuances of having
it your way because they lack skills and workplace experience.
We must also teach them how to keep a job. Our training
includes how to find reliable child care, how to practice
necessary personal hygiene for the workplace, how to use the
public transportation system, and how to budget from one
paycheck to the next, to name a few.
Teaching these skills is expensive and has a direct effect
on my bottom line and my ability to expand and create more
jobs. Even so, we believe the investment is worthwhile, and we
have developed some excellent employees. Marie is a good
example. Marie is a single mother raising three children. She
has an eighth grade education and before welfare reform she had
never been employed. We had to teach and Marie had to learn,
the basic job survival skills. Now Marie is a manager. She is
teaching her own kids the importance of employment and of
education. She talks about no longer being embarrassed when
checking out at the grocery store because instead of using a
welfare card, she now writes a check, something she had never
done. Marie is a great success story. Marie went through our
self-funded, five 2-hour sessions job survival training course,
and it made a difference. Employees like Marie will stay on the
job 45 to 50 percent longer than traditional hired employees if
they get the training. Were it not for the WOTC, we could not
afford the extra effort needed to train, educate, and work with
employees like Marie.
If you were to ask any of the 12,000 business partners of
the Welfare to Work Partnership, they would tell you that job
survival training is a critical component in a successful
welfare to work program. Unfortunately, more small employers
don't have the stories to tell because accessing WOTC sometimes
is difficult. The paperwork seems overwhelming, the minimum
hours requirement oppressive, and the future of the program
uncertain. That is why it is so critical to make the WOTC
program more small business friendly.
I hope we can rewrite the program requirements to reward
companies who take the added risk. Only about 20 percent of
those we hire and train actually make it to the 120-hour
threshold. Eliminating or significantly reducing the 120-hour
requirement would, in my opinion, have an immediate impact on
small business participation. Second is the uncertainty of the
program. While reauthorization wanes from one Congress to the
next, employers like me continue to recruit, hire, and train
employees not knowing whether the tax credits will exist to
offset the higher costs. The uncertainty discourages employers
from participating. Most small businesses cannot afford to
employ a human resources manager. So for the small employer and
his limited staff, the administration of WOTC is a cumbersome
and time-consuming investment for a minimal financial return.
I would be unlikely to participate if it weren't for a
vendor to whom I outsource the paperwork. Of course that
service comes at a fee and reduces the net reimbursement
advantage of the tax credit. Our purpose today is to encourage
you to put some Congressional muscle behind a program that
works. Give the Work Opportunity Tax Credit the clout it
deserves by making it permanent, eliminating the administrative
headaches as much as possible and reducing the minimum hours
requirement. Small business owners like myself will respond
affirmatively. Those are my thoughts. I hope you find them
useful. I appreciate your listening.
Chairman Manzullo. I appreciate that very much. I notice
you put in your statement ``Have it your way.'' That is pretty
subtle, isn't it?
Mr. English. Thank you.
[Mr. English's statement may be found in appendix.]
Chairman Manzullo. Our next witness is Fred Kramer. Mr.
Kramer.
STATEMENT OF FRED KRAMER, DIRECTOR OF COMMUNITY EMPLOYMENT AND
TRAINING, MARRIOTT INTERNATIONAL, BETHESDA, MD
Mr. Kramer. Thank you, Mr. Chairman, members of the
Committee. My name is Fred Kramer, and I am the director of
community employment and training programs for Marriott
International. Although I work for a large employer, I am here
on behalf of small businesses that use the work opportunity and
welfare to work tax credits. Specifically, I am here to ask you
to consider a permanent extension of these tax credit programs.
The fact that these programs continue to be extended, although
for a short period of time, shows the Congress supports these
initiatives because they do work.
They offer an incentive for businesses to consider hiring
individuals who do not necessarily possess the requisite skills
needed. These individuals require extra training to enable them
to become work ready. This extra attention requires time and
costs money. The problem exists when the program expires and
there is a hiatus between expiration and renewal. When the
hiatus occurs, State agencies often reassign the staff that was
once dedicated to the certification process. This slows down
the paperwork process and in some instances may stop it
completely. Once renewal occurs, the States may have to train
new employees to start up the certification unit once again.
A company the size of Marriott has the infrastructure in
place usually through its human resources function to handle
the paperwork and procedures to participate in this program.
These requirements are extensive and time consuming. Think of
the small businesses that participate in these tax credit
programs. The unit managers handle the interviews and
paperwork, follow the procedures and in some cases are offered
incentives by the home office. When the program expires and the
certification is delayed or never materialize, the unit manager
loses motivation to participate in the program. They followed
the established procedures, offered the extra attention and
time to the individuals, but did not receive the tax credit.
Fair or not, this gives the impression that Congress is not
fully committed to the program and makes it difficult for small
businesses to continue with it. A permanent extension would go
a long way toward solving these issues as well as keeping unit
managers and small businesses motivated to continue
participation in these important initiatives. The Work
opportunity Tax Credit program which Congress established has
been very successful and opened up the doors of employment
opportunity for thousands of individuals. A permanent extension
would build upon these successes and result in employment
opportunities for thousands more.
If I may, I would like to just share a few numbers and
statistics within our corporation, with Marriott. Since the
WOTC program began, we have hired over 9,000 individuals
through the program and another 2,000 through the welfare to
work tax credit program. After they have maxed out on their tax
credits, just under 50 percent of those individuals are still
with us. And after a full year of employment, it is around 20
percent that are still with us. If you think about those
numbers for people, this is their first job, those are very
good numbers, because people tend to job hop in their first few
jobs. So we are very proud of those numbers.
I also wanted to share a few success stories. I had put
together seven different ones. Unfortunately, three of those
folks left Marriott for higher paying jobs with other
companies. I am not going to brag on that but good for them.
All these individuals I am going to give you a little blurb
about have maxed out on the credit. They have been with
Marriott for well over a year.
One individual is a female who completed the tax credit and
the special training that we put some of our welfare recipients
through, has been awarded the Associate of the Month for her
excellent performance in food service at her hotel. Another
individual has been nominated as the associate of the Corridor,
which is a very high honor for outstanding performance in
housekeeping. She actually maxed out on the welfare to work tax
credit. So she has been with us for a very good period of time.
Another individual, and this is a gentleman, was awarded
the Rookie of the Year Award in their hotel for outstanding
performance in food service. So the extra training, it does
cost some money; but it definitely--we do get some very, very
good associates out of the program. It does require some extra
time on behalf of the managers. But these success stories go a
long way for spreading the good word about the advantage of
hiring people off welfare.
So I want to thank you for allowing me to address the issue
today. I believe that WOTC is essential in motivating employers
to hire and train individuals with barriers to employment.
Thank you.
Chairman Manzullo. Thank you very much.
[Mr. Kramer's statement may be found in appendix.]
Chairman Manzullo. We welcome Congressman Napolitano with
us. We are going to start first with questions from Mrs.
McCarthy.
Mrs. McCarthy. Thank you, Mr. Chairman; and thank you,
everyone, for your testimony. I found it very interesting and
certainly have written down your ideas. Mr. Littlejohn, one of
the things that I was curious on, what you had said as far as
felons coming out of prison and then trying to come into the
workforce and proving that they obviously have no money. That
is common sense. One of the things that I know happens an awful
lot of time, obviously when you come out of prison, I am sure a
small businessperson depending on what the crime was would be
reluctant to hire that person, anyhow. Yet if we don't have
some sort of an incentive to hire that person, most likely they
will go into crime or whatever they were doing to survive again
before they go back to prison. How can we, besides going
through HUD, not HUD; but how can we encourage businesses,
because I would find it very hard. If someone told me someone
came out with a violent felony, I would be reluctant to hire
them, to take that chance; and I am liberal.
Mr. Littlejohn. Obviously, some employers because of the
products that they have, they can't hire ex-felons. My comment
is more related to the administrative burden of getting the tax
credit back to the employer, because the target group, why do
we want to make them a target group, it is because their
barrier is that they are an ex-felon. Why put the economically
disadvantaged criteria on top of it which slows down the
paperwork and costs additional administrative dollars for me to
prove a negative? When OIG comes in after the program and wants
to start looking around, we prove that a person is what they
say they are before we issue the tax certificate.
So if it was Congress' intent to identify this target group
and their barrier being that they are an ex-felon, then making
the requirement that they also be economically disadvantaged
makes it extremely cumbersome, and many times it delays getting
the tax certificate to the employer for many months because one
of the ways we verify in a negative way that the person has had
no income is through our unemployment insurance wage records
which run generally about 5 months behind. So it just delays
the process, and we wind up trying to prove a negative.
Mrs. McCarthy. I thank you. The Chairman just showed me
something on what you have to do for someone that is just
coming out of jail. Pay stubs. How can you come up with a pay
stub? Employment contacts. You are not going to have any of
those.
Mr. Littlejohn. In Tennessee, we check the unemployment
wage record files and if no employers have shown that they paid
wages to that individual, that is a negative confirmation with
us. We don't fool with the pay stubs. We go for the negative
confirmation, because it is something that we can do and don't
put the burden on the employer of trying to get some pay stub.
If they have worked, it is going to show up on the UI system,
anyway. It can be very cumbersome if a State doesn't have
access to--let's say the State coordinator doesn't have access
to the UI records and things like that.
Mrs. McCarthy. I thank you for that. Going back, when you
said you were sitting in the back and ready to jump up because
you wanted to answer some questions, I have been in that
situation many times.
Mr. Littlejohn. I was told to restrain myself once I got
out of town.
Mrs. McCarthy. I am going to give you an opportunity on
what you felt you needed to make a comment because sometimes
those that are sitting there--and I know you only have 5
minutes time and we only have 5 minutes at a time. I would be
interested in what comments you wanted to make.
Mr. Littlejohn. One of the things I wanted to comment on
was the backlogs that the States have. I would venture to say
that a majority of the States are working on a backlog. I think
we are about as efficient as most States, and we are running
probably 3 to 4 months back into 1999, and those employers,
they have already needed to fill out their 1999 returns. We
just simply--because in our situation it is a staffing
problem--can't get them out the door. But that backlog was
created by the break in the legislation from July of 1999 till
it was reauthorized in December. I couldn't process them.
So I started off right after Christmas with an automatic
backlog that went to July of 1999. Again, a permanent extension
of the legislation or extensions that are longer in nature
certainly helps us. We are going to get the backlog
straightened up, but it takes awhile because all of a sudden it
is dumped in your lap when you start out 6 months behind.
Mrs. McCarthy. What backlogs are you actually talking
about, though, as far as paperwork?
Mr. Littlejohn. Processing and issuing tax certifications
for hires that were made since July of 1999.
Mrs. McCarthy. Thank you very much, and I appreciate that.
We will see what we can do. That obviously leads back to having
permanent status.
Mr. Littlejohn. That would be one of the things, yes.
Chairman Manzullo. Thank you, Mrs. McCarthy. We have your
testimony here. What I would like you to do on the
recommendations that you make is to send us a letter on your
stationery to explain very succinctly the things that you would
like changed. Try to keep it to one page. For example, on the
ex-felon issue asking for pay stubs, that is great. To verify
an ex-felon, all you should have to do is to make a phone call
and just verify it with within a matter of a very short period
of time. But if you could examine each of your recommendations.
For example, eliminating the economically disadvantage for
felons, completely do away with that, put that in the letter,
and explain why. Also you had----
Mr. Littlejohn. I hope I don't have to spend a lot of time
trying to explain that one, though.
Chairman Manzullo. No, that is self-explanatory. Why would
the felon even be applying unless he was economically
disadvantaged? Being without employment for some time might
presume that you don't sit there with a lot of money.
Mr. Littlejohn. They have to be within a year of release or
conviction, whichever is later. In most cases they have been
locked up for at least a year. Again, we are proving a
negative.
Mrs. McCarthy. Something just hit me. I don't know anything
about this; but when someone, maybe within the last 3 months
before they are going to be released, are they going through
any process to say, all right, we have these kind of jobs lined
up for you out there?
Mr. Littlejohn. I think the Department of Paroles, they
tell them about the WOTC program. And when a person is in a
transition period like that, they oftentimes try to utilize the
program by telling employers when they go for job interviews. I
know in Tennessee, I think that is part of their release
package. They take them through these things, tell an employer
you are an ex-felon, there may be a tax credit available to
them if they hire them. They are incorporating that. We get a
lot of calls. We would like to be able to respond to the
employers by getting the tax certificates back to them in a
more timely fashion because they have made the commitment and
hired these individuals. This little glitch, if we could
eliminate it, would speed that process up a great deal.
Chairman Manzullo. Is there a way when the employer applies
for the tax credit that he can't do the self-verification as
you do all the time when you file your income tax is that you
check the boxes, et cetera? Is there a way to make it a lot
easier to eliminate a lot or most of the paperwork that we are
talking about?
Mr. Littlejohn. From an employer's standpoint in
Tennessee--and it varies from State to State--the employer
submits those two forms.
Chairman Manzullo. To you.
Mr. Littlejohn. To me. We verify--I have no trouble
verifying a person's ex-felon status. That is as easy as
getting on the computer or verifying that they are receiving
AFDC or food stamps. What causes me the problem is when I have
to wait for 5 months to get verification of a negative, no
wages being paid by going to the UI system in order to prove
the economic status of an ex-felon. I can prove he is an ex-
felon in 4 or 5 minutes. That is not the problem with that
particular target group.
Chairman Manzullo. Maybe this law should be written so that
if there is proof given to the employer that this person has
not had a job within a certain period of time then the employer
does not have to contact a government agency to verify the
information. There has to be an easier way for small businesses
to be able to do this without contacting a government agency.
Anybody have any thought on that? What does Marriott do on
that, Mr. Kramer?
Mr. Kramer. We actually have a vendor that we utilize. I
think the gentleman from Burger King also utilizes that.
Chairman Manzullo. A regular employment agency?
Mr. Kramer. It is a group out of Indianapolis that
specializes in the tax credit program. If I remember back to
TJTC, as an employer, as a recruiter, I would interview folks
that I am going to consider to hire; and once I have hired
them, then I would ask them to bring in some information to me,
various IDs, paycheck stubs and things like that. Then I would
physically take them to the local job service. I would present
the paperwork to the job service.
Chairman Manzullo. There must be an easier way. That is why
small businesses are not involved in it. That is precisely the
point. I would welcome any comment in your letters to us as to
any creative way that you can come up with to bypass the
Government on a certification document or something. I hate to
eliminate some of your jobs up here, but you have more
important things to do than sit around waiting to see whether
or not somebody has received unemployment benefits from the
past 4 or 5 months. My brother has a restaurant business, and
it is rough for him getting employees. When you have half a
dozen employees, the WOTC is not worth it, it is not worth it
to make the phone call. Even though these forms may be minimal,
for Marriott and for Burger King, my brother Frank has 10 or 15
employees. Ron, you have 370 employees and you have somebody
that does the WOTC application process full time. My brother
doesn't. So he would just bypass the program, which is
unfortunate because teaching somebody to be a good Italian cook
is a real profession. That is true. Mrs. Napolitano.
Ms. Napolitano. Thank you, Mr. Chairman. In thinking about
what you just said in regard to finding a way to be able to
make this easier, I have always felt that the Department of
Corrections should have a release form to give to every felon
they are releasing, with some of that information to be able to
assist the felon. Unfortunately, they don't talk to Department
of Employment--Corrections doesn't; and so you have kind of a
situation where there is no communication for the need, either
by the Department of Employment--and I call it the Department
of Employment because I am used to being in California, to
anybody else. Sometimes agencies do not communicate as to what
would be helpful to the interviewers at the time of being able
to do referrals. If they were able to standardize something to
every single individual, even the felon could fill it out upon
release and have it verified by somebody in the Department of
Corrections. Because then they would be assisting not only an
employer but the felon to be able to get back without having to
go through a whole period of suspense, if you will, trying to
figure out what you do next. That would be easier to verify it.
Then I have other questions.
I was looking at this instruction form, and I dare anybody
to read it with any expediency. The words are run in together.
I looked down here, and it is just unbelievable the way this
form has been set out. Mr. Carroll, could you address that? The
words--there is hardly any spacing between any of the language
in this form.
Mr. Carroll. Sure. You would like me to disagree with that?
Ms. Napolitano. Is this standard? This is what goes out to
an employer?
Mr. Carroll. I believe so, yes. Is that the 8850?
Ms. Napolitano. Employers, any comments on the form?
Mr. Kramer. If that is the 8850, that is the standard form,
yes.
Ms. Napolitano. I am sure most of you already have read it.
What about the employer who is going to try to utilize this and
try to figure out what the world it says?
Mr. Kramer. They won't read it. They will put it somewhere
else.
Ms. Napolitano. Have you noticed the form?
Chairman Manzullo. Mrs. Napolitano, look on the second
page, the words are all bundled together.
Ms. Napolitano. That is what I am referring to. Everything
is run in together. Look at it. The front and back.
Chairman Manzullo. That is a lousy printing job.
Ms. Napolitano. I think first I would suggest we start at
home trying to figure out what is a better and--facilitate this
for the new employer who may want to at least read it and take
part in it.
I am very interested in comments in regard to felons. Right
now I have a program in California for the women and infants.
There are four pilots set up. One of them is in my district.
The women who are ready to be released with their infant
children are looking for jobs but they are felons, they cannot
find employment; and there is no employment office saying,
here, we will help you. How do we go about that, Mr. Carroll?
What would be the most expedient way for us to be able to find
this felon a job with an employer by trying to get them to fill
out these forms?
Mr. Carroll. We had a conference in New York just a couple
of months ago based on just that, having employers consider ex-
felons. A very interesting conference, very touching. Part of
the concern is you have to educate the employers on who these
ex-felons are. Most of us have this impression of something we
see in the movies or something and 70 percent of them are
nonviolent. That is the first thing.
Ms. Napolitano. This program is women who have abused drugs
or alcohol. When I asked this woman what she did, she says, I
sold. But she has got 25 years facing her; and she is not going
to do it again. At least this is what she is professing.
Mr. Carroll. When we talk about that, we educate the
employers on who this population is; and then we say in
addition to that, we encourage the employers to get a
relationship with some kind of service provider to help the ex-
felon make the transition. Part of it--we might not want to
admit it or not--but we don't necessarily agree that ex-felons
are being rehabilitated. So once they go----
Ms. Napolitano. They are not.
Mr. Carroll. Once they go through some process, we have a
certification provider join on board to help in training, then
the employers are more willing to take this opportunity. Now,
the tax credit as Mr. Littlejohn said, needs to be, number one,
we shouldn't have to worry about whether it is in or out or
expired or not. That should probably be ongoing. That is the
very least we can do. We are paying, what, 50-some thousand
dollars to house a felon, and it is like $3,000 or so if we can
get them into a job. So we need to put our energies toward
that.
Ms. Napolitano. Wouldn't it make sense then to try to
establish a program directly with the department of Corrections
and have employers come in and actually provide some of the on-
site training so when they are released, somebody is going to
go to a job?
Mr. Kramer. May I comment?
Ms. Napolitano. Yes.
Mr. Kramer. I was actually--when I was in the hotels, I had
gone to Lorton penitentiary and done job training with the
inmates that were going to be released over a certain period of
time. Lorton at that point had a culinary skills program. The
population that was involved in that were actually separated
from the general population because these guys were trying to
do something with their lives.
If you want an employer to consider hiring someone coming
out of prison, that training needs to take place while they are
in prison, and you are going to need at least 3 to 4 months.
You may be surprised how many employers may be willing to come
out and do some job training because it is in their own
interest as well. The one big barrier that exists in hiring ex-
felons is the difference between nonviolent and violent
offenders. Because with violent offenders, you run the risk of
a negligent hiring liability lawsuit. But with nonviolent, drug
offenders and things like that--and they are ready to come out
and they have learned their lesson--they want a second chance
as we all do at one point or another. An effective training
program with a partnership with various employers in that area
could definitely work.
Mr. English. One other thing I would add to that is that in
the State of Texas, we have what we call halfway houses, people
who are about to be released. They are released during the day
to go and work, and then they go back at night. We have
participated in that program for a couple of years and found it
quite useful for us. As the gentleman on my left had said, part
of the problem that we have is a concern about violence in the
workplace. Bringing those people into the workplace sometimes
creates a problem for us even if it is just someone who sold
drugs before. We are concerned because drugs, as you probably
are aware, run rampant. With the kids that we work, we just
don't want them associated with that as well.
Ms. Napolitano. Anybody else? Thank you, Mr. Chairman.
Maybe we ought to consider a program to be able to assist
employers finding a way to work with prisons.
Chairman Manzullo. I appreciate that. I had a question back
at the beginning about not-for-profits. Did anybody here want
to comment on that? Sir, you were nodding as though you would
know the program. Would you mind taking a seat up here and
introducing yourself.
Mr. Signer. Sure. My name is Bill Signer; and I am general
counsel to NEON, the National Employment Opportunities Network,
which represents the consultants and a number of the companies
that are involved in the Work Opportunity Tax Credit. The
proposal on the not-for-profits that was put forth by
Congresswoman Lowey and Congresswoman Johnson and which Mr.
Houghton has actively supported was one which basically says
that in a lot of inner city and rural communities, the largest
employers are not-for-profits. The thought was, how do you
encourage those employers to participate in hiring entry-level
workers, especially since hospital and universities have a lot
of entry level workers. The proposal, specifically, was to
allow them to take a credit against their payroll tax
liability, which is a tax that they do pay. Mr. Houghton has
been very articulate on the fact that payroll taxes are a tax
employers are paying to the Federal Government.
Chairman Manzullo. Would that be Social Security?
Mr. Signer. Social Security and unemployment insurance.
That was what the proposal was at that point.
Chairman Manzullo. Has anybody scored that with the CBO?
Mr. Signer. With the Joint Committee on Taxation. It came
out to be about $40 million a year.
Chairman Manzullo. That would be solely Social Security or
Social Security and unemployment?
Mr. Signer. I included all payroll taxes.
Chairman Manzullo. Do you see a problem with that? Your
name again is?
Mr. Signer. Bill Signer. S-i-g-n-e-r.
Chairman Manzullo. Do you see a problem with that, Mr.
Signer, or is there another way to allow for non-profits to
participate in the WOTC. For example, someone had mentioned
being able to take a certificate and exchange it with a private
employer for reimbursement but at a discounted rate.
Mr. Signer. Congressman Weller talked about syndication of
tax credits. There are a lot of problems with that. Basically
you are paying middle people a lot of money and the value to
the employer goes down very, very much. In terms of grants,
which is what the administration it testified in favor of when
they say that they have money for welfare to work for grants,
the problem, especially for small businesses and small
companies, is they don't want to go through the whole process
of applying for a grant. They don't have anyone on staff who
can do a grant proposal. They don't want to participate in that
and the odds of them receiving a grant is very, very low. The
advantage of the tax incentive is everybody pays payroll taxes;
it is universally available. If you want to participate in the
program, you can do it that way.
Chairman Manzullo. I guess I would have to think that one
through. Does anybody else have any other suggestions as to how
we could include colleges, universities, local government
units, libraries besides this tax credit bill?
Mr. Signer. One other point, that bill did not go to local
governments. Some local governments don't pay payroll taxes.
They aren't in the Social Security system. Also it was felt
that one government should not be giving another government a
tax incentive.
Chairman Manzullo. But on the other hand, the government
should set the standard, for example, in the hiring of ex-
felons. If a government agency doesn't do that, why would they
expect the private employer to do that? First of all, I
appreciate your shaking your head over there and serving as an
indication that your insight is extremely valuable. I think I
speak on behalf of the members here in saying that this program
is not being used to its maximum, if at all, by most small
businesspeople. I am convinced that unless you have somebody
who does full-time payroll, whether it be a government
compliance officer or somebody in accounting, that this program
simply is not going to be utilized by small business. Small
businesses comprise over half of the employment. Is that
correct, Mrs. McCarthy?
Mrs. McCarthy. It sounds pretty close.
Chairman Manzullo. It is a huge figure. I am not saying
this obviously in criticism of the tremendous efforts that all
of you are doing, but I am just really dismayed that we have
made it so difficult for small employers to get involved. I
would appreciate if you want to make it part of your letter.
Rodney, as you have reached out to the different groups, I
think you hit it right on the head. You just can't seem to
break through. It is the little people that have the most
difficult time getting the employees because they don't have
the recruiting staff, they don't pay the benefits, et cetera.
Mr. English, in your letter you stated that about 20
percent of the people will stay with you for up to 299 hours.
And most of that, at least in my experience after talking with
our agencies back home and verified through Mr. Kramer, is
because they are moving up the economic ladder and going to
other jobs. But your point is that you are doing all the
training. The money that you receive through the tax credit, is
spent by you, anyway. So it is not as though you are getting a
bonus. In fact I found out after was talking to one of your
employees, is that Marriott has an English program for people
that are struggling with it, and also they have a Spanish
program to teach people different languages. This is valuable
especially in Washington, D.C., working with people that have
the incredible language backgrounds.
If you could work on your letters, try to keep them as
short as possible. You are practitioners; you understand this
better than Members of Congress who are theoreticians, but that
is the reason why we have these committee hearings. In all of
your letters to us, if you could work either collectively or
individually and let us know if there is a whole new way to go
about opening this up to small employers, we would make that
recommendation to the Ways and Means Committee as part of the
extension of the credit so that more and more businesses could
avail themselves of it.
Mr. Littlejohn. Mr. Chairman, I would like to add one
comment. The instruction page that I believe you had for the
IRS form 8850, the IRS wrote that. What happens at the State
levels is that, particularly in Tennessee, we broke it down
into a little Southern-ese and it made it--the print is a lot
larger, and it is a lot simpler; but it is something that the
States had to do in order to make it function. The State
coordinators that are out there are doing things such as
rewriting the instruction manual so people can understand it.
We have our own instruction manual for this program. The
instruction package that you were looking at, that scares me. I
don't think I have ever read the thing before--I have seen it--
but we had to rewrite our own to make it user friendly for the
employers. I understand why the IRS had to put all the
bureaucratic-ese in there; but when it gets down to where the
rubber meets the road, we have made it a lot simpler; and most
of the States that I am in contact with, I know Texas, Georgia,
we have all issued our own instruction manual that is much
easier to follow.
Chairman Manzullo. I have a final question. I guess this
would be to you, Rodney. When any of your agencies or groups
see an ad in the paper, with a request for help to find
employers in a particular business or industry, does your
agency sometimes contact the employer?
Mr. Carroll. Sure.
Chairman Manzullo. Tell us how that works.
Mr. Carroll. We have several ways. One, a lot of it depends
on the employer and how they are advertised. For example, when
I was at UPS, I would have agencies contact me directly all the
time wanting to know about the specific requirements for the
job and so forth.
Chairman Manzullo. I know it would be very difficult,
because the want ad pages are tremendous. But does anybody
contact those employers and say, look it, we may have something
here that we can help you with? Or that is just too much?
Mr. Signer. Mr. Chairman, what is going out there is that
the management assistance corporations have done an extensive
job of contacting all the groups that work with ex-offenders,
work with welfare recipients and do training. What they have
done is put in their computer database the location of groups
involved with people who are eligible for the Work Opportunity
Tax Credit. So that when a Marriott wants to hire somebody,
they will place a job order with their consultant. The
consultant will then go out and say, here is what the job is,
here are what the requirements are, please refer people to us.
That is going on extensively. That has really happened
extensively bit since WOTC came into effect because only a
narrow pool of people are eligible and employers need people.
So there has been a partnership going on between the employers
and the consultants, and they have been engaging in extensive
outreach.
The other comment I wanted to make was on the ex-offenders.
The reason you have to provide all those pay stubs in to prove
income. There was a belief on the Committee on Ways and Means
that if you did not require proof of income, you would have
somebody like Michael Milken, qualify. It is an incredible
burden. What ends up happening is that employers say they don't
want to hire in the ex-offender--they have enough problems with
hiring an ex-offender in the first place. But they are told,
okay, hire somebody and get a tax incentive for doing it, and
then they don't get it or it is 5 or 6 months down the road.
The intersection between the act by the employer and when they
get rewarded from it is so long, and it is not the fault of the
job services. It is the fault of the system. The system really
needs to be changed in that area.
Chairman Manzullo. Mrs. McCarthy.
Mrs. McCarthy. Just out of common sense--and I know we are
in the Government--but the average salary starting off when you
take these people into the programs I don't think would quite
live up to his life style.
Mr. Signer. I understand that. We explained that to them,
but they wouldn't listen.
Mrs. McCarthy. Maybe we will have----
Chairman Manzullo. That is the difference between Ways and
Means and Small Business Committees.
Mr. Signer. There are other areas here where I think you
could make some major improvements and as a result you would
get more small businesses to participate in it.
Chairman Manzullo. Please.
Mr. Signer. Congressman Weller talked about the 18- to 24-
year-old category. It applies both to EC, empowerment zones and
enterprise communities, as well as to the food stamp category.
If you are over 24 years old, you don't qualify. What that
means is and what we are seeing now is predominately women are
qualifying for their tax incentives. Eighty percent of the
people who qualify now in WOTC are women on welfare. So if you
are a small businessperson and people coming through your door,
the only ones you are going to get qualified for WOTC are
women. If you only have a couple of jobs a year, and you hire a
man and he doesn't qualify, yet he is from a poverty household,
the employee learns very quickly not to make that mistake
again. If you expanded the number of people who were eligible
so that more people coming through the door with have very
similar characteristics to the people who are on welfare,
quality you would see more small employers participating. The
irony here is that the mother of a child on welfare qualifies
but the father from the same household does not.
Very few States have unemployed parent programs. So the
husband doesn't qualify. There are about 12 million people on
welfare. Of that, about 600,000 are men. So what you are
finding is a very small pool of men. If you expanded WOTC to
cover men, you would end up having more small businesses
participating because more of the people coming through the
door would qualify. The other problem is----
Chairman Manzullo. Back up a second on that, Bill. Is that
becaused the 18 to 24 age category?
Mr. Signer. It is because it is a very small category of
18- to 24-year-old individuals qualify. So what you have is a
woman on welfare who is 30 years old----
Chairman Manzullo. This is a single mom?
Mr. Signer. Or she could be married. Her husband or the
father of the child may be living in the household, but they
are not on welfare, so they don't qualify. They are 30 years
old; the family is on food stamps, but it is only the 18- to
24-year-old on food stamps or 18 to 24-year-olds and living in
an EZ or an EC that qualify. They are living in the household,
they are on food stamps, but they are not qualifying for the
program. So the employers who are going out and recruiting and
getting people are not looking for those men. They are looking
for the women on welfare.
So what you end up having is that very few men are
qualifying in this program. Small businesses are saying, wait a
second, I am hiring only a couple of people a year, maybe one
out of the five people I hire is eligible, yet if I hired a man
from the same household or a similar household, he doesn't
qualify. Yet he has got problems in terms of his ability to
work. I was looking at a statistic the other day that were in
Time magazine. One in nine African Americans age 20 to 39 are
in prison. The reason they are in prison is----
Chairman Manzullo. Is that males?
Mr. Signer. Males. What they were saying is the reason they
are in prison is because they don't have any other
opportunities to get a job. We are seeing welfare moms come off
of welfare and go into work. We are not seeing African American
males going to work. It is 1 in 25 Hispanic Americans age 20 to
29 are in jail. Yet only 1 in 65 white men in the same group
are incarcerated. We are giving no opportunity for those people
to get a job. We have succeeded in welfare. Why can't we
succeed in the other areas?
Chairman Manzullo. Bill, if you could also be so kind as to
submit a letter on your letterhead. This has been very
interesting. I guess the missing witness here is somebody like
my brother, but we could understand that. Rodney, I think you
are totally frustrated with the fact that you have worked so
hard but been unable to bring them into the fold. We will take
your letters. We will work with the Ways and Means Committee.
Apparently we do have time to put more effort into this. What I
would like to see--I don't know if it is going to happen--is a
permanent extension of the present law. You can always tweak
the present qualifications to be more expansive, as Mr. Signer
had requested.
Thank you all for coming here. We appreciate your taking
the time. This Subcommittee is adjourned.
[Whereupon, at 11:30 a.m., the subcommittee was adjourned.]
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