[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
PROMOTING U.S. WORKER COMPETITIVENESS
IN A GLOBALIZED ECONOMY
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JUNE 14, 2007
__________
Serial No. 110-47
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan WALLY HERGER, California
JIM MCDERMOTT, Washington DAVE CAMP, Michigan
JOHN LEWIS, Georgia JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee JERRY WELLER, Illinois
XAVIER BECERRA, California KENNY C. HULSHOF, Missouri
LLOYD DOGGETT, Texas RON LEWIS, Kentucky
EARL POMEROY, North Dakota KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon DEVIN NUNES, California
RON KIND, Wisconsin PAT TIBERI, Ohio
BILL PASCRELL JR., New Jersey JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
Janice Mays, Chief Counsel and Staff Director
Brett Loper, Minority Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
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C O N T E N T S
__________
Page
Advisory of May 31, 2007, announcing the hearing................. 2
WITNESSES
The Honorable Adam Smith, a Representative in Congress from the
State of Washington............................................ 8
______
Sigurd R. Nilsen, Ph.D., Director for Education, Workforce, and
Income Security Issues, Government Accountability Office....... 18
______
John Edward Bolas, Jr., Freedom, Pennsylvania.................... 40
Tammy Flynn, Trade Adjustment Assistance State Coordinator,
Bureau of Workforce Programs, Department of Labor and Economic
Growth, Lansing, Michigan...................................... 43
Virginia Ponser Flanagan, Consultant, Campbellsville University,
Campbellsville, Kentucky....................................... 47
Curtis Morrow, Workforce Development Unit Manager, North Carolina
Employment Security Commission, Raleigh, North Carolina........ 50
James Fusco, East Brunswick, New Jersey.......................... 54
______
Marcus Courtney, President, Washington Alliance of Technology
Workers, Seattle, Washington................................... 70
Karen Pollitz, Research Professor, Health Policy Institute,
Georgetown University.......................................... 73
Diana Furchtgott-Roth, Senior Fellow and Director of Center for
Employment Policy, Hudson Institute............................ 78
Jane M. McDonald-Pines, Workforce Policy Specialist, American
Federation of Labor and Congress of Industrial Organizations... 82
Howard Rosen, Executive Director, Trade Adjustment Assistance
Coalition...................................................... 90
______
The Honorable Mason M. Bishop, Deputy Assistant Secretary,
Employment and Training Administration, Department of Labor.... 122
David R. Williams, Director of Electronic Tax Administration and
Refundable Credits, Internal Revenue Service................... 133
SUBMISSIONS FOR THE RECORD
Illinois Department of Commerce, statement....................... 148
National Association of Health Underwriters, statement........... 156
PROMOTING U.S. WORKER COMPETITIVENESS
IN A GLOBALIZED ECONOMY
----------
THURSDAY, JUNE 14, 2007
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10:00 a.m., in
room 1100, Longworth House Office Building, Hon. Charles B.
Rangel (Chairman of the Committee), presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
June 14, 2007
FC-13
Rangel Announces Hearing on
Promoting U.S. Worker Competitiveness
in a Globalized Economy
House Ways and Means Chairman Charles B. Rangel (D-NY) today
announced the first in a series of hearings on promoting U.S. workers'
competitiveness in a globalized economy. This hearing will focus on the
Trade Adjustment Assistance (TAA) program. The hearing will take place
on Thursday, June 14, 2007, in the main Committee hearing room, 1100
Longworth House Office Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at the hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
The Trade Expansion Act of 1962 (P.L. 87-794) created the Trade
Adjustment Assistance (TAA) Program to assist workers laid-off as a
result of international trade. The main benefits of the program are
extended income support and training. The program has traditionally
applied to trade dislocated manufacturing sector workers.
Firms also are included in the program, and coverage for farmers was add
ed in 2002.
Congress has amended the TAA program several times since its
inception. In 1974, Congress eased program eligibility requirements. In
1988, Congress inserted a requirement that workers be in training in
order to qualify for income support. In 1993, Congress created a
separate NAFTA Trade Adjustment Assistance program (NAFTA-TAA).
The most recent reform of the TAA program--the TAA Reform Act of
2002 (P.L. 107-210)--consolidated the former TAA and NAFTA-TAA programs into
a single program, doubled training funds, and expanded program
eligibility. The 2002 Act also extended TAA benefits to secondary
workers, established a pilot program that provided for an alternative
form of TAA for older workers (i.e., a limited wage insurance benefit),
and added a new benefit, the health coverage tax credit (HCTC), to help
trade dislocated workers maintain health insurance while in training.
However, fewer TAA eligible workers than expected are receiving the
additional benefits added in 2002.
In announcing the hearing, Chairman Rangel said, ``Overhauling the
current TAA is a critical initial step in ensuring we have a 21st
century workforce. We owe it to our workers, communities, and
industries to have a plan in place that will help them succeed in a
globally competitive environment. We need a strategic initiative that
includes enhanced education and training opportunities, as well as
improvements to the portability of benefits, and I look forward to
hearing my colleagues' ideas as we draft and implement a new worker
competitiveness policy for America.''
FOCUS OF THE HEARING:
The Trade Adjustment Assistance (TAA) program is designed to help
workers displaced by trade to adjust and better compete in the global
economy. The TAA program will expire on September 30, 2007, unless
legislative action is taken to re-authorize the program.
The hearing will focus on the operational effectiveness of the
current TAA program for workers, including changes made to the program
in 2002. The hearing will also address ideas for further reforms to the
program, including proposals to expand TAA coverage to workers excluded
from the program, such as some service sector workers, improving access
to training, reducing the costs and complexity of the health coverage
tax credit, and improving participation in the Alternative TAA ``Wage
Insurance'' program for older workers.
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Chairman RANGEL. This Committee will come to order. First,
just for a little housekeeping, the staff under my suggestion,
had the Administration testifying last without the courtesy of
having them to lead off. I apologize for not explaining the
reason for it to the Republican leader as well as to my
colleagues. The reason for this is that Mr. Thomas at one point
in time at the end of the last session did it with the
explanation that it gives the Administration to hear what the
problems are and puts us in a better position to hear the
response. Now comes the question should they have to stay all
day listening? Well, I don't know because if they don't stay
all day to listen, then they won't hear what the problems are
or offer us solutions as to what can be done about it. In any
event, I intend to sit with the Members to see how we can do it
with the utmost amount of courtesy to the Administration and to
accommodate the majority and the Members of the Committee. So,
I just wanted to say that because staff has been receiving
complaints and I can understand why.
This Committee has the responsibility to try to be of some
assistance to workers that have been adversely affected as a
result of trade. It is my understanding that neither Democratic
administrations nor Republican administrations really believe
that these programs have been effective. In any event, as a
result of working very closely with Jim McCrery and Wally and
Sandy, we think we have been persuasive with the Administration
and the U.S. Trade Representative that we all are going to have
to do more to make trade not look as something that is totally
detrimental to American workers and American industries in many
communities. Certainly, how we treat the workers and the
industries and the towns that have been negatively impacted as
a result of trade is very important for the country, for trade,
and for our multi-nationals.
But, as we pointed out, we have to go even beyond that.
Even if it is not related directly to trade, we have a
responsibility as a country to help those people economically
so they can get on their feet, become productive and pay taxes.
So, this concept is going to go far beyond TAA as we know it.
Most of us believe it is broken and with this pay-go provision,
we are only going to try today to fix it as much as we can. But
this Committee will be going on retreat to see how we can play
some role as we see the Federal Government and the private
sector moving toward training and education and productivity to
make certain that when it comes to this situation being created
by trade, that we do a much better job than that was intended
and that we just accept the fact that this program has not
received help from Democrats or Republicans and therefore we
have got to do the best we can with what we have got to work
with. Sandy Levin has worked very closely with the concept and
feels a lot of pain with the reality, and I will ask him to
make some statements. Let me yield to the Ranking Member on the
subject and then I would like to hear from Sandy Levin.
Mr. MCCRERY. Thank you, Mr. Chairman and thank you for
convening this first in a series of hearings entitled,
``Promoting United States Workers' Competitiveness in a
Globalized economy.'' I appreciate and agree with your broad
focus for this series of hearings. Such a broad focus is
critically important I think to helping all dislocated workers
in our country, not just the few who lose their jobs due to
trade.
When you come right down to it, our economy sees changes
not only from trade but also from technology, productivity, and
demographics. In fact, the Council of Economic Advisors
estimates that fewer than 3 percent of long-term job losses are
due to trade. When we speak of expanding our trading
relationships through trade promotion authority and free trade
agreements, we must not lose sight of addressing the needs of
all Americans who lose their jobs, whether as a result of trade
or other factors.
By the same token, globalization and its effects are
realities that we cannot control. Seeking to isolate our
country from globalization, either by passing protectionist
measures or by simply not pursuing trade agreements, will not
slow or stop globalization. We have to stay in the game. We
have to stay in the game just to keep up. Keeping up though has
never been enough for our country. We must strive.
As we debate trade promotion authority, which expires in
less than 3 months, our major trading partners in other
countries are actively pursuing and negotiating free trade
agreements without us. I am afraid we will see far more worker
dislocation if we are not at the negotiating table, actively
creating market access opportunities for United States'
interests.
At this first hearing, we will hear about the Trade
Adjustment Assistance for Workers Program and various
perspectives on how it is working and how it could be improved.
TAA has been successful in helping many adjust after job loss
due to trade, and we think it can be improved in some ways. But
TAA is only one tool in our toolbox of unemployment benefits,
health care assistance and education and training programs for
addressing the effects of globalization and change. So, we
should also consider the needs of all workers who lose their
jobs, regardless of the cause of that job loss, including due
to a change in global and United States economies. This will
require reviewing the many decades old Federal programs,
including TAA, that today seek to assist and re-train
dislocated workers. We will need to consider how they can be
modernized, better integrated and made more efficient and
flexible to meet the diverse needs of our workforce in today's
economy. We owe it to all of our hardworking fellow Americans,
and especially those who lose jobs due to forces at play in our
increasingly global economy to help them get the necessary
skills and assistance they need to adapt and return to good
jobs quickly. In the long run, that type of reform is critical
for the American workforce to remain the best and most
productive in the world.
So, Mr. Chairman, I look forward to continuing to work with
you to address these needs of our workforce and our country.
Chairman RANGEL. Thank you. Mr. Levin?
Mr. LEVIN. Thank you very much, Mr. Chairman. Our Committee
has jurisdiction over trade policy and also over assistance to
those who are dislocated because of the forces of
globalization. I will resist the temptation to talk about trade
policy; it is not in front of us today. I do want to say though
the issue is not simply what authority we have, either the
President or this Congress, but what we do with that authority
and whether we shape trade agreements so we spread its benefits
or not. That has been a major issue within this Committee,
within the Congress and within this country and the world
because too many people feel that they have been left out of
the benefits of expanded trade and globalization. The majority
here is determined to shape trade policies so that we expand
its benefits. I will leave it at that.
Now, it is a distinct, though related, issue as to what we
do about those who are dislocated. I don't think the figure 3
percent is accurate if you look at the overall impact of
globalization and trade policy is part of it. The fact remains
we have lost millions of jobs in this country in manufacturing
and now this dislocation is spreading to the service industry.
The role the trade agreements play, we will debate another
time, but clearly we need to have policies that relate to those
people who are dislocated. I asked the staff to remind me when
is the last time we had a hearing on TAA. No one can remember
and I cannot remember. There has been a lack of oversight and a
lack of action. Despite the fact that we have a TAA with a
formula that so many states--I think last year was nine
states--did not have adequate funds to implement TAA. We have a
formula that gives money to states that don't need the money.
We have a TAA program that doesn't cover service workers at all
except for a small fraction of them that are now held to be
covered because of a court decision. We have a TAA--and there
has been no oversight or action--that is so complicated that it
is difficult for many workers who otherwise would be eligible
to receive those benefits. There has been a lack of oversight
and action even though only a fraction of those who are
eligible for TAA are able to access the health benefits that
this Congress some years ago put together.
So, there are some real problems here. Our Chairman
indicated that the hearing was set up so that the people who
are charged with administering the program can hear people come
forth from the states and individuals, as well as distinguished
like Congressman Smith, and talk about what the problems are
and how we need to change it. So, this is a vital hearing in
terms of TAA. It is in need of a complete overhaul and today,
as has been mentioned, is the beginning of a process to better
equip U.S. workers, businesses, and, as you said, Mr. Chairman,
communities to have programs to re-tool and re-train our
workers for this future of globalization.
Thank you, Mr. Chairman.
Chairman RANGEL. Thank you. I would like to recognize that
Mr. Herger, who really played a vital role in getting this
broad policy to be accepted by the U.S. Trade Representative.
Thank you, Wally.
Mr. HERGER. Thank you very much, Mr. Chairman. As Congress
considers new trade agreements and the renewal of trade
promotion authority, we must remember that the benefits of
trade are diffused and spread across our entire economy,
lowering prices for consumers, offering access to a wider array
of products and creating a robust economy with an enviable
unemployment rate of only 4.5 percent. At the same time, the
costs can be acute, affecting some workers on the individual
level. Losing a job is one of the most disruptive events that
can occur to a worker and family. Our first priority should be
to help individuals who are displaced for whatever reason get
back to work as quickly as possible.
Trade Adjustment Assistance is one of the many tools we
have to balance economic gains from trade with the costs. TAA
offers generous benefits for manufacturing workers, including
cash benefits, job training, a refundable health coverage tax
credit and even an alternative TAA Wage Insurance program
available to workers ages 50 and older.
But with all these benefits, TAA is very costly to American
taxpayers. On average only 54,000 workers receive training and
benefits per year at a cost of $18,000 per worker. To me, TAA's
annual cost of nearly $1 billion means that any expansion must
be done in a cost conscious manner, focusing on actual results,
particularly because less than 3 percent of long-term job loss
is due to trade. Simply put, we should remember that there are
many more significant reasons for job losses in our economy,
including improvements in technology, domestic competitive
pressures, and improved productivity.
In light of this, we must consider what TAA can do, and
just importantly, what it cannot. TAA can be a valuable tool
for getting people re-trained and back to work closely,
providing income support in the interim. However, it alone
cannot create jobs. It has been most successful when combined
with vigorous public/private efforts to stimulate a healthy
environment for jobs. I have witnessed firsthand one such
meaningful application of TAA in Campbellsville, Kentucky when
I traveled in 2004 to the district of my colleague, Congressman
Ron Lewis. After a Fruit of the Loom factory, which had been
the largest source of jobs in the town, shut its doors in the
late nineties, local leaders, business, educators and Federal
officials pulled together to create new jobs that offered
better wages and a better way of life. Nearby Campbellsville
University provided the training, even absorbing some extra
costs. Business and government leaders created an action plan
to attract new business with focus on international companies
to invest and in-source to the community through such policies
as improving local infrastructure. This winning combination
improved the local economy well beyond where it had started.
Ideas to improve the TAA program for workers include
administrative changes suggested by the GAO and the Department
of Labor to facilitate certification of workers and better
allocate training funds as well as statutory changes like
expanding the program to include services workers. Covering
services workers comes with a hefty price tag, estimated to be
about $3 billion. But as we talk about expanding the program,
we should make sure that we avoid creating duplicative programs
and an unwieldy web of new bureaucracies. TAA is only one tool
in our policy arsenal to deal with unemployment, and we also
should consider practical, responsible, fiscally sound
comprehensive and effective ways to help more Americans re-
enter the workforce as quickly as possible.
Thank you, Mr. Chairman.
Chairman RANGEL. Thank you. The record will remain open for
any member that would like to have an opening statement. We
will start this morning and welcome Adam Smith from the great
state of Washington to share with us the work that he has been
doing for a number of years to improve the trade assistance
program. We look forward to hearing from you.
STATEMENT OF THE HONORABLE ADAM SMITH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. SMITH. Thank you very much, Mr. Chairman, I appreciate
it. First of all, I want to thank the Chairman for his
leadership on this issue and his leadership on the broader
economic issues of creating opportunity for our workers on
trade, on training, on a number of issues. In just a few short
months, you have really stepped up and started to examine this
issue in a way that is very helpful and I appreciate that
greatly. I also want to thank the Chairman and the Committee
for welcoming Marcus Courtney from my home state of Washington,
who has done a lot of work on behalf of displaced workers. He
is a member of the Communications Workers Association and also
form wash tack employees, the help workers, looking for new
training to get new jobs. So, I appreciate the fact that you
have invited Marcus here to testify and look forward to hearing
his words as well.
First of all, TAA is part of the broader issue of trying to
help workers deal with the new economy, and I actually agree
with some of the comments from the Ranking Member and others
that it is not about blaming trade, it is about helping
workers. To the extent we analyze this from the standpoint of
is trade costing jobs or adding jobs, that misses the point.
The point is the way the economy has changed, a thousand
different ways, as created challenges for workers that did not
exist before and that our country, our government has not
responded to sufficiently to help workers.
I always draw the contrast, I guess all politics is
personal as much as local, with my father, who got a high
school education, basically bummed around for seven or 8 years
after that and then found a job here in D.C. actually with
Capital Airlines. Capital Airlines was bought by United
Airlines and my father was set. He had a good job with a good
company that was going to pay him, give him a pension, give him
health care, and his job really didn't change that much--he was
a ramp serviceman--in the 32 years that he did it. He was not
worrying about re-training, he was not worrying about United
Airlines getting bought out or downsizing. He had his job and
he went forward.
That is not the world we live in today. Workers will change
jobs, in all likelihood the skills that they have will have to
be updated for them to keep the job they have, and how is our
economy structured to help them? It really has not changed. It
is still structured on the premise that your average low and
middle income workers will get a job for a company that is
going to be there forever. In fact, back when United Airlines
was in bankruptcy for three or 4 years, this story had even
more resonance, to let people know that things are not as
secure as they used to be. We have to step up and help workers
make that transition, whether that transition is caused by
trade, technology, globalization, intense competition,
whatever, they need more help to make that transition to a new
set of skills. Help that they are not getting right now.
Trade Adjustment Assistance is an important piece of it
but, as has been discussed, it needs to be updated in a number
of ways. I have been working on a bill, I introduced a bill in
previous Congresses, and we are working on putting one
together, working with the Committee on Ways and Means to focus
on updating that. One absolutely critical piece is to expand it
to service workers. Of the people who applied for Trade
Adjustment Assistance last year, 40 percent of them were denied
because they were service workers. That needs to be changed and
needs to be expanded. We also triple the number of dollars
available for training so that we can add more people who will
be able to get the benefits. Right now, there are a lot more
people who want these benefits than there are money to provide
for them. I think that is a critical piece.
Also on health care, we try to expand the coverage so that
people can get health care coverage during this transition
phase because that is another thing that has changed since my
father's time is the cost of health care and the necessity of
it. We have not stepped up and made the changes to address and
deal with that.
Now, one thing that I do want to deal with, there is a lot
of concern and skepticism out there from both sides of this
debate about training. On the Republican side, if I may sort of
loosely summarize here, there is concern of does this really
matter? The economy is going well. We have got 4 percent
unemployment. Should we be spending that kind of money? On the
other side, there are a number of people who say, ``Well, what
are we training for? We train people for a job and then that
job goes away because of international competition.'' I think
both of those arguments are wrong. Fundamentally, having more
skills, more education and more training makes you more
employable in this country. That point is not debatable:
training works. We have to accept that as a fact and go out
there and train, educate and get the skills to our workers.
Now a lot of different ways to improve it and make it
better, but if we start thinking the training and education
provided by the government in one way or another does not make
any difference, then I think we are doing a grave disservice to
our workers. It makes a difference. We need to expand it. In my
own state, Boeing has gone through a number of lay-offs over
the course of the last decade. Even now, when they are coming
back, fewer employees than they used to have, and I have story
after story of workers who are able to go out, using this
program or using some other program, and access training that
has made a real difference in their lives. So, I think this
bill will make a huge difference. As we introduce it and move
forward, we have to update and improve TAA. I think it is one
way to help workers deal with the challenges they face in
today's economy. Again, I thank the Chairman and the Committee
for their attention to this important issue.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of The Honorable Adam Smith, a Representative in
Congress from the State of Washington
Chairman Rangel and Congressman McCrery, thank you for holding this
hearing. I appreciate the opportunity to testify before the House Ways
and Means Committee today on the subject of Promoting U.S. Worker
Competitiveness in a Globalized Economy. I am pleased to be working
with you on crafting legislation that will make critical improvements
to the Trade Adjustment Assistance Program and modernize the program so
our workers are prepared to compete in this global economy.
Globalization is a fundamental reality for our changing economy. If
we are to compete internationally, it is critical that we understand
the trends of the global economy in order to identify how we can best
compete, how we can create jobs here in the United States, and how we
can best support U.S. industries.
Robust investments in education, job training assistance, and help
for American manufacturers need to be made. It is important that we
make investment in research and development, improve math and science
education in grades K-12, enhance training and professional development
for workers, open markets for American goods through trade agreements,
and renew the government's focus on promoting innovation. By doing so,
we can make sure that our economy remains the most vibrant and
competitive in the world.
As part of our national competitiveness strategy, we must take
action to help workers compete in this new economy while supporting
those who have been displaced as a result of globalization. While the
Trade Adjustment Assistance Program (TAA) is not the universal remedy
to the growing pains and changes caused by globalization, it is a
critically important program that specifically addresses workers who
have been directly impacted by trade.
As you know, the TAA program was created in 1962, to help workers
who lost their jobs due to international trade learn new skills and
respond to changing realities in the global economy. Since then, the
TAA program has seen many improvements and has been expanded. Most
recently in 2002, Congress passed new reforms that included doubling of
training funds, expanded program eligibility to allow secondary workers
to enter the program and added additional benefits.
But despite these improvements to the program over the years, TAA
needs to be modernized and improved in order to adjust to international
trends. The program has been insufficiently funded compared to the
need, and does not reach enough of the kinds of workers that need it,
such as those in the service sector.
With these shortcomings in mind, I worked with Chairman Rangel to
request a study by the Government Accountability Office (GAO) to
evaluate and report to Congress on the effectiveness of the current TAA
program. In response to our request, the GAO issued a report in May
2007 identifying some significant limitations of the program. These
included shortcomings pertaining to limited worker eligibility,
inadequate funding and outreach, and unnecessary and burdensome
procedural requirements, all of which I believe must be addressed in
this next reauthorization.
Importantly, the report highlighted two problems addressed by the
bill I introduced last year with Chairman Rangel, H.R. 4156, the Trade
Adjustment Assistance Improvement Act. This bill enjoyed over 110
bipartisan cosponsors in the 109th last Congress. Specifically, the GAO
report brought attention to the fact that not all workers displaced by
trade are covered under the TAA Program. The GAO also reported that the
eligibility requirements for obtaining the Health Care Tax Credit
impeded workers from utilizing the program.
Serviceworkers
Currently, only workers in the manufacturing and agricultural
sectors are eligible to receive TAA job retraining and other benefits.
The GAO found that the Department of Labor most commonly denied
petitions because workers were not involved in the production of
articles, a basic requirement of the TAA program. Of the 800 petitions
denied in fiscal year 2006, nearly half were denied for this reason.
Most of the denied petitions in this group were for two service
industries recently affected by offshoring to other countries--business
services, particularly computer-related services and airport-related
services, such as aircraft maintenance. Recent decisions by the U.S.
Court of International Trade in TAA certification appeals affirm that
the line is increasingly hard to draw. Yet, over 40% of the TAA
petitions the Department of Labor denied in 2006 were denied because
the company did not produce an ``article.''
Washington State's economy is highly integrated with the global
economy and is home to industry leaders in service-based industries
like aerospace; software; financial and legal services. When jobs in
these industries are outsourced abroad as a result of global economic
pressures, the workers are left without any resources or assistance
from the TAA program. Even the Chairman of Microsoft, Bill Gates,
recognizes the fact that U.S. employers are feeling the economic
pressures to shift development work and other critical projects
offshore. He said, ``where innovation and innovators go, jobs will soon
follow.''
Recognizing this trend, workers in the service sector are faced
with more job instability then ever before. Even though TAA was created
to help workers displaced as a result of trade, it currently does not
cover serviceworkers. Therefore, it is critical to me and thousands of
workers in Washington state that Congress expand the TAA program to
include serviceworkers.
Health Care Tax Credit
The GAO also found that the Health Care Tax Credit (HCTC) was
underutilized due to both high costs and confusing eligibility
requirements. Many of these workers have been unable to access the tax
credits due to certain conditions in the law and the failure of some
states to provide coverage options. According to the GAO, only 6,900
eligible workers were enrolled in the ``advance'' option in 2006. The
impediments to participation include: certain criteria for receiving
the benefit; the time lapse between receipt of the benefit and
separation from employment; the failure of some states to provide
suitable coverage options; and the high cost relative to unemployment
insurance benefits.
For many workers, maintaining health insurance for themselves and
their dependents can be a significant portion of a family's budget.
Under the current TAA program, the Health Care Tax Credit covers only
65% of health care costs. In 2006, the average annual cost for health
insurance for a family of four was $11,500. That means the head of such
a four-person household receiving the TAA health care tax credit would
still face over $4,000 of out-of-pocket health care costs per year.
That's been an unaffordable burden for someone that's unemployed, and
the GAO report supports that conclusion. It is essential that we reduce
TAA participants' out-of-pocket health-care costs so we can ensure that
displaced workers and their families maintain comprehensive, affordable
healthcare coverage.
Training
In the 2002 TAA reform bill, Congress doubled the training money
from $110 million to $220 million. While this increase was appropriate,
states are still experiencing a shortage of training funds. The GAO
found that this shortage was not only a result of an overall scarcity
of training funds, but that the Department of Labor's method of
allocating training funds is flawed. The current process for allocating
training funds needs to be reviewed and an improved process must be
developed to ensure any reserve funds are immediately available to
states that have spent or obligated a substantial portion of the
current fiscal year allocation so they may quickly respond to a major
layoff.
In addition, I have received feedback from my Washington state TAA
coordinator that a portion of TAA training funds should be used for
case management to help guide workers through this program. Meeting
program deadlines for unemployment insurance and the Health Care Tax
Credit is challenging for workers when dealing with a major layoff.
Congress should provide the flexibility for TAA coordinators to provide
case management services to TAA eligible workers to guide them through
the training and other TAA benefits.
These and other important issues will be highlighted further in the
GAO's testimony today. I would like to specifically thank Sigurd Nilson
and Dianne Blank for their excellent work in delivering this GAO
report. I am looking forward to Mr. Nilson sharing the findings the
Committee later today and I hope the committee will work with me in
introducing a bill that address many of these challenges identified in
the report.
Also on a later panel, I am pleased you have invited Marcus
Courtney to testify before the Committee. Mr. Courtney works with
serviceworkers on a daily basis as the President of Washington State's
WashTech--the nation's leading union for high-tech workers. His
testimony will further highlight the need to expand the TAA to
serviceworkers and the challenges he has seen in obtaining TAA
benefits.
Mr. Chairman and members of the Committee, thank you for holding
this hearing today. As Chairman Rangel has pointed out, the TAA program
is only one part of what must be a comprehensive policy to help U.S.
workers compete and grapple with difficult transitions in the fast-
changing global economy. We must employ the full range of policy
tools--from education reform to job training to scientific research
funding, in order to help American workers successfully navigate and
lead in the global economy.
So while our economic competitiveness efforts must be
comprehensive, they must also be well targeted. In TAA, we have a long-
standing adjustment program that could be made more effective by
expanding and modernizing it. I am looking forward to working with the
Chairman and members of the Committee to do just that.
Chairman RANGEL. Terrific statement. Let me ask your
thoughts as to what you think about education and training
before the student gets to the workplace because I am reaching
the conclusion that the system that we have now, which is local
and state, is not prepared to meet our National competitive
obligations in order to get into the higher skills. Have you
any thoughts on that, Congressman Smith?
Mr. SMITH. Absolutely. I do not know about the--I do not
have specific thoughts on the Federal versus state and local, I
think there is probably a role for all three, but certainly we
are not doing enough to prepare on the front end. Starting in
K-12 education, we still have a K-12 education system that is
primarily in most states aimed at sending a child off to get a
4 year liberal arts degree. That is great, there are a lot of
sociology majors walking around who are not employable. We have
not made the school to work transition. Now in my state, and I
am sure it is true in a lot of others, there has been some
changes. They have started to put a component in there that is
focused on, okay, what job are you going to do, what are we
training you for, but it needs to be greatly expanded. Then
beyond K-12, our community and technical college system in the
state of Washington is outstanding. They train nurses, computer
scientists, technicians, but they do not have enough spots for
the students who want access to them. Certainly there would be
a Federal role to help expand that access for specific training
to fill the jobs that are out there today.
The last thing I will say: apprenticeship programs. I think
apprenticeship programs are incredibly valuable to give those
students starting at 18 years old specific skills in specific
areas. The labor union movement has done a lot on this. We
don't however have enough focus and cooperation to get those
apprenticeship programs. We have to start educating our young
people to do something specifically, and I think we need to
improve the system on a number of levels.
Chairman RANGEL. Thank you. Mr. McCrery?
Mr. MCCRERY. Just one thought, Mr. Smith, as I go around
and talk to employers in my district, I am told that in many
cases the training that potential workers get in some of these
training centers does not really apply to what the employers
need. So many of them have set up their own training programs
and the workers that come through their own training programs
are much more successfully integrated into the workforce and
become valuable employees much more quickly. Should we be
giving some thought as to how to move some of this money into
the private sector to assist companies with training programs
that they would direct. In many cases they are not unionized
companies so there is no apprenticeship program, as you
suggested, it is just the companies doing it themselves, small
businesses, small manufacturers, and so forth. Have you given
any thought or have you had that same experience in talking
with employers in your district?
Mr. SMITH. I have given considerable thought to it. I am
not necessarily opposed to it, I think it would probably be a
fine idea to look at. But I will say there is another way to
beat that problem and that is to bring the employers into the
community and technical college system, to bring them into the
apprenticeship program and have them help direct that and that
is what we have done in the state of Washington, our community
and technical college system works very, very closely with
local businesses, what do you need, and they are tracking that
very closely. So, I think certainly I would be perfectly
willing to look at those options but at a minimum we have got
to get the businesses in there wherever the training is going
on to help direct it. That is happening to some extent, it
needs to happen a lot more.
Mr. MCCRERY. Yes, okay. Thank you very much for your time.
Chairman RANGEL. Are there any members that would like to
make an inquiry at this point. Mr. Levin?
Mr. LEVIN. Very briefly. I think your response is so
germane. Mr. McCrery, for example, in our state there is an
active relationship between the employer and the re-training
program. The trouble is the state--the moneys run out. You have
a number of states which have a demand for re-training and
there are not adequate resources to do it. Also, there are
inadequate resources for case management. The states are asking
for some help on that. So I just close with this, I think in
this country we know how to help in re-training. You mentioned
the apprenticeship programs that go back decades and decades,
where there is an intimate relationship between the employer
and the employee and their representatives. I do not think
people would say that the apprentice programs do not work. The
problem is they were not open to enough people. That was the
problem with apprentice programs. Too often it was determined
by whom you knew instead of what was really needed in terms of
the desires of people to be participants.
So, I do not think that the problem is this country does
not really know how to attack the problem; we just have not
effectively done so, getting in early enough and bringing our
resources to bear. The globalization process is simply saying
to this country, we have to do much, much better. Thank you.
Chairman RANGEL. Mr. Ramstad?
Mr. RAMSTAD. Thank you, Mr. Chairman. Thank you, Adam, for
your excellent testimony. I know you have been a strong
supporter of trade liberalization. If I remember correctly, you
voted for the Trade Act in 2002, which included both Trade
Adjustment Assistance and Trade Promotion Authority, is that
correct?
Mr. SMITH. Yes.
Mr. RAMSTAD. Now you have a bill to reauthorize Trade
Adjustment Assistance, which I agree fundamentally with. I know
there is also a bill that has been introduced to re-authorize
Trade Promotion Authority, and we all know that TAA was
reauthorized in the last Trade Promotion Authority bill. It
seems to me to make sense to couple the two again, to maybe
strike a grand bargain over here in the House by pairing your
Trade Adjustment Assistance bill with the Trade Promotion
Authority reauthorization. Do you agree?
Mr. SMITH. Well, first of all, let me just emphasize that I
will yield to the wisdom of my Chairman in terms of how to
proceed on those matters without question. But let me also say
that I unequivocally support extending Trade Promotion
Authority. I think that the Chairman and Mr. Levin have done an
excellent job of putting out a template on workers' rights that
will make that an even TPA bill. But with that workers' rights
template in it, I support it. I know that that is a
controversial issue, but I think it is a key component in
growing our economy.
Now, the idea that you have, what is certainly true,
whether or not legislatively we wind up coupling those two
pieces of legislation, it is absolutely true that the debate
over trade in this country cannot be de-linked from the debate
over worker protections like this, that the reason that people
oppose trade is because of instability in the economy because
they feel vulnerable. Even if they are not part of that 4
percent that is unemployed, they feel vulnerable. Addressing
that vulnerability by giving them protection on health care and
job training is critical. So, I personally would not be opposed
to linking those two and I think it would focus the debate in a
positive way.
Mr. RAMSTAD. Well, I certainly agree with the premise you
just stated underlying both bills, and it seems to me that it
does make, as I said, good, pragmatic commonsense to marry the
two, if you will, to couple them. Again, if you would be
willing to prod your leadership, I would do likewise and
perhaps we could both lead the charge.
Mr. SMITH. Yes, I think it is a good idea.
Mr. RAMSTAD. Thank you again.
Chairman RANGEL. Mr. McDermott?
Mr. MCDERMOTT. Thank you, Mr. Chairman, for putting this
hearing together. Mr. Smith, as I sit here, one of the things
that I struggle with is why are we focusing only on jobs lost
presumably to trade? If you are working in Massachusetts and
they move your job to Arkansas or to Alabama or Texas or New
Mexico or somewhere else, why should you not have access to the
same kind of benefits? What makes a trade job loss so much more
important than a job loss of any sort?
Mr. SMITH. Nothing, except for the fact in 1962 we created
this program. As I said in the outset, if we want to have a
more comprehensive approach to providing training to people who
have lost their jobs, I am all for it because I totally agree
with you, it does not really matter, first of all. Second of
all, it is kind of self-defeating, and I know you have
supported trade in the past very aggressively, we send a
message out there that says, ``We support trade and, oh, by the
way, it is going to cost you a bunch of jobs so we are trying
to fix that too.'' I do not think that is a great message. I
think your message is better, look, dislocation is happening
now because of increased competition, because of globalization,
because of technology, because of a whole bunch of different
factors. If we want to come up with a new program that tries to
address that, I am not opposed to it except that the
complication involved could delay the process.
TAA is a vehicle that has been around for over 40 years. It
is a vehicle that we can use that clearly gets training to
people that works and is effective. So, that is the vehicle we
have and that is the vehicle that we are working under. But I
think your analysis is absolutely correct.
Mr. MCDERMOTT. The problem I have with looking at this TAA
as we sit with it now, you have to be from a company and you
have got to be over 50 years of age, in a company where the
majority of people are over and all those particular things
that are part of qualification that have to be decided by the
whole DOL or whoever before they will certify people. It seems
to me we set so many barriers that it is almost impossible for
people to get into within the 26 week limit that we set. It
seems to me this thing really needs a tremendous overhaul.
Mr. SMITH. Absolutely.
Mr. MCDERMOTT. Not a little tinkering.
Mr. SMITH. I agree. The legislation we have been working on
does a huge junk of that overhaul. I focused on making service
workers available but there area a number of other changes we
do to try to address that as well and the purpose of this
hearing for the Chairman is to look at that. I agree, be
aggressive as possible about knocking down the barriers here
and giving people access. That would be my recommendation.
Mr. MCDERMOTT. Thank you.
Mr. LEVIN. Mr. McDermott, you have a little time, would you
yield?
Mr. MCDERMOTT. Sure.
Mr. LEVIN. I think Representative Smith's response in terms
of the practicality of moving ahead needs to be considered. As
we look about the possibility of having a totally comprehensive
program that I think we should look at, we need to keep in mind
that TAA needs reauthorization and it very much needs
expansion. If I might say so, Mr. Ramstad, Mr. McCrery kind of
turned to me in terms of the linkage, I think we should be
clear, that suggestion has been raised in the Senate and
rejected by the Chairman of the Finance Committee. It will be a
serious mistake if we delay action on TAA over the issue of
reauthorization of TPA. That linkage in terms of any general
authorization of TPA is not going to happen and it should not
be used as an excuse to fail to address the needs of workers
who are dislocated and communities who are impacted. When we
talk about workers, we are talking about businesses because the
lack of trained personnel is a challenge to businesses as well
as an impact on workers. We have got to face up to this
reauthorization of TAA and to do it and to not use it as any
kind of a vehicle for anything else. It needs to stand on its
own.
The only reason it was done in 2002 was because of this
effort and there was inadequate attention to TAA. I do not
think there was even a hearing in this Committee on TAA. There
was a medical or health benefit put on to TAA that we said
would be inadequate and that, as I remember, was never fully
considered by this Committee or the Subcommittee.
We have no choice and your helping, Representative Smith,
to tackle this issue of TAA, the dislocation impact on workers,
businesses, and communities. We need to do it expeditiously and
not look for any other rationale for not doing it.
Chairman RANGEL. We have to reset the clock, as I recognize
Mr. Tiberi.
Mr. TIBERI. Thank you, Mr. Chairman, for holding this
hearing. I want to agree with Mr. McDermott. Thank you for
being here today. My dad lost his job to one of those states
that Mr. McDermott mentioned. Let me tell you where my bias,
Congressman, thank you for doing this and thank you for being
here today. My dad has a sixth grade education, a lot smarter
than I am, street smart, wise. He worked 25 years for a company
as a steelworker in Ohio. Ohio has lost more manufacturing jobs
than any other state other than Michigan. My dad lost one of
those jobs after 25 years. Not only did he lose his job, but he
lost his pension and he lost his health care. He did not lose
it to China, he did not lose it to Mexico, he lost it to a
state that recruited this company very aggressively and it was
a Right to Work state.
The classification of that job that my dad lost is often
used, and it riles him up a lot still to this day, that it was
lost because of Mexico, it was lost because of China, it was
lost because of globalization, and that just simply is not
true.
So as we have this debate today and tomorrow and into the
next year, my dad is a real person, a real face, a hard worker
who lost a lot at 50 years old that had nothing to do with
China or Mexico but had to do with the dynamics of the economy
within the United States of America. I hope that within this
debate we talk about those people because I do not think the
Federal Government does a very good job of classifying my dad
as losing a job for other reasons other than trade, other than
globalization, but he still lost his job. With a sixth grade
education and not knowing anything other than the manufacturing
job that he has that has been lost because of technology,
because of advances in the field of technology, his life
changed a whole lot and so did mine, the impact that that had.
So as we look to this, it worries me that we are kind of
trying to fit everything into this boat of trade causes job
loss, and we need to figure out how to fix those job losses and
deal with the people who lose those jobs, so much broader than
that. I agree with Mr. McDermott.
Mr. SMITH. Well, let me just assure you, if all this
Congress does on the issue of dealing with the challenges that
workers face in our competitive economy, global economy, all
the challenges that many members have mentioned, if all we do
is make adjustments, however bold, in the Trade Adjustment
Assistance bill, then we will have failed. There is no
question. Health care, it makes a certain amount of sense to my
mind to decouple your health care from your employer. If you
are going to be changing jobs eight, nine different times,
let's give you a more secure health care system. I could go on,
I will not. I know the Chairman, we have got to move on here.
But there are countless things that we need to do address the
very situation that you just described. This is but one of
them, make no mistake about that.
Chairman RANGEL. Mr. Tiberi, you are so correct in your
observations. No one was more eloquent in expressing that view
to our U.S. Trade Representative when she made the same
observation that not all job loss is due to trade, but he said
that it does not have to be connected to trade. The perception
that it is connected with trade makes it very difficult
politically for some members even to consider the substance of
the trade agreement because of what happened to your dad and so
many others. So we may not have jurisdiction over it, but we
are going to have the responsibility to be a partner in
developing a legislative plan that deals with all of our
communities, whether we make them Empowerment Zones, whether we
give training access to their kids like you to compensate for
the loss that your dad had so that at least in the community
there is not a sense that they have been deserted by their
government.
Mr. Kind?
Mr. KIND. I want to thank my friend and colleague, Mr.
Smith, not only for his testimony here today but for all the
hard and terrific work I think that he has done in trying to
lay a bipartisan framework and where we can go forward on TAA
assistance in this session of Congress.
Mr. Chairman, I could not agree with your comments or Mr.
Tiberi's comments more that we have an extremely fluid and
dynamic economy, job losses are occurring unfortunately all the
time around us, whether it is due to domestic competition,
technological changes, the competitiveness of the global
economy. That is why thinking outside the box a little bit and
de-linking this type of assistance, just the trade implications
or foreign competition, I think is going to be crucial to
restoring some faith and confidence in the American worker and
the type of programs that they can access so they can upgrade
their skills and be more competitive.
I think GAO has done a very good report analyzing some of
the TAA provisions in the past. I know you are addressing now,
Adam, in your legislation and in your comments, but the
eligibility requirements for the health care tax credit is
huge. I mean when you lose a job, you not only lose that income
stream and also the retirement or pension benefits but what
seems to scare people the most is the loss of health care
coverage. I think that is a serious issue that we undoubtedly
are going to have to address as we move forward. I know you
have been thinking long and hard on how we get out of this box,
but I think Mr. Pascrell and others have a legitimate point too
that right now TAA is limited--Mr. McDermott just raised it--to
job loss related to the production of some products or some
goods, and yet we have a huge service economy too that is being
effected more and more by job displacement.
But if you could just take a moment and talk about the
health care aspect of all this because I think if there is one
issue that really does strike terror in the hearts of workers
with the possibility of job loss, it is that health care
connection.
Mr. SMITH. That is a number of different challenges in
terms of how the economy has changed. As I mentioned in my
opening remarks, we have not done a good enough job of
responding to that. You had the New Deal for workers and at the
time it made sense, but the economy has changed and we still
got the same now ``old deal'' for workers. Health care is one
of the huge breaks in that.
There are a number of pieces to it. As wages for middle and
low-income workers have stagnated, other costs have not. Health
care is the biggest one but also we have to talk about
education. I know that is not this Committee's jurisdiction.
Just in the time since you and I went to college, looking at
our children getting ready to go to college, the costs have
gone through the ceiling, so that cost aspect is hitting
workers as well. But health care, right at the top.
Personally whatever we are doing here, and I have got some
ideas in terms of how we expand coverage to give more resources
to these displaced workers, to give access there, whatever we
are doing, all of that is just putting bandages on a very, very
severe patient here. We have got to do something to get the
cost of health care under control, to get health care inflation
under control, and to get universal access to folks, universal
access that in my opinion is not tied to their jobs. There are
a lot of different ideas out there. It is a big thing to
swallow because of the politics involved but if we are really
going to help workers, we have got to do comprehensive health
care reform. This will help a little bit, it helps people by
expanding--giving them greater resources to go out and find
health care, giving them access to health care programs that
they usually would not, saving them from having to go on the
individual market, allowing them to go into COBRA or into the
FEBHP. That is helpful but it is still expensive. So, I think
we have to do something comprehensively or we are just nibbling
at the edges.
Chairman RANGEL. Now, we have three panels this morning,
and I want the Members to take that in consideration because
there has got to be plenty of opportunities for them to
question, the question is whether we will be able to finish
today. So, is there anyone seeking recognition?
[Laughter.]
Chairman RANGEL. Let me say you have made an outstanding
contribution over the years. We will not move forward without
making certain that you are part of the input and the
discussion so that we can get this right. We thank you for your
testimony.
Mr. SMITH. Thank you. I just want to say again thank you to
you and your staff in particular. Your staff has been fabulous
in working on this issue, and I appreciate it.
Chairman RANGEL. This is one of the areas that Mr. McCrery
and I have talked about, we may not be able to succeed in a
bipartisan way but we are going to do our darnedest to create
the atmosphere to see what we can get done in this area. Thank
you. The Chair recognizes Dr. Nilsen, director for education,
workforce, and income security from the GAO. Thank you so much.
Your full statement will be entered into the record. We look
forward to hearing you during the 5 minute allocated, and thank
you so much for your patience with the Committee. You may
proceed when you are ready.
STATEMENT OF SIGURD R. NILSEN, PH.D., DIRECTOR FOR EDUCATION,
WORKFORCE, AND INCOME SECURITY ISSUES, GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. NILSEN. Thank you, Mr. Chairman. I was asked to provide
a little more than a 5 minute statement to provide a broad
overview of the TAA program, as well as to report on the
recommendations, the findings that GAO has identified over the
last several years since 2005--2002 reauthorization.
Chairman RANGEL. How much time do you think that you would
need?
Mr. NILSEN. Probably about 12 minutes.
Chairman RANGEL. Okay, let's try that.
Mr. NILSEN. I will provide an overview of the TAA program
and highlight the recommendations we have made to improve the
program and enable it to better assist workers who go through
this challenging transition, that is losing their jobs because
of foreign competition.
[Slides.]
As indicated on the slides here, there are four major
benefits in the program: First, training is available for
workers up to two and half years, including remedial training
for those who need it; next is extended income support to match
the period someone is in training for up 2 years after they
exhaust their regular UI benefits; Wage Insurance, which
subsidizes the difference between the prior wage and new wages
for workers over age 50 who lack transferable skills--this was
new in the 2002 bill--as well as a tax credit to help workers
to pay for health insurance, also new in 2002.
TAA is funded about $900 million, $220 million of that goes
for training and $655 million for the extended income support.
First, I will talk about the certification process, how
workers get access to these benefits. As you have heard, the
process of enrolling trade-affected workers in the program
begins with a petition to the Department of Labor on behalf of
a group of workers. Labor investigates the petitions to ensure
that they meet the certification requirements, namely, that
workers about to be laid off are employed by a company that
produces a tangible good, that is a requirement right now. In
addition, a petition must demonstrate that the layoff is
related to international trade because of either increased
imports or a shift in production overseas. Additionally,
secondary workers are eligible for benefits, those who produce
component parts or do finishing work for a firm that is TAA-
certified.
When Labor has certified a petition, it notifies state
officials who then are responsible for contacting each worker
covered by the petition, informing them of the benefits
available and telling them when and where to apply for
benefits. In 2006, Labor generally processed petitions in a
timely manner, meeting the 40 day processing requirement for
three quarters of the petition.
Over the past 3 years, the number of petitions certified
has declined 17 percent from nearly 1,700 in Fiscal Year 2004
to $1,400 in 2006. However, this is proportionately the same as
the number of petitions that Labor has received. Over that 3
year period, roughly 400,000 workers were included in those
certified petitions.
During 2004 to 2006, more than half the petitions certified
were due to increased imports, as this graphic shows. Nearly,
40 percent were due to a shift in production and about 7
percent of the petitions were for secondary workers.
In 2006, Labor certified 1,407 petitions covering 120,000
workers and denied about 823 petitions. There is a slide
showing the denials and the reason for denials. Forty-four
percent of the denials were because they did not produce a
tangible good, for example, business services and aircraft
maintenance were the two major groups of that forty-four
percent that were denied. A quarter were because there were no
import increase or shift in production associated with the
closure and the layoff and 12 percent was because there was no
employment decline.
If Labor denies TAA petition, workers have two appeal
options. First, they can ask Labor to reconsider its decision.
During 2004 to 2006, about 400 appeals were made to Labor and
about a third of those were reversed after the company provided
additional data to the Department of Labor. Also, workers can
appeal to the Court of International Trade. In the 3 year
period that we looked at, 42 petitions were appealed to the
Court, of which 16 were reversed.
Layoffs tend to be episodic, and the estimated number of
trade-affected workers in a state fluctuates dramatically from
year to year, as this slide illustrates. The estimated number
of trade-affected workers declined dramatically in Kansas from
4,100 workers in 2004 to 75 workers in 2005. Then in 2006, it
increased nearly tenfold to 720 workers. In Michigan, they also
followed a similar trend with a number of effected workers
dropping about 30 percent from 2004 to 2005 and then jumping 70
percent to 8,500 certified in 2006.
Labor's process for allocating training funds does not
adequately recognize this episodic nature of layoffs or the
extent to which states have used their previous year's
allocation. As a result, sufficient funds are often not
allocated to states in the greatest need while many states are
provided more funds than they need. Labor allocates 75 percent
of the funds based on a formula that takes into account layoffs
over the previous two and a half years and distributes most of
the remaining funds at the end of the year, the 75 percent is
allocated on the first day of the Fiscal Year.
What they do not take into account on that second
allocation is whether or not states need additional funds.
Looking at this map, in 2006, states spent or obligated 62
percent of the $220 million available for training nationwide
but in 13 percent of the states, those are the states in blue
there, virtually none of the 2006 allocations were spent and
because the states were still spending their 2005 money. Nine
states, those in orange there, spent all of their 2006 money.
One of the reasons this occurs is that Labor's allocation
process has what is called a ``hold harmless'' provision where
a state will be guaranteed 85 percent of what they got last
year in the next year's allocation regardless of whether or not
they need it, they spent it, or had more or less layoffs. While
this policy is intended to minimize significant fluctuations in
state funding from prior years, it awards states comparable
training funds without recognition of current layoffs or
previous year's expenditures or obligations. For example, those
13 states that used none of their 2006 funds received $41
million in additional funds for 2007, an amount nearly equal to
what they received the prior year that they had not touched
yet. In addition, only days before they got that 2007
allocation, they received another $5 million in end of year
allocations. We recommended in our report that Labor revamp
this formula and how they allocate funds, and they agreed and
said they were going to be doing that.
Now, I would like to discuss workers' use of the benefits
and services available to them. Participants may receive a
total of 104 weeks of extended income support beyond the 26
weeks of Unemployment Insurance benefits available in most
states. While there are no national data on how many weeks of
income support a TAA participant uses, we conducted a study of
five TAA-certified layoffs across the country and found that,
while many workers did not use the extended benefits available
to them, a substantial portion of workers in all the sites we
studied did use this benefit. But in general no more than a
third of the workers actually used the extended benefits for
more than a year.
This shows the five sites we went to, one in Missouri,
Pennsylvania, Washington, Mississippi, and Massachusetts,
covered a broad range of industries. One made printed circuit
boards, another made lawn mower engines, Weyerhaeuser as a
paper or pulp producer, Lear made automotive carpets and the
General Mills, among other things, made frozen cookie dough.
Nationally, the number of workers entering training from
2004 to 2006 has declined, paralleling the decline in the
number of workers certified. Overall, training enrollment
declined by 30 percent to 36,000 workers in 2006. However,
enrollments in remedial training over this period have
increased both as a proportion of the total and in absolute
terms as well. Yet, occupational training remains the largest
training category for TAA participants, with about three-
fourths of TAA training participants opting for occupational
training with the most popular areas being training in nursing,
medical assistance, and truck driving.
While Labor has some information on the number of workers
enrolled in training, no information on the proportion of TAA-
certified workers who uses the training benefit exists. Again,
we gathered this information from the five layoffs we studied.
We found that a minority of workers at each site enrolled in
training. Workers at the Massachusetts site, the one on the
right there, had the highest enrollment in training. Many of
these workers enrolled in remedial courses, including English
as a second language and many also enrolled in occupational
skill training. At four of the sites we studied, half or more
of the workers were enrolled in training for less than a year,
i.e., not long-term training, and 30 percent or more of workers
in most sites took training of less than 6 months.
The number of workers using the Wage Insurance Program has
increased over the 3 years we studied, from about 1,400 workers
in 2004 to 3,200 workers in 2006, yet participation as a
proportion of all workers certified is low. The universe of
workers eligible for Wage Insurance cannot be estimated because
data are not available on the number of workers certified for
TAA who are at least 50 years old and lack transferable skills,
which are the requirements for the Wage Insurance Program.
However, two-thirds of the states that we surveyed estimated
that 5 percent or less of TAA participants received Wage
Insurance in 2006. Total spending for Wage Insurance payments
in 2006 was about $17 million, well below CBO's cost estimate
of $50 million annually.
TAA participants get a 65 percent tax credit for their
health insurance premiums but, again, in this program
participation is low. The number of TAA participants enrolling
in the advanced health coverage benefit has increased since
2004, yet only 6,900 workers received the benefit in 2006.
About half of those participating were in four states: North
Carolina, Virginia, Pennsylvania and Tennessee, with North
Carolina alone accounting for a quarter of those participating
in the program. Officials in the state, that you will hear from
later, attribute this to aggressive outreach to enroll workers
in the program. Overall, they have about 9 percent of TAA-
certified workers, so it is way above the proportion.
As of September 2006, about 7 percent of the workers that
were eligible for extended income support, that is a basic
requirement for recovering the health coverage credit, were
receiving the advanced credits. However, some of the workers
that were eligible for extended income support may not meet
other eligibility requirements for the health coverage
benefits, such as having a qualified health plan. Three-
quarters of those using the tax credit do so to continue their
employers' plan under COBRA. Many of those not using the tax
credit said they had access to other insurance but many who
went without insurance said they did not understand it or it
was too expensive. Workers pay about a quarter of their UI
benefits for coverage in a family plan under the tax credit
even after they get the credit. There is a gap of 2 to 3 months
where they are not eligible to receive any credit and they have
to pay the full premium themselves.
What I would like to do now is go through a timeline of
what happens if you are working at a facility that is going
through a closing and petitioning for TAA certification. What I
am going to do is illustrate this with the actual sequence of
events from a closing we studied. This is what happened in
Pennsylvania at the Lear facility, which manufactured
automobile carpets, where production was being moved overseas.
This facility had about 300 workers at the time of the closing,
three-quarters were men, about three-quarters of the workers
were over 40 years old, 82 percent had no more than a high
school education and about 80 percent had been working at the
plant for 10 years or more.
On October 1, a Warn Notice, that is the advanced notice
requirement, was filed with the state indicating that the plant
would be closing. A week later, a petition was filed with Labor
and investigation was begun. Five weeks later on November 12th,
the petition was approved by Labor and in late November, the
workers were formally notified, as it is showing here.
Meanwhile, layoffs had begun in early November and
continued through February 2004 when the plant was totally shut
down on the 15th of February. Rapid response meetings were held
in mid-November to tell workers about the benefits available to
them, including job search assistance, training, extended
income support, the Health Coverage Tax Credit and Wage
Insurance.
Now, let me illustrate briefly the decisions facing these
workers who were laid off. If they want to take advantage of
the extended income support, workers need to be enrolled in
training by no later of 16 weeks after layoffs or 8 weeks after
they were certified as TAA eligible. In this case, it would be
the 16 weeks after layoffs. For the first round of those laid
off, it would be by the end of February. If they want to use
the Wage Insurance benefit, they need to be re-employed within
26 weeks. To be eligible for the Health Coverage Tax Credit,
they need to be qualified for extended income support, meaning
they need to be in training.
Chairman RANGEL. How much time do you think you will need?
Mr. NILSEN. Well, I can sum up if you would like.
Chairman RANGEL. I need that.
Mr. NILSEN. One of the things we are told--give me 2
minutes, if you would. We are told by workers and their case
managers that this is a very stressful time. The majority of
the workers at this facility had been in their jobs for a long
time. Laid off workers were overwhelmed and confused and often
their first reaction is to quickly get a job, yet this is not
easy in a rural location like this that has experienced a
number of layoffs over the recent years in this community. They
received a lot of information, all at rapid response, and they
said they needed more help to figure this out, and this is
where the case managers come in.
Case management is something that is not covered in TAA.
They either have to borrow from WIA or use some of the
administrative funds that they do get under TAA to provide case
management. Case management helps workers figure out what they
need to do, where to get the information, how to make these
decisions, these are hard decisions. We have recommended in our
recent report that the Congress allow some of the training
funds to be used to pay for case management.
To close here, Mr. Congressman and the Committee, I would
like to just reiterate our major recommendations, that the TAA
program provides much-needed re-employment assistance to
workers who lose their jobs due to international trade. We
recommended a number of improvements to improve that
assistance.
First, just briefly, that slide shows the wage replacement
for workers. It is a point I want to make here, that when we
looked at what happened to laid-off workers, we followed each
one, whether they were in the program or not, it appears that
workers use what they needed to successfully transition to new
jobs. The highest paid and most educated workers tended to find
jobs on their own. They had networks, et cetera. The lowest
paid, least-educated workers really used the program, they used
the job search assistance, they used the educational benefits
in the program. Those in the middle tended to use the job
search assistance, some used the training as well. In general
though, across the three groups, outcomes were comparable. I
just want to make that point.
So, our major recommendations then are summarized here:
First, the process for allocating funds to the states for
training needs to be re-vamped. Second, we need to allow states
to use a portion of their training funds to provide case
management to help workers make those critical decisions and
keep access to those benefits as they make the transition.
Third, the training, we need to simplify the training
enrollment deadline and not make it so complex. Fourth, ease
the constraints on the Wage Insurance Program and conduct an
evaluation of this demonstration program. Fifth, improve the
performance data that is available on the program through the
Department of Labor.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Nilsen follows:]
Prepared Statement of Sigurd R. Nilsen, Ph.D., Director for Education,
Workforce, and Income Security Issues, Government Accountability Office
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the challenges states have
faced in implementing some aspects of the Trade Adjustment Assistance
Act (TAA) program. We have conducted a number of studies on the TAA
program since the program was last reauthorized in 2002, and my
testimony today will focus primarily on the results of that work as
well as from our ongoing work.\1\ Today I'll be talking about issues we
identified and our recommendations for improving the program.
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\1\ For further information on TAA, please see the following
reports: GAO, Trade Adjustment Assistance: Changes to Funding
Allocation and Eligibility Requirements Could Enhance States' Ability
to Provide Benefits and Services, GAO-07-701, GAO-07-702 (Washington,
D.C.: May 31, 2007); Trade Adjustment Assistance: Labor Should Take
Action to Ensure Performance Data Are Complete, Accurate, and
Accessible, GAO-06-496 (Washington, D.C.: Apr. 25, 2006); Trade
Adjustment Assistance: Most Workers in Five Layoffs Received Services,
but Better Outreach Needed on New Benefits, GAO-06-43 (Washington,
D.C.: Jan. 31, 2006); and Trade Adjustment Assistance: Reforms Have
Accelerated Training Enrollment, but Implementation Challenges Remain,
GAO-04-1012 (Washington, D.C.: Sept. 22, 2004).
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The Trade Adjustment Assistance program, established in 1962 and
administered by the Department of Labor (Labor), is the nation's
primary program providing income support, job training, and other
benefits for manufacturing workers who lose their jobs as a result of
international trade. In fiscal year 2006, Congress appropriated about
$655 million for income support payments and another $220 million for
training for trade-affected workers. In 2002, Congress made a number of
key changes designed to expand benefits and decrease the time it takes
to get workers into services. Among the changes, the act
established a deadline for workers to enroll in training,
after they have been laid off or their petition has been approved, in
order to maintain eligibility for extended income support payments;
created a wage insurance benefit for workers age 50 and
older, subsidizing the difference between the prior and new wages of
some trade-affected workers who find reemployment quickly; and
created a health coverage tax credit to help trade-
affected workers pay for health insurance.
In order for workers to receive TAA benefits and services, Labor
must certify that workers in a particular layoff have been adversely
affected by international trade. The certification process begins when
a petition is filed with Labor on behalf of a group of laid-off
workers. Labor then surveys the firm undergoing the layoff and its
customers and also reviews data on the firm's industry to determine
whether it meets the criteria for certification. Congress is now
considering approaches that would facilitate certifying entire
industries for TAA. One approach being considered would make an
industry eligible to be investigated for possible certification when
Labor certifies three petitions from that industry within 180 days. An
investigation would determine whether the entire industry has been
affected by trade and, therefore, whether workers in any future layoff
in that industry should automatically be eligible for TAA.
In preparation for reauthorizing the program, you asked us to
provide information on some of the key issues identified in our work
that should be addressed in reauthorization. In addition, you asked us
to analyze the impact of an alternative industrywide approach to
certifying TAA petitions. My testimony today will provide information
and highlight our recommendations on (1) Labor's administration of the
TAA program, (2) the challenges states face in providing services to
trade-affected workers, (3) the factors that affect workers' use of the
wage insurance and health coverage benefits, and (4) the impact of
using industrywide certification approaches on the number of workers
potentially eligible for TAA.
To address the first objective, we drew upon our most recent report
and a 2006 report on TAA performance data.\2\ Our recent report was
based, in part, on a survey of the 46 states that received an initial
allocation of TAA training funds in federal fiscal year 2006, and a
supplemental survey to collect additional financial information on
fiscal year 2006 training expenditures and obligations. Information on
performance data is based primarily on a survey of 46 states conducted
between November 2005 and January 2006 and on site visits to five
states--California, Iowa, Ohio, Texas, and Virginia. To answer the
second and third objectives, we interviewed Labor and Internal Revenue
Service (IRS) officials and visited state and local officials in four
states--California, Massachusetts, Michigan, and North Carolina. We
also analyzed Labor's quarterly activity reports and IRS's data on the
health coverage benefit. To address the fourth objective, we
interviewed officials at Labor and the International Trade Commission
and analyzed Labor's data on TAA petitions from calendar year 2003 to
2005, the Bureau of Labor Statistics' Mass Layoff Statistics data, and
the Census Bureau's data on trade and production, as well as the
International Trade Commission's data on trade remedies. We conducted
our work in accordance with generally accepted government auditing
standards.
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\2\ GAO-07-701, GAO-07-702, GAO-06-496.
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In summary, our work shows that Labor could improve the way it
administers the program in two key areas--the process it uses to
allocate training funds to states and its tracking of program outcomes.
Labor's process for allocating training funds does not adequately
reflect the current demand for training services in the state, and
Labor distributes additional funds to states regardless of whether they
need them. Regarding program outcomes, we found that TAA performance
data are incomplete and may be inaccurate. For example, only half the
states are including all participants, as required by Labor. States
face challenges in providing services to workers, including the lack of
flexibility to use training funds to provide trade-affected workers
with case management services, such as counseling to help them decide
whether they need training and which training would be most
appropriate. States receive no TAA program funds for case management
and must either use their limited administrative funds or seek
resources from other programs, such as those funded by the Workforce
Investment Act (WIA). States also reported that their efforts to enroll
workers in training are sometimes hampered by the training enrollment
deadline and that workers find the deadline confusing. Few TAA
participants take advantage of the wage insurance and health coverage
benefits, and several factors limit participation. For example, several
states reported that the requirement that workers must find a job
within 26 weeks to receive the wage insurance benefit was the major
factor preventing more workers from taking advantage of the benefit.
Regarding the health coverage benefit, several states told us that high
out-of-pocket costs may discourage workers from using the benefit.
Finally, an industry certification approach based on three petitions
certified within any 180-day period would likely increase the number of
workers eligible for TAA--potentially doubling those eligible--but also
presents some design and implementation challenges. For example, using
an industrywide approach raises the possibility that workers who have
not been affected by trade will be certified. We made a number of
recommendations to Labor to address the issues we identified, as well
as suggested that Congress make changes during reauthorization to
improve the program.
Background
The TAA program was designed to assist workers who have lost their
jobs as a result of international trade. The program provides two
primary benefits to these workers--training and extended income
support. In addition, as a result of the TAA Reform Act of 2002,
workers also have access to wage insurance and health coverage
benefits. In order to be eligible for any of these benefits, Labor must
certify that a layoff was trade affected.
TAA Benefits and Services
Under TAA, workers enrolled in the program have access to a variety
of benefits and services, including the following:
Training. Participants may receive up to 130 weeks of training,
including 104 weeks of vocational training and 26 weeks of remedial
training, such as English as a second language.
Extended income support. Participants may receive a total of 104
weeks of extended income support beyond the 26 weeks of unemployment
insurance (UI) benefits available in most states.
Job search and relocation benefits. Payments are available to help
participants search for a job in a different geographical area and to
relocate to a different area to take a job.
Wage insurance benefit. The wage insurance benefit, known as the
Alternative Trade Adjustment Assistance (ATAA) program, was created by
the TAA Reform Act of 2002 as a demonstration project for workers age
50 or older and those who find reemployment within 26 weeks of being
laid off that pays less than $50,000 and less than what they previously
earned. Workers who meet these criteria are eligible to receive 50
percent of the difference between their new and old wages, up to a
maximum of $10,000 over 2 years. For the fiscal year 2008 budget
request, Labor estimated wage insurance benefits at $23 million.
Health coverage benefit. The health coverage benefit, known as the
Health Coverage Tax Credit (HCTC) and also created by the TAA Reform
Act, helps workers pay for health care insurance through a tax
credit.\3\ Workers can choose to receive the benefit in one of two
ways--as an advance option that covers 65 percent of their monthly
premiums, allowing them to lower the amount they have to pay out of
pocket for health coverage, or as an end-of-year tax credit that is
claimed on their income taxes. To be eligible for the health coverage
benefit, workers must either be (1) receiving extended income support
payments or eligible for extended income support but still receiving UI
payments, or (2) receiving the wage insurance benefit. IRS administers
the health coverage tax credit program. There are three health plan
options that are automatically eligible: COBRA continuation plans,\4\
coverage through the worker's spouse, and individual market plans
purchased by the worker. In addition, the TAA Reform Act also allows
states to designate other coverage alternatives--called state-qualified
options.
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\3\ The Trade Adjustment Assistance Reform Act of 2002 created a
health coverage tax credit for certain workers who are eligible to
receive income support benefits under the TAA program because their
jobs were lost due to foreign competition and for certain retirees
whose pensions from a former employer were terminated and are now paid
by the Pension Benefit Guaranty Corporation (PBGC).
\4\ Under the Consolidated Omnibus Budget Reconciliation Act
(COBRA) of 1985, certain employers with 20 or more employees are
required to make available 18 to 36 months of continued health care
coverage for former employees and their dependents who lose health
coverage due to certain circumstances, such as when a worker is laid
off.
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TAA Certification Process and Eligibility Requirements
Currently, Labor certifies workers for TAA on a layoff-by-layoff
basis. Petitions may be filed by the employer experiencing the layoff,
a group of at least three affected workers, a union, or the state or
local workforce agency. Labor investigates whether a petition meets the
requirements for TAA certification and is required to either certify or
deny the petition within 40 days of receiving it.
The TAA statute lays out certain basic requirements for petitions
to be certified, including that a significant proportion of workers
employed by a company be laid off or threatened with layoff and that
affected workers must have been employed by a company that produces
articles. In addition, a petition must demonstrate that the layoff is
related to international trade in one of several ways, including the
following:
Increased imports--imports of articles that are similar
to or directly compete with articles produced by the firm have
increased, the sales or production of the firm has decreased, and the
increase in imports has contributed importantly to the decline in sales
or production and the layoff or threatened layoff of workers.
Shift of production--the firm has shifted production of
an article to another country, and either the country is party to a
free trade agreement with the United States or
The country is a beneficiary under the Andean Trade
Preference Act, the African Growth and Opportunity Act, or the
Caribbean Basin Economic Recovery Act or
There has been or is likely to be an increase in imports
of articles that are similar to or directly compete with articles
produced by the firm.
Labor investigates whether each petition meets the requirements for
TAA certification by taking steps such as surveying officials at the
petitioning firm, surveying its customers, and examining aggregate
industry data. When Labor has certified a petition, it notifies the
relevant state, which has responsibility for contacting the workers
covered by the petition, informing them of the benefits available to
them, and telling them when and where to apply for benefits.
Training Funds
Approximately $220 million is available annually for training, and
states have 3 years to spend these funds. Thus fiscal year 2006 funds
must be used by the end of fiscal year 2008. Each year Labor allocates
75 percent of the training funds to states according to a formula that
takes into consideration several factors, including the average amount
of training funds allocated to states, reported accrued training
expenditures, and the average number of training participants over the
previous 2\1/2\ years. In addition, to minimize year-to-year
fluctuations in state funding, Labor uses a hold harmless policy that
ensures that each state's initial allocation is at least 85 percent of
the initial allocation received in the previous year. In fiscal year
2006, Labor initially allocated $165 million of training funds to 46
states. To cover administrative costs, Labor allocates to each state an
additional 15 percent of its training allocation. Labor holds the
remaining 25 percent in reserve to distribute to states throughout the
year according to need as they experience unexpected large layoffs.
TAA Performance Reporting System
Labor is responsible for monitoring the performance of the TAA
program. States are required to submit information on exiting
participants through the Trade Act Participant Report (TAPR) each
quarter. The TAPR data submitted by states are used to calculate
national and state outcomes on the TAA performance measures for each
fiscal year, which include reemployment rate, retention rate, and wage
replacement rate. Unlike other training programs, like WIA, TAA has no
individual state performance goals, and states do not receive
incentives or sanctions based on their performance levels, nor are they
otherwise held accountable for their performance. In addition to
submitting TAPR data, states also submit data to Labor on TAA services
and expenditures each quarter.
Labor Could Improve Its TAA Program Administration
Labor could improve the way it administers the program in two key
areas--the process it uses to allocate training funds and its tracking
of program outcomes. Labor's process for allocating training funds
presents two significant challenges to states. First, the amount states
receive at the beginning of the fiscal year does not adequately reflect
states' spending the year before or the current demand for training
services in the state. Second, Labor distributes a significant amount
of funds to most states on the last day of the fiscal year, even to
states that have spent virtually none of their current year's
allocation. In addition the performance information that Labor makes
available on the TAA program does not provide a complete and credible
picture of the program's performance. For example, only half the states
are including all participants, as required, in the performance data
they submit to Labor.
Labor's Policies for Allocating Training Funds Present Challenges to
States in Managing Their Funds
Labor's process for allocating training funds does not adequately
recognize the episodic nature of layoffs or the extent to which states
have used their previous year's allocations. Labor allocates 75 percent
of TAA training funds based upon a formula that takes into account
expenditures and participation over the previous 2\1/2\ years. The
year-to-year fluctuation in layoffs within a state may result in states
receiving more or less funds than they actually need. For example, the
estimated number of trade-affected workers being laid off declined
dramatically in Kansas from fiscal years 2004 to 2005 and increased
somewhat in 2006. Overall the estimated number of trade-affected
workers in Kansas laid off in fiscal year 2006 represented about an 80
percent decrease from 2004. On the other hand, Missouri experienced an
80 percent increase in the number of trade-affected workers being laid
off between fiscal years 2004 and 2006 (see fig. 1). Kansas used hardly
any of its fiscal year 2006 training fund allocation, while Missouri
used virtually all of its. Despite these trends, both states received
about 15 percent less in fiscal year 2007 than they received in 2006.
[GRAPHIC] [TIFF OMITTED] T3113A.001
Figure 1: Fluctuation in Estimated Number of Trade-Affected Workers
Laid Off from Fiscal Years 2004 to 2006 in Kansas and Missouri
While the 46 states responding to our survey reported using
(spending or obligating), on average, about 62 percent of their fiscal
year 2006 training funds during the fiscal year, the percentage of
funds states expended and obligated varied widely. Thirteen of the
states reported using less than 1 percent of their fiscal year 2006
funds for training, while 9 states reported using more than 95 percent
of their fiscal year 2006 training funds(see fig. 2). The amount
individual states reported using ranged from 0 percent in several
states to about 230 percent in 1 state.
[GRAPHIC] [TIFF OMITTED] T3113A.002
Figure 2: States with High and Low Use of Fiscal Year 2006 Training
Funds
A particular problem with Labor's allocation process is the hold
harmless policy, which guarantees that each state receives no less than
85 percent of what it received in the previous year. While this policy
is intended to minimize significant fluctuations in state funding from
prior years, it awards states comparable training funds without
recognition of the previous year's expenditures or obligations. For
example, the 13 states that used less than 1 percent of the fiscal year
2006 funds received nearly $41 million in fiscal year 2007--an amount
slightly less than they received in fiscal year 2006. Moreover, 5 of
the 13 states received a larger allocation in fiscal year 2007 than
they received in 2006.
Labor distributes a significant amount of funds to most states on
the last day of the fiscal year, regardless of whether states need
these additional funds. Labor distributed end-of-year funds to 48
states, including about $5 million to states that had spent or
obligated less than 1 percent of their initial fiscal year 2006
allocation.\5\ Labor distributes these funds to each state based upon a
calculation that takes into account the amount of training funds each
state received from its initial allocation plus any additional amount
it received during the year.\6\ According to Labor officials, all
states will receive an end-of-year allocation unless a state
specifically informs Labor it does not want any additional funds or if
it had not received any funds at all during the year. Waiting until the
last day of the fiscal year to distribute training funds to states does
not reflect good planning or management of program funds. Labor
officials agreed that the distribution of reserve training funds could
be improved so that more funds are disbursed throughout the year rather
than on the last day. Officials also acknowledged that states that have
not spent or obligated any of their initial allocation probably should
not receive additional training funds at the end of the year.
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\5\ Hawaii and North Dakota did not receive end-of-the year funding
because these states received no training funds at all during the year.
\6\ For example, if Labor had distributed a total of $200 million
in training funds during the year and a state had received a total of
$10 million (received $7 million from its initial training allocation
and had requested an additional $3 million during the year), then that
state would receive 5 percent of any reserve funds distributed at the
end of the year.
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In our recent report, we recommended that the Secretary of Labor
develop procedures to better allocate training funds and ensure that
any reserve funds are given to only those states that have spent or
obligated a substantial portion of the current fiscal year allocation.
In its comments, Labor agreed with our findings and recommendations and
noted that it would examine the process for allocating training funds
to states.
TAA Data Do Not Provide a Complete and Credible Picture of the
Program's Performance
TAA performance data are incomplete and may be inaccurate. States
report that they are not including all TAA participants in their
performance data, despite Labor's requirement that all participants be
included after they exit the program. We found that only 23 of the 46
states we surveyed reported that they are including all exiting
participants in their submissions to Labor. In general, states have
information on those in training, but may not systematically track
those who receive other assistance, but not training. Furthermore,
Labor does not have a process in place to ensure that states are
including all exiting TAA participants in their reporting submissions.
Despite the importance of accurately identifying exiters, the exit
dates themselves may not be accurate because some states do not
consistently obtain proper documentation to verify the dates. Accurate
exit dates are critical to TAA performance data for two reasons. First,
whether a participant exits determines if the individual should be
included in the state's report to Labor. Second, the actual exit date
determines when a participant's employment outcome will be assessed.
Some states are not using all available data sources to determine
TAA participants' employment outcomes. Labor requires states to use UI
wage records to determine the employment outcomes of participants
reported to Labor. However, each state's wage record database includes
only wage data on workers within the state and does not have data on
participants who found employment in another state.
In our 2006 report, we made several recommendations to Labor to
help ensure that TAA participant data reported by states are
consistent, complete, and accurate, including issuing clarifying
guidance. Labor has taken some steps to share information with states
and to improve data quality. In fiscal year 2006, Labor distributed
$250,000 to each state to help them improve their TAA performance data
systems, but it is too soon to know whether their efforts will improve
the quality of the data.
States Face Challenges in Providing Services to Workers
States report being challenged by the lack of flexibility to use
training funds to provide trade-affected workers with case management
services, such as counseling to help them decide whether they need
training and what type of training would be most appropriate. In
addition, efforts to enroll workers in training are sometimes hampered
by the confusing TAA training enrollment deadline that requires workers
be enrolled in training within 8 weeks of certification or 16 weeks of
layoff to qualify for extended income support.
Limited Flexibility in Use of Training Funds Hinders Case Management
Services
States also cited the lack of flexibility to use training funds to
provide trade-affected workers with case management services as a
challenge. Workers often need help making decisions about training--
what type of training to take or whether to enroll in training at all.
Difficulty funding case management services for trade-affected workers
was a concern among officials in the states we visited. For example,
state officials in one state said providing proper assessment, career
counseling, and other case management services was a real challenge and
noted that additional funds from other sources are limited. States do
not receive TAA program funds for case management and, by law, cannot
use training funds for this service. As a result, states must either
use their limited TAA administrative funds or use funds from other
programs to pay for case management, but there are limitations with
these funding sources.
According to Labor officials, states are encouraged to co-enroll
participants in the Workforce Investment Act (WIA) program, and in
Labor's view states have sufficient WIA funds to pay for case
management for TAA participants. About three-fourths of the states
reported in our survey that they were able to utilize WIA funds to help
pay for case management services. Yet nearly half of the states also
reported that coordination with WIA was a challenge. For example, WIA
funding may not always be available for TAA workers, especially during
a large layoff. Furthermore, local officials in a state we visited said
that while 85 percent of TAA participants do co-enroll in WIA, a large
layoff can strain funding and makes it difficult for WIA to completely
fund case management for trade-affected workers.
States also reported limitations to using administrative funds to
provide case management. More than half of the states responding to our
survey reported the shortage of administrative funds as a challenge.
One state noted that its administrative funds are usually exhausted by
the end of the first quarter because of the amount of case management
that is required for the program. A local official in one state we
visited said that it uses Wagner-Peyser funds to pay for case
management because not enough TAA administrative funds are received and
TAA training funds cannot be used. As a result, only one case manager
could be funded, and this one person had to cover three counties and
serve approximately 1,000 workers. Moreover, officials in some of the
states we visited cautioned that administrative funds should not be
used for case management because case management is a program
activity--any increase in the administrative limit to pay for this
service could lead to the misconception that the program has too much
overhead. These state officials noted that having the flexibility to
use TAA training funds for case management would alleviate this
concern.
In our recent report, we suggested that Congress may wish to
consider allowing a portion of TAA training funds to be used for case
management services to allow states greater flexibility in how they may
use their TAA funds to provide services to workers. Labor, however,
contended that the WIA, rather than TAA, should finance case
management. We agree with Labor that co-enrollment with WIA should be
encouraged, but as our report points out, WIA funds are not always
available to provide this service, especially during large layoffs. We
believe that states would benefit from having the option to use a
portion of their training funds to defray the costs of providing case
management services to trade-affected workers.
Training Deadline Can be Challenging and Confusing
Efforts to enroll workers in training are sometimes hampered by the
``8-16'' training enrollment deadline--that is, the requirement that
workers be enrolled in training within 8 weeks of certification or 16
weeks of layoff, whichever is later, to qualify for extended income
support. Nearly three-quarters of the states responding to our survey
reported that enrolling workers in training by the 8-16 deadline was a
challenge. For example, one state noted that trying to enroll
participants in training by the 8-16 deadline is particularly
challenging when dealing with large layoffs because it is difficult to
handle all the logistics, such as notifying workers and setting up
appointments, for a large number of workers within the deadline.
Moreover, officials in the four states we visited also indicated that
the deadline is very confusing to workers. They told us that workers
become confused about which point in time the 8 weeks or 16 weeks apply
to and, as a result, are not sure when the clock starts and stops. We
previously reported that about three-fourths of states responded that
workers, at least occasionally, inadvertently miss the deadline and
consequently lose their eligibility for extended income support.\7\ In
that report, we recommended that Labor track the ability of workers to
meet the 8-16 deadline.\8\ As of April 2007, Labor had not yet begun
gathering information on the impact of the deadline. In our recent
report, we suggested that in order to make it easier for workers to
comply with the training enrollment deadline, Congress may wish to
consider simplifying the deadline by specifying a single time period
that commences when workers are laid off or petitions are certified,
whichever is later.
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\7\ GAO-04-1012.
\8\ GAO-06-43.
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Several Factors Limit Participation in the Wage Insurance and Health
Coverage Benefits
Several factors, including a short deadline for getting a job and
the cost of buying health coverage, may limit participation in two new
benefits resulting from the TAA Reform Act of 2002. In our site visits,
states reported that the requirement that workers must find a job
within 26 weeks to receive the wage insurance benefit was the major
factor preventing more workers from taking advantage of the benefit. An
additional factor that may limit participation in wage insurance by
some older workers is the requirement that for a group of workers to be
certified as eligible, the petitioning workers must have been laid off
from a firm where the affected workers lacked easily transferable
skills and a significant portion of those workers were aged 50 or over.
While cost is one of the most significant factors limiting
participation in the health coverage benefit, some states also reported
that the health coverage tax credit program can be complicated and
difficult to understand for both workers and local case managers.
Deadline to Find Employment and Other Requirements Limit Participation
in the Wage Insurance Benefit
Few TAA participants take advantage of the wage insurance benefit.
According to Labor officials, in calendar year 2006, 6,316 workers
received the wage insurance benefit. The universe of workers eligible
for wage insurance cannot be estimated because data are not available
on the number of workers certified for TAA who are 50 years old or
older and meet the other eligibility requirements. However, two-thirds
of the states we surveyed reported that 5 percent or less of TAA
participants received wage insurance in fiscal year 2006.\9\ We
previously reported in a study of five layoffs that less than 20
percent of the workers potentially eligible for the wage insurance
benefit received it.\10\ In this study, we found that workers'
awareness of the wage insurance benefit varied greatly--many workers
who were 50 years old and older were simply unaware of the benefit.
While state or local officials told us they discussed the ATAA benefit
at rapid response meetings or TAA information meetings, workers were
often overwhelmed by the volume of information received after the
layoff, and didn't necessarily recall some of the specifics.
---------------------------------------------------------------------------
\9\ This percentage is based on the total number of TAA
participants because the number of workers potentially eligible for the
wage insurance benefit is not readily available.
\10\ GAO-06-43.
---------------------------------------------------------------------------
Although officials in the states we visited for our most recent
study believe the wage insurance benefit is beneficial to older workers
close to retirement, two key factors limit participation. Officials
said that one of the greatest obstacles to participation was the
requirement for workers to find a new job within 26 weeks after being
laid off. For example, according to officials in one state, 80 percent
of participants who were seeking wage insurance but were unable to
obtain it because they failed to find a job within the 26-week period.
The challenges of finding a job within this time frame may be
compounded by the fact that workers may actually have less than 26
weeks to secure a job if they are laid off prior to becoming certified
for TAA. For example, a local case worker in one state we visited said
that the 26 weeks had passed completely before a worker was certified
for the benefit.
Another factor that may limit participation by some older workers
is the requirement that, under the TAA Reform Act, for a group of
workers to be certified, they must have been laid off from a firm where
the affected workers lacked easily transferable skills and a
significant portion were aged 50 or over. Labor interprets a
``significant portion'' as the lesser of 5 percent of the affected
workforce or 50 workers at a firm with 50 or more workers, or at least
3 workers in a firm with fewer than 50 affected workers. Labor
investigates each petition to see if the firm meets the requirements,
and in fiscal year 2006, nearly 90 percent of TAA-certified petitions
were also certified for the wage insurance benefit. Labor officials
said that eliminating this step of the TAA certification process--that
is, allowing any TAA-certified workers who meet the individual
eligibility criteria for the wage insurance benefit to participate--
would decrease the agency's investigation workload somewhat and may
increase participation in the wage insurance benefit.
Labor officials told us they are taking steps to overcome the lack
of awareness of wage insurance and promote the benefit by informally
encouraging states to ensure case workers talk about wage insurance
during one-on-one case management sessions. Furthermore, in our most
recent report, we suggested that in order to enable more workers to
take advantage of the wage insurance benefit, Congress may wish to
consider increasing the length of time workers have to become
reemployed and eliminating the requirement that to be certified as
eligible for wage insurance, the petitioning workers must have been
laid off from a firm where the affected workers lacked easily
transferable skills and a significant portion of those workers were
aged 50 or over.
Cost Is a Key Factor Limiting Participation in the Health Coverage
Benefit
The high cost of the health coverage benefit to participants is the
greatest barrier to higher participation. State officials said that
many laid-off workers cannot afford to pay 35 percent of their health
care premiums while their primary income is unemployment insurance
benefits. IRS officials reported that the workers' 35 percent share is
among the primary barriers to participation in the benefit. For
example, in the four states we visited, the average monthly premium for
COBRA policies covering two or more individuals was about $800. The
workers' out-of-pocket cost for COBRA coverage in these states would be
nearly one-fourth of their monthly UI payment (see table 1).
Table 1: Comparison of Average Monthly Premiums
------------------------------------------------------------------------
Average Workers'
Average monthly 35
monthly COBRA percent Percentage
State UI premium share of of monthly
payment for two monthly UI payment
or more premium
------------------------------------------------------------------------
California $1,176 $777 $272 23
------------------------------------------------------------------------
Massachusetts 1,465 895 313 21
------------------------------------------------------------------------
Michigan 1,161 737 258 22
------------------------------------------------------------------------
North Carolina 1,074 770 270 25
------------------------------------------------------------------------
Average 1,219 795 278 23
------------------------------------------------------------------------
Source: GAO analysis of UI data from states and average COBRA premiums
from IRS.
State-qualified plans are similarly expensive and are often more
expensive than COBRA coverage. Currently, 43 states have such plans,
which, among other requirements, must provide for preexisting
conditions. For example, in one state we visited, the premium for the
state-qualified plan for a family was about $940 per month, while the
average COBRA premium was about $740 per month. The worker's share of
the state-qualified premium was about $330--or about 30 percent of the
UI benefit--compared to about $260 for COBRA coverage.
In addition, there is currently a period of up to about 3 months
where workers must cover the full cost of their health premiums before
beginning to receive the advance credit, and these costs are not
reimbursable. IRS officials reported that inability to pay the out-of-
pocket costs between layoff and application for the advance credit is
one of the reasons workers lose eligibility and may be denied the
benefit.
While cost is one of the most significant factors limiting
participation in the health coverage benefit, some states also reported
that the health coverage tax credit program can be complicated and
difficult to understand for both workers and local case managers. In
our survey, nearly two-thirds of the states reported that limited IRS
guidance on the benefit was still a challenge. Furthermore, during our
site visits, some state and local officials said that they are not
experts on the health coverage benefit and do not know enough details
of the benefit to get information out to workers and to assist them
with the enrollment process. In some local areas, case managers we
interviewed said that they provide minimal information about the
benefit and primarily refer workers to pamphlets or the IRS call center
for details. We previously reported on the complexity of the health
coverage benefit, noting that the process for workers to become
eligible and enroll for the benefit was fragmented and difficult to
navigate.\11\ In that report, we recommended to several agencies,
including Labor and IRS, that a centralized resource be made available
at the time individuals must make decisions about purchasing qualifying
health coverage and meeting other eligibility requirements. In February
2007, IRS began distributing to all workers covered by a petition a
more simplified program kit for the health coverage benefit.
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\11\ GAO, Health Coverage Tax Credit: Simplified and More Timely
Enrollment Process Could Increase Participation. GAO-04-1029.
(Washington, D.C.: September 30, 2004).
---------------------------------------------------------------------------
Certification Applied Industrywide May Increase Number Eligible, but
Implementation Challenges Exist
Two alternatives are being considered that would expand the current
firm by firm petition certification approach. One approach being
considered would make an industry eligible to be investigated for
possible certification when Labor certifies three petitions from that
industry within 180 days. Another approach would require certification
of an industry once a trade remedy had been applied.\12\ An industry
certification approach based on three petitions certified within 180
days would likely increase the number of workers eligible for TAA, but
the extent of the increase depends upon the specific criteria that are
used. Using trade remedies for industrywide certification could also
result in expanded worker eligibility for TAA in a number of
industries, but the extent is uncertain. As we identify in our
forthcoming report, either approach presents some design and
implementation challenges.\13\
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\12\ Trade remedies include, for example, a duty imposed on an
imported product because the industry had been injured by unfair trade
practices.
\13\ For more detailed information on our analysis, see our
forthcoming report, Trade Adjustment Assistance: Industry Certification
Would Likely Make More Workers Eligible, but Design and Implementation
Challenges Exist. GAO-07-919. (Washington, D.C.: forthcoming).
---------------------------------------------------------------------------
Extent of Increase in Eligible Workers Depends on How Additional
Criteria Are Set
From 2003 to 2005, 222 industries had three petitions certified
within 180 days and therefore would have triggered an investigation to
determine whether an entire industry should be certified, if such an
approach had been in place at that time. These industries represented
over 40 percent of the 515 industries with at least one TAA
certification in those 3 years and included 71 percent of the workers
estimated to be certified for TAA from 2003 to 2005.\14\ The 222 are a
diverse set of industries, including textiles, apparel, wooden
household furniture, motor vehicle parts and accessories, certain
plastic products, and printed circuit boards.
---------------------------------------------------------------------------
\14\ These industries are classified according to the four-digit
Standard Industrial Classification (SIC) System codes.
---------------------------------------------------------------------------
The proposals for this approach would require that, once an
industry meets the three-petition criterion, Labor investigate to
determine whether there is evidence of industrywide trade effects. Not
all 222 industries would likely be certified industrywide. In its
investigation, Labor would use additional criteria and likely consider
such factors as the extent to which an industry has been affected by
imports, changes in production levels in the industry, or changes in
employment levels.
The number of workers that would become eligible for TAA through an
industry certification approach depends on what additional criteria are
established. We used information from the 69 industries for which we
had comprehensive data on petitions, unemployment, trade and production
to estimate the potential increases in eligible workers
programwide.\15\ We found that, if there were no additional criteria
beyond three petitions certified in 180 days, the overall number of
workers eligible for TAA might have nearly doubled, from about 118,000
to about 233,000 in 2005. If the trade threshold were set at a 10
percent increase in the import share of the domestic market, the number
of eligible workers might have increased by approximately 49 percent
from 118,000 to about 175,000. If certification were limited to
industries with a 15 percent increase in any 1 year, the number of
workers eligible for TAA might have increased by approximately 27
percent to about 150,000. Finally, if the criterion was a 20 percent
increase in the import share in any 1 year, the number of workers might
have increased by about 22 percent, to 144,000. More stringent criteria
would result in a smaller increase in the number of workers eligible
for TAA.\16\
---------------------------------------------------------------------------
\15\ Of the 222 industries, we analyzed 69 for which we had
complete data. The data available used different classification systems
that we matched to each other, but we only included data for which we
had complete and well-defined matches. Since the 69 industries were not
drawn from a random sample, the results of this analysis are not
necessarily representative of the entire 222 industries.
\16\ Our analysis applied the same threshold to all industries. In
practice, the criteria would likely vary by industry in order to take
into account industry-specific patterns in trade and other economic
factors.
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Certifying Industries Subject to Trade Remedies Could Increase Eligible
Population, but the Extent Is Uncertain
Using trade remedies for industrywide certification could result in
expanded worker eligibility for TAA in a number of industries. The
number of workers eligible for TAA might increase under this approach
in areas in which there have been few or no TAA petitions. For example,
even though ITC found that domestic producers of certain kinds of
orange juice had been injured by imports, there appear to be no TAA
petitions for workers producing orange juice.\17\
---------------------------------------------------------------------------
\17\ We cannot be certain about the degree of overlap between TAA
petitions and trade remedy products because product information is not
recorded in a standardized way in Labor's petitions data.
---------------------------------------------------------------------------
However, the number of workers eligible for TAA may not increase
substantially in some areas, in part because of overlap between trade
remedies and TAA petitions. For example, over half of outstanding
antidumping and countervailing duty orders are for iron and steel
products, for which hundreds of TAA petitions have been certified. In
addition, industries with trade remedies may not necessarily have
experienced many trade-related job losses because the International
Trade Commission (ITC) does not focus on employment when determining
whether an industry has been injured, according to an ITC official.
Furthermore, trade remedies are intended to mitigate the trade-related
factors that caused the injury to the industry, so employment
conditions in an industry could improve after the trade remedy is in
place.
It is difficult to estimate the extent that industry certification
based on trade remedies would increase the number of workers eligible
for TAA because trade remedies are imposed on specific products coming
from specific U.S. trade partners, and data are not available on job
losses at such a detailed level. The product classifications for a
given trade remedy can be very narrow, such as a dye known as
``carbazole violet pigment 23'' or ``welded ASTM A-312 stainless steel
pipe.''
Potential Design and Implementation Challenges Exist
Although industry certification based on three petitions certified
in 180 days is likely to increase the number of workers eligible for
TAA, it also presents several potential challenges.
Designing additional criteria for certification. Any industrywide
approach raises the possibility of certifying workers who were not
adversely affected by trade. Even in industries that are heavily
affected by trade, workers could lose their jobs for other reasons,
such as the work being relocated domestically. In addition, using the
same thresholds for all industries would not take into account
industry-specific patterns in trade and other economic factors.
Determining appropriate duration of certification.
Determining the length of time that an industry would be certified may
also present challenges. If the length of time is too short, Labor may
bear the administrative burden of frequently re-investigating
industries that continue to experience trade-related layoffs after the
initial certification expires. However, if the time period is too long,
workers may continue to be eligible for TAA even if conditions change
and an industry is no longer adversely affected by trade.
Defining the industries. How the industries are defined
would significantly affect the number of workers who would become
eligible for TAA through an industry certification approach. Our
analysis defined industries according to industry classification
systems used by government statistical agencies. However, some of these
industry categories are broad and may encompass products that are not
adversely affected by trade.
Notifying workers and initiating the delivery of
services. Notifying workers of their eligibility for TAA has been a
challenge and would continue to be under industry certification. Under
the current certification process, workers are linked to services
through the petition process. The specific firm is identified on the
petition application, and state and local workforce agencies work
through the firm to reach workers in layoffs of all sizes. For industry
certification, however, there are no such procedures in place to notify
all potentially eligible workers in certified industries. For large
layoffs in a certified industry, agencies could make use of the
existing Worker Adjustment and Retraining Notification (WARN) notices
to connect with workers.\18\ However, in smaller layoffs in certified
industries, or when firms do not provide advance notice, workforce
agencies may not know that the layoff has occurred.\19\
---------------------------------------------------------------------------
\18\ The WARN Act requires employers to give their employees or
their representatives, the state's dislocated worker unit, and local
government officials 60 days advance notice of a mass layoff or plant
closure. Generally speaking, the WARN Act applies to employers with 100
or more full-time workers involved in layoffs or plant closures that
affect 50 or more workers.
\19\ In a 2003 report on the WARN Act, GAO found that employers
provided notice for an estimated 36 percent of mass layoffs or plant
closures that appeared subject to WARN's advance notice requirements.
GAO, The Worker Adjustment and Retraining Notification Act: Revising
the Act and Educational Materials Could Clarify Employer
Responsibilities and Employee Rights, GAO-03-1003 (Washington, D.C.:
Sept. 19, 2003).
---------------------------------------------------------------------------
Verifying worker eligibility. Verifying that a worker was
laid off from a job in a certified industry to ensure that only workers
eligible for TAA receive TAA benefits may be more of a challenge under
industry certification than under the current system. For example, it
may be difficult to identify the specific workers who made a product in
the certified industry if their employer also makes products that are
not covered under industrywide certification. In addition, determining
who should conduct this verification may also present challenges. A
centralized process conducted by Labor would likely be unwieldy, while
verification by state or local workforce agencies could take less time,
but ensuring consistency across states might prove challenging.
An approach using trade remedies presents some of the same
challenges as an industry certification approach based on three
petitions certified in 180 days.
Concluding Observations
Through our work on the Trade Adjustment Assistance Program since
passage of the Reform Act in 2002 we have identified a number of areas
where Labor and the Congress should take action. Taking steps to limit
confusion, ease restrictions, and provide support for case management
would facilitate workers' access to services and benefits. States'
ability to assist these workers would be enhanced by an improved
process for allocating training funds.
Mr. Chairman, this concludes my prepared statement. I will be happy
to respond to any questions you or other members of the committee may
have at this time.
Chairman RANGEL. Thank you, Doctor, and I apologize for the
time limit, and I appreciate the thoroughness in which you
evaluated the program, as well as giving us a report. I might
add that all of your recommendations have been favorably
received, and we will be pushing that in our package. My one
question is did I understand you to say that you made these
recommendations to the Department of Labor?
Mr. NILSEN. Yes.
Chairman RANGEL. Could you share with me whether they were
receptive to them?
Mr. NILSEN. Many of them, they were. The one about changing
the allocation formula, in their written comments to our
report, they agreed they need to re-vamp the formula and better
allocate funds. Allowing a portion of training funds to be used
for case management was not a recommendation we could make to
Labor because it is a statutory requirement, so we suggested
that Congress change that and Labor did not say anything about
that. When we talked about simplifying the training enrollment
deadline, we said, ``You need to gather some data to see how
many people lose benefits just because they do not understand
the rules.'' They really have not done anything about that yet.
Chairman RANGEL. Well, we intend to be working very closely
with you, and we thank you for the thoroughness of your report.
Mr. NILSEN. Thank you.
Chairman RANGEL. Anyone seeking recognition? Thank you so
much, and we look forward to--I am sorry, Jim?
Mr. MCDERMOTT. I have a quick question.
Chairman RANGEL. I am sorry.
Mr. MCDERMOTT. Dr. Nilsen, there is just one part you did
not explain or I did not hear you say, a company in the case
you gave applied for certification by the Department of Labor.
Is that required by law?
Mr. NILSEN. Yes, either the company, a group of workers,
the union or the state can actually petition.
Mr. MCDERMOTT. So, if at Boeing, Boeing is not going to go
down but they may because they are doing their wing in China
lay off several hundred people because of the loss of those
jobs. The Boeing company or the Aerospace Mechanic Union,
either one of them, can make the application?
Mr. NILSEN. Yes, yes. It does not have to be the whole
company that goes down, it can be a portion of it if it meets
their requirements.
Mr. MCDERMOTT. Then the individual worker then has--once
that certification is made, they have to go and reapply, they
have to apply?
Mr. NILSEN. That is right. What happens is once the
petition is certified by Labor, Labor notifies the state, then
the state goes back to the company and says, ``Okay, I need the
list of workers who are being effected by this layoff.'' Then
those individual workers are notified that they are eligible
for TAA benefits, then they go into whomever providing those
benefits, whether they are through the One-Stop or there is a
separate TAA unit providing them with benefits. They have to
apply for UI, et cetera.
Mr. MCDERMOTT. Okay, and before they can get the benefits,
they have to then apply to the state to get their UI benefits?
Mr. NILSEN. That is correct.
Mr. MCDERMOTT. So there is a delay in some of that, there
can be up to what, 40 days?
Mr. NILSEN. Usually it is about a week.
Mr. MCDERMOTT. Not to get unemployment benefits but for the
Department of Labor to decide a petition?
Mr. NILSEN. Yes, on average it takes Labor 32 days to make
a decision on a petition and three quarters of them are done
within the 40 day limit. So, yes, there is----
Mr. MCDERMOTT. There is a maze that they have to go
through.
Mr. NILSEN. Yes, that is right.
Mr. MCDERMOTT. Okay, thank you.
Chairman RANGEL. Mr. Herger?
Mr. HERGER. Thank you, Mr. Chairman. Thank you, Mr. Nilsen.
Could you tell me how long the program has been going?
Mr. NILSEN. It has been in existence since 1962 when it was
first created.
Mr. HERGER. Any idea or do we know how much has been spent
on this program over the years?
Mr. NILSEN. I do not, I do not know. As I said, it was
about $900 million last year.
Mr. HERGER. Okay, and if you could maybe provide a
written--write an answer for us.
Mr. NILSEN. Okay, we can provide you that.
Mr. HERGER. I understand it is approximately $10 billion
since 1984. Of course, the question is always, and I would like
your opinion on this, is how effective is the program? Is it
working? Is there a way of making it work better? Do we have
data?
Mr. NILSEN. There was an evaluation, the last evaluation of
this program was issued in 1993 and at that time the program
looked very different, so it really does not apply to this
program now. The Labor Department has funded additional
research. It was originally supposed to be done by 2008, but I
hear it has been delayed and it is not going to be available
until 2011.
As I said and part of my statement is, there is not good
performance information out of this program or information
about what the program is achieving, which is why we did our
in-depth case study analysis of five sites to find out what is
going on, what is happening to all the workers, how many people
come into the program, how many people use the services
available through the program and then what happens to them?
From what we found, it seems like there are good things
happening as a result of this program, particularly, as I
indicated, those who are less educated, people at the low end
of the wage scale, seem to be the ones really benefiting and
using the training in this program to get back into the
workforce.
Mr. HERGER. Did your studies indicate any comparison
between those who were not in the program and those who are in
the program, whether there is a difference in how many----
Mr. NILSEN. No, no, hopefully, the Labor Department study
will have a rigorous methodology with a control group.
Mr. HERGER. Well, I think one thing everyone agrees on it
is crucially important that we work. Anyone who is out of work,
for whatever reason, I think it has been brought up that
probably only less than 3 percent is because of trade-related,
but we have people that are out of work. We want to do
everything we can to get them back into a job and prepare them
for that job as rapidly as we possibly can. What I believe is
our responsibility, if we are looking at expanding this
program, we want to make sure that the program is working. We
obviously do not want to put more money into a program that is
not as effective as it can be and so this information is very
important.
I thank you. I yield back.
Chairman RANGEL. Mr. Levin?
Mr. LEVIN. Just a couple of quick questions. By the way,
before the 3 percent is repeated and repeated, if you go to
many places, the relationship between trade and dislocation is
far more than 3 percent. I just do not think we should use
those figures to bootstrap our feelings that the importance,
that this Committee does not have an important role to play in
terms of trade policy and its impact on workers and businesses.
Let me just ask you a few quick questions. The new formula,
the formula used by the Labor Department is within its
discretion, is it not?
Mr. NILSEN. Yes, it is.
Mr. LEVIN. As you look at the chart on page 60, it is
really quite striking in terms of the allocations of funds and
it shows that--and then it is another page where the
percentages, actually on page 58, in 2006, the number of states
where zero was used, zero, and the number of states where more
than 100 percent was used. For example, Iowa, 229 percent was
used, I am not sure how much they had unobligated from previous
funds.
Mr. NILSEN. Yes, according to our information, they spent
all of their 2006 funds and obligated another, more than they
got, one and a half times more than they got.
Mr. LEVIN. Now, you said that the Labor Department has
agreed to re-formulate. When I look at the testimony, and that
is why it is good, Mr. Chairman, that we have the testimony
first and then we have the testimony of the Labor Department,
so we kind of get this straight, as I read the testimony, it
says, ``Now that states have experience with the formula and
the reserve process, the Department is reviewing the current
funding formula and believes it is appropriate to consider
changes.'' So, this testimony would indicate they are
considering it, and that there is no commitment. One of the
issues that we have to really look at is the issue of change in
this formula.
Also, I think it was useful for Mr. Herger to ask you the
question about effectiveness because there has been no
oversight by this Committee or the Subcommittee, and we need
more of it. Mr. Rangel has determined, and I think Mr. McCrery
agrees, there is going to be much more vigorous oversight, but
your data that you were able to glean from five case studies
would indicate that for many income groups, including people
who perhaps are most in need of training and re-training when
they are dislocated, that this program has had some real
effect, no?
Mr. NILSEN. Yes, I would concur with that. Most of the
people who seem to come into the program make use of it and
their results are comparable to others in terms of placement
and wage replacement to those with higher incomes and higher
education people, front-office folks who have the networks.
Mr. LEVIN. Thank you.
Chairman RANGEL. Congressman Hall--Johnson? I did it again.
Mr. JOHNSON. Just call me Ralph.
Chairman RANGEL. Thank you so much.
Mr. JOHNSON. Thank you, sir. I just have a quick question.
I understand that GAO recently completed an investigation into
the feasibility of certifying petitions for TAA on an
industrywide basis. Can you tell me what determinations were
made and any specific barriers to certifying the entire
industry?
Mr. NILSEN. That work is still underway. We provided some
preliminary information to Congressman Rangel's staff and
Congressman Smith's staff who requested this. But that report
is currently out with the Department of Labor for comment, and
we are hoping to issue that by the end of the month.
Mr. JOHNSON. What is your opinion on it?
Mr. NILSEN. I really cannot comment on it until that report
comes out unless the Chairman wants to----
Mr. JOHNSON. Okay, that is all I have.
Chairman RANGEL. Mr. English?
Mr. ENGLISH. Thank you, Mr. Chairman. I wonder Mr. Nilsen--
Dr. Nilsen, if you would perhaps comment on a couple of points.
First off, there have been proposals put out to de-link
benefits under TAA with actual trade flows, in other words, to
make it much more of a generalized program without having to
demonstrate an actual linkage to trade. Second of all, there
have also been proposals to extend benefits to service workers.
I wonder if you could comment on that and also on how one might
best define service workers for purposes of this program?
Doctor, your comments?
Mr. NILSEN. Well, unfortunately, we have not studied
closely any of those three issues. Part of what I do also is to
look at the Dislocated Worker Program under the Workforce
Investment Act, which is the program that other workers, who
are dislocated but not trade-certified, would go to for
assistance. The benefits that are available are very different.
Under WIA, there are training funds available but in general
because of the limitations on the amount of funding in that
program and the fact that it reaches so many people, the amount
of funds that local areas use for training is much less and the
kind of training people can get access to is different because
their caps are so much lower. But, yet, out of the roughly $1.5
billion in that program, they spend about 40 percent on
training and that is where service workers would go to.
I am not sure exactly how you would define, because we have
not studied it, who is a service worker. I know, as was
mentioned earlier, the Labor Department recently because of a
court case changed its definition a little bit on what is
producing a good when makers of software--workers dislocated
because software production went offshore. In the past software
was seen not as a good and now it has been interpreted that it
is a good. So, it is a difficult question, and we just haven't
looked at it so I really cannot comment on it.
Mr. ENGLISH. Thank you, Doctor. Mr. Chairman, before I
yield back the balance of my time, I would simply like to
suggest that this might be a worthy point of further detailed
study by this Committee and by the Subcommittee on Trade. I do
think this is an area that we need to explore and get right.
Thank you.
Mr. MCCRERY. Would you yield for just a moment, Mr.
English?
Mr. ENGLISH. Certainly, I would be delighted to.
Mr. MCCRERY. Mr. Chairman, I would just like to submit for
the record a compilation of data from the United States
Department of Labor showing--illustrating that even though some
states use more than their annual allocation of funding under
TAA, that every state has excess funds in the reserve fund,
which is an accumulation over the years, that they can tap
into. So, I think this is useful information. Rather, than
looking at a snapshot of just 1 year, because like in Louisiana
after Katrina, obviously we had need for a lot of funding for a
variety of things. But we still have some in the reserve fund
that we can tap. So, this chart will show the total picture,
not just the 1 year snapshot of the availability of funds to
each state, and I would like to submit this for the record.
Chairman RANGEL. Without objection.
[The provided material follows:]
[Material is being maintained in the Committee files.]
Chairman RANGEL. Mr. English, what you have said allows me
to ask Dr. Nilsen, who I am certain that you said in addition
to your duties with this program, that you do study the non-
trade-related dislocation. Mr. McCrery and I were successful in
getting the Administration, as a part of their overall policy
to have our Nation look at trade in a different way and not
just job loss, I am asking you to please get in touch with our
staff because we are going to need your thinking as we work
with DOL and perhaps go outside of our jurisdiction in putting
together a program that would do just that. So, I cannot thank
you enough for the hard work that you put in this and thank you
so much for your patience.
Mr. NILSEN. Thank you, Mr. Chairman. We will work with your
staff and Mr. McCrery's staff as well.
Chairman RANGEL. Look forward to it. The next panel, Tammy
Flynn, Trade Adjustment Assistance state coordinator, Bureau of
Workforce Programs, Department of Labor and Economic Growth in
Lansing; Virginia Ponser Flanagan, consultant, Campbellsville
University, Campbellsville, Kentucky; Curtis Morrow, Workforce
Development Unit manager, North Carolina Employment Security
Commission, Raleigh, North Carolina; James Fusco, East
Brunswick, New Jersey. I call on Congressman Altmire, who would
want to be extended the courtesy of introducing another witness
from Freedom, Pennsylvania. Is Congressman Altmire here? Thank
you, you are recognized.
Mr. ALTMIRE. Thank you, Mr. Chairman, for the opportunity
to introduce my constituent, Mr. John Bolas, from the Fourth
Congressional District in Pennsylvania. I know that the
Committee is talking about trade adjustment and the TAA
program, and I can think of no better example than the story
you are going to hear from Mr. Bolas.
He entered the U.S. Army after graduating from high school.
He worked in construction afterward in a number of temporary
jobs, then went to work for a company called Anchor Hocking
Specialty Glass, which is in the district that I represent. He
worked there for 7 years, lost his job due to foreign
competition, what the Committee is talking about today. He re-
trained due to the TAA program, and he is now an occupational
therapist. You will hear his story. He is making a great deal
more money than he was making before. He enjoys his work and
really is a wonderful case study for the program. So, I am very
happy to introduce him, and I appreciate the opportunity to do
so. Thank you.
Chairman RANGEL. Well, we are glad that you have taken the
time to do that. For all of the witnesses, this Committee is
deeply appreciative of your taking the time to share your
experience with us so that we can support what works and have a
better idea of what we have to correct. All of you will have 5
minutes to put your statement in the record, but the statements
will be shared by all of the Members of the Committee.
We will start with Mr. Bolas from Freedom, Pennsylvania.
STATEMENT OF JOHN EDWARD BOLAS, JR., FREEDOM, PENNSYLVANIA
Mr. BOLAS. I want to begin by thanking Chairman Charles
Rangel and the rest of the Committee members for this
opportunity to share my experience with the TAA program.
My name is John Bolas. I live with my wife, Maria, my
thirteen-year-old daughter, Johanna, and my 10-year-old son,
John III. We live in Economy, Pennsylvania, which is a small
town on the Ohio River not far from Pittsburgh, roughly twenty-
five miles.
I went into military service right out of high school. They
trained me for twelve weeks to be a radio teletype operator.
There were no jobs available like that whenever I left the
service. I worked for several construction companies in the
South before coming back to Pennsylvania. After several
temporary jobs, I finally got a job at Anchor Hocking Glass in
Myakka at the beginning 1998.
At Anchor Hocking I worked my way up from general laborer
to a position in the shipping department that paid $12.75 an
hour, and we had family benefits, such as health insurance.
During my time there, we had more weeks of shutdowns
intermittently due to losing customer contracts to foreign
imports. The most I ever made in 1 year was $25,000. Due to
foreign imports, I finally lost that job in 2005. I immediately
looked for work but glass jobs were being eliminated and plants
were closing down. I tried to fall back on my construction
experience, the state job centers called Career Links had no
jobs for someone with my skills available at that time. So, I
realized I needed to learn a new skills.
Because my workplace was eligible for the TAA program, I
knew I could get help with re-training. For most of my life I
had been interested in helping people with disabilities. My
father was a Vietnam veteran and active in different groups,
such as the Disabled American Veterans. My sister and I used to
volunteer at fairs and parades collecting donations to support
those groups. Then my dad had a stroke, and I learned about
rehabilitation from after he had a stroke because he had both
occupational therapy and physical therapy.
But with a family and no education beyond high school, I
did not see any way to do that. The Trade Adjustment Assistance
program gave me an opportunity. Through the state's Career Link
I checked out the projections for income and job openings and
decided on occupational therapy. I like this field because they
focus on getting people to return to their everyday living
activities. I knew that even with help it would take lots of
sacrifice from my family and myself, but it seemed the only way
I could get into permanent work. School was hard, it took lots
of concentration and homework.
There were many long nights and days of studying, but my
family helped and my wife made extreme sacrifices to take care
of many of the home issues as she could. The closest school for
me was in downtown Pittsburgh, 25 miles from my home. It
involved 18 months of class work and 4 months of field work.
The TAA paid for almost everything, which included tuition fees
and books, the books alone were over $1,000. It covered
uniforms, immunization shots and so forth.
Having the school paid for was essential, but there were
still other issues, travel expenses, which was over 50 miles
round trip 5 days a week, and also parking in downtown
Pittsburgh really add up. There is a group in Pennsylvania that
fights for unemployed workers called Mon Valley Unemployed
Committee. They helped all my co-workers and myself get
benefits. My wife called them and explained to them that--they
explained to her that the benefits only covered 100 mile
commutes, we were only 50. They suggested we try the Welfare
Department, which they in turn paid us 12 cents a mile, and
they paid for my parking, which was $5 a day.
A more serious problem for my family was the loss of our
health insurance. The plan for my former employer would have
cost more than $1,100 a month. The TAA program HCTC benefit
would have cost me $389 per month. My income from my
unemployment benefits was only $1,400 a month. We simply could
not afford the premium under the HCTC program. My children
ended up getting the CHIP program while me and my wife went
without insurance at all.
As it was, we used up all of our savings, including our
children's college fund. We almost lost our house but thanks
again to the assistance from the Mon Valley Unemployed
Committee, we held on to it. My wife's parents and other family
members also helped us out with that situation.
Now, after 2 years of training to be an occupational
therapist, I have job offers for $17.50 an hour for full time
and expect to start out at more than $35,000 a year with
benefits that cover my family. I graduated last month and will
get my papers allowing me to start work within a couple of
weeks.
Today, I sit before you with a hopeful future and thanks
for all that Congress has done to help dislocated workers like
myself make a better future for our families and ourselves.
[The prepared statement of Mr. Bolas follows:]
Prepared Statement of John Edward Bolas, Jr., Freedom, Pennsylvania
I want to begin by thanking Chairman Charles Rangel and the rest of
the committee members for this opportunity to share my experience with
the TAA program.
My name is John Bolas. I live with my wife Maria, thirteen-year-old
daughter Johanna and 10-year-old son John the III. We live in Economy,
Pennsylvania, which is a small town on the Ohio River not far from
Pittsburgh.
I went into military service right out of high school. They trained
me for 12 weeks to be a radio teletype operator. There were no jobs
like that when I got out. I worked for construction companies in the
South before coming back home to Pennsylvania. After several temporary
jobs I finally got a job at Anchor Hocking Glass in the beginning of
1998.
At Anchor Hocking, I worked my way up from general laborer to a
position in the shipping department that paid $12.75 an hour with
family health insurance. We had more weeks of shutdowns each year as
customer contracts got harder to get due to global competition. The
most I had ever made in a year was $25,000.
Due to imports, I then lost that good job in 2005. I immediately
looked for work. Glass jobs were being eliminated and plants closing
everywhere around me. I tried to fall back on my construction
experience but there was no construction in our area. The state job
centers, called Career Links, had no jobs available for someone with my
skills.
Then I realized that I needed to learn new skills. Because my
workplace was eligible for the TAA program, I knew I could get help
with retraining. For all my life I had been interested in helping
people with disabilities. My dad was a Vietnam Veteran and active in
groups including the Disabled American Veterans. My sister and I used
to volunteer at fairs and parades collecting donations to support those
groups. Then my dad had a stroke and I learned a lot about
rehabilitation and decided I'd like to work in that field.
But with a family and no education beyond high school, I didn't see
any way to do that. The Trade Adjustment Assistance program gave me
that opportunity. Through the state Career Link I checked out the
projections for income and job openings and decided on Occupational
Therapy. I liked this field because they focus on getting people able
to return to their everyday living activities.
I knew that even with help, it would take lots of sacrifice by my
family and myself but it seemed the only way I could get into permanent
work. School was hard. It took lots of concentration and homework. I
got some remedial help in math but there were many long days and nights
of study. My family helped, my wife tried to take care of as much of
the issues at home as she could.
The closest school for me was in downtown Pittsburgh, 25 miles from
my home. It involved 18 months of classroom and 4 months of fieldwork.
The TAA program paid for just about everything. Tuition, fees, books
($1000+), uniforms and immunization shots were all covered.
Having the school paid for was essential. But there were other
issues. Travel expenses, over fifty miles roundtrip 5 days a week and
parking in downtown Pittsburgh really add up. There is a group in
Pennsylvania that fights for unemployed workers called the Mon Valley
Unemployed Committee that helped all my co-workers get benefits. My
wife called them and they explained to her that the program only pays
for travel if the commute is more than 100 miles daily. They suggested
we could try the state Welfare Department for help. We got 12 cents a
mile from them and they paid my parking at $5 a day and I only had to
walk a mile to and from the parking lot.
A more serious problem for my family was the loss of our health
insurance. The plan from my former employer would have cost more than
$1100 per month. The TAA program HCTC benefit would have cost me $389
per month. My income from my unemployment benefits was $1400 per month.
We simply couldn't afford the premium under the HCTC program. My kids
got the CHIP program and my wife and I went without.
As it was, we used up all of our savings, and our kids college
fund. We almost lost our home but thanks again for the assistance from
the Mon Valley Unemployed Committee, we held on to it. Also parents and
other family members helped us out.
Now, after two years of training to be an Occupational Therapist
Assistant I have job offers for $17.50 an hour for full time work and
expect to start at more than $35,000 a year with benefits that cover my
family. I graduated last month and will get my papers allowing me to
start work in a couple weeks.
Today I sit before you with a hopeful future and thanks for all
that Congress has done to help dislocated workers like myself to make a
better future for our families and ourselves.
Chairman RANGEL. Thank you, Mr. Bolas. I wish we could
legislate the guts that you and your wife had to overcome that
setback. That is a great story and it shows what we can do.
I would like to recognize Mr. Levin for the purpose of
introducing the next witness.
Mr. LEVIN. Tammy Flynn, Tammy has been involved in these
programs for a long time and is now working for the Department
of Labor and Economic Growth. We had a chance to say hello
briefly, so on behalf of all of us, welcome.
Chairman RANGEL. You may proceed, Ms. Flynn.
STATEMENT OF TAMMY FLYNN, TRADE ADJUSTMENT ASSISTANCE STATE
COORDINATOR, BUREAU OF WORKFORCE PROGRAMS, DEPARTMENT OF LABOR
AND ECONOMIC GROWTH, LANSING, MICHIGAN
Ms. FLYNN. Thank you, Chairman Rangel and all of the
Committee members for the invitation today. My name is Tammy
Flynn. I am a Trade Adjustment Assistance program coordinator
with the State of Michigan. I have been working with TAA
program for the last 7 years. For 5 years, I worked as a local
TAA case management for a local One-Stop service center in
Lansing, Michigan. I am very honored to appear before you today
to discuss the important issues affecting trade and the workers
and families in Michigan.
I want to tell you just a little bit about Michigan's
situation. The state does continue to face significant
challenges as the automotive industry undergoes dramatic
changes. In Michigan, 36 percent of all manufacturing jobs are
tied to the auto industry. Many of you have heard about the
layoffs and the plant closings that our major industries are
facing, and the Michigan workers and families are really the
faces of those news stories that you read and hear about. These
are the same working families that help build the foundation of
this country and now they are really in need of our support.
Michigan's Governor, the legislature, and other state
leaders are leading the state through a coordinated strategy to
transform our economy and ensure that workers have jobs and can
support their families. TAA is such a critical part of that
strategy and a vital safety net for our workers. There is a
great need for an improved TAA program in Michigan. Between
2005 and Fiscal Year 2006, Michigan's approved TAA
certifications increased by 60 percent. At the end of 2006,
Michigan had over 10,000 TAA participants and as recent as
April of this year the number increased to almost 13,000
participants.
I am here today to really represent the stories behind
those numbers and share my experiences working with these
workers. Michigan workers truly need and use the TAA program.
In the last Fiscal Year, Michigan received $6.6 million as our
base allocation for TAA with approximately 5,000 TAA
participants enrolled in training, but we had over 13 million
in contractual obligations for training and services. Michigan
received the seventh largest base allocation that year even
though we had the third highest number of certifications and
experienced that pattern of certification increases over the
previous 2 years. In Fiscal Year 2007, we received $7.1 million
as our base allocation. While this was an increase, it still
was insufficient funding.
As Dr. Nilsen mentioned in the previous panel, there are
some states receiving funding that they do not need. Michigan
is one of the states that truly needs and uses their funding.
This situation constantly forces Michigan to focus great energy
and precious resources on developing TAA reserve funding
requests that the Department of Labor has to review. The gaps
in funding really takes a toll on the worker, it provides
interruptions in training, on a state level it becomes a
planning issue, it takes away from other TAA administrative
duties that are vital to the operation of TAA. It also has the
possibility of creating waiting lists. As we know, when a
worker sits on a waiting list for months and months, they are
actually using up the payment benefit that they really truly
need while they are in training. So, if at the end of the
waiting list, they can enter into training, they may not even
be able to pursue that at that time because of lack of the
income support.
It has taken from one to 5 months to receive these
additional funding reserve requests for us to be able to get
those into the hands of the workers. There really does not
appear to be a justifiable basis for Michigan's inadequate
funding situation when we have clearly demonstrated our need
for up front and adequate funding. One solution to this would
be to create a new base allocation formula that more clearly
reflects the current status of each state's TAA program and is
not dependent on prior year expenditure and certification data.
Our workers really suffer when there is inadequate funding.
There are some other administratively burdensome
requirements that are placed on TAA coordinators at the state
and local level that increase time and paperwork and it takes
away time from spending with workers. One example of this is
the time used to produce and manage training waivers. In order
to receive the TAA payment benefits, training waivers waive the
restrictive deadlines that requires workers to be enrolled in
training at least 8 weeks after the certification or 16 weeks
from their layoff. In Michigan, this review process requires
each worker to contact their local agency to continually assess
that waiver. We looked at one Michigan TAA service center that
had 164 open TAA waivers in April of this year and that service
center spent almost $1,000 just returning the phone calls to
those participants who were unable to make their own contact
that month. So, that does not include the staff time that came
before that and then the staff time and postage and different
things like that to actually get the waivers back on track for
that month. So, something that we are suggesting is that the
Department of Labor could help the situation by extending the
deadline for workers, possibly a 30/30 as opposed to an 8/16 or
even lengthening the period of time required between the
waivers to really ease up on the case management.
My experience has really shown that the success of the TAA
program is dependent on the individual case management and
career guidance that is provided to workers.
Chairman RANGEL. Ms. Flynn, you will have to summarize.
Ms. FLYNN. Okay. Really, I just want you to consider
workers and families that have been negatively impacted by
trade. TAA is really a vital piece of our response to those who
are facing hardships due to these situations. I think I speak
for all of my Michigan colleagues and the clients in Michigan
when I say that we really look forward to your support making
this program all that it should be for the workers and really
making it truly available to them.
Thank you.
[The prepared statement of Ms. Flynn follows:]
Prepared Statement of Tammy Flynn, Trade Adjustment Assistance State
Coordinator, Bureau of Workforce Programs, Department of Labor and
Economic Growth, Lansing, Michigan
My name is Tammy Flynn and I am a Trade Adjustment Assistance
Program Coordinator in the State of Michigan. I have been working with
Trade Adjustment Assistance (TAA) and other workforce programs for
approximately 7 years. Prior to my employment in Michigan's Department
of Labor and Economic Growth I worked in one of Michigan's local
workforce agencies located in Lansing, Michigan. I am honored to appear
before you today with the opportunity to discuss the important issues
affecting trade impacted workers and families in Michigan.
I'd like to start by telling you about Michigan's TAA program and
the workers we serve. Michigan continues to face significant challenges
as the American automotive industry undergoes dramatic changes. In
Michigan, 36% of all manufacturing jobs are tied to the auto industry.
Many of you have heard about the layoffs and plant closings that our
major industries are facing, Michigan workers and families are the
faces of those news stories that you read and hear about. These are the
same working families that helped build the foundation of this country
and they are now in need of our support as they attempt to transition
into new livelihoods. Michigan's Governor, Legislature, and other state
leaders are leading the state through a coordinated strategy to
transform our economy and ensure that workers have jobs and can support
their families. TAA is a critical part of that strategy and a vital
safety net for our workers. There is great need for an improved and
comprehensive TAA program in Michigan, between 2005 and 2006 Michigan's
approved TAA certifications increased by 60%. At the end of 2006,
Michigan had over 10,600 TAA participants and as recent as April 2007
that number increased to almost 13,000 participants.
I am here today to represent the stories behind those numbers and
share my experiences providing services to TAA workers. In the last
fiscal year, Michigan received $6.6 million as our base allocation for
TAA with approximately 5,000 TAA participants enrolled in training and
over $13 million in contractual obligations for training and services.
Michigan received the 7th largest base allocation that year even though
we had the 3rd highest number of TAA certifications and experienced a
pattern of certification increases over the previous two years. In FY
2007, we received $7.1 million as our base allocation, while this was
an increase it was still insufficient for the workers that we are
serving and the number of new workers that we are enrolling in the
system. This situation constantly forces Michigan to focus great energy
and resources on developing TAA reserve funding requests that the
Department of Labor has to review. These gaps in funding and the time
it takes to resolve them often cause interruptions in worker training.
When this happens we must lean on other funding sources that are also
limited or create waiting lists, which can decrease a worker's ability
to take advantage of their TAA benefits.
There appears to be no justifiable basis for Michigan's inadequate
funding situation particularly when we have consistently demonstrated
our great need for up-front and adequate funding. One solution would be
to create a new base allocation formula for states that more clearly
reflects the current status of each state's TAA program and is not
dependent on old expenditure and certification data.
Additionally, there are administratively burdensome requirements
that are placed on TAA coordinators at the state and local level that
increase staff time and paperwork and take away from the time spent
assisting workers. One example of this is the administrative time used
to produce training waivers. Training waivers waive the mandatory and
very restrictive deadlines that require workers to be enrolled in
training at least 8 weeks after TAA certification or 16 weeks after
their layoff. The Department of Labor requires local workforce agencies
to review waivers every 30 days. In Michigan, the review process
requires each worker to contact their local agency in order to assess
their waiver status. One Michigan TAA Service Center was managing 164
TAA open waivers in April 2007. The Center spent $932 on returning
phone calls to those participants who were unable to make contact that
month. The Center spent additional funds on postage for mailing
information to those who could not be reached by phone. This is costly
for our local workforce agencies that do not have the administrative
funds or resources to spare. The Department of Labor could help this
situation by extending the deadline for workers to enroll in training,
which could potentially decrease the amount of workers needing waivers.
The Department of Labor should also support local agencies by
lengthening the period of time required to review remaining waivers.
My experience has shown that the success of the TAA program is
dependent on the care and guidance that workers receive. Imagine the
state of mind for workers who have spent their entire careers in one
occupation and have seen their lives disrupted because of layoffs or
plant closings. Many of our TAA clients require significant case
management and individual time. Recently, when I visited a local
workforce agency a woman approached me in tears and told me that while
she wanted the opportunities TAA provided, she really needed direct
guidance in order to make sense of the deadlines and rules. As I walked
her around the Service Center, it became clear that every TAA Case
Manager was completely booked with appointments. TAA can offer great
solutions to workers but only if they understand how to use it
effectively. More funding within TAA for case management is necessary
to relieve the burden local coordinators are feeling and for workers to
properly use it to re-train and gain employment.
In conclusion, I urge you to consider the workers and families that
have been negatively impacted by our nation's trade policy--
particularly those in manufacturing states who have been hit hard and
need help from our federal partners. TAA is a critical piece of our
response to those who are facing hardships due to situations that are
out of their control. I speak for my Michigan colleagues and our
clients when I say that we look forward to your support in making this
program all that it should be for the workers who so earnestly deserve
a program that works for them and fits their unique needs. Thank you.
Chairman RANGEL. Thank you so much. The Chair recognizes
Mr. Lewis from Kentucky for purposes of presenting our next
panelist.
Mr. LEWIS OF KENTUCKY. Thank you, Mr. Chairman. I
appreciate this opportunity. It is my privilege to introduce
Virginia Flanagan and to welcome her to the Committee on Ways
and Means. Welcome.
Whenever this Committee discusses issues related to trade
and globalization, I often talk about the ``Campbellsville
comeback.'' In 2004, I was honored to have two of my colleagues
from this Committee participate in a roundtable forum that we
held in Campbellsville. Virginia was one of the key leaders in
this small community in the effort to rebound after a plant
closing.
She was the director of the Campbellsville University Tech
Training Center and was a big part of that comeback transition.
Her efforts helped many of the residents quickly move into a
new workforce. The ``Campbellsville comeback'' is truly and
inspiring story, and I think we will all learn from Virginia's
testimony today.
But, again, thank you again, Mr. Chairman, for allowing me
to introduce Virginia.
Thank you.
Chairman RANGEL. You can proceed, thank you.
STATEMENT OF VIRGINIA PONSER FLANAGAN, CONSULTANT,
CAMPBELLSVILLE UNIVERSITY, CAMPBELLSVILLE, KENTUCKY
Ms. FLANAGAN. Mr. Chairman and distinguished Members of the
Committee, on behalf of Campbellsville University,
Campbellsville and Taylor County and Central Kentucky, we
appreciate and are very grateful to be able to share the story
of the ``Campbellsville comeback'' and the essential part that
Trade Adjustment Assistance played in this success story.
Congressman Ron Lewis has called Campbellsville a poster
community for her economic recovery from the loss of Fruit of
the Loom in 1997 and 1998 to the creation of 3,773 new jobs
announced from October 1999 to December 2003.
Campbellsville for many years was considered a one-factory
town and suddenly was facing a nearly 30 percent unemployment
rate that would certainly have ripple effects over the local
community and businesses in the community. The rural community
is 40 miles from the most direct Interstate 65 interchange, you
have got to come there on purpose. It is a 90 minute drive from
the Louisville International Airport. In 2002, we had largely a
working-class, high school educated workforce ill-suited for
the high technology jobs. By 2007, Campbellsville has added
nearly 3,800 jobs, a net gain of 600 from when the Fruit of the
Loom layoffs began. The average weekly rate increased to $484
from $374 between 2005 and 1996. Per capita income from 1995 to
2004 increased to $21,771 from $16,081. That growth outpaced
the state by a third. The unemployment averaged 4.9 percent in
2006, about where it was right before the Fruit of the Loom
layoffs began.
Now, how does a rural community overcome these types of
obstacles and have the Kentucky State Data Center rank
Campbellsville as one of the fastest growing communities in
Kentucky in 2003? John Chowning, former Chairman of the Team
Taylor County, said Campbellsville had three keys to its
success: Taking a mid-19th century approach to economic
development and turning it to a 21st century opportunity; the
development of Kentucky Highway 210; and lifelong learning
opportunities, which Campbellsville residents learned that they
could be lifelong learners. Chowning said, ``We have coined the
phrase 'Team Taylor County,' meaning the city, the county, the
university, the schools, the economic development
organizations.'' Many people thanked in Taylor County a crisis
response team of local businesses, community and academic
leaders for bringing the county back. The team has seen its
strategies studied by international scholars looking for ways
to cope with globalization downsizing.
``Campbellsville University responded quickly to the needs
of those who lost their jobs,'' Chowning said. It was crucial
that we be able to move quickly. Campbellsville University
established a Technology Training Center with a $2 million
grant obtained with the help of Senator McConnell. U.S.
Congressman Ron Lewis and Senator Bunning have also played
roles for opportunities for the training.
The Training Center allows companies to customize training.
I might interject here, gentlemen, we have been talking about
training, it is important. I think companies want trainable
people not people who are ready to work necessarily on specific
jobs, but people who are ready to be trained for a specific
job. CUTT works with industries to train employees in a range
of technology skills, including several computer industry
certification. It also provides space for companies to train
their employees on new equipment before it is installed.
Two of the success stories from this era are Lana Wright
and Karen Brockman, who were devastated when their jobs were
discontinued. Wright, who had worked for Fruit of the Loom for
15 years said she and her husband and other family members
worked there and the loss of the plant was devastating because
they were unsure of their future, including health care.
Brockman was employed at Fruit of the Loom for 9 years and she
was both scared and excited when she lost her job. She and
Wright were two of the 30 people who were chosen to work at
Frost Arnet where they still are with jobs they love and are
making a much better salary.
More recently in 2004 and 2005, the garment industries were
closed in Albany in Clinton County, Kentucky, approximately 65
miles from the campus of Campbellsville. We offered a 2 year
associate degree in administration technology to these workers
in Clinton County. We were able with the assistance of TAA
funding to have 46 laid off workers to graduate with a 2 year
degree from Campbellsville University. We faced obstacles
getting this done. One in particular is that many of these
people lived in Tennessee and getting Tennessee to fund their
training in Kentucky proved to be somewhat of an exercise but
we got it done.
The importance of Trade Adjustment Assistance cannot be
over-emphasized in the ``Campbellsville comeback.'' The
specificity of TAA as it relates to manufacturing has been
critical in revitalizing the economy in the Campbellsville
Taylor County area. Not only has this funding aided in income
growth but the opportunities for further education and training
has improved the quality of life for its citizens. TAA has been
an important tool in our toolbox with our comeback. Another
tool was the formation of Team Taylor County and the way that
the county and its area brought together the best possible
leadership. We tried to put aside differences, such as
politics, religion, et cetera, in order for a unified group.
Mr. Chairman, thank you very much for the opportunity to
share the story of Campbellsville Taylor County and the
surrounding area. I hope that our experience will illustrate
the importance of funding through the Trade Adjustment
Assistance program combined with an aggressive business
development plan.
Thank you.
[The prepared statement of Ms. Flanagan follows:]
Prepared Statement of Virginia Ponser Flanagan, Consultant,
Campbellsville University, Campbellsville, Kentucky
Mr. Chairman and distinguished members of the committee, on behalf
of Campbellsville University, Campbellsville and Taylor County, and the
central Kentucky region, we appreciate and are very grateful to be able
to share the story of the ``Campbellsville Comeback'' and the essential
part that Trade Adjustment Assistance played in this success story.
Congressman Ron Lewis called Campbellsville ``a poster community''
for her economic recovery from the loss of Fruit of the Loom in 1997-98
to the creation of 3,773 new jobs announced from October 1998 to
December 2003. Campbellsville for many years was considered a one
factory town and suddenly was facing a nearly 30% unemployment rate
that would certainly have ripple effects over other local businesses
and leaders in the community. The rural county is 40 miles from the
most direct Interstate 65 interchange. It is a 90 minute drive to the
Louisville International Airport and in 2002 had a largely working
class, high school educated workforce ill suited for high technology
jobs.
By 2007, Campbellsville has added nearly 3,800 jobs, a net gain of
600 from when the Fruit of the Loom layoffs began. The average weekly
wage increased to $484 from $374 between 2005 and 1996. Per capita
income from 1995 to 2004 increased to $21,771 from $16,081. That growth
outpaced the state by a third. The unemployment rate averaged 4.9
percent in 2006, about where it was right before the Fruit of the Loom
layoffs.
How does a rural community overcome these types of obstacles and
have the Kentucky State Data Center ranked Campbellsville as one of the
fastest growing cities in Kentucky in July 2003?
John Chowning, former chairman of Team Taylor County said
Campbellsville had three keys to its success: taking a mid-19th century
approach to economic development and turning it around to a 21st
century opportunity; the development of Kentucky Highway 210; and life-
long learning opportunities with Campbellsville residents learning they
could be life-long learners. Chowning said ``We coined the phrase Team
Taylor County, meaning the city, the county, the university, the
schools, the economic development organizations.'' Many people thank
Team Taylor County, a crisis-response team of local business, community
and academic leaders, for bringing the county back. The team has seen
its strategy studied by international scholars looking for ways to cope
with globalization's downside.
``Campbellsville University responded quickly to the needs of those
who lost their jobs, Chowning said. ``It was crucial that we be able to
move quickly.'' Campbellsville University established the Technology
Training Center with a $2 million grant obtained with the help of U.S.
Senator Mitch McConnell. U.S. Congressman Ron Lewis and U.S. Senator
Jim Bunning have also played roles in funding opportunities for
Campbellsville University.
Campbellsville University Technology Training Center (CUTTC) allows
companies to provide customized training. CUTTC works with industry to
train employees in a range of technology skills, including several
computer industry certifications. It also provides space for companies
to train their employees on new equipment before it is installed.
Realizing thousands of workers would need to be retrained after the
loss of Fruit of the Loom, the county tapped into job training funds
like federal Trade Adjustment Assistance, geared for workers losing
their jobs to the negative effects of trade. The assistance program
also provides extended jobless benefits for a year instead of six
months and even longer for displaced workers in school. 340 former
Fruit of the Loom workers enrolled at Campbellsville University and of
that 227 completed at least a two year degree program. The assistance
program provided $10,000 in financial assistance over two years to
students whose jobs were relocated abroad. The remainder of the private
university's annual tuition, about $8,800 during the late 1990's came
from about $2.25 million in aid the university provided. Campbellsville
University took what the government would pay and discounted the
balance. Some programs helped pay for books, gas and even child care.
Workers got one-year certificates and two year degrees and even a few
went through a four year program. A few even went for master's level
degrees. Several hundred other students went to neighboring
universities and community colleges.
Two of the many success stories are Lana Wright and Karen Brockman
who were devastated when their jobs were discontinued. Wright, who had
worked at Fruit of the Loom 15 years, said she and her husband and
other family members worked there, and the loss of the plant was
devastating because they were unsure of their future including health
care. Brockman who was employed at Fruit of the Loom nine years, said
she was both ``scared and excited'' when she lost her job and was
forced to try something new. She and Wright were two of 30 people who
were chosen to work at Frost Arnett, jobs they both love.
``Campbellsville University embraced us,'' Wright said. Training was
offered to them and other community members through various programs
including Trade Adjustment Assistance which paid for their education
through the university.
More recently during 2004-2005 two garment industries were closed
in the Albany/Clinton County area approximately 65 miles from
Campbellsville University, the small rural community faced the loss of
a significant amount of jobs. Campbellsville University offered a two
year associate degree in administration technology to these workers at
a Clinton County site through the TAA program. With the assistance of
TAA funding, 46 laid-off workers were able to graduate from
Campbellsville University.
The staff at Campbellsville University faced many obstacles
obtaining TAA funding for residents who lost their jobs in Clinton
County, Kentucky but who reside in Fentress County, Tennessee.
Improvement to the program could be made to remove barriers in special
situations concerning issues such as residency.
The importance of Trade Adjustment Assistance cannot be
overemphasized in the ``Campbellsville Comeback.'' The specificity of
TAA as it relates to manufacturing has been crucial in revitalizing the
economy in Campbellsville/Taylor County and the surrounding areas. Not
only has this funding aided in income growth, but the opportunity for
further education and training has improved the quality of life for
many citizens.
The ``Campbellsville Comeback'' was made possible using many tools
in the toolbox. One tool in the toolbox was the TAA funding for
training for those who had lost their positions due to plant closures.
TAA funding was essential in the educational experience received by
many laid-off workers. Another tool was the formation of Team Taylor
County. Team Taylor County joined the city, the county, the university,
the schools, the economic development organizations together to provide
the best leadership possible for the community. Team Taylor County set
aside differences such as politics, religion, etc. in order to form a
unified group.
Thank you very much for the opportunity to share the story of
Campbellsville/ Taylor County and the surrounding area. I hope that our
experience will illustrate the importance of funding through the Trade
Adjustment Assistance program combined with an aggressive business
development plan.
Chairman RANGEL. Thank you, Ms. Flanagan. It is a good
story and it really helps us a great deal. We thank you for
taking time to testify.
Curtis Morrow, Workforce Development Unit manager, North
Carolina?
STATEMENT OF CURTIS MORROW, WORKFORCE DEVELOPMENT UNIT MANAGER,
NORTH CAROLINA EMPLOYMENT SECURITY COMMISSION, RALEIGH, NORTH
CAROLINA
Mr. MORROW. Thank you, sir.
Chairman RANGEL. Thank you.
Mr. MORROW. I will begin. My name is Curtis Morrow. I am
the Workforce Unit manager with the Employment Security
Commission out of Raleigh, North Carolina.
Chairman Rangel, thank you for the opportunity to speak
with the Committee on our experiences in the administration of
the Trade Adjustment Assistance in North Carolina. During the
past several years, the impact of imports have had a
devastating effect on job losses in North Carolina. Major
layoffs in industries, such as textile and apparel and
furniture, have contributed to tremendous job losses for North
Carolina workers. The bright spot during this challenging time
has been the utilization of the Trade Adjustment Assistance
program and the funding needed for the re-training of the North
Carolina workforce.
North Carolina currently leads the nation in trade-impacted
layoffs, TAA petitions certified and has the largest number of
workers enrolled in TAA training. In addition, for Fiscal Year
2006 through May of Fiscal Year 2007, the North Carolina
Employment Security Commission has provided TAA program
services for an average of 9,585 workers in re-training per
month, and that does not include the additional 4,000 workers
that are enrolled in the work search component of TAA. TAA
program training expenditures through this same period, Fiscal
Year 2006 through May of 2007, has totaled $21,559,311.
Today, my role is to strongly encourage you to make the
changes that will provide more trade-impacted workers, such as
the thousands in North Carolina, the opportunity to take
advantage of a program that could provide a competitive edge as
we compete in this global economy.
In order to provide a more comprehensive approach in
assisting trade-impacted workers to be more competitive, we ask
that you allow more flexibility in the definition of allowable
cost in the TAA training and administration cost category. The
present definition in the training cost category is extremely
narrow and does not allow the opportunity to provide quality
service. Training costs begin with the assessment of a worker's
needs, career counseling, career exploration, labor market
information on job availability and continues throughout
training with this case management approach. We must change a
trade-impacted worker's mindset. Today's workers must
understand soft skills. Working in groups, completing several
tasks, and displaying interest in additional education is a
must for North Carolina's workforce to maintain a competitive
edge. The redefining of TAA training costs to include these
items will allow the opportunity for the Employment Security
Commission to provide services to an even larger trade-impacted
workforce.
Another critical part of assisting a trade-impacted worker
is providing health insurance coverage for the worker and their
family. North Carolina embraced the Health Credit Tax Credit
Program as another major option of assisting effected workers
and leads the nation in the number of workers taking advantage
of the advanced payment option of 65 percent of the health
insurance premium. From August 2003 through today, North
Carolina has enrolled 7,295 effected workers, or more than 16
percent of the nation's total, HCTC population. This aggressive
process to assist workers with their health insurance premiums
began with the Pillowtex layoffs in August of 2003.
The process utilized for enrollment in HCTC at the Federal
level results in a 30 to 60 day or longer delay or gap in the
payment of initial health insurance premiums. In light of this,
North Carolina submitted a request to the Employment and
Training Administration of the U.S. Department of Labor and was
awarded a Workforce Investment Act National Emergency Grant to
provide bridge or gap-filler payments to effected workers. The
process we established was that trade-eligible worker presents
us with the insurance provider's invoice for health coverage,
we then write a check for 65 percent payable to both the worker
and insurance provider and send it to the worker. It is then
the worker's responsibility to match that with 35 percent and
submit the total payment to the insurance carrier. This
provides for the timely payment of the original premium and
ensures the worker of unbroken health care coverage. To date,
we have provided from August 2003 through May 2007, 7,033
workers with bridge or gap-filler payments totaling $3,754,892.
These numbers represent a small number of effected workers
and their families, but if we have allowed a few families to
maintain their health insurance coverage, we are proud.
However, even with this process, the 35 percent cost to
families, particularly older workers and those with health
issues, remains a crushing economic blow. We strongly encourage
the effected worker portion be reduced to 20 percent. While it
will not provide the total solution, the reduced percentage for
the worker will allow for the economic burden to be lessened.
I also ask that you continue to provide funding for the
bridge or gap-filler payments. While it may be a challenge to
states to administer, in my opinion, it is one of the most
important value-added services we provide to these effected
workers.
I hope I have raised some challenging issues and request
that Congress give workforce professionals, like myself, the
tools to continue to assist our workforce in meeting the
competitive global environment.
Thank you, sir.
[The prepared statement of Mr. Morrow follows:]
Prepared Statement of Curtis Morrow, Workforce Development Unit
Manager, North Carolina Employment Security Commission, Raleigh, North
Carolina
Chairman Rangel, thank you for the opportunity to speak with the
Committee, on our experience in the administration of the Trade
Adjustment Assistance (TAA) program in North Carolina.
During the past several years, the impact of imports have had a
devastating effect on job losses in North Carolina. Major layoffs in
industries such as textiles and apparel, and furniture, have
contributed to tremendous job losses for North Carolina workers.
The bright spot during this challenging time, has been the
utilization of the Trade Adjustment Assistance (TAA) program and the
funding needed for the retraining of the North Carolina workforce.
North Carolina currently leads the nation in trade-impacted layoffs,
TAA petitions certified, and the largest number of workers enrolled in
the TAA training. In addition, for Fiscal Year, 06 and Fiscal Year, 07,
North Carolina Employment Security Commission provided TAA program
services to an average of 9,585 workers in retraining per month. TAA
program expenditures during this two-year period totaled $21, 559,311.
(See Attachment A).
Today, my role is to strongly encourage you to make changes that
will provide more trade-impacted workers, such as thousands in North
Carolina, the opportunity to take advantage of a program that could
provide a competitive edge as we compete in this global economy.
In order to provide a more comprehensive approach to assisting
trade-impacted workers to be more competitive, we ask that you allow
more flexibility in the definition of allowable costs in the TAA
Training and Administration Cost Categories. The present definition in
the Training Cost Category is extremely narrow and does not allow the
opportunity to provide quality service.
Training cost begins with assessment of a worker's needs, career
counseling, and continues throughout training with case management. We
must change a trade-impacted worker's ``mindset''. Today's workers must
understand ``soft-skills''. Working in groups, completing several
tasks, and displaying interest in additional education, is a must for
North Carolina's workforce to maintain a competitive edge. The re-
defining of TAA Training Costs to include these items will allow North
Carolina Employment Security Commission to provide services to an even
larger trade-impacted workforce.
Another critical part to assisting a trade-impacted worker is
providing health insurance coverage for the worker and their family.
North Carolina embraced the Health Coverage Tax Credit (HCTC) program
as another major option of assisting affected workers, and leads the
nation in the number of workers taking advantage of the advanced-
payment option of 65% of the health insurance premium. North Carolina
has enrolled 7,295 affected workers or more than 16% of the nation's
total HCTC population.
The process utilized for enrollment in HCTC at the federal level
results in a 30 to 60 day, or longer, delay, or ``gap,'' in the payment
of the initial health insurance premiums.
In light of this, North Carolina submitted a request to the
Employment and Training Administration of the U.S. Department of Labor
and was awarded a Workforce Investment Act (WIA) National Emergency
Grant (NEG) to provide ``bridge'' or ``gap filler'' payments to
affected workers.
The process we established was that the trade eligible worker
presents us with the insurance provider's invoice for health coverage.
We then write a check for 65%, payable to both the worker and insurance
provider, and send it to the worker. It is the worker's responsibility
to match that with 35% and submit the total payment to the insurance
carrier. This provides for the timely payment of the original premium
and assures the worker of unbroken health care coverage. To date, we
have provided 7033 workers with ``bridge/gap filler'' insurance
payments totaling $3,754,892.
These numbers represent a small number of affected workers and
their families, but if we have allowed a few families to maintain their
health insurance coverage, we are proud. However, even with this
process, the 35% cost to families', particularly older workers and
those with health issues, remains a crushing economic blow. We strongly
encourage the affected worker portion be reduced to 20%. While it will
not provide the total solution, the reduced percentage for the worker
will allow for the economic burden to be lessened.
I hope I have raised some challenging issues and requested that
Congress give workforce professionals like myself, the tools to
continue to assist our workforce in meeting the competitive global
environment.
ATTACHMENT A
Employment Security Commission of North Carolina
Trade Adjustment Assistance Program (RAA)
Funding For Training
As of May 31, 2007
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Expenditures Funding Available
FY 07 Total Funding Total Obligations
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Training 12,237,219 4,982,282 12,974,300 (737,081)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Expenditures Funding Available
FY 06 Total Funding Total Obligations
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Training 16,577,049 16,577,049 16,577,049 0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Summary For All Years
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Cumulative Expenditures Total Obligations Funding Available
Funding
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Training 28,814,268 21,559,331 29,551,349 (737,081)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Active Participants In Training (10/1/06-9/30/07)
October 9,098 April 9,968
November 9,412 May (2007) 9,534
December 9,783
January 9,817
February 9,714
March 9,740
Active Participants In Training (10/1/06-9/30/06)
October 9,600 April 9,645
November 9,978 May 9,117
December 10,330 June 8,893
January 10,041 July 9,194
February 9,753 August 9,278
March 9,613 September 9,190
Chairman RANGEL. Thank you, Mr. Morrow. Your testimony
makes a lot of sense. Now it is my pleasure to recognize Mr.
Fusco from the neighboring state of New Jersey. Thank you.
STATEMENT OF JAMES FUSCO, EAST BRUNSWICK, NEW JERSEY
Mr. FUSCO. Good afternoon, Chairman Rangel and Ranking
Member McCrery. My names is James Fusco. I am a resident of
East Brunswick, New Jersey.
First, I want to thank you and the Members of the Committee
for the opportunity to testify today. I am a college graduate
with a Bachelor's of Arts degree. After college, I pursued
technical training in mainframe computer programming languages,
specifically COBOL. I eventually became employed by the
American Telephone and Telegraph Company, AT&T, as a mainframe
applications developer. I was responsible for the design,
coding and testing of mainframe application software. I had 13
years of service AT&T when in 1999 I and thousands like me were
outsourced to IBM Global Services. Over the course of the next
3 years, many of us lost our jobs as IBM offshored them to
Canada and India. My own job was offshored to Canada, and I
became unemployed in May 2002.
In November 2002, several of my IBM colleagues and I filed
a petition for certification under the Trade Act. In March of
2003, a negative determination was issued by the U.S.
Department of Labor. The reason for the negative determination
was that computer software was not considered an article within
the meaning of the Trade Act. In the meantime, my regular
unemployment benefits and their 13 week extension had run out,
but I was continuing to receive ordinary training benefits as I
was enrolled in a modest training program at a local community
college. This training did not significantly enhance my
employment prospects. I filed for reconsideration on the
Department of Labor's negative TAA determination in April of
2003. In July of 2003, another negative determination was
issued by the Department of Labor again for the reason stated
earlier.
The next step after reconsideration was judicial review
before the U.S. Court of International Trade. Feeling that I
had neither the time, resources nor skill to pursue the matter
further, I was prepared to let the matter drop when in
September of 2003, from contacts with the Alliance at IBM and
Washtec, I was put in touch with Michael Smith, an attorney who
was willing to pursue the matter pro bono. It was Mr. Smith and
later Jean-Claude Andre, his associate, who decided to turn my
request for judicial review into a class action lawsuit that
would encompass all similarly situated workers.
By this time, I was no longer receiving even ordinary
training benefits, and I began to spend down my savings. My
COBRA entitlement ran out in November of 2003, and I had to
purchase private medical insurance. Since no Trade Act
certification was apparently soon forthcoming, I abandoned the
idea of furthering my software skills with an intensive program
of re-training. Many of my software development colleagues had
left the information technology field altogether.
In November of 2003, I was fortunate through the personal
contacts of a family member to obtain employment in Garden City
Long Island. This job, though it was information technology
related, was of a different nature than my former employment.
It also paid only about 80 percent of my previous salary and
required 5 hours of commuting everyday from East Brunswick, New
Jersey to Garden City Long Island.
In July of 2005, a hearing was finally held on our TAA
certification before the U.S. Court of International Trade and
the case was remanded to the Department of Labor, which again
issued a negative determination in December of 2005 and again
for the same reason.
In November of 2005, I began work as a software consultant
contractor in New York City. This position was better paying
and more in line with my skills than the job in Garden City. It
also required less of a daily commute.
In March of 2006, the Department of Labor filed a request
for voluntary remand and finally certified us, the IBM workers,
as eligible for Trade Adjustment Assistance benefits. They
finally agreed with us that computer software was an article
within the meaning of the Trade Act, albeit an intangible one.
This decision came almost exactly three and a half years after
our original petition in November of 2002. As I was working at
the time, I decided not to pursue TAA benefits.
In February of 2007, my software contract in New York City
having run out, I again became unemployed. It was then that I
began to investigate TAA benefits and had almost decided on a
training program, but I stopped when I started my most recent
job on June 4th of this year.
In short, had Trade Act certification been granted to us in
a timely manner, I would have pursued a more intensive and
comprehensive program of training and would have had the
opportunity to compete for jobs involving newer programming
skills like JAVA and.Net. I would never want what happened to
me and my IBM colleagues to happen to anyone else. Had the
Department of Labor recognized sooner that changing technology
had put software workers in the same position as the
manufacturing workers that the Trade Act was originally written
to protect, we would have better been able to make use of its
benefits. A GAO study states that 40 percent of TAA petitions
are denied because the Department of Labor does not regard what
the workers produce as an article within the meaning of the
Act.
How many people are there out there who do not have the
time and persistence to pursue this matter as I did? If I
become unemployed again in the future, I intend to avail myself
of the benefits of our TAA certification, which was so long in
coming.
Thank you.
[The prepared statement of Mr. Fusco follows:]
Prepared Statement of James Fusco, East Brunswick, New Jersey
Good morning, Rangel and Ranking Member McCrery. My name is James
Fusco. I am a resident of East Brunswick, New Jersey.
First, I want to thank you and the rest of the committee for the
opportunity to testify today.
I am a college graduate with a Bachelor of Arts degree. After
college, I pursued technical training in mainframe computer programming
languages, specifically COBOL. I eventually became employed by the
American Telephone and Telegraph Company (AT&T), as a mainframe
applications developer. I was responsible for the design, coding and
testing of mainframe applications software.
I had thirteen years of service with AT&T. In 1999, I and thousands
like me were outsourced to IBM Global Services. Over the course of the
next three years, many of us lost our jobs as IBM offshored them to
Canada and India. My own job was offshored to Canada, and I became
unemployed in May, 2002.
In November of 2002, several of my IBM colleagues and I filed a
petition for certification under the Trade Act. In March of 2003, a
negative determination was issued by the U.S. Department of Labor. The
reason for the determination was that computer software was not
considered an article within the meaning of the Trade Act.
In the meantime, my regular unemployment benefits and their 13 week
extension had run out, but I was continuing to receive ordinary
training benefits as I was enrolled in a modest training program at a
local community college. This training did not significantly enhance my
employment prospects.
I filed for reconsideration on the Department of Labor's negative
TAA determination in April of 2003. In July of 2003, another negative
determination was issued by the U.S. Department of Labor, again for the
reason stated earlier.
The next step after reconsideration was judicial review before the
U.S. Court of International Trade. Feeling that I had neither the time,
resources, nor skill to pursue the matter further, I was prepared to
let the matter drop, when in September of 2003, through contacts with
the Alliance@IBM and WashTech, I was put in touch with Michael Smith,
an attorney who was willing to pursue the matter pro bono.
It was Mr. Smith, and later Jean-Claude Andre, his associate, who
decided to turn my request for judicial review into a class action
lawsuit that would encompass all similarly situated workers.
By this time, I was no longer receiving even ordinary training
benefits, and I began spending down my savings. My COBRA entitlement
ran out in November 2003, and I had to purchase private medical
insurance.
Since no Trade Act certification was apparently soon forthcoming, I
abandoned the idea of furthering my software skills with an intensive
program of retraining. Many of my software development colleagues left
the information technology field altogether.
In November of 2003, I was fortunate, through the personal contacts
of a family member, to obtain employment in Garden City, Long Island.
This job, though it was Information Technology related, was of a very
different nature than my former employment. It also paid only about 80%
of my previous salary, and required 5 hours of commuting every day,
from East Brunswick New Jersey to Garden City, Long Island.
In July of 2005, a hearing was finally held on the our TAA
certification before the U.S. Court of International Trade, and the
case was remanded to the Department of Labor, which again issued a
negative determination in December of 2005.
In November of 2005, I began work as a software consultant/
contractor in New York City. This position was better paying and more
in line with my skills than the job in Garden City. It also required
less of a daily commute.
In March of 2006, the Department of Labor filed a request for
voluntary remand, and finally certified us, the IBM workers, as
eligible for Trade Adjustment Assistance benefits. They finally agreed
with us that computer software was an article within the meaning of the
Trade Act, albeit an intangible one. This decision came almost exactly
3\1/2\ years after our original petition in November of 2002. As I was
working at the time, I decided not to pursue TAA benefits.
In February of 2007, my software contract in New York City having
run out, I again became unemployed. It was then that I began to
investigate TAA benefits, and had almost decided on a training program,
but stopped when I started my most recent job, on June 4 of this year.
In short, had Trade Act certification been granted to us in a
timely manner, I would have pursued a more intensive and comprehensive
program of training, and would have had the opportunity to compete for
jobs involving newer programming skills like Java and.Net.
I would never want what happened to me and my IBM colleagues to
happen to anyone else. Had the Department of Labor recognized sooner
that changing technology had put software workers in the same position
as the manufacturing workers that the Trade Act was originally written
to protect; we would have been better able to make use of its
protection.
A GAO study states that 40% of TAA petitions are denied because the
Department of Labor doesn't regard what the workers produce as an
article within the meaning of the Trade Act. How many people are there
out there who don't have the time and persistence to pursue this matter
as I did?
If I become unemployed again in the future, I intend to avail
myself of the benefits of our TAA certification which was so long in
coming.
Thank you.
Chairman RANGEL. Thank you and let me thank this panel for
the very informative information. Mr. McCrery.
Mr. MCCRERY. Thank you, Mr. Chairman. I just have one
question. For those of you who are involved in trying to help
workers get assistance, as you undoubtedly know, there are a
variety of programs out there designed to assist unemployed
workers. Do you make an effort to combine TAA with other
benefits such as those under the Workforce Investment Act and
things like that?
Ms. FLYNN. I can respond to that just in terms of Michigan.
Yes, we do. All of our TAA service providers are located in the
One-Stop service centers, which Wagner-Peyser funds. Also the
Workforce Investment funds are available, but we do not mandate
co-enrollment with the Workforce Investment Act just because
that is such a precious resource, and we do not want to see TAA
workers having to compete with the dislocated workers. In some
One-Stop service centers, they do a lot of co-enrollment and it
works well for them, but we just see that as being a separate
issue in terms of not having enough to go around.
Ms. FLANAGAN. Sir, if I might add?
Mr. MCCRERY. Sure.
Ms. FLANAGAN. In Kentucky, we try to combine those
opportunities also, not so much the funding but the services.
For example, we are able to use Workforce Investment Act
caseworkers to help us with our TAA money. By combining effort,
we think we have more money to go around for actual training.
Mr. MCCRERY. So, by utilizing the Workforce Investment Act
money, you are able to do case management for the TAA?
Ms. FLANAGAN. Yes, we are. In particular, that worked well
in the Clinton County situation that I referred to. We had a
great hodgepodge of different needs coming into that one
project and through both Workforce Investment Act and TAA we
were able to meet their needs.
Mr. MORROW. Sir, in North Carolina, we use co-enrollment
and have for a long period of time, both TAA and the WIA funds.
The concern comes in that your TAA funding in a lot of cases is
handled locally. In North Carolina, we have such trade-impacted
layoffs, we are not able to maneuver those funds as needed. So,
in a lot of cases, everybody is not on the same page of the
hymn book. I think if it was--if the availability was there in
all states, it would be great but TAA training, the funding
provides for a longer term training and it's a specific group
where your WIA funding is a larger base. But we have used it in
North Carolina. In fact, that is the only way that we have been
able to do what we have been doing in working with dislocated
workers and trade-impacted workers because of our lack of
funding, as the young lady from Michigan mentioned, for TAA.
Mr. MCCRERY. Thank you.
Mr. LEVIN [Presiding]. Thank you, Mr. McCrery. The gentle
lady, the congresswoman from Ohio?
Ms. TUBBS JONES. Mr. Chairman, thank you very much. There
are so many areas that I would want to explore with regard to
TAA assistance. I have in my hand and would like to have it
placed in the record a report by Policy Matters, an
organization in Ohio that does a lot of work but this is
specifically focused on international trade and job loss in
Ohio 2007.
I want to focus my questions or my comments to Mr. Fusco.
In the report that was done by Policy Matters, and I am going
to just read one section because it speaks to the very issue
that you spoke to about being denied a certification in the
process of the appeal. But in this report, it specifically
quotes a case, and let me just read without using up all my
time. The TAA petition process hinges on the U.S. Department of
Labor's thorough investigation. Unfortunately, this does not
always happen. In an August 2006 decision, former employees of
BMC Software versus the U.S. Secretary of Labor, the U.S. Court
of International Trade delivered a scathing review of the U.S.
Department of Labor's handling of TAA petition investigations
in general and concluded that the TAA system is fundamentally
broken. The Court goes on to say, ``The agency's persistent
failure to verify the accuracy of the information on which it
relies, as well as its pattern of turning a blind eye to
obvious inconsistencies and discrepancies in the record before
it, is beginning to verge on contempt for administrative and
judicial process and does a grave disservice to the hardworking
men and women of this country. Extrapolating workers, roughly
90 percent, rate of success before the Court to the hundreds of
TAA petitions that are denied but not appealed every year
suggests that the Labor Department's failure to properly
investigate petitions is routinely depriving thousands of U.S.
workers of the TAA benefits to which they are legally entitled.
The Labor Department should be haunted by the fact.''
I just want to give you another opportunity because in my
country, Cuyahoga County, Ohio, I have some statistics from
this report, there were some 61 petitions accepted with 6,800
workers in this area. The fight to have to have enough money to
withstand the time period is just absolutely outrageous. To the
other of you on the panel, thank you for coming, but I really
wanted to focus in on this specific issue.
Mr. FUSCO. Well, you have just about said it all. At the
hearing before the U.S. Court of International Trade, the
judge, Judge Barzilay I believe, made the remark that this had
not been the first time that TAA certification had been
remanded to Department of Labor. It was common knowledge at the
time, that there was a great percentage of these cases being
remanded to the Department of Labor for just the reasons you
specify. So, I do not have the actual statistics on it but just
verbal commentary.
Ms. TUBBS JONES. I thank you for the time. That was the
area I really wanted to focus on. It is clear that as we go
through this process of looking at Trade Adjustment Assistance,
we must clearly involved in what is the process by which the
Department of Labor makes a determination or does not, and we
need to make sure that the worker gets the just support that
they need in order to establish claims.
I thank you and yield back the balance of my time.
Mr. LEVIN. Thank you very much for your salient point. Mr.
Herger?
Mr. HERGER. Thank you, Mr. Chairman. I want to thank each
of our witnesses. Again, it is so important that we get to that
point that if there is anyone out of work for whatever reason
we need to be doing everything we can to assist those
individuals to find work. But I also think it is very important
that we put into perspective the numbers of jobs, or at least
the percentage, that are attributed to the loss of trade
because trade is so incredibly important to many of us in my
district, in California, to our state, to many states, that
many times we tend to blame all job losses to trade.
I would like to quote from the 2006 Economic Report of the
President prepared by the Council of Economic Advisors from
page 161 in which it states: ``Survey data from the Bureau of
Labor Statistics show in layoffs between 1996 and 2004 less
than 3 percent were attributable to import competition or
overseas relocation.'' So, again, we want to be addressing this
and certainly those of you that are here today and certainly
the Chairman from Michigan are in areas where this is certainly
a major, major area. But I think we need to again put it into
perspective and also be so much aware of how crucially
important trade is to our Nation as a whole.
Ms. Flanagan?
Ms. FLANAGAN. Yes?
Mr. HERGER. I mentioned in my introductory statement that I
had the privilege of participating in a hearing that was in
your state, in your area in 2004 and that was incredibly
impressive what you did in an area where Fruit of the Loom had
closed, was the number one employer, and a fairly small
population----
Ms. FLANAGAN. Yes, 10,000.
Mr. HERGER. Ten thousand and virtually everyone was in one
way or another associated and this whole company just got up
and left.
Ms. FLANAGAN. Yes, sir.
Mr. HERGER. To be able to see what you were able to do
there. It was very impressive on how you were able to work with
both Federal, state, local officials, as well as your
university and others, work together to use these TAA training
funds, as well as other resources that you had to revitalize
your area to where it was stronger afterward than it was
before.
Ms. FLANAGAN. Yes, sir.
Mr. HERGER. Again, I visited a number of these companies
that you brought in, most of which came in from other
countries, that were supported, many of them----
Ms. FLANAGAN. We had two or three of them, yes, sir, we
sure do.
Mr. HERGER. Again, it was quite an eye-opener to me. But
could you talk further about why TAA funding was important but
also why it was essential to combine these TAA fund and other
resources to revitalize your area?
Ms. FLANAGAN. Well, yes, it would be a mistake to think
that one hat fits all because it does not. With the combined
effort of bringing to bear all the resources that we could
think of, we could touch, we could bring to the table, it was
essential and even then it was not perfect. But being able--
maybe it is a part of small town rural America, I do not know,
but being able to combine agencies and bring those people and
one could offer this and one could offer this and it happened
in our whole region like that. Now, we have still got lots of
work to do, and we are certainly not sitting on our laurels, we
have lots of work to do, but when we get the inkling of
something new that we can bring to town, the public school
system, the university, our One-Stop center, our area
development districts, and our Team Taylor County all go to the
table together, trying very much to overwhelm them how
wonderful Campbellsville is, it is a cooperative thing.
Mr. HERGER. Well, you certainly in a positive way
overwhelmed me again on the job of rolling up your sleeves,
taking the bull by the horns, and going out and doing such a
great job. I think the point here is that we have a number of
programs out there, it is important to utilize all these
programs to get the results that we need. The bottom line is to
find jobs, good paying jobs, for everyone and the training and
everything. So, again, thank you very much.
Ms. FLANAGAN. You are very welcome, thank you.
Mr. LEVIN. Mr. Pascrell?
Mr. PASCRELL. I enjoyed this panel talking about practical
things, down to Earth, and I am convinced after listening to
you that we are here in Washington, D.C., amongst economic
royalists, and you are the response, you have to deal with the
folks in your county, in your business, and your own particular
situation. There is no question in my mind that there are two
major problems here, one is that we need to prevent people from
being laid off in the first place; and, number two, if they are
displaced, it is a nice word, laid off, then we need to have
the resources available, whether they are laid off from trade
or anything else, to assist them in getting back on their feet
and particularly during the time when they are trying to be
``re-trained.''
Ms. Flanagan.
Ms. FLANAGAN. Yes, sir?
Mr. PASCRELL. You described the team work in your county in
Kentucky. Why did Fruit of the Loom close in the first place?
Ms. FLANAGAN. They found it more financially feasible to
produce offshore.
Mr. PASCRELL. Where did they go?
Ms. FLANAGAN. They went to South America.
Mr. PASCRELL. I am concerned--and lest you think that I am
using hyperbole--I am concerned that we keep the Fruit of the
Looms here and that in the long run there is nothing to be
gained within the economy if we think we can simply play catch
up and train those folks that have been laid off, many of whom
have worked probably for Fruit of the Loom for 15 to 25 years.
Ms. FLANAGAN. Generations.
Mr. PASCRELL. Yes. That is a big concern of mine. So I have
listened to the ``free traders'' this morning and walked out a
couple of times to breathe in the air and then come back in
here again, there is nothing ``free'' about this whatsoever.
When you said that there are certain people that are
trainable, what did you mean by that?
Ms. FLANAGAN. If that is what I said, I did mis-spoke. What
I said--what I meant to say was that we find in our training
programs now that businesses and industries want trainable
folks, they want folks who have a sound basis in reading, in
math, in communications. They want to be able to understand
what team work is and how to work together. Then they bring
them in and most businesses and industries today have their own
orientation, they will train you how to work that piece of
equipment or how to do flat-line management the way they want
it done.
Mr. PASCRELL. So, education is going to be a major
component----
Ms. FLANAGAN. I think so.
Mr. PASCRELL [continuing]. In any re-training program----
Ms. FLANAGAN. I think so. I think so. I think the way our
business and industry is expanding through technology, that if
we were to propose to train someone in a specific, particular
technical job today, perhaps tomorrow, it would be obsolete
before they could to the front door.
Mr. PASCRELL. Going back to my original question to the
panel, I think it may not be--some good is going to come out of
the bad of folks being laid off, I always believe that, that we
are now dealing with the service part of the economy because
now they are being hit by offshoring.
Ms. FLANAGAN. Yes, sir.
Mr. PASCRELL. They are being hit, the workers, by H1B
Visas. It is interesting that we want to re-train people within
our own society and yet at the other side of our mouths we are
talking about tripling the number of H1B Visas so people can
come in here for IT jobs. We are surrounded by economic
royalists, make no mistake about it.
Mr. Fusco, in your own particular situation, what could
have been 2 years ago, put you through that agony but that is
because we do not have a Department of Labor. It is a misnomer.
If they cannot detect how many folks are here on H1B Visas, how
do you expect them to monitor--monitor the very assistance, the
TAA assistance that we need in so many of our states throughout
the Union? What you experienced and what you could have avoided
experiencing is some legion if you listen to all of the folks
that are here.
One other final question, Mr. Chairman, if I may?
Mr. LEVIN. Yes.
Mr. PASCRELL. Thank you. Mr. Morrow?
Mr. MORROW. Yes, sir.
Mr. PASCRELL. The GAO report indicated earlier that workers
that were re-trained under TAA were able to receive 80 percent
of the pay which they originally accumulated or earned on the
previous job before they were laid off. Has that been your
experience, however, in North Carolina?
Mr. MORROW. Yes, sir, it has been our experience.
Mr. PASCRELL. It has held up to that?
Mr. MORROW. Yes, sir, it has. In North Carolina, we have
had to undergo massive re-training. Most of our traditional
industries, they are good people, they are your neighbors, they
are my neighbors, they are my relatives, but they only had one
task to complete for 35 years. They may have completed high
school, most of them did not. In fact, in our Pillowtex
situation where that was 5,000 people laid off, over 52 percent
of those people did not have a high school diploma, so we have
had to re-train starting with basic education. We have gone
into areas in which we have job growth in North Carolina. A lot
of these folks who are getting their high school diploma are
not going into a lot of these programs but the Allied Health
Sciences and those kinds of things where the actual pay is is
as good or better.
Mr. PASCRELL. Thank you. Mr. Chairman, I just want to make
a concluding point to yourself because I know you are sensitive
to the issue. There are 30 attorneys-- I have got two sons that
are attorneys so put this in context-- there are 30 attorneys
to every machinist and for every IT worker. I want this
Committee, and I know that you want this too, not only with
regard to trade, to be aware of who speaks for whom. We are
letting the American people down, the average worker down in
this country, the manufacturing decimated in New Jersey, if we
do not fight for them even in a populist way, if you will.
Thank you for your service and thank you for coming forth and
testifying.
Mr. MORROW. Thank you.
Mr. LEVIN. Thank you, Mr. Pascrell. Mr. Lewis?
Mr. LEWIS OF KENTUCKY. Thank you, Mr. Chairman. Again, I
thank Virginia for being with us to discuss these issues. I
remember how difficult the news was when we heard that Fruit of
the Loom was leaving, we were going to lose 2,500 employees
there, I think it was something like 2,500.
Ms. FLANAGAN. Sir, it was 3,800.
Mr. LEWIS OF KENTUCKY. Thirty-eight hundred over a period
time, it started with 4,000 and then the last group to leave I
think was around 2,500.
Ms. FLANAGAN. Right, right.
Mr. LEWIS OF KENTUCKY. What I liked about the
Campbellsville community was that you then did not look at the
glass being half empty, you looked at the glass being half
full. You had workers who for years went to their job, did
their job, they were faithful, they were good, employable
people, they just needed to be re-trained.
Ms. FLANAGAN. Exactly, that was it.
Mr. LEWIS OF KENTUCKY. That was the bottom line, they just
needed to be re-trained. With TAA assistance, state assistance,
community assistance, the university, as a team you all worked
together and Team Taylor County is a great title that you have
because it is truly a team and you worked hard. Again, it would
have been great if Fruit of the Loom would have stayed and all
of these other good things would have happened and all these
other new companies that came in, that would have been great.
But we are in a global economy and businesses make business
decisions about where they are going to be able to make a
profit or a better profit. But if you look at Kentucky, and
Campbellsville is an example, we have gained more through in-
sourcing than we have lost in out-sourcing. If you look at
Toyota in Georgetown, that is 10,000 employees for the state of
Kentucky. Then if you look at the component parts industry from
other countries that came in to support Toyota, my son works at
Akibono in Elizabethtown, in my hometown, that employs one
thousand people. You look in Bowling Green at their new
Transpark, there are one thousand working there for a Canadian
company. They make automobile and truck frames. So, if you look
at Kentucky, and I think maybe across the country, we are not
only competing but we are winning in a lot of instances on
bringing more jobs from other countries than we are losing to
other countries in high-paying technical jobs.
Ms. FLANAGAN. It is true in Campbellsville, yes.
Mr. LEWIS OF KENTUCKY. Yes, you just did not go regionally
or across the nation looking for companies to come in, you went
South Korea, to India, other countries.
Ms. FLANAGAN. Japan.
Mr. LEWIS OF KENTUCKY. Japan. So, when we re-train our
workers, because we have got the best workers in the world,
then we can compete anywhere. Campbellsville is a great example
of that, a town of 10,000, a community where the
infrastructure, and you mentioned the challenges for the
infrastructure there, there are no super highways into
Campbellsville.
Ms. FLANAGAN. There are no super highways, no, sir.
Mr. LEWIS OF KENTUCKY. So, if Campbellsville, and I made
this point over and over again, if Campbellsville, Kentucky can
do it with a team, with the leadership that is there, then I do
not know of a community anywhere in this country that could not
look at the glass half full instead of half empty. Would you
like to comment any further on that?
Ms. FLANAGAN. I totally agree. Part of it is not taking
``no'' for an answer and part of it is asking over and over
again and be persistent. It did not happen overnight. We worked
long and hard years.
Mr. LEWIS OF KENTUCKY. Yes.
Ms. FLANAGAN. But we are still striving and we have a few
good things to show for it.
Mr. LEWIS OF KENTUCKY. Yes, and I am sure you would welcome
back Fruit of the Loom any time they would want to come.
Ms. FLANAGAN. Any time they would want to come, yes, sir.
Mr. LEWIS OF KENTUCKY. Thank you. Thank you so much. I
yield back.
Mr. LEVIN. Thank you, Mr. Lewis. Mr. Lewis?
Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman.
Thank you very much, Mr. Chairman, for holding this hearing.
Let me thank all members of this panel for testifying. Mr.
Bolas, I want to ask you just how did you and your family
adjust to make ends meet? When you lose a job, it affects your
sense of pride, your sense of dignity, and you want to work,
you want a job, how did it affect your family?
Mr. BOLAS. Well, actually with my family, what we did was
we got together, we discussed it first between me and my wife
and then her parents and some of her family on how we were
going to broach the subject of whether I wanted to try to find
another job elsewhere, if we wanted to stay in the area that we
were at or if I wanted to go ahead and try for the training.
Once we discussed it amongst ourselves and that it appeared
everything was supported to go ahead and go for the training
and basically how that went is we wiped out everything we had
in savings so.
Mr. LEWIS OF GEORGIA. Well, I appreciate your testimony,
and I appreciate you and all of the witnesses for being here.
Mr. Morrow, are the steel and textile jobs in North Carolina,
are there any left?
Mr. MORROW. Yes, sir, there are just a few left. North
Carolina--that is just one of our traditional industries, that
and furniture, and that is where we have taken the most
difficult hit over the past few years. There are textile jobs
left but those jobs are of the higher end skill level where you
have to----
Mr. LEWIS OF GEORGIA. You do not have the what you call sew
and cut?
Mr. MORROW. No, the sewing plants, those kinds of things,
are going away because in North Carolina it does not pay enough
so therefore those jobs are not looked at as a job to have to
earn a living. The jobs in textiles that remain are the jobs
where it is high-end, where you have got to be able to operate
several machines, you do it in a computerized situation, those
kinds of things.
Mr. LEWIS OF GEORGIA. Are you losing jobs in the furniture
industry also?
Mr. MORROW. In the furniture industry, yes, sir. We just
lost in Lenoir, which is Caldwell County at the foothills of
the mountains in North Carolina, we just lost about 4,000 jobs
over the last seven or 8 months.
Mr. LEWIS OF GEORGIA. Mr. Morrow, I would be very
interested in knowing because the state of North Carolina is
very similar to my state of Georgia.
Mr. MORROW. Yes, sir.
Mr. LEWIS OF GEORGIA. With all of the growth that has taken
place in the Raleigh/Durham and also in the Charlotte area and
then you have people moving in and you have the immigrant
workers, is unemployment high and growing in North Carolina?
Mr. MORROW. No, sir, it is a little over 5 percent I think
is the average right now. But, Mr. Lewis, the two areas that
you just mentioned, Charlotte Mecklenburg County area and the
Research Triangle Park, they are thriving just like----
Mr. LEWIS OF GEORGIA. But that is high-tech.
Mr. MORROW. They are high-tech.
Mr. LEWIS OF GEORGIA. Well, about the average people that
have been in textiles, people that have been working in
agriculture, what happened to those folks?
Mr. MORROW. Those areas are mainly in the rural counties of
North Carolina and that population does not want to migrate to
the cities, to those metropolitan areas. To give you an
example, in Kannapolis, which is 25 minutes away from
Charlotte, PillowTex Industries in 2003 lost 5,000 jobs. We in
a collaborative effort, just like in Kentucky, trying to get
folks re-employed or re-trained, and a lot of those people did
need re-training because it was a mill town, they refused to
drive 25 miles because it had been something that they had been
doing all of their lives. That is the reason in my testimony I
mentioned changing a worker's mindset to where they do go to
where the jobs are that is not 2 minutes down the street from
their home, that they get the additional education they need to
help become more marketable and the fact that the whole
environment is changing where you are not completing just one
task, where you are completing several tasks and you are
working in groups. That is the challenge that we still have
today in North Carolina. That is the reason that we are
requesting that you look at TAA training because that is a
long-term effort, which will help our state.
Mr. LEWIS OF GEORGIA. Thank you very much. Thank you, Mr.
Chairman.
Mr. LEVIN. Mr. McDermott?
Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Bolas and Mr.
Fusco, you both talked about health care, and I would like to
talk for a second about what you need, what would you have
needed to get health insurance when you were on unemployment in
this TAA, how could it be constructed so it would work, either
one of you?
Mr. FUSCO. Well, in my own case, the gap between when my
COBRA benefits ran out and when my new job provided with new
health insurance was only about two to 3 months.
Mr. MCDERMOTT. That is not long enough to have a heart
attack? You did not worry about that?
Mr. FUSCO. It is long enough to have a heart attack, you
only need a few minutes. But I guess the Health Coverage Tax
Credit that is currently provided is somewhat helpful.
Mr. MCDERMOTT. What was your unemployment, you were able to
use the COBRA benefits, how come, how did you have enough money
to carry the COBRA benefit?
Mr. FUSCO. Well, at some point my unemployment benefits ran
out, and I started spending down my savings, that is how I was
paying for COBRA benefits.
Mr. MCDERMOTT. So, it was purely done out of your savings?
Mr. FUSCO. Right, right, while I was receiving unemployment
benefits, it was enough to pay. When they ran out, then I had
to spend down my savings.
Mr. MCDERMOTT. It was enough to pay the COBRA and the rest
of your living expenses out of your unemployment benefits?
Mr. FUSCO. Oh, no, no. Well, it was close. It was just
about enough. It was just about enough. I did not put any
additional money in the bank during that period of time.
Mr. MCDERMOTT. Did you have anybody else in your household
working?
Mr. FUSCO. No.
Mr. MCDERMOTT. So, it was just you?
Mr. FUSCO. Just me.
Mr. MCDERMOTT. Mr. Bolas, did your wife work at any time
during that period?
Mr. BOLAS. No, she is unable to work and she is not
collecting anything from her disability, nothing, she has zero
income. So I am sole income and our problem is with the amount
of money we were getting with the UC benefit, unemployment
benefits, it really in fact did not meet our bills totally
between the utilities and that because we had two small
children at the same time, so every family is different. The
only way we could have made, like the HCTC program, is if the
premium was down some more because we could not afford 35
percent. If it was closer to 10 percent, possible. We still
relied on help from her parents to buy groceries.
Mr. MCDERMOTT. Were you getting the maximum benefit in
Pennsylvania?
Mr. BOLAS. Yes. Well, I was getting a maximum benefit under
what my age per hour per weekly benefit was.
Mr. MCDERMOTT. That was how much a month?
Mr. BOLAS. It was $1,400.
Mr. MCDERMOTT. Mr. Fusco, how did you make?
Mr. FUSCO. My weekly unemployment benefit at the time was
$475 a week.
Mr. MCDERMOTT. So, you were getting about $1,800, almost
$1,900 a month?
Mr. FUSCO. Right.
Mr. MCDERMOTT. So, you were getting almost the maximum in
New Jersey?
Mr. FUSCO. New Jersey has a very generous weekly
unemployment rate.
Mr. MCDERMOTT. So, the $300 or $400 extra you had a month
made the difference. How much was your COBRA payment?
Mr. FUSCO. I forget the exact figure. It was something in
the neighborhood of $100 to $200 a month for the premium. I am
not sure exactly what it was.
Mr. MCDERMOTT. Yours was?
Mr. BOLAS. Our COBRA was $389.
Mr. FUSCO. He had to cover a family, I just had to cover
myself.
Mr. MCDERMOTT. Okay, alright. Let me ask both of you, you
both were sitting there, there were jobs out there, why did you
not go take one of them and just use the Wage Insurance part of
the COBRA benefit--I mean of the TAA benefit?
Mr. FUSCO. I was really unfamiliar with the Wage Insurance
part of it, but my goal was to--I had many years of experience
in the information technology field and my goal was to become
re-employed as an information technology worker rather than go
through the upheaval of starting some other new skill totally.
Mr. MCDERMOTT. You are how old?
Mr. FUSCO. I am 53.
Mr. MCDERMOTT. Fifty-three. Mr. Bolas, why did you not take
a job and just say, ``Look, I am going to take the Wage
Insurance and move on?''
Mr. BOLAS. I wanted to make sure I had a job that I could
provide for my family and myself that was around the same pay
as my original job because anything less, I would have probably
had to move to another house or sell the house that we had and
move to another neighborhood where it would be less money or
however, and I would not be able to provide as well for my
family. So what we were looking at there was that if I could
maintain the level of pay that I was at, which there were no
jobs available at the time, I even had construction experience
and my wife's family had construction companies and they folded
up because there was lack of jobs up there at the same time.
So, the whole company, the construction company that has been
there for years, folds up and you have construction experience
looking for a job and you cannot even do it through your
family, it is time to look someplace else.
Mr. MCDERMOTT. Thank you very much.
Mr. LEVIN. Mr. Davis?
Mr. DAVIS. Thank you, Mr. Chairman. Let me apologize to the
Chair and to the Committee. Most of us have to juggle about
usually five or six balls at one time so that is why you have
not had the kind of attendance and sustained participation that
you were entitled to. Let me ask you a couple of questions and
then make some brief comments because I think I am probably the
last person to speak to this panel. First of all, let me ask
the individuals who were the employees who worked in your
community--how many of you felt that the U.S. Government was
articulating your interests in the context of bilateral trade
negotiations over the last 4 or 5 years? How many of you felt
that the U.S. Government was speaking for your interests and
the interests of people like you? How many of you felt the
opposite of that?
Mr. FUSCO. By articulating my interest, do you mean----
Mr. DAVIS. Advocating on your behalf.
Mr. DAVIS [continuing]. Considering our situation in a
timely manner, in a considerate manner, I would say there was
very little evidence of that.
Mr. DAVIS. Mr. Bolas, did you feel that the U.S. Government
was advocating for your interests and the interests of people
like you over the last 5 or 6 years?
Mr. BOLAS. The only ones that were advocating for me was,
like I said, with the Mon Valley Unemployment Committee.
Whenever I was trying to get jobs or anything up in the state
where I am from, it was hard to even find any avenues that was
open to figure out what to do whereas if they would not have
came, had meetings, held meetings with our union and that, I
would not have known about the TAA program. I would not have
known about any of it until they had the meetings with us.
Mr. DAVIS. This is what I would say to the Committee and to
the panel, all of us have an interest in figuring out a way to
make globalization work. There is no question about that. All
of us have an interest in figuring out a way to make trade a
win/win proposition but I compliment Mr. Levin for recognizing
this, there is no way that the public and this country can be
sold on trade policies, on an aggressive approach to bilateral
trade agreements without the public believing that the
government is advocating for the interest of American workers.
Now, that may sound like just a lot of populist rhetoric to
some people, but I want to tell you why it is concrete.
Ultimately, there are a lot of people in this society who have
lost ground economically in the last 30 years, a lot of them
are people who play by the rules, who have done all that has
been expected of them, and I do not think they are seeking--I
do not think you, Mr. Bolas or you Mr. Fusco, were seeking any
special treatment from your government, you simply wanted to
know that your government was responsive to you and was willing
to reward your service and your labor in this society.
Mr. FUSCO. That is correct.
Mr. DAVIS. If people do not feel that, two things will
happen: First of all, they will believe that we ought to
withdraw from the rest of the world. That is impossible
economically, but some people will endorse that idea because
they have lost--or they think the government has loss face with
them. The second proposition is that I think it will just make
us more insecure as a country. Most of the fractiousness that
we have in this society happens when we are at a low wage
point, when we have more social division, when we have more
people losing ground, people start to think we should withdraw
from the rest of the world. They start to think their neighbor
caused this. They start to think a person with a different skin
color who came here from another country caused it. I am
convinced one of the reasons that we cannot get an immigration
reform bill is because of bad blood over these kinds of issues.
I just think we all have a stake in addressing those problems.
We all have a stake in figuring out how we can build public
confidence in the economic choices that we make as a country
and how we can build public confidence and the way we engage in
trade. If we cannot do that, we will be more divided and more
fractious than we ought to be.
But I thank you for coming here and sharing your stories.
Mr. FUSCO. Thank you.
Mr. DAVIS. Thank you, Mr. Chairman.
Mr. LEVIN. Alright, let me just as you leave say to all of
you I do not know how we found Mr. Bolas and Mr. Fusco, I think
we know how we found the three of you who are in government
service but it was a wonderful discovery and your testimony has
been helpful as has been those of you who are working on these
programs governmentally. This has been structured so that the
Labor Department can come last. I just want to say, to give
notice to them, this issue of a reserve has been mentioned as
if there are funds lying around that have not been allocated or
obligated. For the two of you from Michigan and North Carolina,
I notice there is a reference to North Carolina of a--reserve
training fund of almost $4,600,000 for Michigan, almost $5.5
million they say North Carolina--almost $4.5 million, I do not
think that this takes into account the moneys that have been
obligated. Ms. Flynn, do you know anything about that?
Ms. FLYNN. Yes, that is absolutely correct. It becomes
quite confusing when you are talking about funds that are
available but there really is a difference between expending
funds and actually obligating the funds, and so I could get
some more concrete statistics on that to present to the
Committee, but we are way up at 90 percent where the numbers do
not actually portray that type of expenditure rate.
Mr. LEVIN. Mr. Morrow, any comment?
Mr. MORROW. Only to say that the total amount of TAA
training that is in my testimony comes from three sets of
numbers, which is our initial allocation, a reserve request
that we made for 2006, we made that in May and then we got
another amount in July of 2006. If you notice, we utilized all
of those funds. So, it is money that we are spending as quickly
as we can get our hands on it.
Mr. LEVIN. Okay, because I was given a report regarding a
recent discussion about this relating to the workforce--to WIA,
and the Inspector General said, really commenting on the
Department of Labor figures, he concludes, and I quote,
``Obligations provide a more useful measure for assessing state
WIA funding status if obligations accurately reflect legally
committed funds and are consistently reported.'' I think that
is important to take into account.
I guess we are going to go on. Several have been able to
join us. As mentioned, schedules around here are difficult to
adjust. We are now in recess somewhat unexpectedly because of
an effort to resolve an issue on the Floor. So, that is another
indication of how difficult it is for members to acclimate
their schedules. But we are glad, so glad that all of you could
be here and thank you again. We will call on our next panel,
which has been exceptionally patient. Thank you again.
[Recess.]
Mr. LEVIN. [Presiding] Alright, welcome. Let me just
mention, Mr. Rangel and I have talked about this and I am sure
he has with Mr. McCrery, this is such an important subject and
the schedules here tend to be readjusted every few hours. We
are going to make a special effort, and I am sure Mr. Herger
agrees, to be sure that your testimony is fully distributed.
This is just one in a series of hearings on TAA, so what you
are doing today is providing a necessary foundation for what
will be further hearings and then in all likelihood
legislation. So, thank you very much for coming. So, let me
just quickly review this distinguished panel. Marcus Courtney
is the president of Washington Alliance of Technology Workers
in far away Seattle. I am not sure you came all the way. You
are going first because you may be the most tired. Karen
Pollitz, who is a research professor at the Health Policy
Institute, Georgetown University, and has also had a
distinguished career on the Hill; Diana Furchtgott-Roth, who is
a senior fellow and director of the Center for Employment
Policy at the Hudson Institute; and Jane McDonald-Pines, who is
a workforce policy specialist for the AFL-CIO; and Howard
Rosen, who has appeared before us before, and we welcome again
him as well as the rest of you. Howard is the executive
director of the Trade Adjustment Assistance Coalition. So, we
will go in that order. You will see the lights begin to flash
and if you could possibly summarize within 5 minutes, and then
we will have some useful Q&A and make it as hard-hitting as you
can because the next panel will be of those who are within the
Department of Labor and IRS. So, Mr. Courtney, you are first.
STATEMENT OF MARCUS COURTNEY, PRESIDENT, WASHINGTON ALLIANCE OF
TECHNOLOGY WORKERS, SEATTLE, WASHINGTON
Mr. COURTNEY. Thank you, Mr. Chairman and Ranking Member
McCrery for this opportunity to testify today regarding Trade
Act Adjustment Assistance. My name is Marcus Courtney, and I am
a former software test engineer that worked at Microsoft in the
late nineties and left that job to begin organizing technology
workers for union representation in 1998 with the
Communications Workers of America. I am now president of the
Tech Workers local union in Seattle, Washington, and we
represent more than 1,500 members. I hold a Bachelor's of Arts
degree from the University of Montana. With my allotted time, I
hope to provide a brief overview of the problems unchecked
globalization poses to service sector workers and provide this
Committee with my on-the-ground experience in this matter.
Congress must drastically overhaul the TAA program if we
are to maintain our status as a worldwide leader in technology
and service sector industries. American service sectors workers
are experiencing unprecedented economic changes brought on by
globalization and offshore outsourcing made easy with the
advent of the Information Age. Jobs once thought safe from
foreign competition, such as computer programmers, lawyers,
medical specialists, call center workers, accountants, Wall
Street analysts are all facing threats similar to those faced
by manufacturing workers.
There are estimates that between 3.3 and 14 million U.S.
jobs in the service industry are vulnerable to offshoring.
BusinessWeek Magazine in September 2006 noted that,
``Businesses at the core of the information technology economy:
software, semi-conductors, telecoms and the whole gamut of web
companies have lost more than 1.1 million jobs in the last 5
years.'' I think that is really an important point, especially
that we are continuing to hear about the robust growth in the
information technology service sectors over the past couple of
years. But if you look over the history in the past 5 years,
millions of jobs have been lost. In addition, we have tax
policies that encourage offshore outsourcing, an H1B Visa
program that is abused and a declining trade surplus in
services, which also adds to more jobs lost in the service
sector economy.
The question is what must Congress do to fix the
inadequacies of the current TAA program and create a TAA
program that is more relevant to the 21st century. TAA
eligibility should not be contingent upon the existence of a
Free Trade Agreement as we lose most of our technology jobs to
India with whom we have no FTA.
The modernization of the TAA program must have the ability
to adequately fulfill the needs of the increased number of
displaced service sector workers who will qualify for this more
modern and logical approach to TAA. The TAA program will need
more funding. Presently, states run out of money well before
the end of the fiscal period. The current TAA program does not
recognize that workers holding computer science degrees or
working in other engineering occupations need specific access
to re-training benefits beyond their 4 year degrees. I think
this is really important because a lot of the testimony I have
heard today is focused on manufacturing workers and that they
needed some set of education training beyond high school, but
in the service sector, most of the workers working in the
service sector hold 4 year degrees and many of them computer
science degrees who have lost their jobs just like
manufacturing counterparts to foreign trade but the program
does not recognize that they need advanced training beyond a 4
year Baccalaureate degree to remain competitive.
The TAA program should consider taking skilled computer
professionals and paying for advanced degrees in computer
science and engineering, the very area where companies are
claiming the U.S. workforce is lacking. This change will help
displaced workers meet future demand and better position the
U.S. in maintaining its position as a global leader by creating
a highly skilled workforce. As the program is currently
designed, it does not pay for advanced degree because it is not
currently designed to re-train skilled service professionals.
I recommend the Congress insist that the DOL develop a
system to track the number of jobs offshores and require
businesses to truthfully state reasons for such job shifts.
Presently, a company merely needs to cite ``increased
competition.'' Transparency and having all the information will
aid Congress in modernizing the TAA program.
It is critical that Congress expand TAA eligibility to
include the high-tech workers and other service sector workers
today and tomorrow.
I know some may look at this as a huge cost to Americans. I
would encourage members to look at this as an investment in
America and Americans, an investment that is essential in our
mutual desire to maintain the innovative spirit of America and
provide incentives for a future in high-tech service sector
workers to design and build the next technological product here
in this country.
[The prepared statement of Mr. Courtney follows:]
Prepared Statement of Marcus Courtney, President, Washington Alliance
of Technology Workers, Seattle, Washington
Thank you, Chairman Rangel and Ranking Member McCrery, for this
opportunity. I would like my testimony included in the congressional
record.
My name is Marcus Courtney. I am a former software test engineer
that worked at Microsoft in the late 1990s, and left that job to begin
organizing technology workers for union representation in 1998. I am
now the president of the tech workers local union in Seattle WA. I hold
a BA from the University of Montana. With my allotted time, I hope to
provide a brief overview of the problems unchecked globalization poses
to high tech workers and provide this Committee with my on-the-ground
experience in this matter. Congress must drastically overhaul the TAA
program if we are to maintain our status as the worldwide leader in the
technology field. I would like to begin with a quote:
``It is my experience that a lot of the anxiety in the
economy right now is kind of white collar anxiety due to
outsourcing and offshoring to India and other places. . . .
That is to me why in terms of globalization I wouldn't even try
to determine whether a person lost their job because of
domestic technology or globalization or trade. I think it is
going to be too difficult to tell in the future.''
I never thought I would quote Gene Sperling but this is a statement
he made before this Committee January 30th of this year. Furthermore, I
agree with Gene wholeheartedly on this point. I think this is an
important point to make as I disagree with Gene on so many other issues
regarding globalization and the economy but finding common ground on
overhauling the TAA program is an important issue to me, the thousands
of members I represent and all future high tech workers.
American Service Sector workers are experiencing unprecedented
economic changes brought on by a globalization model that trumpets
offshoring and the information age. Jobs, once thought safe from unfair
foreign competition such computer programmers, lawyers, medical
specialists, call center workers, accountants, wall street analysts are
now all facing threats similar to those faced by manufacturing workers.
Is this the road we want to go down when we have seen what has happened
to our manufacturing sector? Flawed trade policies play a significant
role in this vanishing act but of equal concern are flawed tax policies
that encourage offshoring and completely unnecessary increases in the
H1 B visa program which is riddled with fraud and abuse. These jobs, my
job, were part of the new job creation promised to Americans during the
NAFTA debate. Over a decade later we have a declining trade surplus in
services while the importation of services is skyrocketing.
Additionally, there are estimates stating that between 3.3 and 14
million U.S. jobs in the service industry are vulnerable to offshoring.
In addition, Business Week Magazine in September 2006 noted that
``Businesses at the core of the information technology economy-
software, semiconductors, telecom, and the whole gamut of web
companies--have lost more than 1.1 million jobs in the past five
years.'' I highlight these issues so that we may put this debate into
the proper context by identifying the catalysts if we are to adequately
address the problems of the current TAA program.
The question is what must this Congress do to fix the inadequacies
of the current TAA program and create a TAA program that is more
relevant to the 21st century?
As I stated earlier, TAA eligibility should not be contingent upon
the existence of a free trade agreement as we lose most of our
technology jobs to India with whom we have no FTA. Similarly, we
continue to lose our manufacturing base to businesses located in China
with whom we have not signed an FTA. Together, these two countries pose
a significant challenge to the U.S. labor market standards and fair
wages for workers. As more multinational corporations begin moving
service sector work to put U.S. based workers in direct competition
with significantly lower paid workers, wages here stagnate or decrease
and we lose the jobs of tomorrow. This idea has bipartisan support on
this very panel as Congressman Camp alluded to his support of granting
TAA eligibility to workers whose jobs are offshored to countries with
whom we have no trade agreement during the aforementioned hearing.
The number of service jobs vulnerable to offshoring alone should
adequately address the issue of limiting TAA benefits or capping the
program. Seeing as only 120,000 workers were entitled to TAA benefits
last year, the modernization of the TAA program must have the ability
to adequately fulfill the needs of the increased number of displaced
service sector workers who will qualify for this more modern and
logical approach to TAA. The TAA program will need more funding.
Presently, states run out of money well before the end of the fiscal
period.
TAA must be changed into a more proactive program. Why do we wait
for people to lose their jobs before we begin to even try and help
them? We have mechanisms in place that require advanced notification of
major job shifts by corporations. Beefing up the WARN Act should be
part of any effort by Congress to modernize the TAA program. In
addition the current TAA program doesn't recognize that workers holding
computer science degrees or working in other engineering occupations
need specific access to retraining benefits beyond their four year
degrees. This issue is of particular concern to computer programmers,
and other skilled service sector employees.
Technology companies are proclaiming a significant shortage of
skilled professionals in the U.S. to meet their demand of skilled jobs.
Many of the same companies are laying off U.S. employees and offshoring
these jobs. The TAA program should consider taking skilled computer
professionals and paying for advanced degrees in computer science and
engineering; the very area where the companies are claiming the U.S.
workforce is lacking. This change will help displaced workers meet
future demand and better position the U.S. in maintaining its position
as a global leader by creating a highly skilled workforce. As the
program is currently designed it does not pay for advanced degrees
because it is not currently designed to retrain skilled professionals.
It is unfortunate that this Department of Labor under Secretary
Chao (DOL) has been so complacent and has failed to provide Congress
with any insight as to the extent of the problem we are talking about
today. The sad fact is that DOL does not track job loss resulting
through shifts in production. This is the job of our government and our
government is failing the people.
My local union decided to attempt to track such job shifts
ourselves. Through our efforts we have been able to identify 528,000
jobs that have been offshored. I encourage you to visit
www.techsunite.org/offshore/ to see what we have tracked so far.
Unfortunately, our offshore tracker isn't able to tell Congress the
whole story. I recommend that Congress insist that DOL develop a system
to track the number of jobs offshored monthly and require businesses to
truthfully state the reasons for such job shifts. Presently, a company
merely needs to cite ``increased competition''. Employers realize that
openly admitting that they are offshoring leads to bad public relations
and they have refined the way they report job shifts to both the DOL
and the media. Transparency and having all the information will aide
Congress in modernizing the TAA program.
The Health Care Tax Credit component of TAA is woefully inadequate
for someone who just lost their job. Their household incomes at best
were cut in half and given the ever-rising cost of health care in
America one slip and fall is all it would take to put a family into
bankruptcy and out on the streets. Increasing the federal share payable
for health care to workers who just lost their jobs to and ensuring
that there is no lapse in coverage are key basic components which TAA
modernization must include.
Congress must ensure that the TAA program is a robust one which
doesn't shortchange displaced workers or run out of funding. Congress
must work to increase the visibility of the TAA program and develop an
oversight mechanism at the federal level to ensure that TAA money is
not being withheld or misused in any way. Congress must also do away
with the arcane requirement that a workers job must move to a country
with whom we have a free trade agreement. Finally, it is critical that
Congress expand TAA eligibility to include the high tech workers and
other service sector workers of today who fall victim to the perils of
the presently unsustainable globalization model. I know some may look
at this as a huge cost to Americans. I would encourage members to look
at this as an investment in Americans; an investment that is essential
in our mutual desire to maintain the innovative spirit of America and
provide incentives for our future high tech and service sector workers
to design and build the next great technological wonder here in
America.
Mr. LEVIN. Thank you very much.
Karen Pollitz, you are next.
STATEMENT OF KAREN POLLITZ, RESEARCH PROFESSOR, HEALTH POLICY
INSTITUTE, GEORGETOWN UNIVERSITY
Ms. POLLITZ. Thank you, Mr. Chairman, Members of the
Committee, for inviting me to testify today about the Health
Coverage Tax Credit or HCTC. I conduct health policy research
at Georgetown University, and I have studied this program as
have other academics and government investigators. The most
important finding of all this research is that very few people
who are eligible for the Health Insurance Tax Credit can
actually use it. Estimated take-up rates range from about 7
percent for the TAA population to 13 to 20 percent for all
eligible taxpayers. By contrast, the take-up rate for Medicaid
and S-Chip is about 70 percent, for employer-sponsored health
insurance it is about 85 percent and it is about 100 percent
for the Medicare program.
A variety of program features contribute to this very low
participation rate for the HCTC. First, it only provides a
partial subsidy. It pays 65 percent of health insurance
premiums but the 35 percent share is beyond what most people
can afford, especially trade-dislocated workers who rely on
Unemployment Insurance. As you heard, they must devote about a
quarter or more of their unemployment benefits to pay for their
share of health insurance premiums. Research shows that take-up
rates for health insurance fall off steeply once people are
required to pay more than about 5 percent of their income for
health insurance.
Second, the subsidy is delayed. The HCTC is payable on a
monthly basis, which is important for people to be able to use
it in real time. However, as you heard, it can take months for
this subsidy to be initiated. During this gap, people must pay
100 percent of the cost of qualified coverage and they simply
cannot afford it.
Part of why it takes so long is that the HCTC is a very
complicated program and that is the third reason why people do
not use it. An individual must take multiple steps and interact
with three to five Federal, state and private agencies in order
to qualify for the tax credit and use it. Each step can
generate delays, confusion and opportunities for mistakes.
A fourth problem with the HCTC is that individuals are not
adequately protected against health insurance discrimination
based on their health status, age or other factors. Federal law
provides for some protections, qualified plans may not turn
applicants down because of their health status or impose pre-
existing condition exclusions but these protections expire
after 63 days and it takes longer than that to use the credit.
Even if a person can manage to remain continuously covered,
other important protections are lacking, in particular Federal
law does not limit what can be charged for qualified coverage.
To give you an example, in North Carolina, a health 55 year old
HCTC recipient would pay about $130 a month for his share of
self-only coverage but if he had cancer, his share of the
premium would rise to about $900 a month.
In addition, the HCTC sets no standards on the adequacy of
benefits for qualified coverage, limits on key benefits,
including prescription drugs, have been observed an in many
states only high deductible plans are available. A survey of
retired steelworkers under the age of 65 found that 40 percent
who had replacement health insurance nonetheless postponed or
went without care for a doctor due to the cost.
Finally, the HCTC has proven to be an inefficient method
for delivering health insurance subsidies. In fiscal 2004, the
IRS spent $42 million to administer this program or about one
dollar for every two dollars in subsidy delivered. Most of
those administrative costs are associated with the advanced pay
option. The IRS cut administrative expenses sharply to $26
million in Fiscal 2005 or about one dollar for $4 of subsidy
paid, although some cuts were aimed at outreach and consumer
assistance that support enrollment and enrollment has not grown
very much since then.
Moving forward, Mr. Chairman, if Congress wants to help
more trade dislocated workers keep health insurance through the
HCTC, specific improvements are needed. The level of subsidy
must be increased so that people are required to pay only a
modest share of the insurance premium. Consumer protections
against health insurance discrimination must be enhanced.
Workers and their family members should not be turned down or
charged more based on their health status and all qualified
coverage should provide for adequate benefits and modest cost
sharing. These protections are available to Members of Congress
and Federal workers under the FEHBP, and they are essential to
the health security of all Americans. The HCTC program must be
simplified so that people can use the subsidy to obtain
coverage and remain seamlessly covered. Finally, greater
accountability for this program is desirable. Congress should
have ready access to information about HCTC enrollment,
enrollee characteristics, health plan costs, premiums charged
and how those are justified--as a private researcher, I can
tell you this is hard information to dig out--and
accountability for taxpayer dollars requires much greater
transparency than exist in this program today.
Thank you.
[The prepared statement of Ms. Pollitz follows:]
Prepared Statement of Karen Pollitz, Research Professor, Health Policy
Institute, Georgetown University
Mr. Chairman and Members of the Committee,
Thank you for asking me to testify about the Health Coverage Tax
Credit (HCTC), which was enacted as part of the 2002 Trade Act. I have
conducted research about this program, as have other academics and
government investigators, and my observations today are based on the
findings of several reports and studies. The HCTC was intended to
expand access to health coverage for trade dislocated workers, certain
early retirees, and their dependents. While it was important that the
Congress recognized this need and took steps to address it, the
experience of the HCTC program has not been entirely successful.
Congress could take further steps to improve access to health coverage
for this population.
Low take-up
Estimates suggest anywhere between 7 percent and 21 percent of
people eligible for the HCTC have actually able to use it.\1\ By
contrast, the take-up rate for Medicaid and SCHIP is 70 percent; the
take up rate for employer-sponsored health insurance is about 85
percent;\2\ and nearly 100 percent of persons eligible for Medicare
enroll.\3\
---------------------------------------------------------------------------
\1\ See for example US Government Accountability Office (2007).
``Trade Adjustment Assistance: Changes to Funding Allocation and
Eligibility Requirements could Enhance States' Ability to Provide
Benefits and Services,'' GAO-07-702, May 2007. See also Dorn S (2006).
``Take-Up of Health Coverage Tax Credits: Examples of Success in a
Program with Low Enrollment,'' The Urban Institute, December 2006.
\2\ Cunningham P (2003). ``SCHIP ``Making Progress: Increased Take-
Up Contributes to Coverage Gains,'' Health Affairs, July/August 2003.
\3\ Glied S (2001). ``Challenges and Options for Increasing the
Number of Americans with Health Insurance,'' Inquiry, Summer 2001.
---------------------------------------------------------------------------
A variety of HCTC program features contribute to this very low
participation rate.
Partial subsidy--The HCTC pays 65 percent of the premium for
qualified coverage, but the remaining 35 percent share is too costly
for many to afford, especially laid off workers who rely on
unemployment insurance. GAO has reported that the 35 percent premium
share for qualified coverage averages about 25 percent of the monthly
Unemployment Insurance (UI) benefit for workers in four states with the
highest number of HCTC enrollees. In other states, the worker's share
of a family policy premium would consume more than 40 percent of UI
benefits.\4\
---------------------------------------------------------------------------
\4\ U.S. GAO (2007). See also U.S. Government Accountability Office
(2006), ``Trade Adjustment Assistance: Most Workers in Five Layoffs
Received Services, but Better Outreach Needed on New Benefits,'' GAO-
06-43, January 2006.
---------------------------------------------------------------------------
Delayed subsidy--Congress required that the HCTC be payable on a
monthly basis. Receiving the subsidy in real time is critical if out-
of-work individuals are to have meaningful access to coverage. However,
it takes at least three months to initiate the advance-pay credit.\5\
During this gap, people must pay 100 percent of the cost of qualified
coverage. At year end, a credit for these costs can be claimed on one's
tax return, but the cash flow burden may discourage many from obtaining
coverage. Congress provided for grants to states to provide temporary
subsidies during this gap. However, the Inspector General of the U.S.
Department of Labor reports this grant program does not work well. Few
states participate due to program complexity and other delays and only
a tiny fraction of the target population has been reached.\6\
---------------------------------------------------------------------------
\5\ U.S. GAO (2007).
\6\ U.S. Department of Labor, Office of Inspector General (2005).
``Performance Audit of Health Coverage Tax Credit (HCTC) Bridge and Gap
Programs,'' Report Number 02-05-204-03-330, September 30, 2005.
---------------------------------------------------------------------------
Program complexity--The HCTC is an exceedingly complex program. In
focused surveys of dislocated workers conducted by the GAO, the most
common reason cited for not participating in the HCTC--after the high
cost of coverage--is that the program is too confusing.\7\ To be
eligible for the tax credit, one must first establish eligibility for
other programs--Trade Adjustment Assistance benefits or retirement
benefits through the PBGC. The next step is to identify and obtain
qualified coverage. This may be COBRA, but often will be qualified plan
options under new forms of coverage that states have arranged. In many
states private plan options are medically underwritten. In addition,
most require individuals to first obtain a certificate of creditable
coverage from their former insurer. As they shop for coverage,
individuals must also establish eligibility for the HCTC. Application
for the advance payment HCTC is another step. From beginning to end,
people may have to contact both federal and state agencies as well as
private insurers. Each step can generate delays, confusion, and
opportunities for mistakes.
---------------------------------------------------------------------------
\7\ U.S. GAO (2006).
---------------------------------------------------------------------------
Lack of consumer protections--Federal law requires certain
important consumer protections for individuals seeking qualified
coverage for the HCTC. Because these protections are not comprehensive,
however, individuals with health problems may still encounter
difficulties finding coverage. Critical health insurance protections
consumers need include:
Guaranteed issue--Federal law requires state coverage
options be offered on a guaranteed issue basis, which means applicants
cannot be turned down because of health status. However, this
protection only applies for individuals who have been continuously
covered. Those who have been uninsured for 63 days may be denied
coverage, at least in some states, if they have health problems.
Pre-existing condition exclusions--Federal law also
requires that state coverage options may not impose pre-existing
condition exclusions. However, this, too, only applies for individuals
who have been continuously covered. Those who have been uninsured for
63 days may find such exclusions will be imposed.
Rating limits--Federal law does not limit how much
individuals can be charged based on health status, age, or other
characteristics. As a result, premiums may be prohibitively expensive
for older individuals or those with serious health problems. In North
Carolina, for example, a 55-year-old man with cancer could pay as much
as $900/month for his 35 percent share of the premium for HCTC
insurance sold in that state.\8\ The federal government does not
require justification of such rate surcharges. However, unpublished
findings from one study conducted by the IRS suggest the risk profile
of HCTC enrollees may be similar to other standard risk individuals.\9\
---------------------------------------------------------------------------
\8\ See www.bcbsnc.com. Rate quote for 55-year old male in
Mecklenburg County. Standard rate for Blue Advantage Plan A is $371 per
month. The highest risk tier is seven times the lowest risk tier.
Taking into account age, the spread in premiums between the youngest,
healthiest applicant and the oldest, sickest applicant exceeds 1,300
percent. See also Dorn S, Alteras T, and Meyer J (2005). ``Early
Implementation of the Health Coverage Tax Credit in Maryland, Michigan,
and North Carolina: A Case Study Summary,'' The Commonwealth fund,
April 2005.
\9\ U.S. Internal Revenue Service (2005). ``Risk Analysis of the
TAA Population,'' Presentation to National Association of State
Comprehensive Health Plans annual conference, October 2005.
---------------------------------------------------------------------------
Covered benefits standard--Federal law does not establish
a standard for what benefits must be included in HCTC qualified
coverage. Evidence suggests qualified coverage in many states may not
be adequate. A recent survey of retired steelworkers (under age 65)
found that substantial numbers felt their replacement health insurance
was less satisfactory than their former coverage at work, and 40
percent had postponed or gone without care from a doctor due to
cost.\10\ Other research shows that only high-deductible policies are
offered as qualified coverage options in almost a dozen states, while
in as many states, the most generous plan available excludes or
severely limits either maternity care, prescription drugs, or mental
health benefits.\11\ One qualified plan option offered in Ohio during
the early years of the HCTC limited covered benefits to a maximum of
$1,000 per illness and $5,000 per person per year.\12\
---------------------------------------------------------------------------
\10\ Claxton G (2006). ``Retired Steelworkers and Their Health
Benefits: Results from a 2004 Survey,'' The Henry J. Kaiser Family
Foundation, May 2006.
\11\ Pervez F and Dorn S (2006). ``Health Plan Options Under the
Health Coverage Tax Credit Program,'' The Urban Institute, December 11,
2006.
\12\ Pollitz K (2007). ``Complexity and Cost of Health Insurance
Tax Credits,'' Journal of Insurance Regulation, publication
forthcoming.
---------------------------------------------------------------------------
High administrative costs
To date, the HCTC has proven to be an inefficient method for
delivering health insurance subsidies. In FY 2004, the IRS spent $42
million to administer the HCTC, or $1 for every $2 in subsidy
delivered.\13\ Most administrative costs are associated with the
advance pay credit option.
---------------------------------------------------------------------------
\13\ U.S. GAO (2007).
---------------------------------------------------------------------------
To operate this program, the IRS must verify eligibility of each
enrollee on a real time basis. According to IRS staff, the error rate
of eligibility data transmitted by state workforce agencies can reach
50 percent.\14\
---------------------------------------------------------------------------
\14\ Pollitz (2007).
---------------------------------------------------------------------------
Further, to administer the credit, IRS must establish a payment
arrangement with each health plan that covers even one HCTC enrollee.
In 2005, when just 16,000 people claimed the advance pay credit, more
than 900 health plan vendors were participating in the HCTC with an
average of 15 new vendors added each week. Any change (for example, in
a person's address or eligibility status) or mishap (for example, a
late premium payment) requires a correction to the system. These tasks
are managed by an outside contractor because IRS information systems
cannot accommodate HCTC data needs.\15\
---------------------------------------------------------------------------
\15\ Pollitz (2007).
---------------------------------------------------------------------------
Because the program is so complex, IRS also staffs a call center
with trained operators who can provide consumer assistance. In
addition, the IRS invested in outreach and public education in the
first two years of the HCTC to promote understanding about the subsidy
and boost enrollment.
In FY 2005, IRS cut HCTC administrative expenses substantially to
$26 million, or about $1 for every $4 of subsidy paid. Some of the cost
cutting measures were aimed at outreach and customer assistance that
had been important to increasing enrollment.\16\
---------------------------------------------------------------------------
\16\ U.S. GAO (2007) and Pollitz (2007).
---------------------------------------------------------------------------
It is not clear whether the HCTC could benefit from further
economies of scale. If more people were to enroll in the credit
program, IRS administrative expenses related to eligibility data
verification, beneficiary enrollment, health plan relations, invoicing,
and consumer assistance would likely need to increase, as well. Whether
these tasks could be managed for a program serving millions of
beneficiaries instead of just a few thousand is questionable.
The federal government's expenses represent only a portion of
administrative costs. Health insurers also incur costs to accommodate
the HCTC subsidy. Electronic premium invoicing is not possible for some
plans whose systems are not compatible with the IRS. In addition, many
of the qualified HCTC coverage options are policies sold in the
individual health insurance market, where the administrative costs are
also high. An estimated 40 cents of the premium dollar in this market
pays for marketing, enrollment, agent commissions, insurer profits, and
other costs unrelated to claims.\17\
---------------------------------------------------------------------------
\17\ Pauly M, Percy A, and Herring B (1999). ``Individual Versus
Job-Based Health Insurance: Weighing The Pros and Cons,'' Health
Affairs, November/December 1999.
---------------------------------------------------------------------------
Moving forward
The health insurance tax credit is built around the TAA program,
which is designed to help displace workers get new jobs or new labor
skills, not health insurance. If Congress wants to help people get
health insurance, specific improvements are needed. The HCTC could be
improved in three basic ways: the level of subsidy could be increased,
consumer protections could be enhanced, and program complexity could be
streamlined.
Increasing the subsidy is straightforward. The credit percentage
could be changed to a higher amount. In selecting a level, keep in mind
the cash benefits on which TAA recipients rely. Often, these benefits
amount to only a few hundred dollars per week. Research shows the take
up rate for health insurance drops precipitously when individuals are
required to pay more than about five percent of income in premiums.\18\
---------------------------------------------------------------------------
\18\ Glied S (2006).
---------------------------------------------------------------------------
With respect to consumer protections, consider the circumstances of
those who need coverage most. HCTC coverage must be available,
affordable, adequate, and administratively simple for people in the
most serious circumstances--for example, a worker who loses his job
shortly after learning his wife has cancer. By definition, the HCTC
target population is working families who have lost job-based coverage
and who want to remain well insured. For them to succeed, Congress must
protect individuals from medical underwriting and guarantee access to
comprehensive coverage at least similar to that offered by large
employers. In other health reform discussions, it has been suggested
that insurance coverage through the Federal Employees Health Benefits
Program (FEHBP) offers a proxy standard for consumer protections. This
program offers a choice of mainstream health plans with comprehensive
benefits. Enrollees are never denied coverage or charged more based on
health status, age, gender, or other characteristics and pre-existing
condition exclusions are never imposed, regardless of an individual's
prior coverage history.
Simplifying the HCTC requires several steps. Eligibility and
enrollment could be streamlined so that people can find and enroll in
subsidized coverage quickly. Ideally, coverage should be seamless.
Delivery of the advance pay credit must also be hastened so individuals
can be subsidized from their first day in the program. Congress might
also promote continuity of coverage by providing for continuous
eligibility--for example, for 12 months after initial eligibility is
established.
Finally, regardless of any changes Congress may make to the HCTC,
greater accountability for this program is desirable. To understand the
effect of various program features and changes, Congress must have
ready access to information about HCTC enrollment, enrollee
characteristics, and health plan costs and characteristics. Especially
when taxpayer dollars subsidize premiums, it is reasonable to require
justification of health plan rates, benefit design, and other
practices. In addition, it is important to better understand the
mechanics and cost of administering a private health insurance tax
credit in order to know if this program can reasonably become the basis
for further coverage expansion. Arguably, the HCTC has been an
important experiment in health reform. Experimentation is good as long
as data are collected and lessons learned are well documented.
Mr. LEVIN. Thank you very, very much.
Okay, let's keep going, Ms. Furchtgott-Roth.
STATEMENT OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW AND DIRECTOR
OF CENTER FOR EMPLOYMENT POLICY, HUDSON INSTITUTE
Ms. FURCHTGOTT-ROTH. Furchtgott-Roth, thank you very much,
thank you very much. Mr. Chairman and Members of the Committee,
thank you very much for inviting me to testify here today.
Currently, I am a senior fellow at the Hudson Institute and
from February 2003 to April 2005, I was chief economist at the
U.S. Department of Labor.
In 2007, the United States leads the industrialized world
in job creation and our unemployment rate is the lowest in the
industrialized world. It is true that we had millions of job
losses last year, 55 million separations, but we had 59 million
new hires and this is out of a labor force of about 152 to 153
million, so we have a constant turnover all the time.
In May 2007, the Payroll Survey recorded an increase of
157,000 jobs. Compared to August 2003, non-farm payroll
employment has increased by over eight million jobs, 45 months
of consecutive gains where professional and business services
added 1.9 million, education and health services added 1.7
million, hospitality added 1.3 million, trade, transportation
and utilities added 1.2 million.
In fact, because our job creation is so strong, employers
are complaining about a shortage of workers. Steve Berchem of
the American Staffing Association, which represents staffing
firms such as Manpower, Inc., reports that his companies are
having difficulty recruiting enough skilled workers.
Skilled workers are important for global competitiveness.
We live in an open global economy, and we compete against other
countries to offer the best environment possible. When our
workers lose their jobs, we need to help them find new ones as
effectively as possible. We have enough jobs for Americans, our
challenge is to facilitate the movement of workers from some
sectors to others. The need for skilled workers makes it all
the more imperative that we modernize our workforce training
programs and make them as efficient as possible. Workers
already have some protection from job loss, about 97 percent of
wage and salary workers have Unemployment Insurance. That
program gives unemployed workers who numbered 7.3 million in
2006 benefits for up to 6 months.
There are more than a dozen programs organized by the U.S.
Department of Labor to help train unemployed workers. I will
not describe all but let me review just a few. Workers
adversely affected by trade have access to Trade Adjustment
Assistance, a program that is projected to help 71,000 workers
in Fiscal Year 2007 at a cost of $12,000 per participant. The
Workforce Investment Act Program for adults was projected to
have 333,000 participants in 2007 at an average cost of $2,600
per participant. Some have proposed expanding TAA and
alternatives to TAA, in particular Wage Insurance, to other
sectors such as services in order to deal with problems of
global competition. However, job creation in the United States
is so strong and unemployment is so low that economic
circumstances do not warrant an expansion of the program.
Americans do not know whether expanding Wage Insurance will
solve problems of economic insecurity from globalization but it
might be worth trying it in a few states to see if it works
rather than imposing a Federal mandate.
With respect to TAA, one reason that more people are not
participating in the program might be that they are finding
jobs on their own in the many growing industries in the United
States, industries such as education and health services and
professional business services have hired many more workers
over the past year. Another reason, as have just heard, could
be because of administrative difficulties in applying for
benefits. If this is the case, then it is worthwhile to
streamline the applications process of the current program
before expanding it.
Other methods to improve TAA could have some effect in
shortening the period of unemployment. Workers affected by
trade are all different, it would be beneficial to have one-
stop staff work with TAA recipients to develop individualized
plans to find new jobs and determine under what circumstances
training is likely to have a large positive effect.
TAA recipients could be required to register at One-Stop
career centers and periodically check computerized listings for
suitable jobs. The One-Stops could provide funds to cover
direct training costs and stipends to provide income support
but only in cases where the One-Stop staff certified training
is likely to have a high payoff. In order to further increase
incentives to take the best available job, DOL could pay the
additional cost of transportation to cover commuting to a job
far from home for up to 2 years.
In summary, economic circumstances do not warrant expanding
TAA at the present time. Job creation has been strong and
unemployment is low. A few changes in the administration of the
program could make it more efficient without overall expansion.
Further, integrating different types of Federal training
programs and making them more efficient would help the
unemployed make the best use of these services and obtain a new
job more quickly.
Thank you very much for giving me the opportunity to come
before you and testify today.
[The prepared statement of Ms. Furchtgott-Roth follows:]
Prepared Statement of Diana Furchtgott-Roth, Senior Fellow and Director
of Center for Employment Policy, Hudson Institute
Mr. Chairman, members of the Committee, I am honored to be invited
to testify before your Committee today to speak on the subject of
promoting U.S. worker competitiveness in a global economy and the
effectiveness of Trade Adjustment Assistance.
Currently I am a senior fellow at the Hudson Institute. From
February 2003 until April 2005, I was chief economist at the U.S.
Department of Labor. From 2001 until 2003, I served at the Council of
Economic Advisers as chief of staff and special adviser.
In 2007, the United States leads the industrialized world in job
creation, and our unemployment rate is among the lowest in the
industrialized world. In contrast, unemployment rates in most other
countries are far higher. In April 2007, the latest month for which
comparable data are available, Americans had an unemployment rate of
4.5 percent, while unemployment rates in the Eurozone were 7.1 percent;
in France, 8.6 percent; in Germany, 6.7 percent; in Spain, 8.2 percent;
and in Canada, 6.1 percent. Only Japan had a lower rate than the United
States, and its economy is characterized by a slower rate of GDP
growth.
In May 2007, the payroll survey recorded an increase of 157,000
jobs. Compared to August 2003, nonfarm payroll employment has increased
by over 8.0 million jobs, 45 months of consecutive gains, where
professional and business services added 1.9 million, education and
health services added 1.7 million, leisure and hospitality added 1.3
million, trade, transportation, and utilities added 1.2 million,
construction added 910,000, government added 653,000, and financial
activities added 436,000. The household survey showed a gain of 157,000
employed workers in May 2007 as well, and a gain of over 8.4 million
employed workers since August 2003.
In fact, because our job creation is so strong, employers are
complaining about a shortage of skilled workers. Steve Berchem of the
American Staffing Association, which represents staffing firms such as
Manpower, Inc, reports that his companies have difficulty recruiting
enough skilled workers. According to Mr. Berchem, ``Our members are
saying that they have more job orders than qualified candidates to fill
them, especially for skilled and professional positions. Demand has
increased for recruiting and permanent placement services because our
members' clients are having difficulty filling positions due to lack of
available talent. The U.S. staffing industry needs a larger labor
supply to meet growing demand.''
And Microsoft Chairman Bill Gates also reported a shortage of
skilled workers. Testifying on March 7, 2007 before the Senate
Committee on Health, Education, Labor, and Pensions, he said that
``America's need for highly skilled workers has never been greater,''
and called for an increase in the number of permanent residents,
skipping the bureaucratic H1-B visa process altogether.
Mr. Gates stated that ``Barring high skilled immigrants from entry
to the U.S., and forcing the ones that are here to leave because they
cannot obtain a visa, ultimately forces U.S. employers to shift
development work and other critical projects offshore--If we can retain
these research projects in the United States, by contrast, we can
stimulate domestic job and economic growth.''
Skilled workers are important for global competitiveness. We live
in an open, global economy, and we compete against other countries to
offer the best environment for investment and for firm location. We
want firms to locate and expand in the United States, creating jobs
here rather than going offshore. In order to do that, we need to
provide a ready supply of labor and keep the smartest entrepreneurs and
workers here. When our workers lose their jobs, we need to help them
find new ones as effectively as possible.
We have enough jobs for Americans--our challenge is to facilitate
the movement of workers from some sectors to others. The need for
skilled workers makes it all the more imperative that we modernize our
workforce training programs and make them as efficient as possible.
Workers already have some protection from job loss. About 97% of
wage and salary workers have unemployment insurance (UI), a federal-
state program funded by employer payments that rise with the number of
firm layoffs. The program gives unemployed workers, who numbered 7.3
million in 2006, benefits for up to six months. Qualifications and
benefit levels are set by individual states.
There are more than a dozen programs organized by the U.S.
Department of Labor to help train unemployed workers. I won't describe
all, but let me review just a few. Workers adversely affected by trade
have access to Trade Adjustment Assistance, a program that is projected
to help 71,000 workers in FY 2007, at a cost of $12,000 per
participant. Alternative Trade Adjustment Assistance (ATAA) compensates
manufacturing workers age 50 and older who lose jobs to imports. If
these workers take a job paying less than their previous position, they
receive half the difference in wage between their new job, up to a
level of $5,000 annually, for 2 years, a concept called ``wage
insurance.'' About 2,350 workers signed up in 2005, the latest full
year available.
The Workforce Investment Act program for adults is projected to
have 333,000 participants in PY 2007, at an average cost of $2,600 per
participant. This has a network of ``One-Stop Centers'' where
unemployed workers can register for benefits, training, and available
job openings. A related program, the Workforce Investment Act program
for dislocated workers will have 360,000 participants, at an average
cost of $4,000. The Wagner Peyser Employment Service is projected to
help 13 million participants, at a cost of $55 each. Other programs,
for youths, Native Americans, older Americans, and migrant and seasonal
farmworkers, also make important contributions.
Some have proposed expanding TAA and ATAA, in particular wage
insurance, to other sectors, such as services, in order to deal with
problems of global competition. However, job creation in the United
States is strong, and unemployment is low, such that economic
circumstances do not warrant an expansion of the program.
Americans don't know whether expanding wage insurance will solve
problems of economic insecurity from globalization. But it might be
worth trying in a few states to see if it works, rather than imposing a
federal mandate.
With respect to TAA, one reason that more people are not
participating in the program might be that they are finding jobs on
their own in the many growing industries in the United States.
Industries such as education and health services and professional and
business services have hired many more workers over the past few years.
Another reason could be because of administrative difficulties with
applying for benefits. If this is the case, then it would be worthwhile
to try to streamline the application process of the current program
before expanding it.
Other measures to improve TAA could have some effect in shortening
the period of unemployment. Workers affected by trade are all
different, and it may be beneficial to have One-Stop staff work with
TAA recipients to develop individualized plans to find new jobs and
determine under what circumstances training is likely to have a large
positive effect.
TAA recipients could be required to register at One-Stop career
centers and periodically check computerized job listings for suitable
jobs. Then, One-Stop staff could monitor recipients' job search to
ensure that they are effectively looking for work.
The One-Stops could provide funds to cover direct training costs
and stipends to provide income support, but only in cases where One-
Stop staffs certify training is likely to have a high payoff.
In order to further increase incentives to take the best available
job, DOL could pay the additional cost of transportation to cover
commuting to a job far from home for up to 2 years and paying a portion
of relocation expenses. However, relocation payments should be
contingent on remaining employed in an area for at least six months.
Before expanding any program, it's necessary to make sure that One-
Stops are making the best use of their resources. We should use high-
quality measures and standards to hold One-Stops accountable for
ensuring funds go to workers assiduously searching for new jobs or
obtaining training likely to have a large effect on subsequent
earnings.
We also need to redirect the use of training funds to include more
community colleges for helping unemployed workers. Community colleges
provide some of the best training in the country. They train the
majority of nurses and emergency personnel. Forty-five percent of the
nation's freshmen are enrolled in community colleges. Studies have
shown that when unemployed workers take targeted technical courses at
community colleges, their future earnings increase.
For recipients not in training, an ideal performance measure would
capture how much quicker recipients return to work than otherwise would
be the case. For recipients in training an ideal measure would capture
how much higher are their earnings and how much better are other
aspects of their jobs than otherwise would be the case. The earnings/
job-quality measure also is an appropriate secondary measure for
recipients not receiving training.
In addition to workforce training, America needs to take a
fundamental look at how we educate workers before they join the
workforce. We need to lower our high-school dropout rates, if necessary
by incorporating vocational training into the last years of high
school, and encourage young people to get as much education as
possible. This will prepare them for a succession of careers, rather
than just one, and enable them to change jobs more easily.
In summary, economic circumstances do not warrant expanding TAA at
the present time. Job creation has been strong, and unemployment is
low. A few changes in the administration of the program could make it
more efficient without overall expansion. Further, integrating
different types of federal training programs and making them more
efficient would help the unemployed make the best use of these services
and obtain a new job more quickly.
Thank you for giving me the opportunity to appear before you today.
I would be glad to answer any questions.
Mr. LEVIN. Thank you.
Ms. McDonald-Pines.
STATEMENT OF JANE M. MCDONALD-PINES, WORKFORCE POLICY
SPECIALIST, AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS
Ms. MCDONALD-PINES. Thank you, Mr. Chairman and Members of
the Committee for the opportunity to testify on approving
programs that help workers affected by trade and globalization.
Millions of workers are suffering from the displacement effects
of trade and the need to help them exist independently over the
debate over our trade policies. Though we want to prevent the
injuries for sure, we firmly believe that that the Federal
Government has an obligation to re-training, re-employment
assistance, health care and income support to workers who lose
their jobs due to Federal trade policy.
I would like to focus on four key recommendations for
improving the Trade Adjustment Assistance program: The first,
no worker should be denied assistance, particularly TAA
training, due to insufficient funds. Help for laid off workers
has always been modest compared to the benefits from trade. The
U.S. currently spends less than $1 billion on TAA, while some
claim that the U.S. economy gained $1 trillion a year from
trade. Funding for TAA training should not be capped. Help for
workers should not be nullified because of limited funding,
flawed certification, the state in which the worker happens to
live or when the layoff occurs. The current method for
distributing TAA funds is deeply flawed, as Sig Nilsen from GAO
pointed out, because the formula reflects pass not current
demands. This leads to two undesirable results: Some states
experience funding shortfalls while at the same time other
states have unobligated funds and many states then seek to
ration training services to keep within the constraints of
their TAA allocation, short-changing workers.
Our second recommendation is that TAA must be made
available to all workers displaced by Federal trade policies.
The TAA program must cover secondary workers, as well as those
affected by technology, service and public sector offshoring.
However, expanding eligibility without a guarantee of adequate
funding is an empty promise.
Third, we have got to improve outreach and access to TAA
training. We know displaced workers need counseling, yet there
are no TAA funds available to pay for this help. Funds for
programs like the Employment Service have been consistently
cut. As GAO pointed out, in one state Employment Service funds
were able to pay for only a single case manager, who had to
cover three counties and serve 1,000 workers. Congress should
fund outreach, early intervention, improved certification and
case management through the state Unemployment Insurance and
Employment Service agencies. These state agency staff already
provide access to unemployment benefits and TAA benefits and
provide counseling job search. Also, a state-wide system has
the ability to respond flexibly to layoffs around the state as
they occur.
We also must improve the Health Coverage Tax Credit. As you
heard, we have got to increase the premium subsidy up to 90
percent, provide fallback coverage and presumptive eligibility.
Fourth, we really do need to provide quality training that
is linked to the creation and retention of good jobs. Compared
to the Workforce Investment Act, TAA serves workers that are
older and less education and TAA offers them the chance to get
long-term training and income support. Congress should expand
TAA training that leads to good jobs through quality on-the-job
training and labor management initiatives that save jobs,
improve wages and make industries more competitive. We know
that programs that provide long-term training for dislocated
workers can have positive results. One year at a community
college raises displaced worker earnings by about 5 percent. A
long-term training program for dislocated workers in Washington
state resulted in job placements that averaged 93 percent of
pre-layoff earnings.
We also need to think more strategically about linking TAA
with new opportunities and energy technology. Already the
renewable energy industries are experiencing a lack of skilled
workers. Earlier this week, the Senate by unanimous consent
passed an energy jobs training bill that will create a national
and state framework for providing labor market information,
research and training in renewable energy and energy-efficiency
areas. The Apollo Alliance, a coalition of labor, business and
environmental groups estimates that three million new jobs
could be created over the next 10 years through these energy
efficiency initiatives.
In the time I have remaining, I would like to briefly
address two other issues of concern. We need to restore UI
eligibility to a higher percentage of workforce, increase
benefits and address the under-funding of administration. As
Representative McDermott knows, we support efforts to provide
$7.4 billion over 5 years through an extension of the food
surtax to encourage states to improve and modernize their UI
programs.
Secondly, Wage Insurance. The preceding list of TAA and UI
reforms is a long one. It makes no sense to divert funding away
from these improvements to pay for an expanded Wage Insurance
Program. We believe it is more important to invest in quality
training, including on-the-job training.
Mr. Chairman and Members of the Committee, we look forward
to the opportunity to continue working with you as this
legislation moves forward and thank you again.
[The prepared statement of Ms. McDonald-Pines follows:]
Prepared Statement of Jane M. McDonald-Pines, Workforce Policy
Specialist, American Federation of Labor and Congress of Industrial
Organizations
On behalf of the more than 10 million working men and women of the
AFL-CIO, thank you, Chairman Rangel, Ranking Member McCrery and members
of the Committee, for this opportunity to testify on our
recommendations for improving programs designed to help workers
affected by federal trade policies.
While programs such as Trade Adjustment Assistance (TAA) are
important, it must be emphasized that they are no substitute for good
trade policies that create and retain good jobs in the United States.
This is why the conversation about improving these programs should be
separate from the debate over Trade Promotion Authority and trade
agreements. Millions of workers are suffering from the displacement
effects of our trade policies. The need to help them exists
independently of the debate over these trade policies.
The TAA program must honor the promise made to workers since 1962:
that the federal government will provide retraining, reemployment
assistance, and income support to workers who lose their jobs due to
federal trade policies. These workers are forced to pay the price for
federal policy decisions that benefit other Americans, and they deserve
to be made whole for their loss.
We believe that TAA's greatest strength is that it supports long-
term, intensive training and extended income support. Unfortunately,
many laid-off workers are still not eligible for these benefits, and
others are not receiving the benefits to which they are entitled.
Today I would like to focus on four key recommendations for
improving and expanding TAA.
1. No Worker Should be Denied TAA Training Due to Insufficient Funds
Funding for TAA training should not be capped
To meet the commitments made to workers who are displaced because
of federal trade policy, TAA must be accessible and available to any
worker who qualifies. Specifically, there is no reason why any worker
displaced because of federal trade policy should be denied TAA training
due to a lack of federal funding.
Yet we know this is happening. Eligible workers who want and need
TAA training are being turned away or put on waiting lists because
their state training allocation has been exhausted. According to a 2004
GAO study 35 states expected that available TAA training funds for FY
2004 would not cover the amount they would obligate and spend for TAA-
eligible workers--18 states estimated the gap at over $1 million.\1\
The most recent GAO report confirms that this continues to be a problem
in many states.\2\
---------------------------------------------------------------------------
\1\ GAO, Trade Adjustment Assistance: Reforms Have Accelerated
Training Enrollment, but Implementation Challenges Remain, GAO-04-1012.
September 2004.
\2\ GAO, Trade Adjustment Assistance: Changes to Funding Allocation
and Eligibility Requirements Could Enhance States' Ability to Provide
Benefits and Services, GAO-07-701. May 2007.
---------------------------------------------------------------------------
The current cap on TAA training makes no sense. Why should the
commitment to trade-impacted workers be nullified simply because of
flawed program design, or inadequate administration, insufficient
appropriations from Congress, or the state in which the worker happens
to live, or the timing of the worker's layoff?
Competition for scarce budgetary resources is no excuse for failing
to lift the cap on TAA training. Help for laid-off workers has always
been modest compared to the gains claimed for trade. The U.S. currently
spends less than $1 billion on TAA, while it is claimed that the U.S.
economy gains $1 trillion a year from trade. The U.S. ranks last among
21 high and median-income OECD countries in terms of the share of GDP
devoted to active labor market policies such as job search and
training. Only .14% of the nation's GDP was devoted to these programs
in 2003, compared to Denmark, which spends more than 5% of its GDP on
unemployed assistance and 2% of GDP on active labor market programs. We
spend about 1/10th as much as France and Germany do on active labor
market programs.\3\
---------------------------------------------------------------------------
\3\ Organization for Economic Cooperation and Development,
Employment Outlook, 2003.
---------------------------------------------------------------------------
The flawed system for distributing TAA funds must be reformed to
improve efficiency
The most recent GAO report confirms that the current method for
distributing TAA training funds is inefficient and deeply flawed
because the Department of Labor uses a formula that reflects past, not
current, demand.\4\
---------------------------------------------------------------------------
\4\ GAO, Trade Adjustment Assistance: Changes to Funding Allocation
and Eligibility Requirements Could Enhance States' Ability to Provide
Benefits and Services, GAO-07-701. May 2007.
---------------------------------------------------------------------------
This basic flaw leads to two undesirable results: (1) some states
experience funding shortfalls at the same time that other states have
unspent funds at the end of the fiscal year; and (2) many states seek
to ration training services to keep within the constraints of their
base TAA allocation.
The lack of a dedicated funding stream encourages states to husband
their funding until the end of the fiscal year. While this incentive to
self-ration has kept down the cost of TAA training in recent years,
these savings are achieved by shortchanging workers.
This self-rationing is confirmed by the fact that training costs
have been held down in recent years since states do not know what
future resources they will receive. We have seen states like Michigan
and Illinois experience shortfalls in training funds due to the
extraordinary demand for help. Ohio has had to limit the duration of
training due to funding shortages.
As the recent GAO report confirms, the incentive to self-ration
training is that some states have unspent training funds left over at
the end of the year. This inefficiency would not occur if states did
not have to worry about running out of funding. DOL compounds the
problem by withholding national reserve funds until the end of the
fiscal year, which skews the amount of, unspent training funds.
Short of allowing workers to draw down from an uncapped federal TAA
training fund, one alternative would be to model the system for
distributing TAA training funds to the states after the system for
distributing Unemployment Insurance (UI) state administrative grants.
Each state would receive an annual base allocation for training, case
management, and administration, which could be based on recent
certifications. This base level of funding could be supplemented by a
contingency/reserve that is responsive and readily available to meet
fluctuating demands. Under this system, states would have less
incentive to deny workers training and would be less likely to have
unspent funds at the end of the fiscal year.
2. Make TAA Available to All Workers Displaced by Federal Trade
Policies
All workers who are forced to sacrifice their livelihoods so that
other Americans may benefit from federal trade policies should be made
whole for their loss, regardless of whether they were employed in the
manufacturing sector. But we cannot emphasize enough that expanding
eligibility without a guarantee of adequate funding is an empty
promise.
Cover service and public sector workers
The TAA program does not currently cover the thousands of
technology and service sector workers who find themselves jobless when
their employers outsource their work overseas. TAA should be expanded
to cover service and public sector workers who have been displaced by
trade policy.
Ensure that all secondary workers are served
In 2002 the TAA program was expanded to cover secondary workers,
such as parts manufacturing workers who lose their jobs when the
primary firm moves its operations to another country.
However, few secondary workers are receiving benefits. According to
the latest GAO report, just 7 percent of workers covered by TAA were
secondary workers in FY 2004-2006.\5\ In an earlier report, GAO found
that no state has developed procedures to identify workers who are
secondarily affected by a trade-related layoff in another state.\6\
---------------------------------------------------------------------------
\5\ GAO, Trade Adjustment Assistance: Changes to Funding Allocation
and Eligibility Requirements Could Enhance States' Ability to Provide
Benefits and Services, GAO-07-701. May 2007.
\6\ GAO, Trade Adjustment Assistance: Reforms Have Accelerated
Training Enrollment, but Implementation Challenges Remain. GAO-04-1012.
September 2004
---------------------------------------------------------------------------
Improve TAA certification
Many potentially eligible workers are not able to access TAA
because the Department of Labor has erroneously denied workers' request
for TAA certification.
In the past 5 years, courts such as the Court of International
Trade have issued numerous orders directing the Department of Labor to
reconsider erroneous denials of TAA to hundreds of trade-affected
workers.\7\ Workers have suffered protracted delays in getting
assistance as a result of these errors. Many more workers become
discouraged and give up, or lack the resources to pursue appeals.
---------------------------------------------------------------------------
\7\ Judge Delissa A. Ridgway. Slip Op. 06-132. United States Court
of International Trade.
---------------------------------------------------------------------------
While the Department of Labor has made some changes, Congress must
require that the TAA certification process include a thorough review of
TAA petitions--including full consultation with all affected parties,
most specifically affected workers and their unions.
Industry-wide certification, in addition to improved outreach,
would reduce some of the difficulties workers face in accessing and
qualifying for TAA, and would make eligibility determinations more
equitable, faster, and more predictable.
3. Improve Outreach and Access to TAA Training
Since 2001 we have lost 3 million manufacturing jobs, many of them
as a result of U.S. trade policies. Clearly only a fraction of eligible
dislocated workers are being served by the current TAA training
program. Many of the workers most in need of TAA training are already
eligible, but are not able to access the program. In addition to
ensuring that no eligible worker is denied training due to insufficient
funds, much more needs to be done to improve outreach and access and
make TAA training a more viable option for dislocated workers.
Fund outreach, case management, assessment, referral and support
services through state Unemployment Insurance (UI) and
Employment Security (ES) agencies
As the most recent GAO report points out, there are no funds
available under the current TAA program to pay for outreach, job
matching, case management, and support services to provide workers with
the help they need to transition effectively and make informed
decisions about training.
It is not surprising that there has been a decline in TAA
participation when resources to help workers enroll and participate in
the program are so limited. The GAO report notes that in one state
administrative funds were exhausted by the end of the first quarter. In
another state Wagner-Peyser ES funds were able to pay for only a single
case manager who ``had to cover three counties and serve approximately
1000 workers.''\8\
---------------------------------------------------------------------------
\8\ GAO, Trade Adjustment Assistance: Changes to Funding Allocation
and Eligibility Requirements Could Enhance States' Ability to Provide
Benefits and Services, GAO-07-701. May 2007.
---------------------------------------------------------------------------
In past years, when resources were more substantial, states were
expected to use state agency personnel in the Wagner-Peyser employment
service to provide such services. This program, a companion to the
state unemployment service, uses state civil service employees to
provide labor exchange services, including job matching, counseling,
skills assessment, and other services for job seekers and employers,
statewide. However, in real dollar terms, Wagner-Peyser employment
service state grants have dropped by $200 million since 2001. The
decline is close to $700 million since 1985 in inflation adjusted
dollars.
Neither Wagner-Peyser ES funding nor WIA funding should be expected
to provide these needed services for TAA participants. This is robbing
Peter to pay Paul. To divert these already limited funds to help trade-
affected workers means providing less help for non-trade affected
workers.
Increasing TAA funding for outreach, case management, assessment,
referral and support services through the state Unemployment Insurance
and Employment Service agencies is the most effective and efficient way
to help trade impacted workers for several reasons. First, since TAA
eligible workers are most likely to be identified first when they file
for unemployment benefits and then Trade Readjustment Allowances (TRAs)
with the state agency, strengthening the state agencies' ability to
assist them with job search and other services as early as possible is
important. Second, maintaining this function at the state level will
help facilitate TAA coordination with the WIA state rapid response
program. And, third, this statewide structure provides the flexibility
to quickly move resources from one part of a state to another as
circumstances change and to ensure a professional workforce to provide
the complex services that workers need on a uniform and impartial
basis.
Improve the Health Coverage Tax Credit (HCTC)
Most TAA participants will find it very difficult to participate in
sustained training unless they have health insurance coverage for
themselves and their families. In 2002 Congress created the Health Care
Tax Credit (HCTC) to assist TAA recipients to receive affordable health
care. However, Congress must improve HCTC if it is to be fully
effective.
Increase Affordability
In its most recent report, GAO states, ``the high cost of the
health coverage benefit to participants is the greatest barrier to
participation.'' \9\Congress should increase the subsidy to 90% and
provide fallback coverage through plans like the Federal Employee
Health Benefit plan or Medicare.
---------------------------------------------------------------------------
\9\ Ibid.
---------------------------------------------------------------------------
Address Gaps in Coverage
Delays in TAA and HCTC processing can mean laid-off workers have
lapses in coverage that disqualify them for consumer protections
necessary to get coverage. Congress should allow for presumptive
eligibility so that workers who are TAA eligible are HCTC eligible and
disregard lapses in coverage that occur through no fault of the worker.
Improve Administration
HCTC is a complicated program to administer. The Department of
Labor and the Internal Revenue Service must work with the states to
find ways to improve access to the tax credit for eligible workers.
Expand training deadlines
We know that one academic year of community college raises
displaced workers' earnings by about 5 percent over and above what they
would have been without further education.\10\ Yet many TAA
participants cannot enroll in training because deadlines for enrollment
in training are too restrictive, Congress should extend the training
enrollment deadlines to make it easier for workers to access training.
---------------------------------------------------------------------------
\10\ Robert Lalonde. The Returns of Going Back to School for
Displaced Workers. University of Chicago. Winter 2002. http://
harrisschool.uchicago.edu/About/publications/research-report/winter02/
displace-wokers.asp.
---------------------------------------------------------------------------
Improve TAA income support
In many states income support is not sufficient to enable workers
to enroll in long-term training. The amount of the TRA is the same as
the most recently weekly UI benefit--a national average of
approximately $260/week.
Prior to 1981, workers received TRA and UI combined that were
equivalent to 70% of their prior pay, up to a maximum of the average
manufacturing wage. Pending improvements in UI for all unemployed
workers, restoring the 70% wage replacement benefit would significantly
remedy this shortcoming and provide the economic foundation for workers
to engage in long-term training.
4. Provide Quality Training That Is Linked To The Creation and
Retention of Good Jobs
Improving access to TAA training and expanding eligibility are
necessary, but not sufficient by themselves to make dislocated workers
whole for job loss caused by U.S. trade policies. TAA training must be
improved to put more workers on a career path towards good jobs with
good wages and good benefits.
Support strategies that focus on creating and maintaining good jobs
A good jobs strategy must include policies designed to create and
retain good jobs with good benefits. Congress should create early
intervention and community adjustment programs that involve all
stakeholders, including organized labor, in addressing the effects of
dislocation and globalization. The Steel Valley Authority in
Pennsylvania, for example, is directly engaged in layoff aversion
efforts to help retain good manufacturing jobs.
Expand programs that promote partnerships between government,
employers, and labor to support job retention and creation, as
well as regional economic and community development
Congress should support training that leads to good jobs, including
properly structured on-the-job training, as well as model labor-
management sectoral initiatives that have proven successful in saving
jobs, improving wages, and making industries more competitive. We
believe such high-road initiatives offer a stark contrast to wage
insurance, which promotes downward economic mobility and subsidizes low
wage employers, with no guarantee of on-the-job training that provides
transferable skills.
There are many examples of high-road labor-management partnerships
in manufacturing, health care, telecommunications, and hospitality.
Through collaboration with government and community organizations,
these partnerships assess industry skill needs, and implement programs
that create career ladders and train workers in high-growth, high-wage
occupations.
Establish links between TAA and new opportunities in energy technology
We are particularly excited about the opportunities presented by
the potential for ``green collar'' jobs in the renewable energy and
energy efficiency sector.
The Apollo Alliance--a coalition of labor, business and
environmental groups--focuses on the development of ``green collar''
jobs that create sustainable economies, energy independence, good wages
and benefits, and healthier communities. The Alliance estimates that as
many as 3 million new jobs could be created over the next 10 years if
the country launches a comprehensive effort to build a renewable energy
future.\11\
---------------------------------------------------------------------------
\11\ Apollo Alliance. New Energy For America: Apollo Jobs Report.
www.apolloalliance.org.
---------------------------------------------------------------------------
These jobs would produce environmentally-friendly products and
services such as construction of green schools, solar panel
manufacturing, energy efficiency retrofits of homes, and environmental
clean up and restoration.
Already, the renewable energy and energy efficiency industries are
experiencing a lack of skilled workers. A 2006 study from the National
Renewable Energy Lab (NREL) identified shortage of skills and training
as a key business constraint. In particular, the NREL identified a
number of critical unmet training needs, including lack of reliable
installation, maintenance, and inspection services, the shortage of key
technical and manufacturing skills, and failure of the educational
system to provide adequate training in new technologies.\12\
---------------------------------------------------------------------------
\12\ Margolis and Zuboy, Nontechnical Barriers to Solar Energy Use:
Review of Recent Literature. National Renewable Energy Laboratory,
2006.
---------------------------------------------------------------------------
As an example of one state's response in Pennsylvania, Gov. Rendell
is using state policies to promote and develop renewable energy to
attract wind, solar, and battery manufacturing to the states. He has
attracted companies that have taken former closed steel mills and
created good union manufacturing jobs in building wind turbines.
Invest in quality training programs
Proponents of wage insurance sometimes argue that the existing job
training programs do not work. This is a broad and simplistic
statement. While some retraining programs have not always provided a
smooth transition to equivalent employment, there is substantial
evidence that retraining programs have benefited workers and can serve
as the template for successful transitions for workers affected by
federal trade policies.
We need to better understand how factors like economic conditions
and, participant characteristics play an important role in determining
outcomes for training. Workers participating in retraining programs
often train for a new occupation and a new industry. Skills that are
specialized for their previous jobs may not be compatible with a new
employer.
Careful design of programs is essential. Individual Training
Accounts are not the answer to addressing concerns about the
effectiveness of training. The answer is to improve the effectiveness
of job training and education programs, not to cap training or to
encourage workers to forego job training. As noted earlier one academic
year of community college raises displaced workers' earnings by about 5
percent over and above what they would have been without further
education. Programs that provide long-term training for dislocated
workers can have positive results and a significant return on the
investment. For example, a long-term training program for dislocated
workers in Washington State resulted in job placements that averaged
93% of the pre-layoff earnings.\13\
---------------------------------------------------------------------------
\13\ Washington State Workforce Training and Education Coordinating
Board, Training Benefits Program Review. December 2002.
---------------------------------------------------------------------------
At this point, I would like to briefly address two other policy
options targeted at dislocated workers--Unemployment Insurance and Wage
Insurance.
Unemployment Insurance
Since TAA is directed at a very narrowly defined set of workers who
lose their jobs due to federal trade policy, other unemployed workers
who lose their jobs due to trade policy or other causes must continue
to rely on the Unemployment Insurance (UI) program as a critical safety
net.
The UI system is in a state of disrepair and demands our urgent
attention. Much more needs to be done to restore UI eligibility to a
higher percentage of the workforce, to restore higher benefit levels,
to repair the dysfunctional extended benefits (EB) program, and to
address the severe under-funding of UI and ES administration.
We now have an opportunity to make a down payment on much-needed
repairs to the UI/ES system. The Bush Administration supports extension
of the FUTA surtax, which will generate $7.4 billion over five years.
The FUTA is a dedicated payroll tax whose purpose is to fund the UI
system and we see no reason why this $7.4 billion in additional revenue
should not be dedicated to repairing the UI system.
For this reason, we very strongly support H.R. 2233, a UI reform
bill recently introduced in the House of Representatives by
Representative McDermott, as well as companion legislation to be
introduced in the Senate. These bills would allocate as much as $7.4
billion over five years to encourage states to modernize their UI
programs. Among other things, both bill would provide incentives for
states to support workers enrolled in training programs for high-demand
occupations, which is an especially good idea that fits within a
broader strategy of helping workers get good jobs. For more details
about his legislation I refer you to the testimony of Thea Lee, Policy
Director for the AFL-CIO, at the Ways and Means Income Support
Subcommittee hearing on March 15, 2007.
Wage Insurance
The preceding list of critically needed TAA and UI reforms is a
long one: lifting the cap of TAA training; expanding outreach and
access to TAA training; expanding TAA eligibility; making TAA training
a more viable option for dislocated workers by improving HCTC and TRA
income support and repairing the ES/UI system.
We know these reforms cost money, and it would be optimistic to
think that all these reforms could be funded today. So given the
difficulty of the challenge, we believe it makes no sense at all to
divert available funding away from this reform agenda to pay for wage
insurance--either as an expansion of the current Alternative Trade
Adjustment Assistance (ATAA) program, or as a larger-scale program
available to non-trade impacted workers.
All of the TAA and UI reforms we propose are designed to put more
workers on a career path of good jobs with good wages and good
benefits. We are concerned that wage insurance, by contrast, would
promote downward economic mobility, take jobs away from lower-skilled
workers and subsidize lower-wage employers, as explained by AFL-CIO
President John Sweeney in his recent letter to Senator Schumer.
For a more detailed explanation of our concerns about wage
insurance, I refer you to the testimony of AFL-CIO Policy Director Thea
Lee before the Ways and Means Income Support Committee on March 15,
2007.
In short, we believe that the arguments for wage insurance are
seriously flawed. The most commonly invoked argument for wage insurance
is that it promotes ``rapid reemployment'' by inducing dislocated
workers to consider and accept lower-paying jobs that they would not
otherwise want.\14\ If this is true, then we believe the intended
outcome may not be good for workers' long-term job prospects.
---------------------------------------------------------------------------
\14\ See, e.g., Howard Rosen, Testimony Before the Ways and Means
Subcommittee on Human Resources (May 4, 2006) (``Wage insurance is
specifically designed to encourage people to return to work sooner than
they might have otherwise''); Robert Litan, Lael Brainard, and Nicholas
Warren, ``A Fairer Deal for America's Workers in a New Era of
Offshoring,'' Brookings Institution (May 2005) (``A main purpose of
wage insurance is to accelerate the pace at which permanently displaced
workers are reemployed'').
---------------------------------------------------------------------------
Helping workers find ``rapid reemployment'' in good jobs is a good
thing, and programs such as the Employment Service (ES) that promote
rapid reemployment by matching workers with appropriate employment need
much more funding. But promoting ``rapid reemployment'' by getting
skilled workers to take bad jobs rather than retrain for good jobs may
not be good for workers.
To the extent that wage insurance does induce workers to take
lower-paying jobs, it may also harm other workers who otherwise would
have gotten those jobs. This was the finding of the only economic
modeling on wage insurance that has been performed to date. Since the
workers displaced by wage insurance would be lower skilled workers,
this displacement raises serious equity concerns.
Some advocates of wage insurance claim that rapid reemployment is
not their intention. They claim their intention is to mitigate hardship
for dislocated workers who are already being forced to accept lower
paying jobs. This argument ignores the fact that wage insurance is
likely to induce workers to take lower paying jobs that they would not
otherwise take, regardless of anyone's intentions. And this rapid
reemployment effect would cause displacement of lower skilled workers,
regardless of anyone's intentions. Advocates of wage insurance cannot
say what proportion of the participants in a wage insurance program
would accept lower-paying employment even without the wage subsidy, but
it is clearly less than 100%.
The second most commonly-invoked argument for wage insurance is
that it would subsidize employers to provide on-the-job training, which
is claimed to be more valuable to workers than traditional TAA
training, so that inducing worker to take lower-paying jobs might not
harm their long-term job prospects.\15\ However, there is no
requirement that employers use any subsidy derived from wage insurance
to give workers any kind of training, must less valuable training. This
stands in contrast to employer requirements under the on-the-job
training (OJT) program of traditional TAA.
---------------------------------------------------------------------------
\15\ See Lael Brainerd, Testimony Before the Joint Economic
Committee (February 28, 2007) The retraining that a displaced worker
receives on a new job provides new skills that contribute directly to
his or her performance in the new job and is thus directly useful not
only to the worker but also to the new employer''); Howard Rosen,
Testimony Before the Ways and Means Subcommittee on Human Resources
(May 4, 2006) (``In addition, it is hoped that the new employer will
provide on-the-job training, which has proven to be the most effective
form of training''); Robert Litan, Lael Brainard, and Nicholas Warren,
``A Fairer Deal for America's Workers in a New Era of Offshoring,''
Brookings Institution (May 2005) (``The retraining that displaced
workers receive on a new job is the best kind--in sharp contrast to
generalized training programs such as those available under TAA'').
---------------------------------------------------------------------------
Research tells us that lower-wage employers are the least likely to
offer training that provides workers with transferable skills so this
argument is more wishful thinking than anything else. Workers with the
highest wages and the most formal education receive the most extensive
workplace education, while workers with the lowest wages and least
education receive the least extensive workplace education.\16\
---------------------------------------------------------------------------
\16\
---------------------------------------------------------------------------
[16] Ahlstrand, Bassi, and McMurrer, Workplace Education for Low-
Wage Workers, W.E. Upjohn Institute for Employment Research. 2003.
To make matters worse, the employers that would derive a subsidy
from wage insurance are, be by definition, lower-wage employers. Wage
insurance advocates need to explain how payments to individual workers
would act as a subsidy for employers. One possibility is that wage
insurance could subsidize employers by allowing them to pay lower wages
to participants in the program. Another possibility is that it could
operate to lower wage levels for non-participants.
Finally, advocates of wage insurance argue that dislocated workers
are already suffering income loss upon reemployment, and this program
cannot be ignored. We agree that the problem of income loss for
dislocated workers is very real and cannot be ignored. But the question
is what to do about it. We think the best response is to use available
resources to prevent as many workers as possible from having to accept
income loss, not to induce more workers to take bad jobs that they
would not otherwise want.
Though information on the Alternative Trade Adjustment Assistance
(ATAA) program is quite limited it is worth noting a story that
appeared in the Los Angeles Times recently. The story described two
workers who received wage insurance and are now employed by Target and
Krispy Kreme respectively.\17\ Though they are receiving wage insurance
currently they are also worried about what will happen when their wage
insurance runs out next year. What answer can we give them?
---------------------------------------------------------------------------
\17\ ``Aid plan for unemployed workers gains support.'' Los Angeles
Times. April 9, 2007.
---------------------------------------------------------------------------
We do not accept that the problem is the unwillingness of stubborn
workers to take bad jobs, so the solution is not to get worker to take
bad jobs they would otherwise want. The problem is that there are not
enough good jobs available and there are not enough resources available
to help workers find and quality for the good jobs that are available.
It follows that limited budgetary resources should be dedicated to
helping workers find and qualify for good jobs with good benefits, and
for making sure those jobs are available in the first place. They
should not be diverted to induce workers to take bad jobs.
Mr. Chairman and members of the Committee, we appreciate the
opportunity to present our views on these vitally important issues and
look forward to the opportunity to continue working together as the
legislation moves forward.
Mr. LEVIN. Thank you very much.
Mr. Rosen?
STATEMENT OF HOWARD ROSEN, EXECUTIVE DIRECTOR, TRADE ADJUSTMENT
ASSISTANCE COALITION
Mr. ROSEN. Members of the Committee, it is an honor to
appear before you this morning, and I congratulate you for your
staying power.
Mr. LEVIN. Same to you, Mr. Rosen.
Mr. ROSEN. Well, thank you. I have, I guess I do not know
if it is the honor or not of being the last of 12 people
testifying before you today. I am not sure if I should make my
presentation or respond to the preceding 11 people. I will try
to do both. But before I do, I hope you do not mind me saying,
and if this is not inappropriate, that it is much easier
sitting in front of Mr. Stark than behind him.
Forty-five years ago, Congress made a commitment to assist
American workers and their families, who lose their jobs due to
international trade. Intense domestic and international
competition makes this commitment even more important today.
Before I go further, I want to make one very important
point and that is that we are meeting at a critical time. Trade
Adjustment Assistance authorization expires at the end of
September. We know from previous experience that any lapse or
temporary extension could cause considerable havoc and
disruption to American families and workers who are already
facing probably the most serious financial crisis in their
lives. I hope that Congress will not allow the program to
expire.
Listening today, I come up with three conclusions. Number
one, if you listen to the previous panel, the eloquent
testimonies of the previous panel, Trade Adjustment Assistance
works. If anyone has any questions, I ask them to read the
testimonies that were given this morning. The second conclusion
that I come to today is that Trade Adjustment Assistance and
all these workforce programs are wonderful when they are in my
state, but if we do them nationally, I am concerned about how
much they cost, if they are effective and if there is waste,
fraud and abuse. But somehow in everyone's state, those
concerns are not there. The third is that there has been this
kind of false debate between general programs and targeted
programs. I do not know why one has to come at the expense of
another. Yes, we need to strengthen both our general and our
targeted programs.
There has been a lot of data that has been thrown around
this morning. I cannot go in and respond to all of it today, I
would be more than happy to do that if you want to ask me.
So, I just want to leave you with a few comments. Number
one, Trade Adjustment Assistance is not a substitute for trade
policy. Number two, currently, we need to streamline the
certification process. There is discrimination that is going on
between workers in different firms within the same industry. I
believe that we need to move toward certification by industry,
occupation and region. TAA also must keep up with current labor
market conditions, not just the past ones. We need to cover
service workers. Trade Adjustment Assistance is not a handout.
Wage Insurance and the Health Coverage Tax Credit are two
examples of how the program has moved from income transfers to
targeted assistance. Wage Insurance does not replace
Unemployment Insurance. Workers unanimously report that Wage
Insurance does not force them to take low-paying jobs but, on
the contrary, it helps them once they do. The experiment has
been successful even though we have got very low take-up rates,
for those who are in it, they will all tell you it has been
successful, we need to expand the program.
As we have heard endlessly this morning, the Health
Coverage Care Tax Credit is inadequate. The vast majority of
people who do not have insurance cannot afford the 35 percent.
The credit needs to be increased.
I will not make comments about the amounts and allocation
of training funds, again, this issue has been raised.
But let me just conclude with one thing: Over the last
decade or so, in this country we have moved Workforce
Investment programs and put them on the shoulders of case
management people in the One-Stop shops around the country, and
then we have invest in them. These are the people who do
assessments; these are the people who help people find
training; these are the people who help workers find the jobs,
that are out there; they are the ones that are supposed to be
out there looking for the jobs and yet we are putting a lot of
pressure on these people and not financing them. We have got to
correct that problem in case management.
All surveys suggest that the American people are willing to
move forward on trade liberalization if the government is
willing to help those people who are adversely effected by that
liberalization. As we all know, the trade liberalization has
taken place. Now, it is time for the government to keep up its
side of the bargain.
[The prepared statement of Mr. Rosen follows:]
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Mr. LEVIN. Thank you very much. Mr. Stark.
Mr. STARK. Thank you, Mr. Chairman, and I want to thank the
witnesses. Karen, I think you got to the point, and if I can
summarize your concerns with the current Health Coverage Tax
Credit. One, it is extremely expensive to administer in its
current form. Two, even when workers can get it, there is no
assurance that they can buy insurance in a timely manner that
covers--that provides even reasonable benefits. I would use as
a comparison and say Medicare benefits is a minimum. There
would be a problem, I suspect, if we attempted to require each
state to have insurance rules that would provide a certain type
of insurance and then we would get all jammed up with various
state insurance commissioners, and someone has suggested using
a system like the Federal Employees Health Benefit Plan, I am
concerned that that could get bureaucratic and complicated as
trying to control private insurance. How do you think that
making workers eligible for Medicare and charging them the full
actuarial cost of the Medicare benefit, which would be less
than the premiums that you suggest in your testimony? It would
cost the government nothing. It would have precious little
administrative costs. Would certainly be better than either no
insurance at all or insurance with huge pre-existing condition
deductions and that sort of thing. Would that fill the bill for
you?
Ms. POLLITZ. Well, let's see, the Medicare Program would
certainly be simpler because it is a single program as opposed
to having to go out and shop through the vast marketplace. I
would hope you would include some sort of supplement wraparound
because the Medicare Program does have very high cost-sharing,
much higher than I think most people are used to coming out of
employer-sponsored coverage and much higher than I think they
could afford to pay if they were to get sick and they were on
these other limited income benefits. So, I think that would be
an important addition to your idea. It probably would be easier
for the IRS to administer because they would only have to
establish a payment arrangement with one program instead of
thousands of programs, like they do today. So, I think it could
certainly offer those advantages.
Mr. STARK. You are right, there are co-pays and deductibles
but that for the very low-income that might be covered under
the various state Medicaid policies, which for those--varying
from state to state but for people of low-income, they would
get that coverage so that it would be less onerous for those of
low income.
Ms. POLLITZ. They would, Mr. Chairman, if you made them
eligible for Medicaid. Most of these people would not be
eligible for Medicaid.
Mr. STARK. They would have too high an income and too high
assets?
Ms. POLLITZ. They probably would not fit a category. You
would have to be in a population category of parents or a child
or disabled or elderly and have the income that associates with
that category to be eligible for Medicaid.
Mr. STARK. But I guess then what you are suggesting is it
would be good to have a universal Federal nationwide plan.
Ms. POLLITZ. Sure.
Mr. STARK. That was available or set minimum benefits and
regulations so that people knew that there would be a plan
available to them.
Ms. POLLITZ. I think that is very important, yes.
Mr. STARK. Howard, I had trouble wondering whether you had
been sitting too long and somebody had put a tack on your chair
but what was it that led you almost to an outbreak of laughter
and mirth during the testimony of the gentle lady from Hudson
Institute, would you care to enlighten me as to--was it the
idea that we do not have any unemployment in this country and
do not have any need to assist workers who may be displaced by
trade?
Mr. ROSEN. Well, let me just give two examples, it is
correct that 97 percent of workers in this country are taxed
for Unemployment Insurance but the share of unemployed that
receive Unemployment Insurance is one third. That means it is
basically a crap-shoot when you lose your job if you are going
to get Unemployment Insurance or not. We give it for 26 weeks
on average. In contrast to what we heard on the previous panel,
I actually could not believe the numbers that were being
suggested, the average payment across the country is $260 a
week. That is below the minimum wage that Congress has just
passed, so I do not know what a minimum wage is if we are not
willing to give people Unemployment Insurance at that minimum
wage. So, that is one I will just leave on the side.
The second is I am glad that we raised the issue of 55
million job losses and 59 million new job creations. When you
say it that way, there is a suggestion that just because the
net is positive net means that everything is wonderful. It does
not mean that those 55 million people who lost their jobs took
those 59 million new jobs. We know from survey data, that about
a third of the dislocated workers will not find a job within
two to 3 years. Now, if you want to say that they are lazy and
they are not looking, that is fine, but I do not think that is
the case. We also know that another 40 percent of those
dislocated workers will take an earnings loss when they take
their new job. That means that when you lose your job, I am
talking about a dislocated worker, seriously dislocated worker,
there is a 70 percent chance that your life will not be whole
again. Only 25 percent of people will be able to get back to
where they were before they lost their jobs.
If I could just say one more thing and that is based on
these data. One in 10 people in this room will change jobs this
year. Now, I hope it is not the people on this dais, which
means that the ratio is even higher for the rest.
Mr. STARK. Maybe next year, not this year.
Mr. ROSEN. There is a significant cost. Now, many of those
jobs changes may be voluntary, people may move voluntarily from
one job to another. But for some people it will not be
voluntary and there is an extreme cost to that job change and
that is what we are here talking about today.
Mr. STARK. Thank you. Thank you, Mr. Chairman.
Mr. LEVIN. Rather than giving you a chance to answer, Ms.
Furchtgott-Roth, let me call Mr. Herger who may want to provide
you that chance, I am not sure. One way or another you will
have that opportunity. Go ahead, Mr. Herger.
Mr. HERGER. Thank you, Mr. Chairman. Indeed, that is my
intent. Ms. Furchtgott-Roth, in your testimony you stated that,
``Job creation in the United States is strong and unemployment
is low such that economic circumstances do not warrant an
expansion of the TAA program.''
Ms. FURCHTGOTT-ROTH. That is correct, yes.
Mr. HERGER. I take it that you believe that the existing
TAA program is adequate given the strong state of the economy
today. Could you talk further about your ideas for improving
the administration of the existing program and making it more
efficient and outcomes-based?
Ms. FURCHTGOTT-ROTH. Well, the existing program is, as I
said before, is adequate but it does not mean that it could not
be improved by making it more efficient. In other words, one
could take the existing funding for the program and make it
more efficient and also combine some of the programs with other
programs in the Department of Labor. There are about over a
dozen programs to help unemployed workers and what would be
useful would be to have more guidance, more individual guidance
for TAA participants, more use of vouchers to enable them to
get training at community colleges, and more help with the
administration paperwork of filling out the program. I think by
doing that, dislocated workers could make better use of the
program without having it expanded to services or to other
industries. We have a tremendous amount of growth in our
economy. The dislocated workers that Howard is talking about
are a very small proportion of the unemployed. Workers who are
unemployed, who pay their Unemployment Insurance benefits--pay
their Unemployment Insurance, whose employees pay Unemployment
Insurance on them do get Unemployment Insurance when they leave
and that is the vast majority of these workers who lose their
jobs from another job. As you come into the labor market as a
new entrant, you are considered unemployed but you do not get
Unemployment Insurance or unemployment benefits. So part of the
workers who do not get unemployment benefits, who Howard is
talking about, is those kinds of workers. If you have been in
your job for a certain amount of time, generally a year,
depending on the state, then when you leave, you get
unemployment benefits. Dislocated workers are defined as a very
small group of workers who lose their jobs through changes in
industrial change and structure. But we have about 24 million
workers who voluntarily leave their jobs and get other jobs and
then those are unemployed for a small period of time, what we
call ``frictional costs'' of moving jobs. They leave their jobs
because they can find better ones and they can move up in the
labor force.
Mr. HERGER. Well, I thank you for your comment. Again, the
whole purpose of this is that if there is anyone out there, and
we do have people out there who need jobs and cannot find them
and who have been displaced, we want the most efficient program
we can and the least duplicative programs that we can to make
it work. If we look around the world today, the industrial
world is very envious of the job creation we have here in the
United States, the relatively low unemployment we have here in
the United States but that is not to say that we cannot nor
that we should not be making it better. So I appreciate your
comments and your testimony, and the testimony of each of you.
Mr. McDermott?
Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Rosen, you
raised an issue, and I think that Mr. Courtney also raised an
issue in a way and that is this whole issue about there are
millions of jobs created every year and millions that are lost
every year. My question is if that is true, why is there so
much anxiety, what is going on that a high-tech work or a
computer person or whatever in Seattle, why should not they
say, ``Well, gee, there are a lot of high-tech companies around
here, I will pick myself up a job here in the next 2 weeks''
and go on down the road? Is that what the circumstance is, as
is suggested by Ms. Roth, or is this--are there some problems
with shifting from one company to another or is it that they
want to take the job offshore?
Mr. ROSEN. First of all, let me make it very clear that I
also agree that the labor market is very strong right now, and
I also know that there are shortages in certain sectors of the
economy, in certain occupations, in certain regions of the
economy, but what concerns me is when people use that
information to then ignore the other things going on in the
economy. Let me just use an example, Mr. Levin, if you do not
mind. I doubt that the Adelphi workers that are losing their
jobs in Michigan are prepared immediately to take the nursing
jobs that Michigan needs. It does not happen. There is a
transition that has to take place. If they do not make that
transition, it is very costly to them. The question is the
government willing to help make that transition? Sometimes it
can take, as we heard in the previous panel, it can take a year
or two to do that. I agree that--all I am arguing is that just
because the economy is doing well does not mean that we can
ignore the costs that are being borne by a few people. It was
just said that 20 million of the 55 are transitional on
unemployment, well, what are the rest of them, what are the
other 30 million, if these are long-term unemployed? I think
the numbers are not that large but if it is even one or two.
Now, let me just come back to the efficiency of the program
for a second. These programs----
Mr. MCDERMOTT. Could I just stop you there a second?
Mr. ROSEN. Yes.
Mr. MCDERMOTT. We have split the economy into those people
who lose a job and those who lose a job because of trade, is
that an efficient division to make?
Mr. ROSEN. Yes. First of all, let me give you a substantive
response. Again, it has been very frustrating listening to this
discussion this morning. I began working in this field about 25
years ago and 25 years ago we were able to document that trade-
related dislocations, those workers, were different than other
people losing jobs in the economy. They were older, they were
minorities, they were less educated. That is when trade-related
dislocations were focused on the ``Big Three''--textiles,
steel, and autos. But that is not the case anymore. When you
look at the list of petitions going to the Department of Labor
for TAA, very few of them are in autos, steel and textiles.
Much of them are in electronics. The differences between those
workers and the overall composition of workforce is now pretty
much the same. But, and this is documented in my written
statement, the adjustment that these trade-related people go
through is still harder. They tend to take harder hits. They
tend to take more earnings losses. It tends to take longer for
them to find re-employment. Why? Because they are not just
changing their jobs, they are changing their occupation. They
are not going back to their previous occupation, so their
adjustment is harder. That is a substantive reason for why we
should be doing something special for trade-related workers.
Now, as has been mentioned by my colleague, there is an
ethical reason, I know people do not like to talk about ethics
up here, but we are told that the benefits of trade are
gigantic in this economy. Well, they are widely distributed and
the costs are very highly concentrated. It would seem to me
that there is an ethical obligation to take some of those
benefits and redistribute it to those people who are paying the
price for those benefits.
The third, as you discussed this morning, is a political
motivation for these things. If we are going to move forward--I
told you that the public opinion surveys all say that the
American people are only in favor of trade liberalization if
the government is willing to help those people who are hurt.
That is what your constituents are saying, so there are
political motives.
Mr. MCDERMOTT. Could I just stop you because my time is
about to run out.
Mr. ROSEN. I am sorry.
Mr. MCDERMOTT. There is an editorial in The Wall Street
Journal, I was just sitting up here reading my clips. On the
14th of June it says, ``The Case for Taxing Globalization's Big
Winners,'' and it really is making the point that you are
saying is that there is some reason, since there have been
large benefits to trade, there ought to be some spreading out
of the benefits from just the top companies that have gone
overseas and are now benefiting from having money overseas.
Mr. ROSEN. I am sorry I have said too much, but I have one
sentence, which is that the financial markets are getting a lot
of the benefits from international trade and globalization, and
we do not tax them at all for those things.
Mr. MCDERMOTT. Thank you. I yield back the balance of my
time. We will try and redress some of that as we go along.
Mr. LEVIN. Thank you. Mr. Weller?
Mr. WELLER. Thank you, Mr. Chairman. It is always
interesting when we often talk about trade that the focus is
always on the negative. I represent a district that is heavily,
heavily dependent on trade and when we have an opportunity to
expand exports, we have seen growth. In my district, about 40
percent of the agricultural products, the corn and soybeans we
grow, those are exports. My biggest manufacturer, and I
represent both manufacturing as well as an agricultural
district, over half of the production in the Joliet Caterpillar
plant in my district, which employs local machinists, is
exported and that is consistent with other Caterpillar plants.
Again, Caterpillar is my biggest manufacturer so that is why I
am using them as example. But they also have added 3,000 jobs
in Illinois because of expanded trade, good paying
manufacturing jobs. Of course, we are in a global economy, we
only represent 4 percent of the globe's population, 96 percent
of the world is outside of the United States, so that is the
marketplace, and we want to be competitive.
I find in talking with my farmers, I find talking with my
other employers, particularly manufacturing, that their biggest
challenges in being competitive include energy costs, we have
the highest energy costs in the world, that we do tax those who
export to the global marketplace. Some label those who benefit
from globalization. But we have the second highest tax burden
on manufacturing in the world, so we punish you if you invest
in the United States in creating jobs in manufacturing, as well
as other business ventures because we tax you extremely highly.
Economists say that about 3 percent of job losses are a direct
result of trade, which means 97 percent of job losses come from
other factors, energy costs and tax policy obviously contribute
to that.
So, as we discuss Trade Adjustment Assistance, the thought
of how we can change these programs to recognize economic
realities in America, the thought of making it more of a
``Globalization Adjustment Assistance'' may be a better
approach, Mr. Chairman. It something that I would certainly
welcome working with you on.
Ms. Furchtgott-Roth, let me direct my question to you
because my time is somewhat limited. You have noted, as have
others, that Trade Adjustment Assistance benefits are a
supplement to other taxpayer-provided benefits. We provide
about $30 billion in annual unemployment benefits, about $15
billion in additional education and training benefits in
addition to TAA for someone who qualifies and participates in
TAA. In your testimony you state, let me quote you, that,
``While there is no need to expand the TAA program,'' you
suggest, ``Americans do not know whether expanding Wage
Insurance will solve problems of economic insecurity from
globalization but it might be worth trying in a few states to
see if it works rather than imposing a Federal mandate.'' Of
course, we have an experiment right now in TAA, but can you
elaborate on that view?
Ms. FURCHTGOTT-ROTH. Yes, yes, there are pros and cons of
Wage Insurance. Some people say the important thing is to get
unemployed workers back in the job market as soon as possible
to prevent them losing skills and to keep up their human
capital and to make easier for them to get another high-paying
job afterward. So if that is the view, than the Wage Insurance
idea that will encourage them to get back in the workforce soon
would be very beneficial. Then other people would say that what
unemployed workers really need to be encouraged to move and so
states, such as Michigan, that have high unemployment workers
there need to be encouraged to move to states like Alabama
where you can get a job with a six figure salary without even a
college degree because the auto plants are hiring there. So
some people say Wage Insurance would prevent the movement from
one part of the country to another and that what we want to do
is encourage movement. So, those are basically the two views.
But we have a very large country, we have many different kinds
of segments of the population and the advantage of having 50
states is that we can try out these things and if they work,
then other states will copy them.
Mr. WELLER. So, you support the idea of giving states the
opportunity to experiment, is that what you are suggesting?
Ms. FURCHTGOTT-ROTH. Absolutely, I would support the idea
of getting states to experiment on almost everything, yes.
Mr. WELLER. Well, and I would mention to you, I would ask
you to take a look at H.R. 1513 legislation that I have
introduced specifically to that, which would encourage states
to seek waivers to develop Wage Insurance programs.
Ms. FURCHTGOTT-ROTH. Right, I think that would be very
positive.
Mr. WELLER. We have 50 laboratories in America which could
experiment and they may have an idea which at some point we
could take nationwide.
Ms. FURCHTGOTT-ROTH. Exactly.
Mr. WELLER. But I do want to ask you to take a look at that
and of course your other panelists as well and my colleagues,
to look at that legislation.
Ma'am, you discussed earlier with Mr. Herger your thoughts
about modernizing the TAA program for the 21st century economic
realities we have today, can you elaborate further on your
ideas?
Ms. FURCHTGOTT-ROTH. Yes, yes, well, there are a lot of
high return occupations that people could go into through
community colleges but community colleges are not providing
that kind of training. Nursing training for example is one.
Because of our demographics, we need a lot more nurses and
nurses is a high-paying occupation. But community colleges are
regularly turning away nursing candidates. There are more
people who want to be trained as nurses than can be trained
right now.
Mr. WELLER. Our first community college in America is in my
district and when I speak with them, they have an outstanding
program, the challenge they have is because there is such a
demand for nurses today that they are unable to compete to
afford to hire the instructors and that is why they are not
able to expand their programs.
Ms. FURCHTGOTT-ROTH. That is right. One reason for that is
that they have to charge the same tuition to everybody. They
are not allowed to charge premiums for nursing students so they
encourage to have people learn languages because that way they
gain a bit more on languages and they can put that additional
tuition in nursing. If they were allowed to charge different
amounts, and perhaps the Federal Government would subsidize for
example their training of nurses, they could afford to hire
more instructors, and we could get these workers who are on
TAA, these dislocated workers, into these nursing training
programs and perhaps some other training programs where we know
have high returns, such as maybe auto mechanics or some kind of
software. It differs depending on what part of the country you
are in so I cannot stand here and tell you which ones they are
for each part of the country. If we could give more guidance
because we know what kind of high returns trainees need and
encourage community colleges to do that and see if we can get
over some of these barriers, then we might be able to have more
success with shortening periods of unemployment.
Mr. WELLER. Thank you. I assume my time has expired. You
have been very generous, Mr. Chairman. Thank you.
Mr. LEVIN. Mr. Pascrell?
Mr. PASCRELL. Mr. Chairman, this is another question of
whose ox is gored. My district, and in New Jersey overall, we
have lost a tremendous amount of manufacturing jobs over the
last 25 to 30 years, and we lost those jobs either to other
states and then those states lost them to other countries. When
we were losing those manufacturing jobs, it was very difficult
for people to convince those from rural areas, from suburban
areas around the country to even consider it. So, whether you
are talking about the loss of textile jobs or you are talking
about the loss of machine part jobs, et cetera, et cetera, and
now you are talking about the loss of service jobs. Now, all of
a sudden, and the opening witness today, a good friend of mine,
Congressman Smith, who is certainly a proponent of free trade,
has been, and we disagree on that, I respect his intellect on
the matter and respect his integrity, but this is a question of
whose ox is gored. We have lost a lot of jobs and regardless of
how you lose those jobs, in what areas you lose those jobs, I
think there is some responsibility on the part of state and
Federal Government to fashion programs, whether they are
directed to manufacturing folks or whether they are directed to
people who lose their jobs in the service area, and if we can
expand the programs to do that. We need to put a face on these
people, not just to deal with them as numbers.
It is disheartening on the question of trade we bring up
that we have this great economy out there, when we know quite
well what wages have done over the last 6 years, they have been
basically stagnant, perhaps having increased in terms of
productivity by.05. Wages have been stagnant. More writers than
not have written about how the affluence of America has not
been spread over, they are not suggesting any government
handout, they are suggesting simply that the opportunity to be
fair so that everybody gets a shot.
We know in terms of the job market, Ms. Roth, that you
spoke about today, we know that in this time in the last 6
years that less than 50,000 jobs per month have been created.
We know that 135,000 jobs are needed per month to be created in
order to take care of those that are coming into the labor
stream. We know that the fact is that every month, 8 years,
from 1992 to 2000, that 230,000 jobs were created per month. I
wanted to respond to that rosy picture because we do not know,
in many cities in this country, the unemployment rate is close
to 13 and 14 percent. We need to take a look at that to see if
we can help without interfering, without being overbearing.
I had a question for you, Ms. Pollitz, the question is in
your testimony on page two, when you talked about rating limits
and discussing health coverage, you talked about the gentleman
in North Carolina, 55 years old, he has cancer, he can pay as
much as $900 a month for his 35 percent share of the premium
for the HCTC insurance----
Ms. POLLITZ. That is correct.
Mr. PASCRELL [continuing]. Sold in that state, the Federal
Government does not require justification of such rate
surcharges. Who monitors this program?
Ms. POLLITZ. Well, the Federal Government does not monitor
the rates at all, they just pay 65 percent of them, whatever
they are. They are probably not paying 65 percent of too many
of those premiums because people who are sick cannot afford to
take the benefit. It is left to states that arrange for these
programs to decide whether they want to limit the rates or not,
many do not. Then states--in general, state insurance
regulation varies a lot by states and many state insurers do
what is called ``file and use,'' they just file their rates and
use them until such time as ever that that someone challenges
them and their justification.
Mr. PASCRELL. Mr. Rosen, would you support the expansion of
this program to include more folks who are in the service area?
Mr. ROSEN. Definitely.
Mr. PASCRELL. Why?
Mr. ROSEN. Senator Baucus tried to do that in 2002 and it
was taken out of the bill when it was taken to the Floor. They
are the people right now on the forefront of globalization, as
we heard on the previous panel, and I do not really understand
how we can discriminate and say that because of what industry
you come from, you get some assistance and you get other
assistance. So, they are being hurt just the same by
competition from abroad or outsourcing, and so I think we need
to cover those people.
Mr. PASCRELL. Work with one's hands and work with other
parts of your body are all integral to the working person in
this country.
Mr. ROSEN. The point I am trying to make is that the cost
of job loss in this country is very high because in this
country, relative to other countries, we place the burden on
the worker. I am not suggesting that we should be like Europe,
but in Europe the burden is absorbed by the government. But
here in the United States we put the burden on to the worker,
they pay the full price of the burden of job change, so that is
why it does not matter if you are $100,000 wage IT worker or a
$50,000 truckdriver.
Mr. PASCRELL. When you couple that with the fact that the
American middle-class is drowning in debt, when you couple with
the fact that there has been wage stagnation and that there is
tremendous under-employment in the United States of America,
when you couple that with the rise in inflation with energy
costs, education, et cetera, et cetera, and when you look at
the unemployment rate, which whether it states or overstates
the strength of the labor market is debatable, I believe a very
debatable issue. So, when people lose 20 percent, when they are
being laid off, when they are being displaced, whatever
category and however you define it, we are talking about a
serious interruption of being able to maintain consumer buying
power, purchasing power, aren't we?
Mr. ROSEN. Can I just say one thing and that is because
this has not been discussed at all today----
Mr. LEVIN. Do it quickly.
Mr. ROSEN. One sentence and that is that when if we do the
adjustment successfully, these people pay taxes. So, the
gentleman from Pennsylvania today who is making more money than
he did before is going to be paying more taxes.
Mr. PASCRELL. Thank you, Mr. Rosen. Thank you, Mr.
Chairman.
Mr. LEVIN. Thank you. I was going to use my time to let
each of you comment on the testimony of the others but it is
late, so maybe I will not do that. This has been a stimulating
panel. I think, Mr. Rosen, your responses as to why there was a
TAA and why there needs to be expansion of a trade-related
adjustment assistance is something everybody needs to hear. Let
me just as you leave, I want to say one thing because you know
this country in terms of re-training of adjustment and efforts
regarding dislocation really I think is behind the curve. If
you look, for example, at Canada or other countries, it is a
fraction, as you mentioned, of France and Germany but even if
you take into account the difference in unemployment, somehow
it does not add up, especially when we have you mentioned about
nursing at community colleges, the ability to train and re-
train in this country. I think one reason why so much of the
public is not influenced by the rise in GDP, for example, is
because in the individual lives of people, there is more
insecurity today than security.
Let me just finish in terms of citing facts. I think people
do a disservice to their cause when they very much exaggerate.
I just wanted to say to you who work at the Hudson Institute,
to take a figure of 97 percent coverage and to put it in your
testimony regarding the problems of dislocation will turn off a
large number of people from reading the rest of your testimony
because it slips by the reality. It is true perhaps that 97
percent are working and there is unemployment compensation tax
that is being paid on them, I am not sure the 97 percent figure
is correct when you say ``coverage,'' but if you say that, I
will accept it for the moment. But in terms of the people who
become eligible, it is less than half of that and it is not
only because they change jobs; a large number of them are
people who work for a time and they never receive coverage. A
lot of them are working, as you know, in states where the
differentials in terms of eligibility coverage, those
differentials are huge from place to place. So it is not
helpful to your position, if I might be direct, to take that
figure when we know there are some major inadequacies in the
unemployed compensation system of this country. They are major
problems, aren't there? When you say 97 percent coverage, why
do you not talk about the number of people who work hard who
are laid off through no fault of their own and never receive
anything?
Ms. FURCHTGOTT-ROTH. Because systematically, there might be
a few anecdotes that you can get, but it is not a systematic
problem in the United States.
Mr. LEVIN. When you say a ``few anecdotes,''----
Ms. FURCHTGOTT-ROTH. Yes.
Mr. LEVIN [continuing]. I will tell you what I will do is I
will send to you the information regarding these problems in
the unemployment compensation system and then you submit a
response for the record. It is not anecdotal. There are
structural issues within the unemployment compensation----
Ms. FURCHTGOTT-ROTH. You did not let me finish my sentence.
I said it is not a systematic problem in the United States
right now. We have a low unemployment rate, vast amounts of job
creation. We have a few problems in the job training area. We
spend $10 billion on job training, much of it duplicative. But
in general the private sector does much of the job training. No
one relies on the Federal Government for these job training
programs. The private sector does most of it.
Mr. LEVIN. All right, you can take the apprenticeship
programs, for example, in the building craze and say they are
private sector, they have some Federal assistance. You are
determined to minimize the role of the Federal Government in
assisting job training programs, then you talk about nurses and
say maybe there should be some Federal assistance in terms of
nursing programs. It is that kind of polarization that very
much handicaps this. You were in the Labor Department. There
was a majority here in the House and Senate. You talk about all
the duplication. For years nothing was done in terms of these
programs. You worked in the Department and now we will hear
from the Department spokespersons who have helped to guide
these programs. They have helped to guide these programs
including TAA.
Ms. FURCHTGOTT-ROTH. For the past three or 4 years, the
Department of Labor has proposed eliminating the duplication
and reforming the workforce training system and Congress has
not acted. These things have to be changed by law, it is not a
matter of the Department just moving things around.
Mr. LEVIN. Well, except the Department is the on that has
the formula for TAA programs. That is not mandated by Congress
and so if there are problems, they could have been resolved by
the Department.
Ms. FURCHTGOTT-ROTH. Some problems, some things can be
resolved but the whole issue of the duplication of services in
the workforce training program cannot be resolved by the
Department because it is a matter of cutting certain programs
and combining them with others and this the Department has
proposed in budgets in the past 3 or 4 years.
Mr. LEVIN. Nothing happened.
Ms. FURCHTGOTT-ROTH. Nothing has happened, right. The
Department has also, by the way, proposed cutting wasteful
programs, programs that Secretary Chao sees as wasteful and the
Congress has refused to let her cut wasteful programs too.
Mr. LEVIN. Yes, and we were not in the majority.
Ms. FURCHTGOTT-ROTH. But now that you are all these things
are going to move forward much more smoothly, and we should see
this happening.
Mr. LEVIN. We will make sure I hope that people who are
laid off in, for example, service industries are not excluded,
that the formula will be changed so that states have adequate
TAA moneys. When some states are doing anything in terms of the
use of the moneys, they maybe do not need them, that is a total
imbalance that is within the power of government, in this case,
the administration to change and now we are saying to them,
``Change,'' and now they are going to do something.
All right, I am going to send you the unemployment
compensation thing and you can respond for the record, okay?
Ms. FURCHTGOTT-ROTH. Absolutely, I would be delighted to do
that.
Mr. LEVIN. This was an unintended----
Mr. ROSEN. Can we just make a short statement, a short
response?
Mr. LEVIN. Go ahead, 30 seconds. Each of you 30 seconds.
Ms. MCDONALD-PINES. What the administration has proposed
over the past 3 years is essentially to block grant and cut
programs. Since the Bush administration has taken office, these
programs have been cut by about $1 billion. Their proposals for
the first time would set a Federal cap on the amount of money
that an individual could get for training. The last proposal
was $3,000 a year for 2 years. That certainly pales in
comparison to the amount of money that is available under Trade
Adjustment Assistance and it is not sufficient to help workers
who need long-term training.
Mr. LEVIN. Each of you will get 30 seconds.
Mr. ROSEN. As a share of GDP, the Federal Government is
currently spending half, of what it was spending 10 years ago
on training and employment programs.
Mr. LEVIN. Ms. Roth, you get 30 seconds to say anything
further.
Ms. FURCHTGOTT-ROTH. I think that these programs, no one
really believes Federal job training programs do any good and
if you ask any CEO, GM, any of the major companies, small
businesses, they say, ``We take the people and we train them.''
We need to do a lot better job at the high school level too,
making sure that there are fewer high school dropouts, that
people have sufficient standards that employers can then train
them because that is how the most effective workers and
workforce training programs happen within the companies, with
people who have a good solid base of education. We are not
doing a good job in the elementary and secondary school years
either with dropout rates of around 20 or 25 percent. That is
something that we need to fix.
Mr. LEVIN. Ms. Pollitz.
Ms. POLLITZ. Back to health insurance, I think the Health
Coverage Tax Credit, while a good idea and concept, has turned
out to be more of a tease. It is sort of held out there as
assistance that most people cannot take advantage of and that
is very unfortunate. I think Mr. Stark's suggestion that you
could replace that with a program that is available to
everybody, that is easy to find, easy to enter, treats
everybody the same and is affordable and adequate would be a
better approach to this program.
Mr. LEVIN. Mr. Courtney, you are not batting fourth clean-
up, fifth is pretty good in the line-up.
Mr. COURTNEY. Thank you, Mr. Chairman. I would just say
that I think in response to one of the witnesses, I think we
listen too much to CEOs in this country and not enough to
workers. The fact is that there are millions of workers that
are getting displaced due to globalization and international
trade and it is happening even in highly skilled, educated
workers. If that happens, they need access to re-training. They
need access to skills in a rapidly changing industry and world.
For people--it is incredible to me to imagine that people can
sit here where we are at in today's economy and say that
millions of workers are not getting displaced due to trade and
the government should have no response, to me is an outrageous
statement. I certainly hope that is not the direction this
Congress will take.
Mr. LEVIN. Alright.
Mr. PASCRELL. Mr. Chairman? Mr. Chairman?
Mr. LEVIN. Yes?
Mr. PASCRELL. I would like to make a point, I have stayed
here for 4 hours, can I make a point, sir?
Mr. LEVIN. Sure.
Mr. PASCRELL. Thank you.
Mr. LEVIN. In 30 seconds, you are capable of doing that.
Mr. PASCRELL. Mr. Chairman, it took us 4 hours to hear that
something that obviously we may have known before we got into
the room and that is there is an attempt to undermine, if not
eliminate, the Federal programs that do exist out there as now
being meaningless. The point is this, Mr. Chairman, while the
Federal Government has been accused of basically interfering
and getting involved and everybody says, ``Less government,
less government,'' it is the very same government that has
violated that premise by either through actions of the Congress
or the executive branch of government has put all the eggs in
one basket. I agree we have too much government and that is why
the position we are in right now. What we do need, however, is
to act and respond and correct this out-of-course line that we
have traveled. Ms. Roth, in all due respect to the Chair, in
all due respect, you are learned person and I do not say that
to patronize you but you are so off-course it is not funny.
Ms. FURCHTGOTT-ROTH. By the way, I would like to say you
that when you said there were cities in United States with a
13.5 percent unemployment rate----
Mr. PASCRELL. Yes.
Ms. FURCHTGOTT-ROTH. --the highest unemployment rate in
April 2007 was the Detroit area with 7.5 percent. You are
almost 50 percent wrong with that.
Mr. PASCRELL. No, I do not think I am wrong because many of
those people in those cities do not cooperate with the Labor
Department and check off. They have dropped out of the labor
scene altogether. For you to provide the impression, I have got
to get upset about this thing, I will tell you this right now--
--
Mr. LEVIN. In fifteen seconds.
[Laughter.]
Mr. LEVIN. I think he can do that.
Mr. PASCRELL. Because there are so many under-employed in
our cities that are not being counted, and this is what I
referred to before, this is a serious, serious problem. We may
not refer to these people within the program that we are
discussing today, but they are there. If you do not think they
are there, I will show you them. Come to Patterson. Come to
Passaic, New Jersey. Come to Newark, New Jersey. I will
personally take you on a tour and then you make your own
judgment. Put a face on these numbers, Ms. Roth, please.
Mr. LEVIN. All right. Actually, this made it even more
interesting. I think your statement that the ``Federal training
programs do no good'' does frame a position that may underlie
some of the approach but I hope not. I hope that this
Committee, and I say this to you, Mr. Herger, and the
Subcommittee, the full Committee and the Congress can put
together a reform of TAA that will lend more than majority
party support. We will see.
Mr. STARK. Mr. Chairman?
Mr. LEVIN. Mr. Stark?
Mr. STARK. I just wanted to add, as I think about it, as
one of the few former CEOs in Congress, what I find is it is
really easy to discuss these issues with them because so many
of my former colleagues are in places like Allentown where they
are getting government re-training as they serve their time.
So, it would be very easy to find a lot of CEOs with whom we
could consult.
Mr. LEVIN. On that note, thank you very much. Now we are
going to hear the two very distinguished witnesses. Seriously,
I think it does bring us to an important point of having a
discussion with Hon. Mason M. Bishop, who is the deputy
assistant secretary, Employment and Training Administration at
the Department of Labor and David Williams, the director of
Electronic Tax Administration and Refundable Credits of the
IRS. As before, your testimony will be put in the record.
Deputy Secretary Bishop, you are going to lead off. Use your
judgment as to--because we have your testimony, how much you
want to review that, how much you want to have an interaction
with us on what you have heard so far and likewise, Mr.
Williams, so welcome. It is your time.
STATEMENT OF THE HONORABLE MASON BISHOP, DEPUTY ASSISTANT
SECRETARY, EMPLOYMENT AND TRAINING ADMINISTRATION, DEPARTMENT
OF LABOR
Mr. BISHOP. Okay, great. Mr. Chairman and Members of the
Committee, I am pleased to have the opportunity to appear
before you to discuss the reauthorization of Trade Adjustment
Assistance or TAA, as it is more commonly known. Since the 2002
reauthorization of TAA, we have made several important
administrative improvements to the program. The first major
improvement we made is in the area of fiscal management. Prior
to 2004, TAA funds were distributed to states on a request
basis. What this meant was that states would request what they
thought they needed, and the Department would make a guess and
provide funds. This led to many problems including distributing
all funds mid-way through a fiscal year. In 2003, we
commissioned a study that found that states were gaming the
system and that there was no concrete methodology for
distributing funds. Therefore, starting in Fiscal Year 2004,
the Department adopted a new TAA allocation formula to fund
state TAA needs more equitably and ensure that current year
funds are allocated efficiently to meet current year needs.
This reform has worked very well and states are being held
accountable for TAA training funds.
Second, I would like to discuss administrative improvements
to program performance. In Fiscal Year 2001, the Department
implemented a new Trade Act Participant Report to track
participant outcomes. Prior to 2001, there was no outcome
reporting and data was extremely sparse. It is safe to say that
policy-makers had no idea what was being accomplished with the
billions of dollars being spent on TAA. As a result of our
reforms, we can now tell Congress and the public what outcomes
are being achieved and how the TAA program compares to other
employment and training programs. We have also initiated a 5-
year impact evaluation of TAA, the full results of which will
be available in 2011.
Finally, the Department has taken significant steps to
improve the speed of petition processing. As a result, the
average processing time for TAA petitions has been reduced from
a high in Fiscal Year 2002 of 96 days to the current average of
31 days, which is well below the statutorily allowed 40 days.
Rather than having a huge backlog of unprocessed petitions,
which is what we faced in 2001, now workers gain access to TAA
services faster because their petitions are being reviewed
expeditiously and with quality.
However, administrative improvements alone are not enough.
The TAA program must be re-examined to address its current
flaws in light of the new challenges of the 21st century global
economy. As currently designed, TAA is an all or nothing
program. By requiring a worker to give up benefits if he or she
returns to work, including the education and training benefits
so many of these workers need, and remain unemployed and out of
the labor market for extended periods of time, the program
limits worker options to do what is best for a person in his or
her family.
Access to training in the Trade Adjustment Assistance
program is also problematic. Training options may not be
flexible enough to meet worker needs and workers attempting to
access these training options often face barriers, such as
strict enrollment deadlines. In addition, workers cannot access
training prior to their trade-affected layoff even if their
worker group has been certified.
With these issues in mind, the Department has identified
four overarching priorities to achieve through reauthorization.
The first priority is that trade-affected workers must have
increased individual opportunity to earn and learn through the
Trade Adjustment Assistance program by having access to
transitional benefits in certain cases. Benefits under the
program should include a menu of services that allows the
worker to choose the option that best fits his or her
individual needs.
The second priority for reauthorization is for trade-
affected workers to have improved access to education and
training. Reauthorization should ensure greater access to
postsecondary education training by providing new economy
scholarships. These scholarships should be available to
certified workers whether they are unemployed or return to
employment.
The third reauthorization is that trade-affected workers
should have access to education and training prior to layoff.
Finally, the fourth priority for reauthorization is that
trade-affected workers must be able to access services through
a streamlined and efficient workforce investment system.
The Department firmly believes that these proposed reforms
will help more workers return to work as quickly as possible in
high-skilled jobs that pay good wages.
Mr. Chairman, this concludes my opening statement, and I
will be pleased to respond to any questions the Committee might
have.
[The prepared statement of Mr. Bishop follows:]
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Mr. LEVIN. Thank you.
Mr. Williams?
STATEMENT OF DAVID R. WILLIAMS, DIRECTOR OF ELECTRONIC TAX
ADMINISTRATION AND REFUNDABLE CREDITS, INTERNAL REVENUE SERVICE
Mr. WILLIAMS. Thank you, Mr. Chairman. In the interest of
the lateness of the hour, I will also be brief as you
suggested. I just want to make a couple of comments about the
Health Coverage Tax Credit and how the IRS administers it.
First, implementing the HCTC was a real challenge for the IRS.
While we are pretty good at efficiently processing large
volumes of returns and tax payments, the tax system is set to
accomplish that once a year. In contrast, the HCTC for the most
part delivers taxpayer payments and distributes them to health
plans on a monthly basis. Because these payments are so
different, we had to start from scratch to build a system that
was fundamentally different from anything else the IRS does. We
had to create new business practices, systems and
infrastructure components from the ground up to administer a
monthly payment.
Secondly, despite those challenges, we have worked
cooperatively with our colleagues at the Department of Labor,
with state workforce agencies the PBGC, and many health plan
administrators to implement the program effectively and as
efficiently as we could. Since its inception about 4 years ago,
we have delivered the tax credit to over 71,000 taxpayers and
their family members. Our offices handle over 550,000 calls and
mails more than 800,000 program kits to assist taxpayers in
determining their eligibility for the program. We have
processed over $380 million in premium payments to over 1,800
health plan administrators. Between the month and end-of-the-
year options, the total amount of HCTC credit paid, the 65
percent portion, doubled between 2003 and 2005 to nearly $100
million this year. We have had good customer satisfaction with
HCTC, our past measurement showed it to be about 90 percent,
and we found that the program has a very low error rate,
something that is sometimes a question with regard to
refundable credits.
One last point, Mr. Chairman, that I would like to make
concerns the trends we are seeing and the costs that are
associated with administering the program. While historically
changes in the steel, textile, airline and other manufacturing
industries have contributed to the growth in the number of
participants, we are beginning to see other industries, such as
the auto and parts manufacturing industries enter the program.
Potential expansion of TAA eligibility may drive more workers
to participate. For this reason, let me point to the cost of
administering the program. I suspect you may want to ask about
that. I noted earlier that we created a new and functionally
separate program to administer the credit. Even though it makes
it easy for us to look at the cost, it is hard for us to know
what will happen to those costs if the program is expanded.
However, we have done some preliminary work on that, and we
think that the cost per beneficiary or the cost to deliver the
program will drop with some economies of scale. For now, I can
tell you that if we were to triple the number of taxpayers
taking the monthly credit, right now it is a relatively small
number, about 16,000 taxpayers a month get a subsidy through
the Health Coverage Tax Credit. If we were to triple that
number, our costs would go up about 40 percent. Our costs now
is $20 million, so you can see that they go up some. However,
if we were to expand it substantially, and I believe there are
proposals before the Congress that would do that, we would have
to go back and look and see what the costs would be.
Mr. Chairman, that is a summary of my written statement,
which goes into greater detail. I would be happy to answer any
questions. Thank you for the opportunity to testify.
[The prepared statement of Mr. Williams follows:]
Prepared Statement of David R. Williams, Director of Electronic Tax
Administration and Refundable Credits, Internal Revenue Service
Good morning Chairman Rangel, Ranking Member McCrery and Members of
the Committee. I appreciate the opportunity to appear today to discuss
the IRS' experience in implementing the Health Coverage Tax Credit
(HCTC). My name is David R. Williams, and I am the Director of
Electronic Tax Administration and Refundable Credits with the Wage and
Investment division of the Internal Revenue Service (IRS). As my title
would imply, my office is responsible for administering all refundable
credits, including the HCTC.
Background
In the Trade Act of 2002, Congress established a new refundable tax
credit for the purchase of health insurance. The credit was designed to
help certain workers who are certified for participation in the Trade
Adjustment Assistance (TAA) program or the TAA and the Alternative
Trade Adjustment Assistance (ATAA) program to maintain health
insurance. The credit covers 65 percent of premium costs for certain
eligible participants, which includes those who had lost their jobs due
to trade and were thus eligible for TAA/ATAA and those who receive
guaranteed pension payments through the Pension Benefit Guaranty
Corporation (PBGC).
Eligible individuals can use the HCTC to purchase certain types of
qualified health insurance for themselves or their families. An
eligible individual can use the tax credit to purchase coverage from a
former employer that the employer is required to provide under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or to
purchase coverage through his or her spouse's employer, if that
employer covers less than 50 percent of the premium.
Tax-credit recipients who are enrolled in individual health
insurance for at least 30 days prior to losing their jobs can also use
the tax credit to subsidize the purchase of insurance in the individual
market. In addition, states are allowed, but are not required, to offer
other health insurance coverage options for individuals eligible for
the tax credit. In so doing, states can enter into arrangements with
private insurers for group health insurance coverage for tax credit
recipients, allow recipients to ``buy in'' to the health insurance plan
for state employees or a similar plan, or allow recipients to purchase
insurance through state high risk pools.
Program Implementation
The IRS was given the task of implementing the new health coverage
tax credit in August 2002. Creating a program that provided an
opportunity for eligible taxpayers to have 65 percent of their health
plan premiums paid by the government presented a significant challenge
to the IRS. The law provided two ways for eligible taxpayers to claim
the HCTC. The first is the more traditional method where taxpayers pay
for health insurance throughout the year, and then claim 65 percent of
the premiums they paid at the end of the year on their tax return.
The second way to claim the HCTC was unique. Taxpayers could enroll
to receive the credit on a monthly basis by sending the IRS 35 percent
of their monthly health insurance premiums. The IRS matches their
payments with the 65-percent government portion, and remits 100 percent
of the monthly premiums to the taxpayer's health plan. This difference
in the way the credit can be claimed led the IRS to establish a
separate and distinct program to meet the needs of administering this
credit.
We had to start from scratch to build a system that was
fundamentally different from anything else the IRS does. We created new
business practices, systems and infrastructure components from the
ground up to administer a monthly payment. While the IRS is very good
at efficiently processing large volumes of returns and tax payments,
the tax system is set up to accomplish that task once a year. In
contrast, the HCTC, for the most part, receives taxpayer payments and
distributes payments to the health plans of enrolled taxpayers on a
monthly basis.
We were also challenged in that we had only a matter of months to
implement a program that took in payments from eligible workers, made
payments for them to qualified health plans, and ensured that workers
adhere to complex rules regarding eligibility, enrollment and payments,
while providing customer service to the affected taxpayers. The program
also required strong collaboration with organizations such as the
Department of Labor (DOL), the PBGC, state workforce agencies and many
health plan administrators.
By June 2003, the IRS began accepting registrations to enroll in
the monthly HCTC. To become eligible, either the taxpayer's pension
must be trusteed by the PBGC, or their TAA and ATAA petitions must be
certified by the DOL, and they must meet other eligibility
requirements.
The IRS provides oversight and administration of the HCTC when the
PBGC and the states forward the names of potentially eligible taxpayers
to the IRS. At this point, the IRS sends a Program Kit to these
potentially eligible workers. The kit is designed to help workers
determine if they are eligible and, if so, to facilitate registration.
Many taxpayers to whom we send these kits do not register because they
do not meet all of the eligibility rules required to receive the
credit.
Eligible taxpayers send their registration to the IRS' HCTC
Customer Contact Center for processing. We are generally able to enroll
taxpayers in the monthly HCTC program in an average of six days, though
it could take additional time to get them into the monthly payment-
processing cycle. Taxpayers then remit their monthly health premiums to
IRS until their qualified health insurance coverage lapses, they become
eligible for Medicare, they find a job, they don't meet the relevant
TAA/ATAA eligibility conditions for the HCTC, or for other reasons.
The IRS also processes any changes to a taxpayer's health coverage.
This could include premium changes, family member updates, and new
insurance carriers.
The IRS has a robust case management process that allows us to
resolve taxpayer transactions and issues across Federal and State
boundaries and commercial entities.
HCTC Performance Data
During tax year (TY) 2005, HCTC identified 350,000 potentially
eligible taxpayers and informed them of the program. IRS has recently
revamped registration materials to improve taxpayer access to the
credit. We conducted focus groups with HCTC Customer Service
Representatives, interviewed HCTC stakeholders, rewrote the Program Kit
and registration form and field tested the completed materials.
In addition, as part of the Administration's Program Assessment
Rating Tool (PART) we have committed to:
Working with other participating federal agencies to
developing long term goals by 2011 that capture the program's success
in providing access to the tax credit to potential beneficiaries.
Working with partner federal agencies to find ways to
improve access to the tax credit for eligible workers.
Continuing to focus on administrative changes to lower
program cost and improve taxpayer service
During TY 2005, 28,000 taxpayers claimed the credit either through
the monthly program or on their end of year tax returns. An additional
17,000 family members benefited from the credit. The average monthly
premium in TY 2005 was $660 meaning that the participant had to pay
$231 monthly and the government $429. In 2007 the monthly premium has
risen to $720.
Overall, HCTC participation has increased each year since its
inception in 2003, with a higher percentage of participants using the
monthly credit option each year. In TY05, nearly 79 percent of
participants took advantage of the HCTC using the monthly credit.
Currently, TAA/ATAA benefit recipients comprise 37 percent of the
enrolled population claiming the HCTC, while PBGC beneficiaries
represent 63 percent of the enrolled HCTC population. The PBGC
eligibility timeframe is up to 10 years, while TAA eligibility expires
much earlier.
As of April 2007, the HCTC program has delivered the tax credit to
over 71,000 taxpayers and their family members. Our office has handled
over 550,000 calls, mailed more than 800,000 Program Kits, and
processed over $380 million in health premium payments to over 1,800
health plan administrators. The annual amount of IRS HCTC credit paid
(the 65 percent portion) doubled between TY 2003 and TY 2005 increasing
from $46 million to $92 million. The HCTC customer satisfaction levels
have consistently been 90 percent. In addition, as HCTC enrollment
slowly increased, the IRS has continued to find cost savings and
operational improvements designed to reduce the cost per taxpayer
served.
Finally, we believe this program experiences very low erroneous
payments or fraudulent activity compared to other tax credits. There
are a number of reasons for this. First, we have instituted robust
compliance checks, such as confirming age/Medicare eligibility,
verifying COBRA continuation coverage end dates, and verifying HCTC
eligibility on a monthly basis.
Second, taxpayers and health plans register to participate in the
monthly program. As part of this registration, the IRS reviews health
plan documentation to verify that the plan is qualified, that the
taxpayer is a current subscriber and to confirm an accurate premium
amount. This is different from other IRS tax credit claims, which rely
mostly on self-attestation.
Third, for nearly 80 percent of participants, we do not pay this
credit directly to taxpayers. Rather, enrolled taxpayers pay IRS their
portion of their monthly health premiums, and the IRS pays the full
premiums to the health plans.
Reasons for Seemingly Low Participation Rates
As indicated earlier, we identified 350,000 potentially eligible
taxpayers for TY 2005 and notified them of the program, but only 28,000
signed up during the course of the year--below what was originally
projected. Some of the 350,000 potentially eligible taxpayers do not
meet other HCTC eligibility requirements, such as:
Having coverage from a spouse that pays more than 50
percent of the premium;
Being entitled to Medicare (which precludes any covered
family members from continuing to receive the credit); or
Not meeting the training and other requirements for TAA/
ATAA assistance.
We are unable to determine the number of eligible taxpayers who do
not sign up for the credit. Many eligible participants may be unable to
afford their 35 percent share of the premium because they have no
source of income. In addition, some individuals cannot meet the
requirements for an eligible plan because the rules for a qualified
health plan are complex. It also may take a long time to establish
initial eligibility through either the PBGC or the TAA because
establishing eligibility can be an extensive process due to the various
information gathering and review requirements involved.
HCTC Future Trends
While historically, changes in the steel, textile, airline and
other manufacturing industries have contributed to the growth in HCTC
participation, we are beginning to see workers in new industries
participate in the program. In addition, policies under consideration
to expand TAA eligibility would increase participation. For this
reason, let me discuss the costs of administering the HCTC.
I noted earlier that the IRS created a new, functionally separate
program to administer the credit. Even though this approach makes it
easy to track overall HCTC costs, it is difficult to extrapolate how
much more the program would cost if the number of participants were to
rise. Some portion of HCTC costs are fixed costs of administering the
program (such as IT infrastructure maintenance and support) which do
not vary with the number of participants. As a result, dividing current
total program outlays by the number of current recipients and then
multiplying that amount by the projected number of new enrollees would
yield an inaccurate estimate of the new costs. For example, IRS
recently analyzed our ability to support HCTC program increases in
preparation for an expected growth in the enrolled HCTC population due
to auto industry trends. We found that if the number of taxpayers
enrolled tripled, administrative costs would increase by approximately
40 percent.
Summary
Administering the HCTC has presented unique challenges for the IRS.
Our prime function is to collect revenues and administer the tax laws.
But, the HCTC has required us to create systems to offer outreach and
assistance to eligible HCTC taxpayers, to process and approve
applications, and to collect monthly payments from eligible
participants, couple them with the government subsidy and send them to
a qualified health insurance carrier. We have also had to establish
relationships with not only other Federal agencies but also with state
insurance offices and private health care providers.
Despite these challenges, we have increased our operational
efficiencies and we have consistently earned a 90-percent customer
satisfaction rate.
I appreciate the opportunity to appear today Mr. Chairman, and I
will be happy to respond to any questions.
Mr. LEVIN. Mr. Herger?
Mr. HERGER. Thank you, Mr. Chairman. Mr. Bishop, I would
appreciate if you would highlight the various initiatives
undertaken by the U.S. Department of Labor in recent years to
improve the administration of the TAA program?
Mr. BISHOP. Yes, I touched on some of those briefly in my
oral statement, and they are in my written statement as well.
They really fall under three categories. The first is TAA
training funds. As I mentioned, the law provides $220 million
in funds and leaves it to the Department to make the decision
on how those are distributed. Frankly, we had a very broken
process that we inherited early in 2001 and 2002. Basically,
the states that screamed the loudest and got their requests in
the earliest were the ones that got the money, and there was no
correlation between states that had high levels of trade
participants and how much money they received. For instance,
North Carolina had the most trade participants in 2004 and yet
were sixth in how much TAA training funds they received. All of
the discussion here about states running out of TAA training
money was under that process, not under our new methodology. We
believe our methodology has fixed with that, and I can say with
a strong assurance that any trade worker who is effected under
the current law now can get training in any state in the United
States of America as a result of our training dollar
distribution.
The second is in program performance. As I mentioned, there
was no program performance outcomes prior to 2001. Even with
the 2002 Reform Act there are not any program performance and
reporting requirements; however, we have been able to
administratively implement those and now get some reporting
from the states on whether people get jobs, at what wages, and
do they keep those jobs.
Then finally, as I mentioned, we radically improved the
petitioning process. In 2001, we had over 100 backlogged
petitions. It would take workers three, four or 5 months in
some cases to find out if their petition was being certified.
Now, it takes them 1 month, 30 days, we are usually about 10
days under the 40 day statutory timeframe under the current
law, so we are proud of our record on making those
administrative reforms and changes and it is to the benefit of
the workers in this program.
Mr. HERGER. Thank you, Mr. Bishop. Mr. Williams, much has
been made today about the low participation rate for the HCTC
program. I understand the IRS, while not disputing
participation could be higher, has some issues with the data
reported by the GAO in its study. (A) Could you explain why you
believe this data is inaccurate? And (B) does an internal data
process by the IRS show different conclusions?
Mr. WILLIAMS. Mr. Herger, I am not aware of any current
dispute with the GAO with regard to the participation rate. In
fact, we have worked very closely with GAO in their report on
this subject. It does have low participation, and we do not
dispute that. We have spent a fair amount of time trying to
figure out ways in which we could reduce barriers for taxpayers
to participate in the program as a result of that low
participation. We would not dispute that number.
Mr. HERGER. Thank you. Thank you, Mr. Chairman.
Mr. LEVIN. Mr. Stark?
Mr. STARK. Thank you, Mr. Chairman. I appreciate the
witnesses being here. I just am kind of distracted by Mr.
Herger's low participation rate. The GAO--you are talking about
the GAO study?
Mr. HERGER. Yes.
Mr. STARK. Okay, I would just want to put in the record,
Mr. Chairman, both page 58 and 57 of the GAO, which shows that
the proper denominator is 436 workers, for instance, in General
Mills and not 42, which would make the participation rates look
somewhat different. Having said that, I have a couple of
questions for Mr. Williams. The first is I gather from your
title that you are intimately involved with the electronic
information and control systems at IRS, is that correct?
Mr. WILLIAMS. Well, Mr. Stark, actually I----
Mr. STARK. Their electronic----
Mr. WILLIAMS [continuing]. Took on that job 3 days ago so
that is my current title, but I have had 3 days to develop
intimacy with----
Mr. STARK. But in that job, you are expected to understand
all the electronic databases and everything that IRS has, is
that correct?
Mr. WILLIAMS. I think actually within that job, I am
supposed to understand how we administer and what we can do
better. What can I answer for you?
Mr. STARK. How can you find me for these random audits that
I now understand you are going to undertake? Can you tell me
what kind of things you are going to put in there? If you were
trying to identify me in that system----
Mr. WILLIAMS. If we were going to--when we do the audits
that you are describing, we would not look for, nor would we
necessarily find you, because they would be at random.
Mr. STARK. Positive of that? Okay. ``Honest Injun?''
Mr. WILLIAMS. True.
Mr. STARK. Okay.
Mr. WILLIAMS. The point----
Mr. STARK. So, I take my chances that you are going to get
Congressman Levin?
Mr. WILLIAMS. There is an equal chance. Let me just mention
one thing, in most audits we select people because we have a
very high expectation that there is a compliance problem,
either deliberate or otherwise. Every once in a while, in order
to figure out how to pick folks who are not complying, we do
some random auditing, and we have limited it and worked very
carefully to make sure it is as minimally burdensome as
possible even thought it is not tough, so that we are better
able to identify the taxpayers who are not complying.
Mr. STARK. That is not the topic, what I guess I am
concerned about is that if I can generalize, you are suggesting
that it is costing us about a dollar for every $2 of benefits
on the monthly payment plan, is that----
Mr. WILLIAMS. Well, actually, that was the initial figure.
In the last 2 years, we brought down the cost substantially. It
is still not cheap. It costs us a dollar to deliver about five
dollars worth of benefits today.
Mr. STARK. On the other hand, if you do the annual, how
much does it cost a year for the one annual payment, a couple
of bucks?
Mr. WILLIAMS. If that. As I said, we are really good at
processing----
Mr. STARK. So, that is our range?
Mr. WILLIAMS [continuing]. That piece of paper. That is
right.
Mr. STARK. This high cost of administration could be almost
just an asterisk if we could figure out how to just make one
disbursement a year? Would it make any difference whether we
made it prospectively or at the end of the year?
Mr. WILLIAMS. As long as we had it built into the tax
system and had the tax return.
Mr. STARK. What about, and I just pick this, paying at the
beginning or the end, but what about a reconciliation at the
end of the year using the standard tax form? In other words,
could you tell easily and reconcile that if you paid my premium
for a year up front for two bucks, then it turns out I worked
for the last 6 months, could you collect from me simply the 6
months I would owe you out of the Tax Code or would that be
just about as complicated as monthly payments?
Mr. WILLIAMS. Well, I think we would have to look at that
to see if it, but we would need some third party reporting, the
health plan would have to tell us that you were actually making
those payments or we would have to know that you were
collecting them.
Mr. STARK. No, what I am getting at is--okay, or I would
have to tell you?
Mr. WILLIAMS. Yes, one way or the other, but we would need
an independent verification. The second thing would be, and
Congress would have to consider this, many taxpayers get to the
end of the year looking for a refund and particularly lower
income tax payers. I administer something called the earned
income tax credit, which is really significant for many low-
income taxpayers. It might be possible for the IRS to try and
recover that 6 months of payments that we made on your behalf
but you were not eligible for. But it might put a strong burden
on those taxpayers if we said, ``Okay, you owe us 6 months and
you have got to pay it now or start paying interest and
penalties.'' So, the timing of that might be tough as well.
Mr. STARK. Do you have a recommendation for us on a manner
in which we might change the payment or any reconciliation that
might be needed?
Mr. WILLIAMS. Mr. Stark, you have moved into a policy
realm, which is really beyond my responsibility or ability to
comment on. I will tell you this, we spend a lot of time trying
to figure out; how we can reach eligible taxpayers and make it
as clear as we can within the rules to let them know about the
program. In fact, we have worked with the Department of Labor
to try to shorten the period of time that they have to wait to
figure this out. We do know that people are happy with the
program once they are in it. But to bring the cost down
substantially, there will be some savings per taxpayer if we
have a lot more people in it but it is still going to cost a
fair amount of money to administer it.
Mr. STARK. An opinion, first of all, it would seem to me
that you could do it in effect two ways. You could just have
presumptive eligibility and disperse and trust that the
beneficiary in this case would 'fess up at the end of the year
if there was employment that would have disqualified some of
the payments. Or you could go the other way and say these bums
will lie every chance they get, and we are going to have to
reaffirm this each month. My sense is that we might not lose as
much money as we would save administratively if we just went
ahead and presumed that people could have this just--they would
have to qualify for the Trade Assistance but then just say, go
ahead, you can just sign up and get it and then worry about
getting those who might have been entitled to the full term?
Mr. WILLIAMS. Well, there are two things: One, I think if
you had a presumption, you could certainly shorten the amount
of time people are waiting. You might overcome some of the
barriers to participation that we are having today because
folks are not waiting around and trying to figure out how to
come up with money to participate in the program. I do think
experience shows, it is not folks that are trying to play fast
and loose with the system. We are not talking about folks who
have lots of money lying around to pay up if they make a
mistake. One of the toughest things that we have had,
particularly at the inception of the program, is folks not
understanding the rules. One of my personal favorites is we did
have some people who went out prior to the time they were going
to lose their jobs and they bought health insurance. So when
they enrolled in the program, they checked off the box that
said, ``Individual Plans.'' They did not understand the rule
that it had to be in the individual market 30 days before
losing their job, or they mistakenly bought a group plan. Those
are folks who technically owe money back to us. So I think that
when you look at this, Congress needs to decide if there is a
mistake, if the worker makes a mistake, what are your
expectations about the IRS getting money back from the
taxpayer?
Mr. STARK. Go back to that, they bought a group plan just
before the job ended?
Mr. WILLIAMS. Right.
Mr. STARK. What kind of--a group plan outside of their
employment?
Mr. WILLIAMS. Yes, to cover themselves because they knew
things were happening. There are very, very few people who did
it.
Mr. STARK. What type of group plan would have been
available?
Mr. WILLIAMS. A group retirement plan, It has been several
years since it has happened, but what we found was that they
were not in the individual market, and they did not know the
difference. What we found though is when you go back to someone
like that and say, ``Okay, you have been getting the subsidy
for the last 17 months and that is $5,000 that you owe the
government,'' that is a tough thing to ask for. So what I would
ask you to think about is if you are enamored with the model of
presumptive eligibility, what are your expectations about what
the IRS should do when we find errors in that model?
Mr. STARK. Right, we will talk some more about that. Thank
you very much.
Mr. LEVIN. Mr. Pascrell?
Mr. PASCRELL. Chairman, thank you, Mr. Bishop, Mr.
Williams. Mr. Bishop, you talked very succinctly about the--in
terms of your suggestions an increase choice to earn and learn
and easier recommendations, improved access to education and
training early intervention, you spent quite a bit of time on
that, and the integration of the workforce. Let me ask you this
question. Let's take two scenarios. We heard about Fruit of the
Loom today. A large company decides to take its business
offshore for whatever reason. Is there any difference between a
person being laid off in that situation and a person in a
machine shop, five or six employees, where it could be directly
or indirectly associated to some trade policies because the
customers have decided to go offshore? What is the difference
between the individual applying for TAA in both of those
positions?
Mr. BISHOP. Well, the process of applying for TAA would be
exactly the same. Under the current statute, all you need are
three or more workers to form a worker group in order to
petition the Department of Labor for Trade Adjustment
Assistance. So in the case of a five or six person machine
shop, if they believe they were impacted by trade, those five
or six individuals could band together as a worker group and
petition the U.S. Department of Labor, and we would do an
investigation and look at whether they were in effect a trade--
--
Mr. PASCRELL. Does the Labor Department communicate to
businesses such as that or a small IT company that has only
five or six people? How would they know about this? We have
heard so many times----
Mr. BISHOP. Right.
Mr. PASCRELL [continuing]. Regardless of which area we go
into, folks do not know.
Mr. BISHOP. Right.
Mr. PASCRELL. I have the opinion that people have a right
to know since this is their own tax money that is involved in
the program itself. Do you agree with that?
Mr. BISHOP. I do. In fact, the challenge we have hear and
the important thing to remember, and there was some discussion
in the prior panel about different employment training
programs, the challenge we have at the Department of Labor is
that we have a devolved system. The Federal Department of
Labor, while we have responsibility to oversee programs like
the Workforce Investment Act programs, and the Trade Adjustment
Assistance programs. However, at the end of the day, the bulk
of those moneys are pushed down to the state level and the
local level, in the case of WIA, and it is in law their
responsibility on our behalf to do that kind of outreach. A
continual challenge we have as a Federal administering agency
is assuring that the states are doing effective outreach,
consolidating services, and integrating services; which is one
of the biggest challenges. Some of the programs we have talked
about, the Wagner-Peyser Employment Services has been around
since 1935. It is a state merit staff-based program. The WIA
Dislocated Worker program, 60 percent of that money leaves our
department each year, goes through the state right down to the
local workforce investment boards, 40 percent is held at the
state level and when you talk about thinks like TAA workers
getting co-enrolled and do they know, the rapid response is a
state function and yet the One-Stop Career Centers are managed
locally. We essentially have designed systems in our country
right now where we have created two or three different kinds of
systems, operating by state and local folks, and we wonder why
workers get confused. Then it is our responsibility to try to
work through that, and we do the best we can but it is a big
challenge.
Mr. PASCRELL. WIA is up for reauthorization.
Mr. BISHOP. It is, it has been up for reauthorization 4
years, and we have had a bill or a plan for the last three
Congresses, including this one, we have had two bills passed
out of the House and nothing passed out the Senate in the last
two Congresses.
Mr. PASCRELL. That is not acceptable. I think it is very
germane to the entire program from what I have read.
Mr. BISHOP. It is very germane. Let me mention one thing
too because there is a lot of confusion in this area. The Trade
Adjustment Assistance law currently only provides for the
training and income support benefit, as well as the Health
Coverage Tax Credit, relocation allowances, and job search
allowances. The law anticipates that workers pre-training, pre-
TAA and post--TAA training are going to get services through
the Workforce Investment Act. Yet when I hear states, like we
heard today say, ``Well, we do not mandatory co-enroll
workers,'' what that means, it is important for Congress to
understand, that what that means is that the trade-affected
worker in your district, that local community, the local
workforce investment system is telling that worker we are not
going to serve you. We are not going to do assessment, we are
not going to do career counseling, and we are not going to
after you get out of training help you find a job with post-
training job placement assistance. That is why we continue to
maintain we have to have an integrated approach to helping
these workers.
Mr. PASCRELL. Why doesn't the Department of Labor, I have
got some major problems with the Department of Labor, and I am
going to be kind to you because you have been kind to this
panel.
Mr. BISHOP. Okay.
Mr. PASCRELL. You have been very good, you have been
forthright. That is very different than what I have
experienced. But anyway why does not the Department of Labor
track training funds----
Mr. BISHOP. We do track training.
Mr. PASCRELL [continuing]. On an obligated basis----
Mr. BISHOP. Sure.
Mr. PASCRELL [continuing]. Which according to a report that
we just had on the WIA program by your own IG, by the way, says
that it is a more accurate way to reflect legally committed
funds.
Mr. BISHOP. Yes, I appreciate the opportunity to respond to
that. The first thing that needs to be mentioned is that the IG
staff that did that report, none of them were accountants. The
reason that is important is because obligations are an
accounting mechanism. Let me give you a real life example of
what we have dealt with around obligations versus expenditures
in the TAA program. Prior to us changing the TAA training
methodology, this is what states were doing. If you came into--
if I had $10,000 to disburse in training to customers and you
came through my door and you needed $5,000 per year for the
next 2 years for training, I would obligate all $10,000 toward
your training. Then if Mr. Levin came through my door, even
though I only needed $5,000 for that first year, I would tell
him, ``Sorry, I have no money for training. I have it all
obligated.'' Well, on average then you as a worker on average
in the TAA program only train for 1 year. So, meanwhile I have
told Mr. Levin that there is not money there when in fact there
was $5,000 sitting there. Then on top of it, I do not go back
and de-obligate that $5,000 so I continue in year two to tell
people there is not money. Obligations are future commitments,
they are not actual--money that was spent on actual services.
We have all the states, we had Pennsylvania in 2003 that was in
all kinds of trouble financially in this program, and we sent
our senior executive manager up there to work with the state
and what Pennsylvania was doing was creating all of these
future year obligations and saying that there was not any money
and none of those obligations came to fruition and none of that
money was ever expended in training. So, on their books----
Mr. PASCRELL. Well, where did the money go?
Mr. BISHOP. It was on their books. It was never spent. They
had it obligated in the accounting of the books, but they did
not actually spend it on training. What we have found is that
there is plenty of money in the system to spend on training.
Mr. PASCRELL. Mr. Chairman, I do not think there is a
policy, unless I missed something here, to recapture the money
that is not being spent so that it can be fairly distributed or
re-distributed to folks that really need this.
Mr. BISHOP. That is correct.
Mr. PASCRELL. That disturbs me, should I be disturbed about
it or what am I missing?
Mr. BISHOP. We do not have recapture authority in the law.
We can voluntarily recapture. Once in a while we get a state
that says, ``I have more money than I need. Department of
Labor, would you please recapture and disburse?'' But, again,
because we have set up a base allocation in a reserve process,
at the beginning of the fiscal year, we hold $55 million in
reserve, and we invite any state in the Union to come to us and
say if you need more money for TAA training, we can get it to
you. Every year for the first 3 years of this process, we have
disbursed at the end of the fiscal year $20 to $30 million of
unasked for money. So, any state who says, ``I am spending all
my money, I can't get any more,'' it is simply not true. We
have put out money that has been unasked and unrequested by the
states. So, to us we have demonstrated the $220 million under
the current law is enough to meet the needs of trade-affected
workers who are being certified by the Department of Labor as
needing training.
Mr. PASCRELL. Thank you for your testimony.
Mr. BISHOP. Thank you.
Mr. PASCRELL. Thank you, Mr. Chairman.
Mr. LEVIN. Go ahead.
Mr. STARK. I want to just see if Mr. Bishop and Mr.
Williams will hold hands there, and we will jump into this
pool. I can maybe solve the problem of simplifying this health
insurance thing but only for a small group. If, Mr. Bishop, the
beneficiary used in the training program, they get the cash
from you each month, right?
Mr. BISHOP. For training you are asking?
Mr. STARK. Yes, if they are in a training program for TAA.
Mr. BISHOP. Yes, we provide money to the states who then
disburse the training to the customers.
Mr. STARK. If they the training program for instance quits
for the summer, takes a summer vacation, do you get pretty
quick feedback so you can cut out the payment or what do you do
there?
Mr. BISHOP. Well, again, that is a real issue in the
program that needs to be looked at. Right now, you can get up
to 2 years of income support and 2 years of training and one of
the reasons that Congress extended the amount of training that
people could get and income support was to match those up in
2002 but the reality is that those do not match up and it is
something that ought to be looked at. But, yes, what happens is
somebody who is on a semester break, if there is not a part of
the program they can continue, they would still maintain that
income support until they could re-enter their--complete their
training program.
Mr. STARK. So you do not get that money back?
Mr. BISHOP. No, we disburse those training moneys to the
states and those are held at the state level to be used for
providing training assistance to workers under the TAA program.
Mr. STARK. I am just wondering if you could not--I am sure
you do not want to but it could take on Mr. Williams'
responsibility of distributing--being in a more real time
situation with each of these people. By the time Mr. Williams'
here at IRS that they have quit training or have gone away,
they may have continued to get benefits for three or 4 months
toward the insurance but you would know it before he did.
Mr. BISHOP. Well, yes, Mr. Stark, you mentioned
``presumptive'' and again the point I would like to make on
this, and it is a very important point to understand about the
HCTC. In 2002, Congress tied, at least for the TAA workers,
eligibility for HCTC on the receipt of the trade readjustment
allowance, which is the income support, not on the training,
not on the fact that you are certified as part of a worker
group. That has created issues, it creates a couple of gaps.
The first gap is that worker is laid off, starts collecting
their regular UI benefit----
Mr. STARK. For 6 months?
Mr. BISHOP. For 6 months, right. Say they have to wait a
couple of weeks, the worker group, somebody sends a petition
into us, we take our 30 days. We then say you are eligible.
Under the law at that point, that is when you are eligible for
HCTC because you are receiving UI in lieu of TRA for that first
6 month period. So, there is always a one to 2 month gap to 3
month gap right up front for individuals from the time they are
laid off to the time they are even deemed eligible because of
the linkage to TRA. Then, once that happens, we have to get the
state workforce agencies, the UI directors have to get those
records up to the IRS. The IRS actually processes it incredibly
quickly given the data they have to collect from the state
workforce agencies. Then they have a slight gap until they can
get that first advanced payment out.
So, your presumptive question is an interesting policy
question because right now the way the program is designed,
there is always going to be a natural potential for a month or
so gap from the time a person is laid off to the time the IRS
realistically under current law can get that first payment out
on behalf of that individual to the insurer. So, it presents a
real dilemma. It is something from the very start in 2002, the
IRS and DOL and even HHS have been involved in trying to figure
this out given what the law said in terms of who was actually
eligible.
Mr. STARK. At the risk of being accused of shilling for a
Federal universal health care plan, which is not my intention
here, but it does seem to me that the complication is
compounded by the fact that there are different policies
available, and in some cases no policies available, and at
different costs for different states so that, and let's leave
Medicare out of it for a minute, let's just say that we said,
``Okay, we could get jurisdiction and once they are laid off
and have applied, they are eligible to go to the VA hospital.
If they did go and cost the government some money and later
were not allowed in, go try and collect from them just the way
we try and collect a bad debt from anybody else.'' But if you
were dealing with one entity nationwide, it would seem to me we
could resolve those payments at the Federal level and see that
people had a continuity of medical care.
Mr. BISHOP. There are really two issues here I think
Congress is going to need to look at----
Mr. STARK. Okay.
Mr. BISHOP [continuing]. In terms of HCTC, one is what we
have talked about, which is the eligibility and at what point
are you eligible and who is eligible.
Mr. STARK. Okay.
Mr. BISHOP. The second question becomes what types of
coverage are you eligible for. The reality I think of the law
currently is that there really are only two options for
individuals to partake of the list in the law of different
options, one is COBRA and two is a state-qualified health plan.
As has been testified, some of the state-qualified health plans
because of requirements in the law tend to be fairly expensive,
but what we found in working with the IRS----
Mr. STARK. COBRA is not very cheap.
Mr. BISHOP. Right, COBRA can be very expensive as well. So
if you go to the law, there are various options of what types
of insurance you can get in the individual market and all that
but the reality for most people is that the state-qualified
coverage is about the only realistic option they have. We
worked very, very hard in 2003, again, on a multiple-agency
basis, HHS was very involved, the IRS and DOL in working with
states to try to get state-qualified plans through insurers up
and running and it was a very challenging process.
Mr. STARK. The insurers are not jumping up and down I do
not think to get into this business, quite frankly.
Mr. BISHOP. It is not a large universe of people from an
insurance standpoint.
Mr. STARK. Well, okay.
Mr. BISHOP. I am not an insurance expert.
Mr. STARK. It just occurs to me that part of this is that
we are dealing with 50 different jurisdictions and different
sets of rules and trying to apply a uniform Federal amount to
these people and that we could simplify it actually if we took
the risk. The fact is, and I do not know what the statistics
would be, but the fact is if the people do not use, if the
Federal Government were providing it and then people did not
use the services, it does not cost us anything and so that
while we can talk about average insurance costs for various
Federal, whether it is VA or Medicaid or Medicare, it might be
somewhat simpler. Thank you both and we welcome any thoughts
because it would, as I say, by making your work simpler and
less costly, I think we do a service to the relatively small
number of people who need this under or are entitled to it
under the Trade Adjustment Assistance. Thank you.
Mr. LEVIN. I have just a couple of points. I think we will
ask GAO to comment, and perhaps the states, on your analysis
regarding the expenditure process and the role of obligations.
What may have been true three or 4 years ago may not be true
today. So you are statement that you do not take into account
the obligations that a state has may no longer be accurate and
states may well be obligating funds on a 2-year basis because
there is a commitment to someone for a 2 year period of
training. You say that states who are gaming the system, and I
think we ought to ask GAO and the states to comment on that. It
will affect how we handle this. I am not sure the main issue is
whether we should raise the amount of money for the present
program, but, clearly, if we are going to expand the program to
include service personnel and clarify the present rules, we are
going to have to think about that.
I do not think your testimony, Mr. Bishop, talks about the
expansion of the program to service industries, is that
correct?
Mr. BISHOP. That is correct.
Mr. LEVIN. Why not?
Mr. BISHOP. At this time, the administration has not taken
a position on that. I would just say that when it comes to
service workers that, as part of the discussion that we have
with the Congress, we have to really look at what does that
mean? Service workers are a broad category of people, it can
range from call centers to lawyers and it just is something
that we would like to work with Congress on but yet also be
mindful that it is a large group of people in the service
sector and what does that actually mean with regards to
globalization, service sector workers, and what the costs
ultimately might be.
Mr. LEVIN. Have you looked at that?
Mr. BISHOP. We have started looking at some of that data,
yes.
Mr. LEVIN. When do you think you will be ready to engage?
Mr. BISHOP. I think we, again, have some ideas, as I
mentioned in my testimony, on fixing the basic foundation of
the program. As we move into the summer and the like, again, if
Congress would like to work with us on TAA reauthorization and
the discussion around service workers, we can do that during
the summer.
Mr. LEVIN. You mentioned the summer, when does the program
end?
Mr. BISHOP. The authorization expires September 30th. Let
me make one comment on that. We have actually talked to our
lawyers at DOL and it is their opinion that there would be no
impact on the program at all if Congress does not reauthorize
it by September 30th. So, long as appropriations continue,
there is not an issue.
Mr. LEVIN. I just wonder here it is June and the
authorization ends in a few months, and I am not sure you are
ready to engage us on the issue of service workers. How about,
and I finish I guess with this except for one brief question,
the GAO recommendation regarding the formula, are you committed
to change, are you committed to considering change?
Mr. BISHOP. Yes, let me answer both of those questions.
First, real quickly, the reason we have a hold-harmless at 85
percent was because any time you change the way you distribute
money, and the states are the first to get worried about this,
we wanted to assure that there would be a level and a
commitment to the states that they would receive stable funding
coming out of the start of this methodology. Again, IBM in
their report in 2004 recommended having a hold-harmless.
Mr. LEVIN. That was a few years ago, correct?
Mr. BISHOP. Yes, 2004 was the first year we did this.
Mr. LEVIN. Okay.
Mr. BISHOP. Now that we have again believed that this
methodology works, now that all states have achieved a level
and stable playingfield with regard to this, we said, and we
mentioned in the GAO report in our response in the GAO report
that we are willing to take a look at more targeted funding for
this program, whether it be how we do the reserve distribution
at the end of the fiscal year if moneys are available or how we
distribute funds at the beginning of the year.
Mr. LEVIN. You say you are willing to take a look, you run
this program. If you believe in it, you should be more than
willing----
Mr. BISHOP. No, we are willing to take a look but, again--
--
Mr. LEVIN. How about taking a look?
Mr. BISHOP. Well, we are taking a look, we definitely are.
We are looking at two things: One, what makes the most sense in
terms of changes and, two, again not to sound to bureaucratic
but making sure we run it by our lawyers to assure that any
time you are dealing with changes to funding allocations, often
you come under administrative procedure requirements with
potential rulemaking and other kinds of things, and so whatever
we do we just have to make sure we do it in the context of
administrative procedures.
Mr. LEVIN. Your testimony indicates that you support
reauthorization. I take it you do not agree with the statement
of at least one witness here that Federal programs do no good?
Mr. BISHOP. I do not agree with that statement. I will say
this that I do believe, and I have witnessed, Federal programs
can do good. I would say that a caveat to that is I do think
one issue Federal employment training programs, I have been at
the Department of Labor almost 6 years now, and I worked at the
state level in this area, and I do think one thing we suffer
from a bit is a lack of unified support that these programs
have been effective over the last few decades, whether it be
TAA, CETA, we had JTPA and now we have WIA, and I do think
there is some question over time, and one of the reasons we are
trying to get impact evaluation studies going in many of these
programs and have accountability in outcomes is to demonstrate
whether or not these programs are effective because that is
important.
Mr. LEVIN. That impact study was due 2008?
Mr. BISHOP. No, we do not have a requirement on an impact
evaluation. It is something we are going to look into.
Mr. LEVIN. What is the study that you said was due 2008
that is now coming 2011?
Mr. BISHOP. No, 2011, we have started a longitudinal 5 year
impact evaluation of TAA and the final report will be in 2011,
we will have some interim reports in the meantime.
Mr. LEVIN. That is a long time.
Mr. BISHOP. Well, that is the problem is any time you do
actual gold standard impact evaluations, you have to compare
outcomes over a five or 6 year period, and they do take a long
time. It is one of the frustrations I know.
Mr. LEVIN. All right. Thank you very much. I guess a long
hearing but a most useful one. We are going to have another
one. So, this hearing is now adjourned.
[Whereupon, at 3:00 p.m., the hearing was adjourned.]
[Submissions for the Record follow:]
Statement of Illinois Department of Commerce
Thank you Mr. Chairman and members of the Committee, for the
opportunity to share our perspective on the Trade Adjustment Assistance
program.
Needless to say, the State of Illinois strongly supports
reauthorization. We also applaud the Committee's interest in potential
expansions of the program's current scope, to provide further
assistance to a wider array of U.S workers to help ensure they succeed
in the global economy.
Our comments here will focus on current aspects of the program--
regarding both the employment and training assistance and trade
readjustment allowances (TRA)--and opportunities for improvements that
will better serve the people the program is intended to benefit.
Our recommendations, not necessarily in order of priority, are as
follows:
1. Clarify a claimant cannot be held ineligible for TRA benefits
because he/she has not complied with a deadline, unless the deadline is
expressly spelled out in either the Trade Act or formally adopted rules
interpreting the Trade Act. For example, USDOL takes the position that
a claimant is not eligible for TRA benefits unless a) he/she is
enrolled in training by a specific point (referred to as the 8/16 week
deadline), or b) by that point, the state has waived the training-
enrollment requirement. The Trade Act expressly provides enrollment
must occur within the 8/16 week deadline, but imposes no deadline with
regard to waivers. There is no formally adopted rule expressly
extending the deadline to waivers. Requiring states to enforce
deadlines not expressly established by statute or rule leaves them
unnecessarily open to legal challenge.
2. Expressly permit critical deadlines, such as for enrollment in
training or a waiver of the training-enrollment requirement (if a
waiver deadline is expressly provided for) to be retroactively extended
for a claimant who has missed the deadline through no fault of his/her
own, as well as for other extenuating circumstances. For example, USDOL
has taken the position that a training-enrollment waiver cannot be
extended once it has lapsed and more than a week has passed since it
lapsed.
3. Base an individual's weekly TRA benefit amount on the weekly
benefit amount the individual received in regular unemployment benefits
immediately following (a) his/her ``first qualifying separation'' from
the trade-impacted job or (b) the ``last qualifying separation,''
whichever will yield the higher weekly TRA benefit. Currently, the
weekly TRA amount is tied to the regular-benefit amount payable
following the first qualifying separation. However, it is not unusual
for an individual to be laid off from a trade-impacted job numerous
times--i.e., to have several qualifying separations--before finally
being separated from the job. It is conceivable the individual's weekly
regular-benefit amount will differ from one qualifying separation to
the next. Tying the TRA benefit to the higher regular-benefit amount
will more accurately reflect the earning capacity that has been lost.
It will also improve the chances that the individual's TRA benefits
will sustain the claimant and his/her family while the claimant
completes training for a new job.
4. Institute a hold-harmless provision for individuals who
requalify for regular unemployment benefits in the midst of a TRA
claim. Currently, an individual is ineligible for any TRA benefits for
any week for which he/she is eligible for regular unemployment
benefits, even where the regular benefit amount is substantially less
than the TRA benefit amount the individual had been receiving. A
significant drop in weekly benefits may jeopardize the claimant's
ability to continue with retraining. Under the hold-harmless provision,
an individual's weekly TRA benefit would be reduced by the amount of
regular benefits for which he/she was eligible, but the sum of the
weekly regular and TRA benefits he/she received would equal the amount
of weekly TRA benefits he/she had been receiving.
5. Excuse a TRA claimant from having to repay a TRA overpayment
where the overpayment is not the claimant's fault. Currently, the
claimant must also demonstrate very extreme financial hardship. The
fact that the individual may now be supporting his/her family,
receiving only a fraction of his/her prior wages, does not necessarily
constitute severe enough financial hardship. Moreover, USDOL staff have
indicated current law only permits a state to waive the requirement
that a TRA overpayment be recouped through deductions from prospective
payments--not to forgive the overpayment.
6. Provide an individual who leaves a trade-impacted job to take
other employment is still an ``adversely affected worker'' for purposes
of TRA benefits. To qualify for TRA benefits, an individual must be
considered an adversely affected worker. To be considered as such, the
individual must have separated from the trade-impacted job for lack of
work. An individual who quits a trade-impacted job to begin working
elsewhere, but is then laid off from the second job, is currently not
considered an adversely affected worker, since he/she was not separated
from the trade-impacted job for lack of work. The current approach
provides a disincentive for trade-impacted workers to try to help
themselves by finding work elsewhere and not waiting for the ``bitter
end'' at their trade-impacted jobs.
7. Eliminate the current requirement that an individual must have
applied for training within 210 days after first being certified as
trade-impacted. The current 8/16 week deadline for training enrollment
serves the goal of promptly getting trade-impacted workers into
retraining. The 210-day requirement appears now to be largely a
potential technical barrier to serving trade-impacted workers.
8. In the course of investigating a petition application, it would
really help if USDOL would request from the company the list of
affected employees. This would alleviate the problem of the short time
frame in getting an employee list and notifying the workers of their
deadlines for TRA. If USDOL does not want to commit to obtaining the
employee list, would they consider mandating that the companies provide
the list of affected workers to the states? Many of the eligibility
problems stem from not having the lists of affected employees in a
timely manner. Currently, non-notification or late notification
(although not the customer's fault) is not an extenuating circumstance
for missing the 8/16 deadline. The proposed regs however, do include
this as an extenuating circumstance but the issue is the same. The goal
of the TAA program is for dislocated workers to be re-employed as soon
as possible. Any delay in receiving an employee list not only currently
puts the customer at risk of missing the 8/16 deadline but also delays
their re-entry into the workforce.
9. Because of the 104 training week time limit, on the whole
Illinois can't train workers in the healthcare field. Most of these
programs require pre-requisites and then a full two years of course
work which exceeds the 104 training weeks allowed. A solution would be
for DOL to allow us to consider pre-requisites as remedial training.
The healthcare field has the highest demand for workers and is included
in most of the State's Critical Skills Shortage Initiative projects. It
is counterproductive that we can't train in fields where the need is
the greatest and the wages are good. A guideline or suggested duration
is much better than a strict limit. This issue was presented to USDOL
in May 2006 at the National Rapid Response Summit. It was suggested
that pre-requisites in the healthcare field be considered remedial.
This would enable the states to train customers within the established
training time limit of 104-week limit for regular training and up to
130 weeks if remedial classes are included.
10. USDOL's proposed rules make a bad situation worse by changing
the 104 week limit from 104 actual training weeks to 104 consecutive
weeks. In other words, the clock continues to tick against the training
weeks whether they are in training or not. Major problems with the 104-
week that will be amplified with the proposed rule change:
The scheduled breaks in training will be counted as
training time. For workers who need remedial and vocational classes,
the breaks between the scheduled classes will eat up weeks.
Limited class size.
Class availability and class cancellation--especially in
rural areas.
Full-time status. Workers that have not been in a
classroom in 30 years may not be able to handle full time school. For
customers with only 1 or 2 classes left, the full time requirement
mandates that the balance of classes be filled--this is a waste of
valuable TAA training money.
In the new regs, the training institutions will be
required to certify that a customer has attended all scheduled classes
and activities--we fear most institutions will not do this.
Remedial and pre-requisites need to be better defined.
Customer will be disqualified from receiving TRA if the
worker misses even a single class or activity in the training program
week without good cause.
Thank you for your time and consideration.
Statement of National Association of Health Underwriters, Arlington,
Virginia
The National Association of Health Underwriters (NAHU) is a trade
association for health insurance agents and brokers, representing more
than 20,000 health insurance producers nationally. Our members help
millions of Americans find affordable health insurance every day and
assist them in making that coverage work in the best possible way.
As the leading professional association for health insurance
producers, our two principle public-policy goals are (1) reducing the
number of uninsured Americans through private health insurance market
solutions and (2) making sure that Americans have as many affordable
and accessible private health insurance options available to them as
possible.
As such, we were strong advocates of the Health Care Tax Credit
when it was included in the Trade Adjustment Act of 2002 (TAA). Our
association worked directly with many states regarding the
implementation of the credit and the establishment of their purchasing
options, and our members have helped many beneficiaries use the credit
to obtain coverage. Over the course of the past five years, while
working with the TAA health care tax credit, we have noticed a few
issues that have hindered the success the success of the credit that
could be improved when TAA is reauthorized.
State-Elected Purchasing Options
TAA provides a refundable tax credit to help eligible individuals
purchase health coverage from a number of different sources. The
legislation specifies that automatically, in all states, beneficiaries
can use the credit to purchase health insurance through three sources--
COBRA, a spouse's group health plan, or individual coverage if in force
at least 30 days prior to separation of employment. The legislation
also specifies seven additional purchasing options a state can choose
to elect, like coverage through a high-risk pool or state-based
continuation coverage. To date, 39 states plus Puerto Rico and the
District of Columbia have elected additional options, leaving 11 states
with only the automatic options or only the automatic options plus
state-based continuation coverage.
Unfortunately, while the legislation does specify three automatic
purchasing options, all beneficiaries do not have those options
available to them personally. Individual coverage is not an option for
the vast majority of recipients because they did not have it in-force
prior to their job loss, and there are many beneficiaries who do not
have access to coverage through a working spouse.
Many people assume that an individual who has lost coverage always
has a COBRA option. This is not the case. Many TAA-eligible individuals
worked for employers that have gone out of business. Since COBRA is an
employer law, if there is no employer, there is no COBRA. The same
holds true for state-continuation options. Also, many other eligible
individuals worked for small employers for whom COBRA does not apply,
and not all states have mandated continuation of coverage options for
smaller employers. Individuals who are eligible for the TAA credit
because they receive benefits from the federal Pension Benefit
Guarantee Corporation (PBGC) may have long since lost their employer-
sponsored coverage.
Because many individuals do not have one of the automatic options
available, this means that many individuals may be eligible for a tax
credit but have no place to spend it. NAHU recommends that, during the
reauthorization process, Congress revise the purchasing options to
allow eligible individuals to purchase coverage available and approved
in their state, without requiring a special state election.
Separate Guaranteed-Issue and Preexisting Condition Requirements for
Each Purchasing Option
If a TAA-eligible individual has been previously insured for three
months and has less than a 63-day break in coverage, any coverage
option(s) selected by the state must provide coverage on a guaranteed-
issue basis without application of a preexisting condition waiting
period and at benefit levels and premiums that would be customary for a
non-TAA-eligible individual purchasing the same type of coverage.
These provisions for guaranteed issue and waiver of preexisting
conditions apply separately to each state-elected option, therefore,
any option selected by the state must on its own provide for coverage
to be guaranteed to qualified individuals, with no limitation for
preexisting conditions. Even if a state elects both a high-risk pool
and and an arrangement to provide coverage through an insurance
carrier, each option must separately provide for guaranteed issue and a
pre-existing condition waiver for eligible individuals, even though the
very purpose of a high-risk pool is to guarantee coverage for those who
do not meet underwriting guidelines in the individual health insurance
market.
This lack of flexibility has resulted in fewer coverage options for
eligible individuals, and has many eligible individuals paying far more
for their share of premiums than they should. This has resulted in
reports that the 35 percent share of premiums is too high for some
eligible individuals to afford. In fact, the problem is that the rigid
nature of the purchasing options is forcing a higher premium level than
may be appropriate for the majority of those eligible under the
program. This lack of flexibility does not improve choice or access,
but rather limits it by making coverage unaffordable for some eligible
individuals.
Lack of flexibility in the program also impacts the federal
government in an even bigger way as the government is picking up 65
percent of the cost of coverage when the cost of that coverage could be
significantly lower. It seems fiscally irresponsible for the United
States government to pay an unnecessarily inflated price for health
insurance coverage under the tax credit when other simple solutions
exist.
The best situation would be to completely revise purchasing options
to allow eligible individuals to purchase coverage available and
approved in their state without requiring a special state election. At
a minimum, it would make sense not to reinvent the wheel and have TAA
requirements follow HIPAA portability law, which has a longer prior-
coverage requirement and allows states to use their high-risk pool to
guarantee access. Even under HIPAA, insurance carriers in states
without high-risk pools estimate that they lose 18 dollars for every
one dollar they receive in premiums from those who purchase coverage
under HIPAA rules. Considering that the TAA requirements are
significantly more restrictive on insurance carriers than those under
HIPAA, it's easy to understand why participation by carriers under TAA
has not been as robust as would have been preferable.
The reasoning for requiring that each option meet the provisions
separately was that insurance carriers might turn down high-risk
individuals and force them to obtain their coverage at a higher price
through a high-risk pool or some other state guarantee mechanism. Yet,
because of this rigid requirement, we've seen 15 states elect their
high-risk pool as the ONLY option for anyone of any health status, even
though far more affordable rates and more choices in coverage could be
made available to eligible individuals through the traditional market.
While high-risk pools provide critical access to health insurance for
individuals in poor health, they were never designed to accommodate
healthy individuals and their pricing structure is not designed for
individuals in good health. If states with high-risk pools could make
arrangements with one or more carriers to use their normal pricing and
underwriting structure for eligible individuals and guarantee access to
coverage for uninsurable individuals who meet prior-coverage
requirements through the high-risk pool, it would be far better than
the current arrangement for health insurance tax credit purchasing
options. It would provide more choice for most individuals at a better
price, which would also result in a better price for the United States
government. And those who are uninsurable would have the same options
they have now in the 13 states that have already elected a high-risk
pool as their purchasing option and that could be elected as an option
in the other 21 states with functioning high-risk pools.
Expansion of TAA
While expansion of the health care tax credit to other groups may
seem like a logical next step, there are challenges in taking this
course. First, while a number of states have elected options, not all
of the options would be suitable if the eligible population grew from
its current number to several million. For example, state high-risk
pools, elected as the only option in 15 states, are not designed to
handle large populations.
Second, cost will likely dictate that any expansion is limited to
select populations and, with each possibility of limitation, specific
issues arise. For example, if a person's period of eligibility was tied
to being on unemployment compensation, then that would mean that a
person would be eligible for the credit for a six-month period. A
short-term risk like this is not attractive for insurance carriers with
the current structure of guaranteed issue and preexisting conditions
waivers in the TAA law and many might choose not to participate in the
program. Third, even with a generous credit like the TAA credit,
individuals and families who have substantially reduced income due to
the loss of employment are significantly less able to come up with
their own 35 percent share of the premium, particularly if the cost of
coverage is artificially high as is the case with the current
purchasing options.
An alternative solution would be to simply target low-income
working individuals who make too much to qualify for Medicaid but not
enough to afford health insurance on their own. We have seen over the
years that the government's cost of some proposals for subsidizing the
cost of health insurance coverage for low-income individuals can be
very high. These costs can be made lower in several ways. First,
credits or other subsidies can be phased out for the ``higher'' low
incomes, although reduced subsidies can significantly reduce the
ability of some individuals to come up with their share of the premium.
If take-up rates are low, measures of the relative success of the
program may appear low, simply because people in this income category
for the most part live paycheck to paycheck and may have little to
spend for health insurance.
Another way to control the cost is to make the subsidy available
only to those who are currently uninsured. While this does have the
down side of penalizing those who are already doing the right thing
financially and buying coverage, it does measurably reduce the number
of those who are actually uninsured. The period of uninsurance to
determine eligibility should be fairly long, at least 12 months, so as
not to create an incentive for those who are already insured to drop
their current coverage in order to qualify.
Another way to control cost is to limit the duration of the
subsidy. If this is done, the benefit should be at least two to three
years (assuming that someone meets the income requirements for that
length of time). Shorter periods are less-attractive risks for insurers
and may invite adverse selection.
It should be noted that many people in this income category already
have access to employer-sponsored coverage but can't afford to pay
their share of premiums. This is particularly common with dependent
coverage where the employer may pay some or all of the employee premium
but none of the dependent premium. This employer/employee cost-sharing
structure is quite common in small businesses that employ primarily
low-income workers, as well as in certain areas of the country.
Allowing employer-sponsored coverage, where the employer makes only a
minimal contribution to be considered a qualified purchasing option,
would help these employees maximize all sources of funding to better
enable them to afford coverage. This could be combined with a qualifier
that the individual have been uninsured for a period of time to limit
cost.
Finally, if it is decided not to allow employer-sponsored coverage
(other than COBRA) to be an allowable purchasing option, it is
important to establish eligibility parameters that do not create
incentives for employees to leave employer coverage to use the subsidy
in the individual market. This could create a real problem particularly
for small employers as insurers have participation requirements that
can be difficult to meet if all employees don't participate. It could
be a really big problem for employers whose workforce, however small,
is highly concentrated towards low-income employees. The end result
could be loss of coverage for those employees who are already insured
as a result of inability of the employer to meet participation
requirements. This can be avoided if language is included that says
that if people are ``eligible'' for employer-sponsored coverage, then
they are not eligible for the subsidy, as opposed to language that says
that if they are ``participating in'' employer-sponsored coverage, they
are not eligible.
With any of these eligibility choices, adequate flexibility in
purchasing options is essential for success. Coverage must be
affordable even for those with a subsidy or the program will not
achieve its desired objective.
NAHU sincerely appreciates the opportunity to provide comment on
the Committee on the Trade Adjustment Assistance Act and how its Health
Care Tax Credit could be improved upon. If you have any questions, or
if NAHU can be of further assistance, please do not hesitate to contact
me.
Respectfully submitted,
Janet Trautwein
Executive Vice President and CEO