[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 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            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.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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noted above.

                                 

    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.
---------------------------------------------------------------------------
    \2\ GAO-07-701, GAO-07-702, GAO-06-496.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \7\ GAO-04-1012.
    \8\ GAO-06-43.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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

                                  
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