[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
IMPLEMENTATION OF UNEMPLOYMENT INSURANCE PROVISIONS IN THE RECOVERY ACT

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON INCOME SECURITY AND
                             FAMILY SUPPORT

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 23, 2009

                               __________

                           Serial No. 111-15

                               __________

         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       DAVE CAMP, Michigan
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            SAM JOHNSON, Texas
JOHN LEWIS, Georgia                  KEVIN BRADY, Texas
RICHARD E. NEAL, Massachusetts       PAUL RYAN, Wisconsin
JOHN S. TANNER, Tennessee            ERIC CANTOR, Virginia
XAVIER BECERRA, California           JOHN LINDER, Georgia
LLOYD DOGGETT, Texas                 DEVIN NUNES, California
EARL POMEROY, North Dakota           PAT TIBERI, Ohio
MIKE THOMPSON, California            GINNY BROWN-WAITE, Florida
JOHN B. LARSON, Connecticut          GEOF DAVIS, Kentucky
EARL BLUMENAUER, Oregon              DAVE G. REICHERT, Washington
RON KIND, Wisconsin                  CHARLES W. BOUSTANY, JR., 
BILL PASCRELL, JR., New Jersey       Louisiana
SHELLEY BERKLEY, Nevada              DEAN HELLER, Nevada
JOSEPH CROWLEY, New York             PETER J. ROSKAM, Illinois
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
DANNY K. DAVIS, Illinois
BOB ETHERIDGE, North Carolina
LINDA T. SANCHEZ, California
BRIAN HIGGINS, New York
JOHN A. YARMUTH, Kentucky

             Janice Mays, Chief Counsel and Staff Director

                   Jon Traub, Minority Staff Director

                                 ______

           SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT

                  JIM MCDERMOTT, Washington, Chairman

FORTNEY PETE STARK, California       JOHN LINDER, Georgia
ARTUR DAVIS, Alabama                 CHARLES W. BOUSTANY, JR., 
JOHN LEWIS, Georgia                  Louisiana
SHELLEY BERKLEY, Nevada              DEAN HELLER, Nevada
CHRIS VAN HOLLEN, Maryland           PETER J. ROSKAM, Illinois
KENDRICK MEEK, Florida               PAT TIBERI, Ohio
SANDER M. LEVIN, Michigan
DANNY K. DAVIS, Illinois

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 
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version. Electronic submissions are used to prepare both printed and 
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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 April 16, 2009, announcing the hearing...............     2

                               WITNESSES

Ray Uhalde, Senior Advisor to the Secretary, U.S. Department of 
  Labor..........................................................     6
Michael L. Thurmond, Commissioner, Georgia Department of Labor, 
  Atlanta, Georgia...............................................    37
Joseph Walsh, Deputy Director, Iowa Workforce Development, Des 
  Moines, Iowa...................................................    43
Maurice Emsellem, Policy Director, National Employment Law 
  Project, Oakland, California...................................    56
Mike Mitternight, Owner and President, Factory Service Agency, 
  Inc., Metairie, Louisiana......................................    75
Heidi Shierholz, Ph. D., Economist Economic Policy Institute.....    82

                       SUBMISSIONS FOR THE RECORD

Randel K. Johnson, Letter........................................   107


                           IMPLEMENTATION OF



                  UNEMPLOYMENT INSURANCE PROVISIONS



                          IN THE RECOVERY ACT

                              ----------                              


                        THURSDAY, APRIL 23, 2009

             U.S. House of Representatives,
                       Committee on Ways and Means,
        Subcommittee on Income Security and Family Support,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:00 a.m., in 
room B-318, Rayburn House Office Building, the Honorable Jim 
McDermott [Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON INCOME SECURITY
                           AND FAMILY SUPPORT

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
April 16, 2009
ISFS-2

                     McDermott Announces Hearing on

                Implementation of Unemployment Insurance

                     Provisions in the Recovery Act

    Congressman Jim McDermott (D-WA), Chairman of the Subcommittee on 
Income Security and Family Support of the Committee on Ways and Means, 
today announced that the Subcommittee will hold a hearing to review the 
implementation and impact of the unemployment insurance (UI) provisions 
included in the American Recovery and Reinvestment Act of 2009. The 
hearing will take place on Thursday, April 23, 2009, at 10:00 a.m. in 
B-318 Rayburn House Office Building. In view of the limited time 
available to hear witnesses, oral testimony at this hearing will be 
from invited witnesses only. However, any individual or organization 
not scheduled to appear may submit a written statement for 
consideration by the Subcommittee and for inclusion in the record of 
the hearing.
      

BACKGROUND:

      
    In addition to initiating a variety of tax and spending provisions 
designed to protect and create jobs, the American Recovery and 
Reinvestment Act included several proposals to directly assist 
unemployed workers. The Recovery Act continues the Emergency 
Unemployment Compensation (EUC) program, which provides up to 33 weeks 
of federally-funded extended unemployment benefits, and temporarily 
permits full Federal funding for additional benefits in high 
unemployment States through the permanent-law Extended Benefits (EB) 
program. For the first time ever, the measure provides Federal funds to 
increase the amount of weekly unemployment benefits by $25. 
Additionally, the legislation increases administrative funding for 
processing unemployment claims, temporarily suspends taxes on UI 
benefits (up to $2,400) and waives interest payments for State UI 
programs requiring loans through next year. Finally, the new law 
provides up to a total of $7 billion in modernization grants for States 
that have or that put in place specific reforms designed to increase 
access to UI benefits for jobless workers, such as counting a worker's 
most recent wages when determining his or her eligibility. All of these 
benefits are to be administered by State unemployment agencies.
      
    In announcing the hearing, Chairman McDermott stated, ``In the face 
of the worst economic crisis since the Great Depression, we responded 
in historic fashion to meet the needs of unemployed workers. We must 
now ensure the benefits are reaching jobless workers--both to help them 
and the economy. I expect most Governors will ultimately seize this 
opportunity to help workers who have paid taxes and who have lost their 
jobs through no fault of their own. ''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the implementation and the impact of the 
unemployment insurance provisions in the American Recovery and 
Reinvestment Act.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
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the final page. ATTACH your submission as a Word or WordPerfect 
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by close of business Thursday, May 7, 2009. Finally, please note that 
due to the change in House mail policy, the U.S. Capitol Police will 
refuse sealed-package deliveries to all House Office Buildings. For 
questions, or if you encounter technical problems, please call (202) 
225-1721.
      

FORMATTING REQUIREMENTS:

      
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    1. All submissions and supplementary materials must be provided in 
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    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.

                                 

    Chairman MCDERMOTT. The Subcommittee will come to order.
    There can be no doubt we're in the midst of an economic 
tsunami that has turned the lives of many Americans upside 
down. We've lost over 5 million jobs since the start of the 
recession 16 months ago, and further job losses are likely to 
come.
    Responding to this crisis, Congress and President Obama 
worked together to pass an economic recovery act that cuts 
taxes and invests in America. One of the key investments was 
made in the most comprehensive package of assistance to the 
unemployed since the enactment of the New Deal in 1935.
    We're here today to assess the implementation and the 
initial impact of these unemployment insurance provisions, 
which this Committee took a lead role in developing.
    The Recovery Act not only provides the most far-reaching 
extension of unemployment benefits ever, but it also provides 
the first-ever Federal funding to temporarily increase the 
amount of the weekly UI benefit.
    Additionally, the measures increase administrative funding 
for processing unemployment claims, cut taxes on UI recipients, 
and provide a 65 percent subsidy for dislocated workers 
maintaining their employer-based healthcare coverage through 
what is known as COBRA.
    Finally, the Recovery Act provides a total of up to $7 
billion in modernization grants for States that enact specific 
reforms designed to increase access to unemployment benefits 
for jobless workers.
    We've seen many Governors--Democrats and Republicans 
alike--express a desire to draw down these funds. At the same 
time, we've also heard from a few Governors who say they don't 
want their State's share of these dollars because they say the 
reforms will pose a significant burden in the future.
    This argument, in my view, is both callous and wrong. 
Turning down these funds amounts to turning your back on the 
innocent victims of the recession. It ignores the fact that 
modernization reforms are common-sense provisions to help 
workers who have lost their jobs in our present-day economy.
    For example, one of the provisions simply requires that 
States count a worker's most recent wages when determining his 
or her eligibility for unemployment benefits. Is any Governor 
really willing to say such a step is unreasonable? It's just a 
matter of basic fairness.
    Another reform says that if an individual becomes eligible 
for UI benefits based on part-time work, then he or she should 
be allowed to look for another part-time job. Again, this is 
the fair thing to do for workers who have effectively paid into 
the system and then become unemployed.
    Many States have already enacted these reforms without a 
single dime of Federal money, and they have not found them to 
be a burden on their UI systems. However, if a State finds the 
reforms are unsustainable in the future, it can change them 
after the Federal money runs out, without any penalty.
    Let me quote directly from guidance provided by the 
Department of Labor on this point:

          ``If a State eventually decides to repeal or modify any of 
        these provisions, it may do so, and it will not be required to 
        return any incentive payments.''

    Rejecting the modernization funds is not only bad for 
unemployed workers, but it also might increase taxes on 
employers. Without this new infusion of Federal dollars, the 
solvency of many State unemployment trust funds will continue 
to decline, thereby triggering tax increases on employers.
    Governor Sonny Perdue of Georgia acknowledged this fact 
when he signed his State's UI modernization on Tuesday. He said 
this measure ``will help prevent tax increases on Georgia 
businesses so that they can grow and create jobs.''
    Another provision in the Recovery Act that I urge every 
State to take advantage of is specifically focused on long-term 
unemployed workers. The legislation provides temporary 100 
percent funding for the permanent-law extension benefits, or EB 
program.
    In high unemployment States, the EB program--that's the 
extended benefits program--provides additional weeks of 
benefits to workers exhausting their emergency unemployment 
compensation. This program has been enacted in only 26 States, 
but 14 more States could offer extended unemployment benefits 
under EB if they simply enacted an optional trigger, that is, 
6.5 percent total unemployment.
    One last point directly relevant to all the UI provisions 
in the Recovery Act is that unemployment insurance is an 
essential form of economic stimulus. Helping jobless workers 
maintain at least some of their prior consumption of goods and 
services generates revenue for business and saves jobs. It is 
therefore no surprise that we continually hear from economists, 
including those at the Congressional Budget Office, that 
unemployment benefits provide one of the biggest economic bangs 
for the buck.
    Finally, let me say that even with all that we've done on 
unemployment insurance, we may need to do more. As President 
Obama has said, we are beginning to see a few hopeful signs, 
but we don't know yet when a full recovery will come.
    Chairman MCDERMOTT. I will yield to Mr. Boustany to make 
opening remarks, and when Mr. Linder comes, if he has remarks, 
we will listen to them.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    I was going to request that Mr. Linder be allowed to 
deliver his opening statement upon his arrival.
    Chairman MCDERMOTT. Without objection.
    Mr. BOUSTANY. Thank you. I just simply want to say that, 
first of all, thank you for holding the hearing. I think it's 
very important to have this initial discussion about how this 
program is working in its early stages.
    There are, however, a number of unresolved questions. 
Clearly, some of the Governors around the country have raised 
legitimate concerns about the increased burden in the form of 
taxes on employers and will this, in fact, create a vicious 
cycle that could further feed unemployment.
    That's not to belittle the importance of this program, but 
we want to make sure that we look thoroughly and get all of our 
questions answered about how this program is going to work, and 
what also will be the impact on unemployment and, as a result 
of possible tax increases, on the employer.
    With that, I will yield back. Thank you.
    Chairman MCDERMOTT. Thank you.
    Ray Uhalde is the senior advisor to the Secretary. I think 
you worked in the Department of Labor before, and you've 
returned to your duty station, or another similar duty station, 
to implement this legislation.
    So, we welcome your testimony, and your full statement will 
be put in the record. We'd like to ask you to limit it to 5 
minutes, if you can, please.

 STATEMENT OF RAYMOND J. UHALDE, SENIOR ADVISOR, OFFICE OF THE 
              SECRETARY, U.S. DEPARTMENT OF LABOR

    Mr. UHALDE. Thank you, Mr. Chairman.
    Yes. Like the National Guard, I've been called to active 
duty, and I'm proud to serve.
    Good morning to you, Mr. Chairman and Members of the 
Subcommittee. Thank you for inviting me.
    I'm pleased to have the opportunity to discuss the 
provisions related to unemployment insurance in the Recovery 
Act.
    In addition to addressing the urgent needs brought on by 
the recession, the Recovery Act brings long-overdue recognition 
to the fact that since the 1930s, when the unemployment 
insurance program was created, the economy has changed, the 
workforce has changed, and the way we work has changed.
    We'd like to thank you, Mr. McDermott, for your efforts 
leading to this legislation.
    The Department of Labor promptly executed agreements with 
all the States, as needed, and issued implementing guidance 
within a few days of the Recovery Act becoming law.
    States have worked very hard to implement the provisions of 
the Recovery Act as quickly as possible, and in turn, get the 
Recovery Act's money out to beneficiaries.
    I'll briefly discuss implementation of these provisions.
    The emergency unemployment compensation program was set to 
expire March 31st of this year. The Recovery Act extended the 
date for new EUC claims to December 31st of 2009, with payments 
on those claims ending on May 31, 2010.
    All States are paying at least 20 weeks of EUC. Currently, 
42 States meet the high unemployment criteria under which 33 
weeks of EUC are payable. Through March, 3.7 million 
beneficiaries had been paid a total of $12.2 billion.
    The Recovery Act created the new Federal additional 
compensation program that provides a 100 percent federally 
funded $25 add-on to all weekly UI payments. Jobless workers 
can enter the program until January 1, 2010, and can continue 
to receive benefits until June 30, 2010. All States signed 
agreements to pay FAC effective February 22nd of this year, the 
first week for which the $25 was payable.
    Despite being a technical challenge for many States, 37 
were able to begin payments of FAC on or before March 16th. As 
of today, all but two States have begun making FAC payments.
    The Recovery Act made available $7 billion in incentive 
payments to States that have updated their UI programs to 
reflect the nature of the 21st century economy. These 
provisions treat part-time workers, low-wage workers, women, 
and recent entrants to the labor force more equitably, and 
recognize that many individuals must balance work and family.
    These workers have been disadvantaged because they are 
ineligible for benefits, even though unemployment taxes have 
been paid on their earnings. These eligibility provisions are 
not novel or radical. In fact, many State laws contained 
qualifying provisions prior to the passage of the Recovery Act.
    The UI modernization eligibility provisions should have a 
modest overall impact on benefit costs. Research shows that 
using more recent wages for recent entrants to the labor market 
increases benefit outlays by between 4 and 6 percent.
    New Jersey was the first State to apply and receive its 
entire share of the incentive payment, $206.8 million.
    Connecticut, Illinois, Massachusetts, New Hampshire, and 
South Dakota received a total of $200.3 million, the first one-
third of their shares of the $7 billion incentive payments.
    Minnesota's application is for its entire share, and 
applications from New York, Hawaii, and Virginia are for their 
first one-third shares, and they're currently under review 
within the department.
    In their applications, all States have advised us that they 
plan to use the incentive money for the payment of benefits and 
strengthening their trust fund accounts.
    Seventeen more States, existing UI laws meet requirements 
for one-third of their share of the incentive payments, and we 
are awaiting receipt of their applications.
    Several States have enacted new legislation that should 
enable them to receive incentive payments. Other States have 
introduced bills in their State legislatures, and the 
department's unemployment insurance staff are providing 
virtually around-the-clock technical assistance to States to 
assure that these bills result in State laws qualified for 
incentive payments.
    The department strongly encourages States to update their 
UI programs to qualify for the incentive payments, as it's 
beneficial both to the workers and the States. We've also 
provided, through the Recovery Act, $500 million special 
administrative distribution to the States, and deposited it in 
the State accounts.
    The Recovery Act provides 100 percent Federal funding of 
most EB costs. This gives States an incentive to add the 
optional trigger, based on the State's three-month average 
total unemployment rate, which generally makes EB payable 
sooner.
    Prior to the Recovery Act becoming law, 12 States had an 
optional TUR trigger in the law. Since the Recovery Act, 
California, D.C., Georgia, Michigan, Nevada, and Ohio amended 
their laws to provide this optional trigger.
    The Recovery Act also permits States to expand EB 
eligibility to individuals who exhaust EUC while EB is payable 
in their State. This was needed, since workers who collect at 
least 52 weeks of regular benefits and EUC would not be 
eligible for EB otherwise.
    The Recovery Act also provides relief to States that borrow 
from the Federal Government to keep paying State unemployment 
benefits, by suspending payment of interest on these loans 
through the end of 2010.
    Currently, 14 States have borrowed a total of over $9 
billion. We project the UI trust fund will need to borrow $16 
billion from general revenue in fiscal year 2010 to cover loan 
payments.
    Thank you for the opportunity to speak with you on these 
provisions, and I'll be glad to answer questions.
    [The statement of Mr. Uhalde follows:]
       Statement of Ray Uhalde, Senior Advisor to the Secretary,
                   United States Department of Labor
    Good morning. Chairman McDermott, Ranking Member Linder and 
distinguished Members of the Subcommittee, thank you for this 
opportunity to discuss the provisions related to Unemployment Insurance 
(UI) in the American Recovery and Reinvestment Act (Recovery Act).
    The Recovery Act is without a doubt the single most significant 
piece of Federal UI legislation in over 30 years. As you are well 
aware, the total unemployment rate in the United States is 8.5 percent. 
Experts anticipate that it will rise. Indeed, if this recession follows 
historic patterns, unemployment will not peak until after the recession 
ends. The Recovery Act brings urgently needed wage replacement to 
workers who are unemployed because their jobs have vanished.
    In addition to addressing the urgent needs brought on by the 
recession, the Recovery Act brings long overdue recognition to the fact 
that, since the 1930's, when the UI program was created, the economy 
has changed, the workforce has changed, and the way we work has 
changed. I would like to thank you, Mr. McDermott, for your efforts 
leading to this legislation.
BACKGROUND
    I would like to begin by providing some background information 
relevant to the UI program. Enacted in the Social Security Act nearly 
75 years ago as a Federal-State partnership, UI is the primary source 
of temporary, partial wage replacement for the nation's laid-off 
workers who are seeking jobs. It helps put food on the table and helps 
pay the rent.
    It is also the nation's leading automatic economic stabilizer 
during downturns, returning $2.15 to national output for every $1.00 
spent on UI benefits. To emphasize its role as an automatic stabilizer, 
I note that in calendar year 2007--the recession began in December of 
2007--the system paid $32.4 billion in regular benefits. Last year, the 
amount paid jumped to $43.0 billion. This year we are on track to pay 
$74.4 billion, including the permanent extended benefits program. These 
figures do not include Federal provisions enacted last year, or the 
provisions in the Recovery Act. Including those, we paid a total of 
$50.8 billion last year and project to pay $113.7 billion this year. As 
noted, the stimulative effect of these payments is over twice that 
amount. There are few stimulative tools that are as effective as the UI 
program during a downturn.
    I would now like to turn to the Recovery Act. The Department of 
Labor (Department) promptly executed agreements with States, as needed, 
and issued implementing guidance within only a few days after the 
Recovery Act became law. States have worked very hard to implement the 
provisions of the Recovery Act as quickly as possible and, in turn, get 
the Recovery Act's money out to beneficiaries. I will briefly discuss 
implementation of the UI provisions.
EMERGENCY UNEMPLOYMENT COMPENSATION
    The Emergency Unemployment Compensation (EUC) program, created in 
June 2008 and expanded in November 2008, provides up to 20 weeks of 
benefits to eligible jobless workers in all States and up to 13 
additional weeks of benefits in States with high unemployment. It was 
set to expire on March 31, 2009. The Recovery Act extended the date for 
new EUC claims to December 31, 2009, with payments on those claims 
ending on May 31, 2010.
    All States (including the District of Columbia, Puerto Rico, and 
the Virgin Islands) are paying EUC. Currently, 42 States meet the high 
unemployment criteria, under which 33 weeks of EUC are payable to 
eligible jobless workers. Through March, 3.7 million beneficiaries had 
been paid a total of $12.2 billion.
FEDERAL ADDITIONAL COMPENSATION
    The Recovery Act created a new Federal Additional Compensation 
(FAC) program, which provides a 100 percent federally-funded $25 add-on 
to all weekly UI payments. Jobless workers can enter the FAC program 
until January 1, 2010, and can continue to receive benefits until June 
30, 2010. All States signed agreements to pay FAC effective February 
22, 2009--the first week for which FAC was payable.
    Despite being a technical challenge for States, thirty-seven were 
able to begin payments of FAC on or before March 16, 2009. As of today, 
all but 2 States have begun making FAC payments.
UI MODERNIZATION INCENTIVE PAYMENTS
    The Recovery Act made available $7 billion for States that have 
updated their UI programs to reflect the nature of the 21st century 
economy. These provisions are not novel or radical. In fact, many State 
laws contained qualifying provisions prior to the passage of the 
Recovery Act. These provisions treat part-time workers and recent 
entrants to the labor force more equitably and recognize that many 
individuals must balance work and family. Recent entrants in particular 
have been disadvantaged because, for administrative reasons, their 
earnings in the most recent calendar quarter are not used to determine 
their eligibility, even though unemployment taxes have been paid on 
these earnings. Individuals with a substantial history of part-time 
work are also disadvantaged because in many States they are denied 
benefits when they seek the same part-time hours they have always 
worked. Again, this denial occurs even though taxes have been paid on 
their wages.
    The UI Modernization eligibility provisions should have a modest 
overall impact on benefit costs. Research shows that using more recent 
wages increases benefit outlays by 4 to 6 percent. Actual costs will 
vary from State to State since labor markets vary. Also, some States 
may need to add entirely new provisions while other States needed only 
relatively minor changes. Of States obtaining enactments this year, we 
note that South Dakota estimated that using more recent wages would add 
only $700,000 per year. Arkansas estimated that adding the necessary 
provisions to qualify for its full share of UI Modernization payments 
would cost $5.75 million per year. Similarly, Iowa estimated that 
adding such provisions would cost $20.2 million per year. Minnesota, 
which had already had some provisions that were similar to the 
modernization provisions, estimated that upgrading its law to 
qualifying for incentive payments would cost only $1.5 million per 
year.
    The incentive payments are available to States that have expanded 
eligibility for UI benefits in specific ways. States receive one-third 
of their share when they use recent wages when determining UI 
eligibility. Research shows this ``base period'' provision is critical 
for low wage workers and individuals who are recent entrants to the 
labor market.
    States receive the remaining two-thirds of their share when they 
also provide for two of the following four eligibility provisions.

      Pay UI to individuals seeking only part-time work.
      Ease qualifying requirements for workers who quit because 
of certain family responsibilities. These relate to workers who leave 
work to escape domestic violence, to care for an ill family member, or 
who quit to follow a spouse who moves to a new job.
      Extend benefits to workers in training who exhaust 
regular UI.
      Add dependents' allowances to weekly benefits.

    These provisions are particularly important to women, who often 
require flexible work arrangements as they balance their families' 
needs with their professional responsibilities. Incentive payments may 
be used for unemployment benefits or to improve States' ability to get 
benefits out to eligible workers quickly and to help them find a good 
job. The training benefit will assist in creating a skilled workforce, 
which will benefit employers who need these workers.
    New Jersey was the first State to apply and receive its entire 
share of the incentive payment--$206.8 million. Connecticut, Illinois, 
Massachusetts, New Hampshire, and South Dakota's applications for the 
first \1/3\ of their share of the incentive payment have been approved, 
and these States have received a total of $200.3 million. Minnesota's 
application for its entire share, and applications from New York, 
Hawaii and Virginia for their first \1/3\ shares, are currently under 
review by the Department. Sixteen more States use recent wages when 
determining UI eligibility, and we are awaiting receipt of their 
applications. In their applications, all States have advised us that 
they plan on using the incentive money for the payment of benefits and 
strengthening their trust fund accounts.
    Several States have enacted new legislation that would enable them 
to receive incentive payments. I note that one of the approved States--
South Dakota--added the base period provision. Minnesota enacted 
several UI Modernization provisions this year prior to submitting its 
application. Other States have introduced bills in their State 
legislatures, and the Department's staff is providing technical 
assistance to assure that these bills result in State laws that qualify 
for incentive payments.
    The Department is pleased that so many States recognize that UI 
modernization isn't a partisan issue--it's an issue of fairness, and it 
makes the UI program more responsive to the modern workforce. The 
Department encourages States to update their UI programs to qualify for 
incentive payments as it is beneficial to both workers and States' 
economic recovery.
    The Recovery Act also provided a $500 million special 
administrative distribution. Each State's share was deposited in the 
State's account in the Unemployment Trust Fund on February 27, 2009, 
where it is available for implementing the State's incentive 
provisions, improving outreach to individuals potentially eligible 
under the State's UI Modernization provisions, improving UI tax and 
benefit operations, and the provision of staff-assisted reemployment 
services. Most State laws require appropriation of these funds by the 
State legislature. At this stage, it is too early to report on State 
use of this money.
EXTENDED BENEFITS
    The Extended Benefits (EB) program is a permanent Federal-State 
program that provides up to 13 additional weeks of unemployment 
benefits to eligible jobless workers in States with high and rising 
unemployment. At State option, workers in States with very high total 
unemployment rates (TUR) are eligible for an additional 7 weeks for a 
total of 20 weeks of EB. Costs of EB are generally split equally 
between the Federal Government and the States.
    The Recovery Act provides for 100 percent Federal funding of EB 
(where EB is federally reimbursed) for weeks of unemployment beginning 
before January 1, 2010. This gives States an incentive to add the 
optional ``trigger'' based on the State's three-month average TUR. It 
is easier for many States to trigger on using the TUR.
    Prior to the Recovery Act becoming law, 12 States already had this 
optional TUR trigger in their laws. Twenty-six States are currently 
triggered ``on,'' either using this trigger or a mandatory trigger 
based on the insured unemployment rate. Since the Recovery Act became 
law, California, the District of Columbia, Georgia, Michigan, Nevada 
and Ohio have amended their laws to provide for this optional 
``trigger'' for the period during which 100 percent Federal funding is 
available. Fourteen additional States could be triggered ``on'' if they 
added the TUR trigger.
    The Recovery Act affected EB eligibility in another way. Generally, 
an individual must establish eligibility for EB within 52 weeks of 
first filing a claim for regular State benefits. Given that some 
workers can collect up to 26 weeks of State benefits and 33 weeks of 
EUC, some workers would not be eligible for EB since 59 weeks have 
passed. The Recovery Act permits States to expand EB eligibility to 
individuals who exhaust EUC while EB is payable in their State for 
weeks of unemployment beginning before January 1, 2010 with phase out 
for beneficiaries in payment status ending on June 1, 2010. Of the 
States currently triggered on EB, almost all have indicated that they 
are taking advantage of this expansion.
    As you may know, due to longstanding concerns about the 
responsiveness of the EB program, the Administration will set forth a 
proposal to reform the program. As part of this effort, we will 
certainly review the program's triggers. Among the other EB issues we 
would like to address are work search provisions that are difficult to 
administer since they differ from regular State work search 
requirements. They are also paper-intensive since the requirements were 
designed in a time when State systems were not highly automated. States 
have told us they would like to see these requirements modified to 
reflect the way they currently implement their State law work search 
requirements. While we have tried to provide the States with 
flexibility, this has been difficult because the Federal EB 
requirements are very specific. We look forward to working with the 
Subcommittee to address this and other issues related to the EB 
program.
ADVANCES TO STATES
    The Recovery Act also provides relief to States that need to borrow 
from the Federal Government to keep paying State unemployment benefits. 
It does so by suspending the provisions that require States to pay 
interest on these loans through the end of 2010.
    Currently, 14 States have borrowed a total of over $9 billion. Due 
to the increase in benefit payments, we project increased borrowing 
with the result that the Unemployment Trust Fund will need to borrow 
$16 billion from General Revenues in FY 2010 to cover these loans to 
States.
CONCLUSION
    Thank you for the opportunity to talk to you about the UI 
provisions in the Recovery Act. I will be glad to respond to any 
questions you may have.

                                 

    Chairman MCDERMOTT. Thank you for your testimony.
    We reserved some time for Mr. Linder to make his opening 
statement, so I will turn the microphone over to him, now.
    Mr. LINDER. Thank you, Mr. Chairman. I apologize for my 
tardiness.
    Today's hearing offers a valuable chance to review the 
effects of the recent so-called stimulus package on workers, 
and especially the unemployed.
    Instead of discussing how many unemployed Americans have 
gotten a job--because that didn't happen in the wake of last 
year's stimulus bill, much less this year's--we will be talking 
today, I expect, about how many more and bigger unemployment 
checks are being paid.
    As a result of the most recent stimulus legislation, 
unemployment benefit checks can stretch for more than 18 months 
in 11 States, 17 months in 26 States, and 14 months in 42 
States. Workers can collect twice as many unemployment checks 
paid for by Federal revenues than are supported by their own 
employer's payroll taxes.
    This is just the beginning. As unemployment rates keep 
rising, more and more States will pay workers a year-and-a-half 
of benefits. For someone laid off this month, that's through 
October 2010, but the temporary extended benefit program, 
already extended and expanded twice, is now scheduled to pay 
its last benefits in May 2010.
    Even under the Administration's overly optimistic 
assumptions, the average unemployment rate in 2010 will be 7.9 
percent. CBO says 9 percent. Raise your hand if you think the 
extended benefit program will expire at those levels.
    The simple truth is, we will see more extensions of 
unemployment benefits, perhaps through the balance of this 
Administration, costing upward of $100 billion or more. That 
would be on top of $300 billion in regular unemployment 
benefits over that same period. Now, that's real money, to 
quote the President.
    None of this is necessarily connected with helping long-
term unemployed individuals get a job. On the contrary, 
numerous studies confirm that longer unemployment benefits lead 
to slower returns to work.
    One expert stated flatly: ``Each unemployed person has a 
reservation wage, that is the minimum wage he or she insists on 
before accepting a job. Unemployment insurance and other social 
assistance programs increase that reservation wage, causing an 
unemployed person to remain unemployed longer.''
    The author of that comment? The director of President 
Obama's National Economic Council, Larry Summers.
    As informercials say, ``Wait, there's more.''
    The stimulus bill nationalized the previously Federal-State 
extended benefits program, encouraging all States to claim 
``free'' Federal funds for paying longer benefits.
    It now pays a Federal bonus of $25 a week to each 
unemployed recipient. Perhaps most famously, it offers States 
temporary Federal funds if they permanently expand benefits, 
including to part-time workers and job quitters. All without 
precedent, all promoting higher taxes, and all making States 
increasingly dependent upon Washington.
    The irony is, Americans want jobs and paychecks, not 
layoffs and unemployment checks, and for good reason. 
Unemployment checks can never replace earnings from work, and 
these benefits certainly are not free. It takes taxes to pay 
them, and those taxes are already poised to rise in the depths 
of this recession, with far more to come. All of which will do 
harm to job creation, as we will hear from the only employer 
and unemployment taxpayer testifying today, Michael Mitternight 
of Metairie, Louisiana.
    So, while we hear about the thousands of additional 
unemployment benefit recipients collecting benefits as a result 
of this trillion-dollar bill, we need to ask a few simple 
questions.
    Where are the 500,000 jobs Speaker Pelosi promised would be 
created by last year's stimulus, or the 1.7 million jobs the 
Economic Policy Institute, one of our witnesses today, said 
would be created then?
    The reality is, they weren't created, and 5 million real 
jobs have been destroyed since those predictions.
    Further, where will the 3.5 million jobs come from that 
have been promised by this year's stimulus plan? We all would 
like to know, especially since the point of this legislation, 
as the Speaker noted, was ``jobs, jobs, jobs.'' Yet in the past 
2 months, we've seen 1.3 million more job losses. Even in this 
town, that gap between promises and achievements is stunning.
    Thank you, Mr. Chairman.
    Chairman MCDERMOTT. Thank you.
    Mr. Uhalde, why haven't all States taken advantage of this 
particular legislation? What's your explanation for them, if 
you can categorize them?
    My staff wanted to have this hearing a little while ago, 
and I said, ``No, no, it takes State legislatures a while to 
get their act together.'' So, we're having it now, but I'd like 
to hear your analysis of why people have not.
    Mr. UHALDE. Mr. Chairman, first of all, I think your staff 
were reflecting the fact that State legislatures have to enact 
legislation.
    While many of the States do have some of the provisions of 
unemployment insurance modernization, they've had to engage in 
legislation to fix or tweak their legislation to make sure it 
qualifies.
    We expect probably 30 or more States will ultimately submit 
applications and qualifying legislation for the one-third, 
which will be the alternative base period. We already have 27 
States. We think it will be more than 30 for that provision.
    Some States have an alternative base period. They're 
waiting until they're able to get the legislation for 
qualifying for the other two-thirds, and they'll bundle them 
together into a submission to the department.
    So, there's enormous activity in all the States. We're 
hearing that as States are inquiring of our staff of qualifying 
legislation, and we're reviewing that legislation so that we 
can advise them as they move through that legislative process.
    Chairman MCDERMOTT. There were some States initially who 
said they didn't want it. Have any of them stayed in that 
position?
    Mr. UHALDE. Well, there have been some Governors that have 
stated that they didn't want the incentive payments. The issue 
is that sometimes when they've taken a closer look at it, that 
their States have moved through their State legislatures to 
actually enact, and I think you'll be hearing from a witness 
today from the State of Georgia with regard to that.
    I think we've had some questions from Governors and from 
States for clarification. There was some concern expressed to 
me personally and to the department that passing permanent 
legislation would bind one State legislature to a subsequent 
legislature, but we put clarifying information out that States 
are free, once this is enacted and implemented, if States 
choose at a subsequent time to repeal that legislation, they 
can, and there will be no clawback of any of the incentive 
payments. So, I think that has alleviated some of the concerns.
    Then the analyses that States have been doing with regard 
to the potential costs of some of these provisions are ending 
up suggesting that they indeed can not only pay for these 
through the incentive payments, but for a substantial number of 
years.
    Chairman MCDERMOTT. Mr. Linder suggests that the problem of 
extended benefits is that people then won't seek work, they'll 
just sit and wait for their unemployment check.
    What's the situation out there right now, in terms of 
applicants for every job opening? I ask that, because the 
Seattle paper had this story last week about a meter reader for 
one of the utility companies, for which they had 1,400 
applications, and the guy who got it was talking about how 
lucky he was; he won the lottery.
    So, I'm wondering, do you have any data about what there is 
out there in terms of number of applicants per job opening?
    Mr. UHALDE. No, I don't. There are vacancy data that are 
available from BLS. I don't currently have those data. I know 
from the other side of our operation, the Workforce Investment 
Act that operates the One-Stop Career Centers, that they are 
flooded with applicants coming in, seeking jobs, working the 
computers, looking for help in that regard.
    I agree with Mr. Linder that the people would rather work 
than draw unemployment insurance, and I think that, while this 
discussion about whether or not there are disincentive effects 
with regard to unemployment benefits, in reality, in this time, 
we're facing such a dearth of jobs and job vacancies that the 
least of our worries is whether we're disincenting people. The 
issue is jobs, and people are actively seeking those jobs.
    Chairman MCDERMOTT. Thank you. Mr. Linder will inquire.
    Mr. LINDER. Thank you, Mr. Chairman.
    Mr. Uhalde, you have suggested that we will deplete our 
funds for this sometime during the next year, and will be 
borrowing $16 billion from general revenues in 2010?
    Mr. UHALDE. Several States currently have borrowed about $9 
billion, and our estimate is that those and other States may 
borrow up to $28 billion for the fiscal year 2010.
    Mr. LINDER. Total?
    Mr. UHALDE. Yes, I believe so.
    Mr. LINDER. For the year. How about the following year; do 
you have any estimates on that?
    Mr. UHALDE. I don't have with me, but I'd be glad to 
provide that----
    Mr. LINDER. Could you do that?
    Mr. UHALDE [continuing]. For the record. Yes, sir.
    Mr. LINDER. On the recovery website, it says that DOL has 
received $4 billion in stimulus funds and paid out $1 million, 
less than \3/100\ of 1 percent. In contrast, HHS has paid out 
46 percent, and Agriculture 42 percent.
    What accounts for DOL's difficulty in spending that money?
    Mr. UHALDE. I'm sorry. Are we talking about unemployment 
insurance?
    Mr. LINDER. The recovery.gov website, says that DOL got $4 
billion in stimulus funds, and has spent $1 million to date. Do 
you have any feel for those numbers?
    Mr. UHALDE. The number that you're talking about is too 
small for unemployment benefits, so I suspect this is talking 
about job training moneys, Workforce Investment Act moneys.
    Mr. LINDER. I'll submit that question to you in writing.
    Mr. UHALDE. Thank you. Since we have put out to the States 
$3.5 billion of Workforce Investment Act money within 29 days 
of the passage of the legislation, and as of Monday, all States 
had put down to the local areas their sub-State allotments.
    Mr. LINDER. You suggest that every dollar in unemployment 
benefits spending results in $2.15 in increased GDP.
    Mr. UHALDE. That's correct.
    Mr. LINDER. Mark Zandi, who has often been cited by this 
Administration, says the multiplier is 1.64. Heidi Shierholz of 
EPI notes Zandi's figure in her testimony on Page 7. CBO finds 
a range of between $2.20 and 80 cents.
    How did you arrive at your multiplier?
    Mr. UHALDE. It was an independent study that was done in 
the 1990s. I'd be glad to submit for the record that study.
    These are multiplier effects. Obviously, if you get three 
economists in the room, you're going to get three estimates of 
that--you'll get five estimates for every three economists. 
That's a multiplier effect, as well.
    Mr. LINDER. You just reminded me of one of my axioms, and 
that is, that if all the economists in the world were laid end 
to end, it would be a good idea.
    [Laughter.]
    Mr. UHALDE. I take no personal offense in that.
    Mr. LINDER. Thank you.
    Mr. UHALDE. Undoubtedly, there are important multiplier 
effects. People spend this money and they spend it in local 
communities, and they spend it on items of need, food and 
mortgages, and I know that from personal family experiences 
going on now. This is critically important, and it doesn't get 
saved, doesn't get put into IRAs. This is money that's spent.
    Mr. LINDER. Thank you. Thank you, Mr. Chairman.
    Chairman MCDERMOTT. Mr. Davis of Illinois will inquire.
    Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman.
    Mr. Uhalde, could you refresh for me the purpose of 
unemployment insurance?
    Mr. UHALDE. Well, Mr. Davis, unemployment insurance is 
intended to protect American workers against the risk of 
unemployment.
    It was deemed, in the thirties, as an insurable risk, that 
workers who are laid off, through no fault of their own, and 
who are actively engaged in seeking work, be provided 
unemployment benefits while they searched for work. It is good 
for the economy, just for this discussion here, that we can 
increase spending that otherwise would not have happened.
    Mr. DAVIS of Illinois. Could you share with me the 
rationale or criteria that is often used to determine benefit 
periods?
    Mr. UHALDE. Typically, benefits are based on the amount of 
earnings within 1 year. A base period is generally looked at as 
the first four of the last five quarters, and we look at the 
earnings for those four quarters, whether an individual can 
qualify.
    Mr. DAVIS of Illinois. Would you suggest or say that 
unemployment insurance has had some impact on individuals who 
are facing mortgage foreclosure?
    Mr. UHALDE. Oh, absolutely. For millions of Americans who 
are out of work, and their families, but for unemployment 
insurance, they would be more likely to not be able to make 
both basic necessity payments, as well as their mortgage 
payments, as well.
    So, unemployment insurance is a bedrock of being able to 
forestall mortgage deficiencies.
    Mr. DAVIS of Illinois. So, one could suggest, with a fair 
degree of certainty, that was it not for the insurance, and not 
for the payments, that the foreclosure rates would be higher 
than what they currently are?
    Mr. UHALDE. I have no data to support that, but it's just 
common sense, that if we were to take out of the economy the 
moneys that are spent through the unemployment insurance and 
the multiplier effects, we would have a much worse situation 
for mortgage foreclosures.
    Mr. DAVIS of Illinois. In your experience, have you come 
across any data that suggests that the insurance actually 
serves as a deterrent for individuals seeking work, that if a 
person is getting unemployment, they are less likely to seek 
employment, because they're getting the insurance?
    Mr. UHALDE. As we were having this exchange just a moment 
ago, there are numerous studies on both sides of this issue, 
with regard to the disincentive effects of unemployment 
insurance benefits, and mostly, disincentive effects tend to 
arise in making workers more careful and choosier about jobs 
that they select, so sometimes with the benefit of unemployment 
benefits, they can look for better matches and the ability to 
get jobs that might pay higher wages, that better suit their 
skills, and to that extent, it can tend to lead to a longer 
spell of unemployment.
    The notion, however, that unemployment benefits cause 
people not to look for work is not really seriously in 
question.
    Then lastly, with the serious downturn we have now, the 8.5 
percent, and some suggesting it's going to go much higher, the 
issue is not deterring people from looking for work. The issue 
is work, availability of work.
    Mr. DAVIS of Illinois. Thank you very much, and thank you, 
Mr. Chairman.
    Chairman MCDERMOTT. Thank you.
    Mr. Boustany will inquire.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    Mr. Uhalde, President Obama has said repeatedly, as has 
Secretary Geithner and Budget Director Orszag, that the 
stimulus bill will save or create 3.5 million jobs over the 
next 2 years.
    So, I keep grappling with this. In the interest of 
transparency and accountability, can you tell us how we'll be 
able to tell if a job has actually been saved by this 
legislation? What are the metrics that the Department of Labor 
has to determine whether a job has been saved or jobs have been 
saved?
    Mr. UHALDE. Well, that clearly goes beyond the unemployment 
insurance questions here.
    For jobs that have been saved, in general, we know that, 
for example, a substantial amount of recovery payments went to 
States for Medicaid and education, and to the extent that 
layoffs have been prevented in school systems, for example, and 
in State Governments, those jobs have clearly been retained as 
opposed to being lost.
    As to----
    Mr. BOUSTANY. Do you have a database?
    Mr. UHALDE. As to the metrics, I'd really have to defer to 
OMB, which is putting out substantial guidance, precisely on 
these questions of how to count job creation and job retention.
    Mr. BOUSTANY. Does the Department of Labor have a database 
to track saved jobs?
    Mr. UHALDE. No, we do not.
    Mr. BOUSTANY. Do you intend to create a database to track 
this?
    Mr. UHALDE. To track saved jobs?
    Mr. BOUSTANY. Saved jobs.
    Mr. UHALDE. For purposes of the direct recipients of our 
funding--for example, we put $500 million out to States for 
unemployment insurance administration--the Administration could 
have reporting on those jobs that were either retained or 
created as a result of that $500 million.
    So, people hired in the unemployment insurance service, or 
retained, that would otherwise have been laid off, could be 
reported.
    Mr. BOUSTANY. If the President and the budget director are 
going to continue to use that phrasing, ``save or create,'' 
then I think, in the interest of accountability, we would like 
to see the Department of Labor come up with some way of 
tracking this.
    Mr. UHALDE. As I said, we will be able to generate reports 
on the direct expenditures to States, and State recipients, and 
the recipients at the local level, but not any of the 
multiplier effects. We won't have a reporting system.
    OMB will be developing, and has issued guidance, and will 
be glad to share it with you, on the methods to be used to 
count job creation.
    Mr. BOUSTANY. Not jobs saved?
    Mr. UHALDE. I don't know that.
    Mr. BOUSTANY. Okay. I would hope that, if the 
Administration is going to continue to use this type of 
language, that between Department of Labor and OMB, we know 
what that means.
    Mr. UHALDE. We'll get the guidance from OMB on how those 
things are going to be measured. I just don't have those.
    Mr. BOUSTANY. Okay. As I traveled around the district last 
two weeks--I live down in Southwest Louisiana--we have a lot of 
oil and gas production, and a lot of jobs related to this 
industry, the refining industry. There's a great deal of 
concern right now about proposals in the budget for tax 
increases, energy tax increases, specifically.
    This is an area of the country that actually has been doing 
fairly well, although we're starting to see unemployment creep 
up and I'm hearing about many more furloughs and some jobs that 
are being lost as a result of the prospect of increasing taxes 
in the energy sector.
    So, again, if it's the Administration's proposal to save 
jobs, I have to question some of the policies that I think are 
going to actually exacerbate unemployment.
    Mr. UHALDE. Okay. With regard to the unemployment insurance 
provisions, I would just point out that a substantial amount of 
the resources that are going to States, like the $7 billion UI 
modernization moneys, to the extent States receive those in the 
near term, short term, those are actually improving the trust 
fund balances in States, and in some cases, actually 
forestalling tax increases for unemployment insurance on 
employers in those States in the near term.
    Mr. BOUSTANY. Sir, that's not my real question there, and 
again, I would hope that, between Department of Labor, 
Treasury, and OMB, that we can get some answers on this saved 
jobs issue, because I'm seeing jobs being lost now, even on the 
concerns of what's coming with future tax proposals, as a 
result of this budget.
    Clearly, what we want to do is save jobs. So, I would hope 
that you could come forward with actual tracking for this and 
also bring it back to Treasury and OMB that we would like an 
analysis of how many jobs are going to be lost, as a result of 
these proposals, in the energy sector.
    Mr. UHALDE. I will carry that message back----
    Mr. BOUSTANY. Thank you, sir.
    Mr. UHALDE [continuing]. To Treasury and OMB.
    Mr. BOUSTANY. I yield back.
    Chairman MCDERMOTT. Thank you very much, and Mr. Levin will 
inquire.
    Mr. LEVIN. Thank you very much.
    Welcome.
    Mr. UHALDE. Thank you, Mr. Levin.
    Mr. LEVIN. I'm not quite sure what to say, because if I 
might say to my colleagues on the minority side, I really don't 
know that, in view of the pressing conditions, it really makes 
much sense, in terms of the needs of unemployed people in this 
country, to go after Mr. Uhalde on this issue of saved jobs. 
It's part of a larger debate. I think it's unwise to politicize 
it.
    Look----
    Mr. BOUSTANY. Will my friend yield?
    Mr. LEVIN. I'll be glad to yield.
    Mr. BOUSTANY. This is a real concern among painters, 
welders, back in my district.
    Mr. LEVIN. I know, and I represent them, but that isn't the 
purpose of this hearing.
    The purpose of this hearing is to look at legislation that 
was passed and to see its impact, and if you want to, you can 
raise issues as to whether unemployment compensation induces 
people not to look for jobs. At least that would have some 
relevance to the purpose of this hearing, though I think, if I 
might say so, it's really misguided.
    Mr. LINDER. Will the gentleman yield?
    Mr. LEVIN. Okay.
    Mr. LINDER. There are several studies that show that people 
start looking extra hard for work as their unemployment 
benefits run out, whether it's after 26 weeks or 52 weeks. I 
would like unanimous consent to submit those studies.
    Mr. LEVIN. All right, and I'm glad you raised it, because 
we might as well talk about that.
    Look, some of us have been on this Subcommittee for a long 
time, and we've tried for years to provide an adequate 
unemployment compensation structure, a long time.
    I can remember going back to when Tom Downey chaired the 
Subcommittee, I can't remember how long ago--20 years ago? We 
never were able to accomplish it.
    Now, with the leadership of Mr. McDermott and others, we 
were able, some months ago, to extend benefits and to begin the 
reform of the system.
    There's a crisis in this country for unemployed people.
    We're going to have testimony in a few minutes, and it just 
reminds us, last month, 45.6 percent of all workers collecting 
State unemployment insurance reached the end of their maximum 
26 weeks of benefits. It's the highest exhaustion rate on 
record, and that goes back 35, 36 years.
    So, that should be the atmosphere within which we have this 
hearing. We have historic exhaustion of benefits, people 
including painters and welders, in everybody's district, who 
are out of work, who are looking for work, and this Congress 
took the step to make sure that they weren't out in the cold.
    With an exhaustion rate of historic proportions, we're 
saying to people that, you're unemployed because you don't want 
to be employed, anywhere in this country, with this jump in 
unemployment compensation.
    We also should be considering the fact that the 
unemployment compensation system doesn't cover 50, 60, and 
sometimes more percentage of people who are employed, who are 
workers.
    So, I just think that we need to look, if I might say so, 
at this almost unprecedented circumstance facing workers in 
this country, and States in this country.
    The moneys in Michigan, in 1 week--I couldn't believe this 
figure--there were 800,000 phone calls, some of them were 
repeat phone calls, people who were out of a job, who were 
looking for some help--800,000.
    Through action of this Congress, we provided some money to 
the State of Michigan and other States so that people would 
have their telephone calls answered. Yes, to make sure that 
employers weren't taxed more because of this high unemployment 
compensation rate. We helped prevent States like Michigan 
raising taxes on employers.
    So, I think we should somewhat join together to understand 
the predicament facing workers in this country, and to 
understand what we passed, the benefits, and if you want to 
talk about the detriments, let's talk about any problems with 
the legislation that was passed, but not use this as an 
occasion to either revive this notion that the people of this 
country are lazy, getting unemployment comp, and therefore not 
going to work.
    Chairman MCDERMOTT. Thank you.
    Mr. LEVIN. For the vast majority of people, that just isn't 
true.
    My time has expired. Mr. Chairman, I just wanted to try to 
help put in perspective, really, the response of this Congress 
under the leadership of yourself and others to respond to, 
really, this unprecedented problem facing the workers in this 
country, in every State.
    Chairman MCDERMOTT. Thank you.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    Since I'm the next minority Member speaking after the 
gentleman from Michigan, the Ranking Member doesn't need 
anybody to defend him, but, it's ironic that the President's 
economic advisor makes a statement like that, and it's sort of 
dismissed as kind of a non sequitur, when I think it's actually 
probative, and it's a question that has to be asked and 
answered. We can sort of dance around it, and I would never put 
words in the Ranking Member's mouth, but my eighth grade son 
might say something like, ``I'm just saying.'' It is something 
that's a significant part of the debate. It's not meant to be 
accusatory. It's not meant to be condescending.
    There is, I think what Mr. Summers is saying is, there is 
an economic reality to the time period within which benefits 
are made, and one of the responsibilities, it seems to me, of 
the Subcommittee, is to put that into the calculation.
    So, that being said, let me just make a couple of points to 
the witness.
    First, thanks for your time and for your courtesy in coming 
in today.
    The President, during the stimulus debate, particularly as 
it related to jobs, came to Illinois, my home State and Mr. 
Davis's home State, and went down to Caterpillar. There was a 
big presentation, a great deal of hope, and a great deal of 
fanfare about Caterpillar being able to perform better once the 
stimulus package passed. The President was very hopeful about 
that, but the reality has set in, and it's underperformed.
    I don't know if you saw this, but yesterday, in Bloomberg, 
Caterpillar announced 2,200 more layoffs in March. So, this 
sort of cascading effect is important.
    I think Mr. Boustany's point is, look, the use of language 
matters. He's not trying to give you a hard time, but the use 
of language characterizing things as saved begins to sound a 
little bit cagey. That's not your choice of language, but it's 
a choice of language that the Administration has used that's 
kind of fuzzy. It's a little bit easy to throw out there, not 
unlike the presentation at Caterpillar, but then when the 
reality comes, and the next morning shows up, it's like, ``Oh, 
that didn't happen.''
    So, I don't think he's trying to give anybody a hard time. 
He's trying to say, let's just get some concreteness around 
this, let's come to some unanimity around the use of the word, 
or else let's not use it. If it's not definable, then let's 
take it out of the press releases and let's move on, but let's 
come to a common understanding of what that word ``saved'' 
means.
    Here's a question, kind of in the larger context. Could you 
reflect on the tax implications, particularly as it relates to 
employers around the country, and what your expectation is as 
the benefits reach their exhaustion level? Just comment a 
little bit about the replenishment of the fund and where we 
will be looking for revenues, either general revenues in the 
future, another source of revenue that maybe the Administration 
is contemplating, or going back to the business community. Can 
you give me some insight on your understanding of that?
    Mr. UHALDE. Yes. As I said in my testimony, States have 
borrowed about $9 billion. Our estimates are about $10 billion 
in total this year. In response to a question, I said we'll 
supply for the record, if we have any estimates for the 
subsequent year.
    States have access to borrowing, and to the extent that we 
are the reinsurer of the unemployment insurance system at the 
Federal level, we may have to back up those borrowings in 
subsequent time periods.
    What's important is how fast we can get recovery, because 
it's actually in recovery that we're able to replenish not only 
Federal treasuries, but also State unemployment insurance trust 
funds.
    Mr. ROSKAM. There's no question. I think we're all like-
minded. We want to see recovery as soon as possible.
    Mr. UHALDE. Absolutely.
    Mr. ROSKAM. That makes a lot of problems go away.
    I see that my time has expired, and I yield back. Thank 
you, Mr. Chairman.
    Chairman MCDERMOTT. Thank you.
    Mr. Davis from Alabama will inquire.
    Mr. DAVIS of Alabama. Thank you, Mr. Chairman and Mr. 
Uhalde.
    I have been in this city for 7 years, and it's always 
struck me as a bizarre place, because people say things here 
and do things here that frankly, outside Washington, wouldn't 
make sense. Give you two examples.
    It's commonplace in Washington for people to say something 
and then one minute later, say something that's the exact 
opposite of the previous point. I'll give you one example.
    At 10:20 this morning, I was taking my notes, one of my 
friends in the Committee on the other side of the aisle said 
that the problem with unemployment insurance benefits is that 
they last too long. If they go on for too long a period, that 
people get them longer than they need it.
    At 10:22, the same friend and colleague said that 
unemployment is going to rage on at a very high level for the 
next 2 years. He lamented the fact that, in all likelihood, 
Democratic policies would not bring it down and talked about 
the fact that the unemployment rate is probably going to be 
substantially higher a year-and-a-half from now than it is 
today.
    So, 10:20, unemployment benefits last too long and we're 
making them last even longer; 10:22, unemployment is going to 
go on for the next year-and-a-half at higher levels.
    In most places outside Washington, D.C., those would seem 
to be two wildly contradictory points.
    Another strange thing happens in Washington. People 
occasionally say things that have absolutely no factual 
foundation, but they do it with great passion and great vigor.
    Example. Several times this morning I've heard some of my 
friends on the Republican side of the aisle say that, well, 
we're losing jobs because our taxes are going up.
    So, while I understand, Mr. Uhalde, you're a labor 
specialist, you obviously read the papers and follow the news. 
Did I miss something? The tax year that just ended on December 
31st, President Bush was President during that entire tax year; 
am I right?
    Mr. UHALDE. That's correct.
    Mr. DAVIS of Alabama. Do you recall reading about any 
increase in the personal or corporate income tax during 
calendar year 2008?
    Mr. UHALDE. I do not.
    Mr. DAVIS of Alabama. There was a stimulus bill that was 
passed a few months ago by the Democratic Congress. Do you 
recall any provisions of the stimulus bill that increased taxes 
on any individuals or corporations?
    Mr. UHALDE. Well, while I have read the stimulus bill, I 
don't recall every item, but I don't recall, certainly in the 
press, any discussion of tax increases.
    Mr. DAVIS of Alabama. In fact, to the contrary, were there 
not provisions of the stimulus bill that actually reduced tax 
obligations for a number of small businessowners, some of the 
carryback provisions, for example?
    Mr. UHALDE. I'll defer to you. I don't know.
    Mr. DAVIS of Alabama. Well, just to assert my own 
recollection, there was not a single line of the stimulus bill, 
that's been much scrutinized and greatly debated, that raised 
by one inch the marginal tax rate of any individual or 
corporation in this country.
    There were a number of provisions that reduced the tax 
obligations, including a significant number of provisions that 
reduced tax obligations for the primary job creators in this 
country, small businesses.
    We just passed a budget resolution.
    Mr. BOUSTANY. Would the gentleman yield?
    Mr. DAVIS of Alabama. No, because I'm making a point.
    We just passed a budget resolution. The budget resolution 
addresses the calendar year that will expire on December 31, 
2009. I voted for the budget resolution. A majority of Members 
in the House and Senate did.
    There was not a single provision of that budget resolution 
that raised any individual or corporate tax one iota in 
calendar year 2009.
    The budget resolution also contemplates calendar year 2010. 
There was not a single provision of the budget resolution that 
raised any individual or corporate rate one iota for calendar 
year 2010, yet I've heard it asserted several times this 
morning that we're losing jobs because we're raising taxes.
    I would represent, having been here the last several years, 
that this Congress has not passed, and no President has signed, 
any single provision that has raised taxes for the last several 
years or the next two.
    One final point. The chairman asked the question, why are 
States turning down this money? Since my State is one of the 
ones doing it, I'll throw out the very bad reason that the 
Governor of my State has offered.
    His rationale is that we don't want to extend unemployment 
benefits because, right now, Alabama does not offer an 
extension of unemployment benefits, and we want businesses who 
come to our State to know that if you come to Alabama, you 
won't have to provide unemployment insurance for nearly as many 
people as if you go to other States.
    Mr. Chairman, I would say that, first of all, I wasn't 
aware that Alabama was selling itself on the grounds that we 
protect fewer people than our neighbors.
    If we are selling ourselves on that ground, that we protect 
fewer people and help fewer people than our neighbors, that we 
might, at least in my State, and I'm sure others contemplate a 
change in strategy, and maybe get in the business of selling 
these States and recruiting industry on the grounds that we 
educate people better and train workers better, than on the 
grounds we do less for our people than our neighbors do.
    I'll yield back.
    Mr. BOUSTANY. Mr. Chairman?
    Mr. UHALDE. I was going to respond.
    Chairman MCDERMOTT. Mr. Uhalde.
    Mr. UHALDE. I was just going to say that the whole purpose 
of the program I'm representing--unemployment insurance--is to 
insure people. It's not to figure out ways not to insure 
people, insure people against the risk of unemployment.
    We certainly don't want to be in a situation of a race to 
the bottom to try and figure out how we can cover or make 
eligible fewer people for unemployment insurance, and that's 
precisely why we're actively encouraging all States to take up 
unemployment insurance modernization, because it's only fair to 
have eligibility extended to those people who have worked, who 
have had taxes paid, unemployment insurance taxes paid on their 
earnings, and yet are not drawing benefits.
    Mr. BOUSTANY. Mr. Chairman, I ask unanimous consent to put 
this document in the record. It's a listing of articles 
pertaining to 10 States that are going to see State 
unemployment payroll taxes rising.
    Chairman MCDERMOTT. Without objection.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 50601A.001
    

    Mr. BOUSTANY. Thank you.
    Chairman MCDERMOTT. Mr. Lewis of Georgia will inquire.
    Mr. LEWIS. Thank you very much, Mr. Chairman, for holding 
this hearing. It is very much needed, and I really appreciate 
you for holding this hearing.
    Welcome.
    Mr. UHALDE. Thank you, Mr. Lewis.
    Mr. LEWIS. I noticed in your resume, just reading through 
your resume, you've been with the Department of Labor now for 
more than 25 years?
    Mr. UHALDE. That's correct.
    Mr. LEWIS. You've been in charge of many different 
programs?
    Mr. UHALDE. Yes, sir.
    Mr. LEWIS. Have you seen anything like this, anything, with 
so many people out of work, struggling for work, losing their 
jobs, trying to make ends meet, can't pay their mortgage, can't 
pay rent, just struggling?
    Mr. UHALDE. No. I've been in Government service since 1977, 
took some break in 2002, and I've never seen an economy that 
has been devastated quite this badly, even the early 1980s, 
because this financial crisis and the mortgage crisis has just 
compounded this problem substantially.
    Mr. LEWIS. With your long history of knowing something 
about the American workforce and being at the Department of 
Labor, do you think, for many working people, people out of 
work, people that are struggling, that the Recovery Act, the 
stimulus, is almost God-sent?
    I know you don't want to get involved in theology or 
anything like that, but----
    Mr. UHALDE. I am a praying man, but I won't get involved in 
theology.
    I think the Recovery Act is a lifeline to the country, and 
certainly the provisions about the Department of Labor that we 
are administering go directly to the concerns of the American 
workforce and their families.
    We talk about insuring people against unemployment. We talk 
about training people for new jobs. We talk about providing 
summer employment for disadvantaged young people who may never 
get a chance to work until they get to their twenties. We 
protect the safety and health of workers in the workplace--we 
think we've got the most important department that affects the 
American worker.
    Mr. LEWIS. Could you help me maybe with the question that 
my colleague from my native State of Alabama was asking--I 
don't understand it, but help me--where there's such a great 
unmet need, why certain officials or certain individuals are 
saying, ``We don't need it, we don't need help.''
    The people have been left out, they're left behind, they're 
just struggling. I have people in my own district that are 
well-educated, they go out, trying to get a job at McDonald's. 
They cannot find employment. So, they need help.
    Can you help me understand that? What is the psychology of 
that?
    Mr. UHALDE. Well, I think the basic argument for those 
individuals who don't want to take up these reforms to 
unemployment insurance is that, while workers may be benefited, 
at some point, unemployment insurance taxes will have to be 
increased to offset that.
    Now, I think the Recovery Act has paid substantial amounts 
of incentive payments to those States, so that will be deferred 
for quite some time.
    Secondly, actually, the receipt of the incentive moneys in 
States will actually either forestall some tax increases in the 
near term, and actually in some States will reduce unemployment 
insurance taxes because of the triggering effect.
    Third, I think you have to look at the benefits. These are 
workers who, under very reasonable conditions, would be drawing 
unemployment insurance benefits. These are workers who worked 
during four quarters, but they just didn't happen to work the 
quarter that the administrative record system is looking at.
    So, it's almost an administrative convenience on behalf of 
the States that they don't qualify for unemployment benefits, 
and if they looked, they would see they worked during four 
quarters and should be eligible for unemployment benefits.
    So, those are the benefits.
    Part-time workers are terribly important to many of the 
employers in retail sales, in hospitality, particularly, so 
they love part-time workers. Why should we deny them benefits 
in those States when they're laid off? They're just as 
important when they're laid off, looking to get their next 
retail service job, as they were when they were working for 
those employers.
    So, I think that it's a matter of equity, and has to be 
balanced off against paying for the costs of extending those 
benefits to those workers.
    Mr. LEWIS. Thank you. Thank you, Mr. Chairman.
    Chairman MCDERMOTT. Thank you.
    Mr. Meek of Florida will inquire.
    Mr. MEEK. Thank you very much, Mr. Chairman, and I want to 
thank you for holding this hearing today.
    Mr. Uhalde, I want to thank you for coming before the 
Committee.
    Mr. Chairman, first, I want to enter into the record, by 
unanimous consent, a letter to the Governor of the State of 
Florida that relates to the modernization of the unemployment 
insurance program, that's in the stimulus bill.
    Chairman MCDERMOTT. Without objection, so ordered.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 50601A.002
    

    Mr. MEEK. Thank you.
    I've been here listening, and I think that it's very, very 
important that all of the Members understand that, in this 
recovery package, we have done a lot of good things on behalf 
of the American people. Mr. Uhalde, I want to ask you, how many 
States have so far passed legislative requirements to receive 
part of the $7 billion in modernization grants?
    Mr. UHALDE. Well, we have 10 States that have actually sent 
applications in to the department, and we've announced a 
portion of those, and we're reviewing the others.
    There are 27 States, I believe, that have alternative base 
periods, and we expect virtually all of those to be coming in 
at some point. They may want to pass some other provisions and 
package them with them before they apply.
    So, we see a lot of activity out there amongst the States.
    Mr. MEEK. A State has to have one of, I believe, four 
requirements, under the unemployment insurance modernization 
provisions that are in the Recovery Act; am I correct?
    Mr. UHALDE. That's correct.
    First, they have to have this alternative base period, so 
the workers who would qualify if their most recent earnings 
were looked at, and then they have to adopt two of those four 
other provisions, including part-time workers and a training 
extension.
    Mr. MEEK. So, if someone is laid off and they get a part-
time job and then they're laid off from that job, if they were 
to comply with unemployment insurance modernization provisions, 
they would be eligible for unemployment or training?
    Mr. UHALDE. Well, under the UI modernization, if they 
worked part-time and they otherwise qualified on every other 
provision, when they were laid off, if they were looking for 
part-time work again, modernization would make them eligible, 
then, for unemployment insurance benefits while they continued 
to look for part-time work.
    Mr. MEEK. One of the things I want to bring to the 
attention of the Committee is that unemployment in Florida is 
9.4 percent, and in other parts of the State it's even higher.
    I'm very concerned, because we have legislation that's 
before the legislature right now, with less than 10 days left 
to be eligible for some $440 million of the $7 billion 
authorization and appropriations that we put forth in the 
Recovery Act.
    These are people that wake up to go to work every day. 
These are the folks that punch in and punch out, or sign in and 
sign out, and they have real life issues. These are not 
individuals sitting at home flipping through cable channels, 
saying the job situation looks sad.
    These are parents, these are grandparents, and these are 
young people. I think it's important that we move with great 
aggression, not only in the State of Florida, but also in other 
parts of the country.
    Going back to Florida, we have the highest unemployment in 
33 years, so we do have people in that State that are applying 
for unemployment that have never done so before.
    I want to ask you also, if they were to pass the necessary 
legislation to make them eligible for these dollars, for the 
$477 million grant money, will they have to keep those 
provisions in place forever, or just during the time of this 
economic slowdown?
    Mr. UHALDE. No. We expect States to make a good-faith 
effort in the passage of this legislation and the 
implementation of their legislation to modernize their system, 
but there's nothing that binds the State beyond that period.
    If a subsequent legislature decides that this is not 
benefiting workers enough, or that it's not benefiting them 
enough compared to the tax revenues and the burden on 
employers, then they can choose to repeal those provisions, 
and, importantly, the State would retain those incentive 
payments that were already given to them.
    We believe that encouraging States to take these provisions 
up, States will, with experience, find that, overall, there's a 
net benefit to their States by covering these workers, making 
them eligible, that employers will not find the system 
burdensome, and that the State's economy will benefit over the 
long term.
    Mr. MEEK. I just want to make sure that it's clear, because 
I almost, like many Members on this Committee, cannot 
understand. Maybe based on their personal principles, because 
they're not in a situation where they're working part-time or 
they may be dealing with real life issues of folks trying to 
figure out how they're going to make ends meet, and out there 
standing in the job line.
    So, what you're telling me is that the unemployment 
insurance modernization provisions that are in the stimulus 
package, where States have not passed the legislation to be 
eligible for those dollars, that in the case of Florida, with 
$444 million at stake, that they can pass legislation, and if 
they find that that legislation is not helpful toward helping 
those individuals that would be captured in that modernization 
provision that's dealing with unemployment insurance, that they 
can, in future legislatures, remove it when the economy gets a 
little better, or what have you, or they see that it's no 
longer useful, and they can retain those dollars?
    Mr. UHALDE. That's absolutely correct.
    Mr. MEEK. Okay. Thank you. Thank you so very much.
    Chairman MCDERMOTT. Thank you. The gentleman from Maryland, 
Mr. Van Hollen, will inquire.
    Mr. VAN HOLLEN. Thank you, Mr. Chairman.
    I thank our witness here today for his service.
    Just a quick comment, and then a question.
    I think this country has made the right decision in 
ensuring that hard-working people, who lose their jobs through 
no fault of their own in an economic downturn, have some 
support until they can get themselves back on their feet and 
find another job.
    If we don't do that, it means people can't pay their 
mortgages, they can't put food on the plates of their families, 
and they can't go about their daily lives.
    So, it's the right thing to do from the perspective of a 
society that tries to make sure that it takes care of those who 
are looking for work and can't find it in a down economy.
    It's also economically the right thing to do, because if 
you're not paying your mortgage and your house goes into 
foreclosure, that means one more house in the neighborhood 
that's under water, and it has an impact on everybody else, all 
the neighbors.
    It also means that those people aren't out there, able to 
spend any money in the economy, and as we all know, when you 
have a downward spiral of fewer consumers spending money, it 
means less people who can sell their goods and services, so you 
have the downward spiral.
    So, I'm very proud of the fact that the Congress took this 
action. It was the right thing to do from a moral perspective, 
and it's the right thing to do from an economic perspective, 
and now we've just got to make sure it works.
    My question is, given the fact that we're in this huge 
downturn, and so many millions of Americans are out of work--we 
have the greatest job loss in a very, very long time--have the 
States been able, just as a matter of administrative 
efficiency, to make sure that people are getting the support 
they need on a timely basis, or are there some States where 
they just haven't had the mechanisms in place to make sure that 
the support is provided in a timely manner?
    Mr. UHALDE. Thank you for the question.
    The rapid rise in unemployment insurance claimants has been 
pretty astounding. States have gone from paying about 2.5 
million claimants to 9.9 million claimants, in a very short 
time period, and they've done that, I think, overall, in a 
remarkable fashion.
    States have been able to handle that massive increase 
substantially, and be able to implement these reforms in a very 
quick manner.
    We had States within a few weeks paying the additional $25. 
We put out guidance within 2 days from the Federal level. 
States have been moving very promptly.
    This is difficult. Many States have very antiquated 
computer systems---they refer to them as ``legacy'' systems. 
Trying to fix those on the fly while you're meeting all the 
customers in front of you at the counter has been very 
challenging.
    The $500 million that was provided for administrative costs 
has been most welcome by States, and a lot of information 
technology improvements and the like will be done.
    I'm very proud of the unemployment insurance system and the 
State-Federal partnership, and how we've responded to it.
    Mr. VAN HOLLEN. The administrative funds, have those been 
put to use, or has the timeframe just been too short?
    In other words, have States been making use of those funds 
to upgrade and improve the delivery systems?
    Mr. UHALDE. We don't have the reports yet. We made them 
available, virtually instantaneously put it into the States' 
accounts, and they've been drawing against those.
    We won't have a report for a while on how they're putting 
them to use. We do know they have sort of very near-term needs, 
because phone banks have been flooded, and some of those have 
to be upgraded, and more people and individuals.
    So, some of that kind of near-term operational stuff to 
stay up with the demand has been important.
    We will get a read from the States on how much 
infrastructure, looking forward, because we need to always be 
ready for the next recession, and we need to be able to get our 
administrative systems up to par.
    Mr. VAN HOLLEN. Thank you. Thank you, Mr. Chairman.
    Chairman MCDERMOTT. Thank you.
    Mr. Boustany would like to ask a clarification question.
    Mr. BOUSTANY. Yes, sir. Thank you, Mr. Chairman.
    Just to follow up on Mr. Meek's question earlier, regarding 
the unemployment modernization provisions and how it applies to 
States and their legislative action, I know that the Recovery 
Act provides for special transfer of up to $7 billion total.
    The States will get their allocations as incentive 
payments, but the changes in the State law must be made 
permanent, and changed only by repeal by the respective State 
legislature.
    What happens if the State changes the State law, signs the 
agreement with the Department of Labor, accepts the money, is 
still in session, and upon receipt of the money, immediately 
repeals the legislative change; how would that be treated?
    There seems to be a little bit of confusion about permanent 
versus repeal by the legislature.
    Mr. UHALDE. We're not confused. We didn't want to be played 
for fools.
    Mr. BOUSTANY. I understand. I'm just trying to get a 
clarification.
    Mr. UHALDE. We need to safeguard the taxpayers' money, as 
well, so we tried to be clear that permanent meant that, within 
the State legislation that's passed to implement the 
modernization features, there's nothing that would sunset that 
or trigger off, say by some change.
    Mr. BOUSTANY. So, in other words, the State legislature, in 
the initial change in legislation, could not put in a sunset 
date?
    Mr. UHALDE. That's correct, the State could not put a 
sunset date within the law, but there would be nothing to 
prevent the State coming back later and repealing it, but when 
we say good faith, we mean good faith and implement, so we 
presume that when the States pass the legislation, that the 
State is then going to implement and pay benefits, and not the 
next day after the check arrives, terminate the program.
    So, we understand circumstances can change, a subsequent 
legislature could decide this is not a good deal for us, but--
so permanent means nothing that would trigger it off or sunset 
it within the legislation, but then a subsequent legislature 
could repeal.
    Mr. BOUSTANY. Just one quick followup.
    Do you plan to promulgate regulations that will actually 
clarify whether that repeal language is within the duration of 
the program, the Federal program, the dates are already 
explicitly placed in the bill?
    Mr. UHALDE. We've put a----
    Mr. BOUSTANY. Will there be a timeframe to prevent gaming? 
Will you offer further clarification?
    Mr. UHALDE. We did put out clarification and actually wrote 
letters in response to this precise question, we didn't put a 
time period on that clarification. I don't think we would.
    The legislation can't have a repeal provision within it or 
a sunset, and we said that the State would certify when they 
applied to us that they make a good faith effort to implement 
the benefits.
    Beyond that, we have no time period.
    Mr. BOUSTANY. Thank you.
    Mr. LINDER. Mr. Chairman?
    Chairman MCDERMOTT. Yes, Mr. Linder.
    Mr. LINDER. Mr. Uhalde said that the cost to the States of 
expanding benefits would be modest. I'd like to submit for the 
record a study published in 2006 by the National Bureau of 
Economic Research. They found that New Brunswick, Canada and 
Maine are quite similar across a number of social and economic 
dimensions, making them a region well-suited for comparison.
    In the 1970s, New Brunswick expanded unemployment benefit 
eligibility to cover more marginally attached workers, as 
States are being encouraged to do today, and by 1991, New 
Brunswick's UI spending as a share of GDP was six times the 
share in Maine.
    I'd like to ask unanimous consent to submit that.
    Chairman MCDERMOTT. Without objection, so ordered.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 50601A.003
    
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    [GRAPHIC] [TIFF OMITTED] 50601A.007
    

    Chairman MCDERMOTT. Thank you very much for your testimony, 
and we will perhaps see you again.
    Mr. UHALDE. Mr. Chairman, thank you very much.
    Chairman MCDERMOTT. Our next panel, if you'll take your 
places and turn your nameplates around so I can see who is who. 
You know who you are.
    We will begin with Mr. Thurmond, and Mr. Lewis of Georgia 
will introduce him.
    Mr. Lewis.
    Mr. LEWIS. Thank you very much, Mr. Chairman.
    Mr. Chairman, I am delighted and very pleased to present 
and introduce a hard-working public servant from the State of 
Georgia.
    He's a lawyer by training. He's an author. He is a friend. 
I've known him so many years, when he just a teeny-bopper, 
really.
    He was elected to a legislative district from Clarke 
County, where the University of Georgia is located, and he 
became the first African American to be elected from a 
predominantly white district in the State of Georgia.
    Following his tenure in the legislature, Michael Thurmond 
was called upon to direct Georgia's historic transition from 
welfare to work.
    He created the innovative workforce program, which has 
helped over 90,000 welfare-dependent Georgia families move into 
the workforce, saving more than $100 million in tax dollars 
that have been re-invested in child care, training, and other 
supportive service.
    In 1998, he was elected Georgia's Labor Commissioner. He is 
completing, or serving, I should say, not completing, but 
serving his third term as labor commissioner.
    The Labor Department in the State of Georgia has undergone 
significant transformation in customer service and efficiency. 
The Unemployment Office has been transformed into state-of-the-
art career centers focused on getting jobless Georgians back to 
work as quickly as possible.
    I want to thank Commissioner Thurmond for being here today. 
We look forward to your testimony.
    Mr. LINDER. Mr. Chairman, if I may, Michael and I have been 
friends for over two decades. Welcome.
    Chairman MCDERMOTT. Your full statement will be put in the 
record. We'd like to ask you to limit your time to 5 minutes.
    Mr. Thurmond.

               STATEMENT OF MICHAEL L. THURMOND,

           COMMISSIONER OF LABOR, GEORGIA DEPARTMENT
                   OF LABOR, ATLANTA, GEORGIA

    Mr. THURMOND. Thank you, Mr. Chairman.
    To my mentor and friend, Congressman Lewis, thank you so 
much for the kind words of introduction, and thank you for your 
leadership and your inspiration.
    To Ranking Member Linder, my former colleague in the 
Georgia House, it's good to be with you.
    Members of the Subcommittee, I welcome this opportunity to 
testify, and I thank you for inviting me to share Georgia's 
experience with the implementation of the unemployment 
insurance modernization provisions and the American Recovery 
and Reinvestment Act of 2009.
    Mr. Chairman, I would be remiss if I did not personally 
thank you for your longstanding commitment to improving and 
modernizing America's unemployment insurance program.
    Your work, your dedication is well-known in Georgia, and 
I've come today to say thank you on behalf of those unemployed 
citizens who, but for this intervention, would be in truly 
difficult, difficult circumstances.
    The State of Georgia has been hard hit by the ongoing 
recession. Our State unemployment rate is 9.2 percent, the 
highest rate ever recorded in the history of our State.
    Some 442,000 Georgia citizens are officially unemployed. 
Thousands of others are discouraged workers not included in the 
official unemployment rate. Others are working part--time, but 
would prefer full-time employment.
    The number of unemployed Georgians has increased by more 
than 64 percent over the past year. Of that number, 173,000, or 
39 percent, are currently receiving State unemployment 
benefits, while another approximately 85,000 are receiving 
Federal emergency unemployment compensation.
    Georgia's seasonally adjusted 9.2 percent unemployment rate 
remains, for the 17th consecutive month, above the national 
average.
    As we grapple today with the most severe downturn since the 
Great Depression, I am reminded of the words written by 
President Franklin Roosevelt in a letter dated March 23, 1934, 
in the midst of that depression, and addressed to Congressman 
Robert Doughton, chairman of the House Ways and Means 
Committee.
    The President wrote: ``I have advocated unemployment 
insurance as an essential part of our program to build a more 
ample and secure life. The benefits of such a system will not 
be limited to the individual, however, but will extend 
throughout our social and financial fabric.''
    Some seven decades after its enactment, President 
Roosevelt's prediction that the benefits of a national UI 
system will be spread throughout our economy has been largely, 
though not completely, fulfilled.
    The provisions of Section 2003 of the Act will, I believe, 
enhance the opportunities for States and jurisdictions to 
provide for a system of expanded UI coverage, fund rising 
administrative costs, reduce employer taxes, and help get 
workers back to work.
    Since 1998, when I was first elected, the Georgia 
Department of Labor has worked to meet the needs of the 
unemployed by amending various provisions of our State 
unemployment insurance law.
    We have obtained eight maximum weekly benefit increases, 
increasing the maximum benefit from $244 to $330 a week. We 
have raised the earnings disregard from $30 to $50 a week, 
which allows unemployed workers to work while they are 
receiving unemployment benefits. The UI modernization options 
included in this Act will allow us to further enhance our 
system.
    Despite longstanding opposition in the legislature, in 
2002, Georgia enacted a statute authorizing the alternative 
base period to determine monetary eligibility and calculate 
benefits for UI claimants.
    This was an important piece of legislation because it 
allowed part-time workers, TANF recipients moving into the 
workplace, and low-wage workers to qualify for UI benefits if 
they become laid off.
    You can see in the table in my remarks or my testimony, 
that we also began to track the actual cost of the ABP benefits 
program to our UI trust fund.
    On Page 5--and by the way, that was one of the major 
concerns expressed in our General Assembly as to what would be 
the short-term and long-term costs--you can see that in 2008, 
14,724 ABP claims were filed and the total benefits paid were 
$17 million and 900-plus thousand. In 2008, we paid out a total 
of $950 million.
    Studies suggest that a significant portion of the benefit 
cost is actually cost neutral, because these individuals would 
have applied and received benefits at a later time.
    The Federal Additional Compensation, which is the $25 
increase, was implemented in Georgia immediately after Governor 
Perdue and I signed an agreement, and within 30 days, we began 
providing this benefit. In the most recent week, we had 136,000 
regular UI claimants and some 87,000 Tier 1 and Tier 2 
claimants to receive some $5.6 million in additional benefits 
to their unemployment compensation.
    The key in Georgia to ultimately passing the Modernization 
Act was three things.
    One, we had broad-based bipartisan support. I'm proud--and 
my time may be up.
    In conclusion, I'm proud to state that the key to our 
success was, number one, bipartisan support. It was passed 
unanimously in the House and the Senate. On Tuesday, the 
Governor signed the legislation. We had specific cost 
projections as to what the part-time worker provision and the 
extended training provision would cost. We focused on getting 
Georgians back to work.
    [The statement of Mr. Thurmond follows:]
            Statement of Michael L. Thurmond, Commissioner,
             Georgia Department of Labor, Atlanta, Georgia
    Mr. Chairman, I would be remiss if I did not personally thank you 
for your longstanding commitment to improving and modernizing America's 
unemployment insurance (UI) program. The State of Georgia has been hard 
hit by the ongoing recession. Our State unemployment rate is 9.2%, the 
highest ever recorded in Georgia and 442,758 citizens are officially 
unemployed, an increase of 64.1% over the past year. Of that number, 
172,947, or 39.1%, are currently receiving State unemployment insurance 
benefits, while another 84,700 are receiving Federal Emergency 
Unemployment Compensation. Georgia's 9.2% seasonally adjusted 
unemployment rate remains above the national rate, presently 8.5%, for 
the 17th consecutive month.
    As we grapple with the most severe economic downturn since the 
Great Depression, I am reminded of the words written by President 
Franklin D. Roosevelt in a letter dated March 23, 1934, addressed to 
Congressman Robert Doughton, chairman of the House Ways and Means 
Committee. The President wrote, ``I have advocated unemployment 
insurance as an essential part of our program to build a more ample and 
secure life. The benefits of such a system will not be limited to the 
individual, however, but will extend throughout our social and 
financial fabric.''
    Some seven decades after its enactment, President Roosevelt's 
prediction that the ``benefits'' of a national UI system would be 
spread throughout our society have been largely, though not completely, 
fulfilled. The provisions in Section 2003 of the Act, Special Transfers 
for Unemployment Compensation Modernization, provide enhanced 
opportunities for States and other jurisdictions to help unemployed 
workers get back to work, expand UI coverage, fund rising 
administrative costs, and reduce employer taxes by protecting State 
trust fund solvency.
    I am honored to share with the sub-Committee how Georgia has 
leveraged stimulus funding to modernize our State unemployment 
insurance program. We thank you for your unprecedented support of 
unemployed workers and in helping to stabilize the American economy.
STATE UI MODERNIZATION EFFORTS
    Since my election in 1998, the Georgia Department of Labor has 
worked to meet the needs of the unemployed by amending various 
provisions of our State's unemployment insurance law. We obtained 
legislative approval for eight (8) maximum weekly benefit increases 
(from $244 to $330 per week), three (3) overall weekly benefit 
increases for all claimants, and increased the earnings disregard (from 
$30 to $50 per week). The UI modernization options included in Section 
2003 of the Act will allow us to further enhance Georgia's unemployment 
insurance program. In addition to our ABP provision, we adopted the 
part time worker and demand occupation training options.
Alternate Base Period (ABP)
    Despite long standing opposition in the Georgia legislature, in 
2002 Georgia enacted a statute authorizing the use of an alternative 
base period (ABP) to determine the monetary eligibility and calculate 
benefit amounts for some UI claimants. The traditional base period had 
been exclusively defined as ``the first 4 of the last 5 completed 
calendar quarters.'' ABP allows the Georgia Department of Labor to 
consider earnings generated during the last four completed calendar 
quarters prior to the date a claim is filed, if the claimant does not 
have sufficient wages in the regular base period.
    Adoption of ABP was especially helpful to new entrants to the 
workforce, including
    low wage and part-time workers because it increased the probability 
that these unemployed workers would meet monetary qualifications for 
unemployment benefits. Prior enactment of ABP pre-qualified the State 
for one-third of the Act's trust fund stimulus allotment.
    The number of claimants and the amount of benefits paid after under 
Georgia's ABP is reflected in the following table:


                                                     Table I
----------------------------------------------------------------------------------------------------------------
                                     Total ABP Claim Benefits Paid Annually
-----------------------------------------------------------------------------------------------------------------
                         Calendar Year                           Total ABP Claims Filed      Benefits Paid($)
----------------------------------------------------------------------------------------------------------------
2003                                                                       10,141              $13,761,841
----------------------------------------------------------------------------------------------------------------
2004                                                                       11,565              $15,282,997
----------------------------------------------------------------------------------------------------------------
2005                                                                       10,768              $11,647,894
----------------------------------------------------------------------------------------------------------------
006                                                                        10,745              $11,281,048
----------------------------------------------------------------------------------------------------------------
2007                                                                       11,063              $12,565,132
----------------------------------------------------------------------------------------------------------------
2008                                                                       14,724              $17,936,305
----------------------------------------------------------------------------------------------------------------
1st quarter 2009                                                            4,827               $5,016,627
----------------------------------------------------------------------------------------------------------------


Federal Additional Compensation (FAC)
    The American Recovery and Reinvestment Act of 2009 included 
provisions for the Federal Additional Compensation (FAC) program. 
Claimants that are eligible to receive UI benefits, including regular 
UI, Emergency Unemployment Compensation (EUC), and Trade Readjustment 
Assistance (TRA), now receive the temporary FAC supplemental benefit of 
$25 per week. The first affected week ending date was February 28, 
2009. Table II details the number of claims filed and the estimated 
amount of benefits paid under the FAC program.


                                                    Table II
----------------------------------------------------------------------------------------------------------------
                                      Weekly: W/E 2/28/2009--W/E 4/18/2009
-----------------------------------------------------------------------------------------------------------------
                                                                 Regular UI     EUC Tier 1 & 2  Total FAC Amount
                         Week Ending                             Claimants        Claimants           Paid
----------------------------------------------------------------------------------------------------------------
2/28/09                                                           134,357           90,473         $5,620,750
----------------------------------------------------------------------------------------------------------------
3/7/09                                                            133,634           89,282         $5,572,900
----------------------------------------------------------------------------------------------------------------
3/14/09                                                           132,906           90,058         $5,574,100
----------------------------------------------------------------------------------------------------------------
3/21/09                                                           134,410           90,051         $5,611,525
----------------------------------------------------------------------------------------------------------------
3/28/09                                                           137,292           87,911         $5,630,075
----------------------------------------------------------------------------------------------------------------
4/4/09                                                            139,846           87,825         $5,691,775
----------------------------------------------------------------------------------------------------------------
4/11/09                                                           135,494           87,141         $5,565,875
----------------------------------------------------------------------------------------------------------------
4/18/09                                                           136,816           87,557         $5,609,325
----------------------------------------------------------------------------------------------------------------
  Total to date                                                 1,084,755          710,298        $44,876,325
----------------------------------------------------------------------------------------------------------------


Employer Tax Relief
    The most underappreciated aspect of the UI Modernization Act is the 
tax relief afforded insured employers through stimulus investments that 
protect the solvency of State UI trust funds. Georgia's compliance with 
the provisions of the Act qualified the State for receipt of 
approximately $220 million that will be invested in our UI trust fund. 
Without the stimulus investment, Georgia's UI trust fund with a current 
balance of $467 million, plus an estimated 475 million in 2009 employer 
contributions would have been inadequate to meet our projected annual 
benefit costs. To produce an additional $220 million in employer 
contributions would have required a one year 45% tax increase on 
Georgia's 200,000 experience-rated employers. In light of rising 
benefit costs, a strong argument was made for pursuing the UI 
Modernization stimulus funding.
Part-Time Workers
    Prior to the passage of the American Recovery and Reinvestment Act 
of 2009 there had been numerous unsuccessful attempts in Georgia to 
enact legislation that would allow qualified part-time workers who 
wanted to limit their work search to part-time employment to receive UI 
benefits. These proposals failed due to concerns raised by lawmakers 
and business community advocates who argued that the proposed 
eligibility expansion would result in significant additional costs to 
the UI trust fund and lead to increased tax burdens on employers.
    Critical to the eventual success of our 2009 legislative effort was 
the political and fiscal leverage provided by the conditional 
availability of approximately $220 million stimulus dollars for 
Georgia's UI trust fund. Therefore, we decided to implement a sustained 
information campaign aimed at key stakeholders. We emphasized the fact 
that under existing Federal and State law, insured employers are 
required to pay UI tax premiums on part-time workers and that hundreds 
of laid-off part-time workers were currently receiving UI benefits, as 
long as they were available for full-time employment. If a monetarily 
eligible part-time claimant refused to be available for full-time work, 
however, they were determined not eligible.
    However, the most important element of our Georgia strategy was the 
development and dissemination of a detailed fiscal analysis of the 
projected UI trust fund cost of the proposed part-time amendment. 
During 2008, 742,488 initial claims were filed in Georgia which 
included 792 claims that were based on wages from part-time employment. 
Two hundred and nine of these part-time claimants were denied benefits 
because they limited their job search availability to part-time work.
    The additional cost of the proposed part-time ``expansion'' was 
surprisingly low. Based upon 2008 data, the total cost to pay benefits 
to laid-off part-time workers who are currently denied benefits was 
estimated to be $320,000.
Extended Training Benefits
    The Demand Occupation Training (DOT) benefit in the UI 
Modernization Act calls for an additional 26 weeks of UI benefits for 
claimants who were employed in a declining industry, have exhausted 
regular State benefits, and are not receiving similar monies or 
stipends from other programs, such as Trade Act Assistance (TAA), 
Workforce Investment Act (WIA), and Georgia's HOPE grant program. They 
must be enrolled in State approved training for a high-demand 
occupation (e.g., nursing, automotive technician).
    The proposal for establishing a DOT benefit had no history in 
Georgia. Although legislators and advocates agreed that providing 
displaced workers in declining occupations with training that prepares 
them for careers in demand occupations was a policy that should be 
encouraged, there was concern that the financial burden could be 
prohibitive. Again, projecting the cost of providing extended UI 
benefits to eligible claimants/trainees became a critical issue during 
the legislative deliberations.
    We conducted a detailed cost analysis of the DOT benefit proposal. 
During 2008, 5,581 Georgia claimants, who had been separated from 
employment in a recognized declining industry, filed a claims for 
regular UI benefits. This represented 1.6% of the 357,954 claimants who 
received benefits during that same year. In 2008, forty-six percent or 
------ of all UI recipients exhausted their regular State benefits and 
began receiving emergency unemployment compensation. Thus, we estimate 
that 2,567 claimants from declining industries ``46% of 5,581 
claimants'' exhausted their regular UI benefits.
    The average weekly benefit amount in Georgia during 2008 was $264; 
the average 26 week DOT benefit cost would be $6,864 per claimant/
trainee. Prior experience with similar training programs suggests that 
from 10% to15% of qualified claimants will participate, though most 
will qualify for other programs, such TAA and Dislocated Worker 
activities. Under TAA, a participant has nine months to complete 
training, and in the WIA Adult and Dislocated Worker programs, 
participants have up to two years. Over 4,700 Georgia claimant/trainees 
are currently participating in WIA training programs and there are 
8,630 claimants eligible for TAA training.
    The department's analysis indicates that between 2.5% and 5.0% of 
UI recipients who worked in declining industries would qualify for the 
additional 26 weeks of DOT benefits. The total annual projected cost 
for the extended benefits proposal was between $440,000 to 880,000.
Technology Upgrades to UI Benefits Program
    The special transfer for Administration funding provided in Section 
2003 of the act is especially welcome and needed. We intend to make the 
following uses of these funds.
    Overpayment Automation System (BARTS/AWARE/RECOVER) is software 
products that helps to prevent, detect and process both fraudulent and 
non-fraudulent unemployment insurance overpayments.
    The advantage of obtaining this type of system is to improve 
unemployment insurance integrity.
    Intelligent Fact-Finding Adjudication System--This is a web-based 
product that provides fact-finding prompts to claims examiners to 
ensure that they have asked all relevant questions relating to the 
issue(s) identified for adjudication.
    The advantage of obtaining this type of system is to create uniform 
decisions through consistent fact finding.
    Distant Learning On-Line Training System--This system will allow 
the UI Division to create customize web-based self taught training 
modules for staff use.
    The advantage of obtaining this type of system is managers would 
have readily available UI training modules to assist newly hire staff 
and season staff needing refresher training.
Technology Upgrades to UI Tax Program
    Field Tax Assignment Tracking System--A web based system that will 
provide a more efficient process for tracking assignments.
    The advantage of obtaining this system is that it will allow staff 
to easily identify and focus on delinquent large dollar money 
assignments.
    Adjudication Imaging System--This imaging system is designed to 
capture images of documents to the Adjudication Section. The project's 
goal is to replace the existing microfiche and film-based imaging 
system with a digital system.
    The advantages of obtaining this System are providing real time 
Statewide access to confidential documents and improved efficiency in 
work processes.
    TOPICS--Tax Processing System Enhancement--This system images and 
processing tax and wage documents. The enhancement will allow 
additional tax related documents, to be imaged and/or processed more 
accurately in a timely manner. The advantage of obtaining this System 
is reduced processing time for tax & wage documents and quarterly 
processing.
    Thank you for the opportunity to testify. We appreciate your 
concern for the challenges we face at the State level.

                                 

    Chairman MCDERMOTT. Thank you for your testimony.
    Our next witness is Mr. Walsh, who is the deputy director 
of the Iowa Workforce Development in Des Moines, Iowa.
    Mr. Walsh.

 STATEMENT OF JOSEPH L. WALSH, DEPUTY DIRECTOR, IOWA WORKFORCE 
                 DEVELOPMENT, DES MOINES, IOWA

    Mr. WALSH. Thank you very much. Thank you, Mr. Chairman and 
Members of the Committee.
    It's a great honor for me to be here today with the 
opportunity to speak to you about the importance of our 
unemployment insurance system, and specifically, the American 
Recovery and Reinvestment Act.
    With the help of Congress, I believe that our workforce 
system is on the verge of achieving tremendous accomplishments 
to improve the lives of working people.
    I think it's most important for me, though, to thank the 
frontline workforce staff and workforce professionals for their 
dedication and sacrifices during this economic turmoil.
    While I have the privilege of discussing these issues with 
you here today, it is the direct customer service workers from 
all across the country who are, at this very moment, going 
above and beyond to help ordinary workers through these 
difficult economic times.
    In Iowa, we have an incredible staff. They work long hours 
under stressful conditions, and often helplessly feel the pain 
of workers who are suffering job losses.
    Their work is frequently thankless, and they are often on 
the frontlines of frustration and anger. In some cases, they 
even fear for their personal safety. Yet they know that, if 
they do not get claims processed timely, families may go 
without a check, so they work a little harder each day, and 
these folks are truly the backbone of our workforce system, and 
I would like to start by thanking them today.
    The decline in Iowa's economy coincided with our normal 
seasonal downturn. We came a little bit late to the recession 
in Iowa, and our unemployment rate is still only 5.2 percent, 
but it was a dramatic increase from what we had seen before.
    Right now, the traffic in our one-stop offices in claims 
being filed is roughly double from what it was from the 
previous year, and at times, our system has experienced 
difficulty even maintaining minimum customer service standards.
    Through all of this, of course, our staff has remained 
strong and remarkably dedicated.
    Iowa began paying emergency unemployment compensation back 
in July of 2008, and has continued to do that. Through all of 
last year, we paid about $54 million in emergency unemployment 
compensation. Through this year, just in the first quarter, 
we've paid $34.3 million, for a total of about $88 million just 
in EUC.
    So, we've seen our payments going through the roof, 
essentially, in terms of what we're paying out from Iowa.
    Just as a point of comparison, just in the first quarter of 
this year, which is usually our high quarter, we paid $227 
million out in regular benefits, plus the $34 million in EUC. 
That's compared to last year in the first quarter when we paid 
out $136 million just in regular benefits in the first quarter.
    We've also now triggered Tier 2, because our insured 
unemployment rate has reached 4 percent, and we've already paid 
out $6.3 million in those benefits.
    The importance of these additional dollars to Iowa's 
economy is difficult to precisely measure. The only thing we 
can say for certain is, our economy would be far worse if these 
benefits had not been made available.
    I have to ask the question, how many home foreclosures were 
prevented because these benefits were extended? How many rent 
payments or car loan payments have been made because these 
payments were extended? How many bags of groceries and winter 
coats have been bought from local stores in local communities 
all across the State of Iowa and all across the country?
    These extensions of benefits are going directly into Iowa 
communities and communities across the country, and I don't 
think this fact should be understated for a moment.
    In addition, similarly, the Federal Additional Compensation 
payments, the $25, those were enacted on February 17th.
    The next day, our Governor signed an agreement, Governor 
Chet Culver, with the Department of Labor, starting to pay 
those benefits immediately. In fact, for the week of February 
22, we were getting that money out on the streets.
    That was probably the first Federal stimulus money to hit 
the streets out there, and that has a direct and immediate 
impact on our economy, simply because, in Iowa, in 2008, the 
average weekly benefit for an unemployed worker was about $288, 
and that's not enough to live on.
    It's a temporary stopgap measure to stop the hemorrhaging 
and help people maybe not get their house foreclosed on, but 
it's not enough to live and pay the bills, but when you do give 
them a little extra help, that money will go back into our 
local economies immediately, and that has also had a huge 
impact.
    The other thing that I would like to directly thank 
Congress for, and the President, is the additional 
administrative funding that has been made available.
    In Iowa, we've received $5.1 million in Federal stimulus 
funds for the Administration of the workforce system. In 
addition, we've received a significant amount of contingency 
funds, which has been fully funded this time by the Department 
of Labor.
    That's a recognition, I think, by Congress and the 
President that, in these times of high unemployment, some 
States are not able to meet their minimum customer service 
standards.
    In some of our areas, we've had 2-hour waits to get in to 
see somebody and get a question answered. In some places, it's 
taken too long to get initial payments and first checks out to 
people.
    So, with this administrative funding, we should be able to 
improve our service and get the payments out to people quickly.
    The most significant portion, though, of the Recovery Act, 
I think, is the Modernization Act, and Iowa is very proud to be 
the first State that has actually passed all of the provisions 
in the law and had it signed by the governor, that included all 
of the provisions of it, and we're eager to submit our 
application to the Department of Labor for this.
    We focused on a couple of different things in Iowa. One was 
the part-time workers. We also focused on extending training 
benefits for workers who are going into high-demand training 
fields, and in addition to doing the alternate base period.
    We think that those things are going to have an incredible 
stimulative effect on the economy, and not only a short-term 
stimulative effect, but in the case of these training benefits, 
those are going to have a long-term stimulative effect, in 
terms of increasing the educational capacity and the high-
skilled nature of our workforce for years to come in the 
future.
    So, again, I'd like to close just by thanking you for all 
of your work on this, and helping us through this difficult 
time.
    [The statement of Mr. Walsh follows:]
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    Chairman MCDERMOTT. Thank you for your testimony.
    Mr. Emsellem is the policy director for the National 
Employment Law Project in Oakland, California.
    Mr. Emsellem.

                 STATEMENT OF MAURICE EMSELLEM,

            POLICY CO-DIRECTOR, NATIONAL EMPLOYMENT
                LAW PROJECT, OAKLAND, CALIFORNIA

    Mr. EMSELLEM. Thank you, Mr. Chairman, Members of the 
Committee.
    Our organization, the National Employment Law Project, 
specializes in the unemployment insurance program. These past 2 
months, we've been working in the States to help implement the 
stimulus legislation, which will provide relief to the 
struggling economy and to the millions of families hardest hit 
by this severe recession.
    Chairman McDermott, we wanted to begin by expressing our 
appreciation for your remarkable leadership and the dedication 
of your staff in bringing about the historic reforms adopted by 
the stimulus legislation.
    Given the unemployment crisis, it is welcome news to the 
unemployed workers and their families in this country that 
their voices are being heard here in Congress.
    We also appreciate the strong support of the Obama 
Administration and the very hard work of the Labor Department's 
expert staff charged with immediately implementing the new law.
    Starting with the State unemployment insurance 
modernization program, I wanted to provide some background on 
our understanding of the process so far.
    Our sense is, the punch line is very clear. Nearly every 
State has been taking a serious look at the incentive funding 
option, and more and more, both governors and legislatures are 
concluding that it serves the best interests of the unemployed, 
the unemployment insurance system, and the States' employers.
    In just 2 months, a dozen States have already enacted 
legislation that qualifies for the Federal incentive funding, 
and it's likely that at least half the States will do so by the 
end of the year.
    States as diverse as Arkansas, California, Georgia, Iowa, 
Nevada, Oregon, South Dakota, West Virginia, evenly represented 
by Governors of both political parties, have put politics aside 
in this recession to do what's right for unemployed workers.
    While a handful of Governors continue to hold out, they are 
under significant pressure to rethink their positions, thanks 
to the actions of their State legislatures.
    That's the case, for example, in Alaska, where the 
legislature just approved a bill by a veto-proof margin, which 
is now on its way to its Governor.
    What, then, are some of the key considerations that are 
moving the States?
    First, the legislation addresses a clear and compelling 
need to modernize the State unemployment program, to help low-
wage workers and others who are falling through the cracks of 
the system.
    For example, we have heard no serious opposition in the 
States to the logic or fairness of the incentive funding reform 
called the alternative base period. The six new States that 
will now update their computer systems to start counting these 
workers' recent wages will provide benefits to another 75,000 
workers a year, which is what the unemployment modernization 
program is all about.
    Second, the legislation takes the best of what's already 
been adopted in the States and backs these reforms with serious 
sums of incentive funding. Most States qualify for enough 
Federal funding to pay for at least 7 years of the new State 
benefits. In fact, given the large sums of funding available, 
most States are moving on the extra reforms like Iowa, that 
qualify for the full amount of the incentive grant.
    Finally, the Federal stimulus funds could not have come in 
at a more critical moment for the States. Just when they're 
starting their legislative sessions, and struggling with the 
realities of more limited reserves in their trust funds to pay 
benefits, then along comes the major infusion of Federal 
funding, which the States collect all at once, even if they put 
off implementing the new reforms for as much as a year.
    Thus, the incentive funds provide more breathing room in 
many States to respond to their funding concerns.
    By boosting the State reserves, the incentive funds also 
help prevent, delay, or reduce scheduled tax increases that 
would kick in in many States to replenish the trust funds.
    Texas provides a vivid example of how this works, with the 
infusion of $555 million in incentive funds, it will reduce the 
scheduled tax increase on employers by $450 million to $500 
million.
    That's why, in States like Nevada and Alaska, and others, 
employer groups are now coming out in support of the Federal 
incentive funding.
    While there is still some time to go before the 
modernization program deadline of October 2011, for sure the 
progress in activity to date has been very encouraging.
    Finally, giving the surging rates of long-term unemployment 
and the record rate of exhaustion of State benefits, as was 
mentioned by Congressman Levin earlier, it's important to take 
a look at the stimulus bill's extended benefits provision.
    The stimulus legislation suspends the Federal requirement 
that these extended benefits be paid 50 percent by the States, 
and instead provides full Federal funding for the program.
    The good news, as was mentioned, is that 27 high 
unemployment States now qualify for federally funded extended 
benefits, which is a huge help to more than a million workers 
and of course to the State unemployment trust funds.
    The bad news is that 13 States have still not paid the 
benefits, because they have failed to take up a Federal option 
that allows the program to kick in when the State's 
unemployment rate reaches 6.5 percent, even though they have 
the authority to sunset the benefits when the Federal sharing 
runs out in December.
    As a result, in the next several months, nearly 400,000 
long-term jobless workers will be denied critical benefits in 
those very States with the highest rates of unemployment. Thus, 
much more needs to be done right now, right away, to urge these 
States to provide the federally extended benefits.
    Thank you.
    [The statement of Mr. Emsellem follows:]
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    Chairman MCDERMOTT. Thank you for your testimony.
    We now turn to Mr. Boustany to introduce our next witness.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    I would like to introduce Mr. Michael Mitternight. He is 
the owner and president of Factory Service Agency, and comes to 
us from Metairie, Louisiana.
    I'm very pleased to have a small businessowner from 
Louisiana today before us, who can explain and give us some 
insight into Governor Jindal's decisions, and how Governor 
Jindal's decisions will ensure that taxes remain low so that 
our businesses can hire new workers.
    Over Michael's career, he's worked in the public and 
private sectors. He is a retired member of the Louisiana Air 
National Guard. For the past 30 years, he's been involved in 
his family's small business, leading the Factory Service 
Agency, which grew from a $500,000 business in annual sales to 
over $2.3 million today, and currently has 13 employees, I 
believe.
    Additionally, he's served on numerous boards and councils, 
focusing on small business issues and health issues, and has 
served in an advisory capacity to Governor Jindal. I appreciate 
the level of expertise that Michael is going to bring to this 
panel today and look forward to your testimony.
    Sir, you may proceed.
    Chairman MCDERMOTT. Mr. Mitternight.

              STATEMENT OF MICHAEL A. MITTERNIGHT,

              OWNER AND PRESIDENT, FACTORY SERVICE
               AGENCY, INC., METAIRIE, LOUISIANA

    Mr. MITTERNIGHT. Chairman McDermott and Ranking Member 
Linder and Members of the Subcommittee, Representative 
Boustany, thank you for the opportunity to testify today with 
respect to the unemployment insurance provisions in the 
American Recovery and Reinvestment Act of 2009.
    I am Mike Mitternight, owner of a small business from 
Metairie, Louisiana, started in 1975 by my father-in-law. I 
joined him in 1978, bought him out in 1996, and have been able 
to grow the business over these years.
    My testimony today will focus on the UI provisions of the 
Recovery Act as they affect employers in the near term and in 
the years to come. I'm testifying on behalf of not only myself, 
but the Louisiana Association of Business and Industry and the 
National Federation of Independent Businesses, specifically in 
Louisiana.
    As an employer in Louisiana responsible for meeting 
payroll, I'm well aware of the bottom line costs associated 
with employing workers. I strive to assure that my employees 
are fairly compensated, but as we all know, my ability to 
maintain my employment levels and hire new workers depends on 
whether revenues exceed costs. Payroll costs, including 
unemployment insurance, are a significant part of the cost of 
doing business.
    Employers pay the taxes that fund the Federal and State 
unemployment insurance system. We pay Federal unemployment tax, 
the FUTA, and we also pay the State unemployment insurance tax, 
or SUTA.
    State taxes are experience rated. Unlike the flat FUTA tax, 
if I'm able to operate my business without my employees 
becoming unemployed, my unemployment insurance rates go down. 
The FUTA and SUTA tax is paid solely by employers. There's no 
payroll withholding from employee wages for the FUTA or SUTA 
tax, and I have no choice as an employer but to pay these 
taxes.
    Just to set the record straight, the Federal-State 
unemployment insurance system is paid for by employers and the 
cost of this Federal-State system is a bottom line cost that 
directly impacts my ability, and the ability of all employers, 
to retain their employees and increase employment.
    Enactment of the UI provisions of the Recovery Act earlier 
this year has so far had no discernible positive impact on my 
business. A number of the features of this legislation are 
likely to negatively impact my bottom line, in my opinion.
    The additional weeks of benefits and the additional $25 per 
week payment make it more difficult to attract employees from 
the ranks of those who may be unemployed, even if they have the 
experience needed to perform the work available at my company.
    They also make it more likely that unemployed workers will 
exhaust their regular State unemployment compensation benefits 
in order to obtain maximum unemployment compensation. We've 
heard a lot of discussion about that issue already.
    The so-called UI modernization provisions, for which 
incentive funds would be distributed to States choosing to 
enact them, would also have a series of negative impacts on 
employers, making it more difficult to maintain employment 
levels or hire employees.
    First of all, I should note that, in the view of 
Louisiana's employers, the $7 billion that has been reserved 
for incentive funding is not a gift from the Federal 
Government. The financing for the $7 billion comes from the 
Federal unemployment account, which is exclusively funded by 
the FUTA tax paid by employers.
    In our view, since the FUTA funds being used for the 
special distribution are employer--paid funds, they should be 
distributed back to Louisiana without adding special 
conditions.
    Some have argued that Louisiana employers could receive the 
benefit of their own dollars if only the State legislature 
would pass and the Governor would support legislation to meet 
the conditions set forth in the UI modernization provisions.
    It is important to remember that Congress made it quite 
clear that the changes to Louisiana's UI law must be permanent, 
and that's the issue that I think we have been trying to 
address today. Employers have a serious concern about that word 
``permanent'' in the law--it's not subject to discontinuation 
or to be sunsetted, as we've heard today--in order to obtain 
the State's share of the distribution.
    So, the cost of these changes is something that Louisiana 
employers feel they will be responsible for and will be having 
to deal with for a long time to come. There are a number of 
reasons why that would be a bad deal for us.
    The estimated cost of the additional State unemployment 
compensation benefits that would be charged to employers and 
the Louisiana unemployment trust fund resulting from enactment 
of an alternative base period requirement exceeds the one-time 
incentive distribution which is being offered.
    There are significant administrative costs to employers, as 
well as the State, associated with the transition and long-term 
administration of an alternative base period. I know there's 
supplemental pay for that, but we feel that the cost is going 
to far exceed that allocation.
    Decisions about benefit eligibility and amounts along with 
State unemployment taxes have been made in the UI system at the 
State level for decades, and they should continue to be made at 
the State level, based on State-specific factors, including 
industrial mix, unemployment claims data, State tax policy, and 
consideration of the local and State economy.
    A number of the UI modernization requirements for incentive 
distributions are inconsistent with the fundamentals of the 
Federal-State UI system, and they will still increase the costs 
to employers.
    The options for an employee to take extended paid leave to 
care for an ill or disabled family member, and the payment of a 
dependent dividend, although admirable in intent, should not be 
paid for through the UI fund. This is not a UI benefit. This is 
something that should be paid for elsewhere.
    That's one of employers' main concerns about some of the 
options which they can choose from.
    In closing, let me just ask, when reviewing the relevant 
facts with regard to this issue, that you please look through 
the eyes of one who has to sign the front of a paycheck, and 
not just the back.
    Thank you.
    [The statement of Mr. Mitternight follows:]
          Statement of Mike Mitternight, Owner and President,
           Factory Service Agency, Inc., Metairie, Louisiana
    Chairman McDermott, Ranking Member Linder, and Members of the 
Subcommittee on Income Security and Family Support, thank you for the 
opportunity to testify today with respect to the Unemployment Insurance 
Provisions in the American Recovery and Reinvestment Act of 2009.
    I am Michael Mitternight, President and Owner of Factory Service 
Agency, Inc. in Metairie, Louisiana. Factory Service Agency is a small 
business, specializing in commercial air conditioning service and 
construction. The business was founded in 1975 by my Father-In-Law, Mr. 
E. Reid Powell. I joined him in 1978 and purchased the company from him 
in 1996. Since 1978, we have grown from a $500,000 per year business 
with 5 employees to a $2.3 million business with 11 employees.
    My testimony today will focus on the provisions of the Recovery act 
as they affect employers in the near term and in the years to come. As 
an employer in Louisiana responsible for meeting payroll, I am very 
well aware of the bottom line costs associated with employing workers. 
I value the work performed by my employees and strive to assure that 
they are fairly compensated. As we all know, my ability to maintain 
employment levels and hire workers depends on whether revenue exceeds 
costs, and payroll costs, including unemployment insurance, are a 
significant part of my total cost of doing business.
    As you know, employers pay the taxes that fund the Federal-State 
Unemployment Insurance system. We pay a Federal Unemployment Tax Act 
(FUTA) tax to cover the cost of Federal and State administration of the 
UI program, the Federal share of regular Federal extended benefits when 
they are triggered, and for loans to individual State unemployment 
insurance funds that are depleted. No portion of the FUTA tax that is 
used to finance Federal unemployment compensation payments is paid by 
employees. There is no payroll withholding from employee wages for the 
FUTA tax, and I have no choice as an employer but to pay these taxes.
    Employers also pay the State unemployment insurance taxes (SUTA) to 
pay for State unemployment benefits. These taxes are experience rated, 
and unlike the flat FUTA tax, if I am able to operate without my 
employees becoming unemployed, my unemployment insurance tax rates go 
down. No portion of the SUTA tax that is used to finance State 
unemployment benefits in Louisiana is paid by employees. There is no 
payroll withholding from employee wages for the SUTA tax, and I have no 
choice as an employer but to pay these taxes.
    So, just to be clear, the Federal-State unemployment insurance 
system operating in Louisiana is paid for by Louisiana employers, and 
the cost of this Federal-State system is a bottom line cost that 
directly impacts my ability, and the ability of all employers in 
Louisiana, to retain employees and increase employment.
    The enactment of the UI provisions of the Recovery Act earlier this 
year has so far had no discernable positive impact on my business, and 
a number of the features of this legislation are likely to negatively 
affect my bottom line.
    The additional weeks of special emergency unemployment compensation 
included in the bill and the additional $25 per week in additional 
benefits may have increased the cash provided to unemployed workers to 
help them pay credit card and other bills, but it has had no direct 
impact on additional orders for work for my business. These increased 
payments do, however, have other consequences for businesses seeking to 
hire workers.
    The additional weeks of benefits and the additional $25 per week 
make it more difficult to attract employees from the ranks of the 
unemployed, even if they have the experience needed to perform the work 
available at my company. Take, for example, the individual who was laid 
off from a larger company because it could no longer afford to pay 
higher wages than I can offer. That individual may possess the work 
experience needed to perform work in the commercial air conditioning 
service, but the longer period of emergency unemployment compensation 
and the additional $25 per week reduces the difference between what 
that individual receives in unemployment benefits and the compensation 
I can afford to pay him.
    As a result, it is more difficult for me to find individuals with 
the work experience I need because some of them would choose to stay on 
unemployment compensation longer, hoping for a higher paying job that 
may not come, instead of taking a job with my company. In fact, the 
availability of additional weeks of unemployment compensation and the 
additional $25 per week makes it more likely that unemployed workers 
will exhaust their regular State unemployment benefits, as they 
postpone an active search for work deciding not to accept job offers 
that become available during the claims period.
    The increased duration of regular State unemployment benefits 
resulting from the Recovery Act provisions also increases benefit 
charges to Louisiana employers, increasing their unemployment tax rates 
for the following year and negatively impacting their bottom lines just 
at the time that there is a need to provide incentives for rehiring or 
hiring new employees. I understand that this increase in State 
unemployment claims resulting from additional weeks of Federal extended 
or emergency benefits has been recognized by the Congressional Budget 
Office. I can also tell you from experience that claimants who are 
close to exhausting regular State benefits, but are assured of 
additional weeks of extended benefits, will be more likely to exhaust 
State benefits that are charged to employers.
    The so called ``UI Modernization'' provisions for which incentive 
funds would be distributed to States choosing to enact them would also 
have a series of negative impacts on employers, making it more 
difficult to maintain employment levels or hire employees.
    First of all, I should note that, in the view of Louisiana's 
employers, the $7 billion that has been ``reserved'' for incentive 
funding is not a gift from the Federal Government. The financing for 
the $7 billion comes from the Federal Unemployment Account (FUA), which 
is exclusively funded by the FUTA tax paid by employers. In our view, 
since the FUTA funds being used for this special distribution are 
employer paid funds, they should be distributed back to Louisiana 
without special conditions. By requiring the enactment of certain 
provisions into our State UI law in exchange for this incentive 
distribution, Congress effectively limited the distribution to a select 
handful of States, not including Louisiana. Congress chose to take FUTA 
tax dollars that I and other employers in Louisiana paid and to send 
them to be used in the 19 or so other States that happen to already 
have alternative base period provisions in their State laws. The impact 
on Louisiana employers over time will likely be an increase in their 
FUTA taxes, again making it more difficult for them to retain employees 
or hire new ones.
    Some have argued that Louisiana employers could receive the benefit 
of their own dollars if only the State legislature would pass and the 
Governor would support legislation to meet the conditions set forth in 
the ``UI Modernization'' provisions. It is important to remember that 
Congress made it quite clear that the changes to Louisiana's UI law 
must be ``permanent'' and not ``subject to discontinuation'' in order 
to obtain the State's share of the distribution. So, at the least, the 
cost of these changes is something that Louisiana employers will have 
to deal with for a long time. There are a number of reasons why that 
would be a bad deal for us:

        1.  The estimated cost of the additional State unemployment 
        compensation benefits that would be charged to employers and 
        the Louisiana unemployment trust fund resulting from enactment 
        of an alternative base period requirement exceeds the one-time 
        incentive distribution being offered;
        2.  There are significant administrative costs to employers as 
        well as the State associated with the transition and long term 
        administration of an alternative base period provision that 
        must be considered in determining the bottom line cost to 
        employers;
        3.  Decisions about benefit eligibility and amounts along with 
        State unemployment taxes have been made in the UI system at the 
        State level for decades and should continue to be made at the 
        State level based on State specific factors, including 
        industrial mix, unemployment claims data, State tax policy and 
        consideration of the local State economy;
        4.  A number of the ``UI Modernization'' requirements of 
        incentive distributions are inconsistent with the fundamentals 
        of the Federal-State UI system and would increase costs to 
        employers.

Part-time worker eligibility
    Part-time workers already qualify for unemployment benefits in 
Louisiana. Unemployed workers qualify for benefits with as little as 
$1,200 in annual wages before becoming unemployed. Louisiana encourages 
unemployed workers to take part-time work during their unemployment by 
excluding partial earnings of the lesser of $50 or one-half of their 
weekly benefit amount when determining how much is to be paid in weekly 
benefits.
    Partially unemployed workers must, however, be able to work, be 
available for work and be seeking suitable work. These requirements 
have been fundamental to the UI system for more than half a century.
    The Recovery Act would require as a condition of receiving 
incentive funds that State law prohibit the denial of unemployment 
compensation under any provision relating to availability for work, 
active search for work, or refusal to accept work, solely because such 
an individual is seeking only part-time work as defined by the U.S. 
Secretary of Labor. Under this provision, the State would actually have 
to pay unemployment benefits to someone who refused full-time suitable 
work, and in some cases, such benefits would be charged against the 
very employer that offered that full-time work. This provision will not 
only increase benefit payments and charges to employers, but sends a 
signal to unemployed workers that they need not seek or be available 
for full-time work as a condition of receiving benefits.
    We should be encouraging individuals to search and be available for 
full-time work instead of prohibiting a State from denying benefits 
when they refuse to do so. As a practical matter, the determination of 
appropriate work search, availability and suitability of work should be 
made on a case-by-case basis under guidelines set by the State. This 
should not be determined based on Federal dictates.
Quits For Compelling Family Reasons
    In Louisiana, and in most States, an individual who quits 
employment without good cause in connection with the individual's work 
is disqualified from receiving unemployment compensation. This 
connection to the work and good cause standard is tied to the fact that 
unemployment benefits are charged to employers.
    Unlike public assistance programs that determine eligibility for 
benefits that are paid from general revenue, there is an immediate 
charge and cost to employers when individuals are paid unemployment 
compensation. To pay unemployment benefits in such cases is 
inconsistent with the insurance principles inherent in the UI system 
and inequitably imposes costs on employers who are not at fault.
    For example, the Recovery Act provision, as a condition of 
incentive payment, would prohibit a State from disqualifying an 
individual for separating from employment for the illness or disability 
of an immediate family member. The separation need not be related in 
any way to the work, and ``illness'' and ``disability'' have been 
defined by USDOL to mean a verified illness or disability which 
necessitates the care of the ill person for a period of time longer 
than the employer is willing to grant leave (paid or otherwise). This 
definition is so broad that it cries out for abuse.
    If one of my employees requests leave for the sickness or 
disability of an immediate family member, the period of leave requested 
is longer than that permitted by company policy, and the individual 
then quits employment, there would be no disqualification from 
unemployment benefits and the benefits subsequently paid would be 
charged to my account and those of other base period employers. This 
would significantly increase benefit charges to employers and result in 
the payment of benefits to workers whose reason for unemployment is not 
connected to the work and has nothing to do with whether they became 
unemployed through no fault of their own.
Dependents' Allowances
    Unemployment insurance is a program that provides temporary partial 
wage replacement to individuals who become unemployed through no fault 
of their own in connection with their employment. The partial wage 
replacement is intended to provide support on a temporary basis while 
the individual searches for suitable employment.
    Louisiana and the vast majority of States do not have dependents' 
allowance provisions because the number of dependents has nothing to do 
with wage replacement and the addition of dependency add-on amounts 
results in individuals with dependents receiving higher wage 
replacement than those without dependents. It also seems to suggest 
that there is a single wage earner for a household when in recent 
decades a high percentage of households have more than one wage earner. 
In multiple wage earner households all wage earners who become 
unemployed may be able to qualify independently for unemployment 
benefits.
    Unemployment insurance is not a family support program based on 
need. Again, it is an insurance program paid for by employers for the 
narrow purpose of providing temporary wage replacement for unemployed 
workers.
    The Recovery Act would provide as a condition of incentive funding 
that a State provide at least $15 per dependent per week in addition to 
what would otherwise be provided in weekly benefits. If adopted, this 
would dramatically increase the amounts of benefits paid to unemployed 
workers with dependents and charged to employer accounts.
    Such a provision would not only increase benefit costs but would 
create additional administrative costs for employers and the State 
associated with determining whether the claimant had dependents and the 
number of dependents. Such determinations are often complicated with 
child support obligation disputes and questions about the age, mental, 
and/or physical capacity of individuals claimed as dependents, and 
other issues.
Training Benefits
    A very small number of States provide for additional unemployment 
compensation benefits during extended periods of training because it 
significantly increases costs to employers and the impact on the 
duration of unemployment benefits to the individuals and their return 
to employment varies considerably from State to State and depending on 
the training provided.
    For example, under the Recovery Act provision if my company were to 
lay-off one of our employees due to lack of work and the individual 
exhausted 26 weeks of regular State unemployment compensation charged 
to our account, the individual would be entitled to an additional 26 
weeks of benefits charged to my account as long as it was approved by 
the State, even if the training did not assist the individual in 
becoming re-employed.
    There are training programs that may be effective in training and 
placing unemployed workers, but such decisions about unemployment 
eligibility and State approved training are much more appropriately 
left to the State and employers in the State.
Extended Unemployment Compensation Funding
    Section 2005 of the Recovery Bill provided for 100% Federal 
reimbursement of regular extended unemployment compensation instead of 
the normal 50% reimbursement. I can certainly understand why employers 
in other States that have triggered on to extended unemployment 
compensation might favor not having their individual accounts charged 
for extended unemployment compensation payments.
    However, in Louisiana we have a different policy concern that as 
other States, noting the availability of the 100% reimbursement 
provision choose to enact the optional lower trigger provision more 
weeks of extended unemployment compensation will be paid in other 
States depleting the extended unemployment compensation account which 
is financed by employers in all States paying the FUTA tax.
    Because the unemployment rate is lower in Louisiana than in many 
other States, regular Federal extended unemployment compensation has 
not triggered ``on'' in Louisiana and as of April 12th at least would 
not trigger on even if the State were to enact the optional trigger 
provision.
    As a result, employers in Louisiana are likely, due to the 
provisions of the Recovery Act, to have FUTA tax dollars paid by them 
directed to the payment of benefits in other States and the resulting 
depletion of balances in the extended unemployment compensation account 
and subsequent increases in their FUTA tax.
    Mr. Chairman, there is still no such thing as a free lunch.
    One need only look back to the experience of the 1970s and 1980s to 
observe the impact of significant increases in unemployment 
compensation payments on employer tax rates at the State and Federal 
level.
    In response to significant extended unemployment compensation 
payout in the 1970s, the employer financed Federal accounts dedicated 
to paying these claims were depleted and Federal general revenue was 
advanced to cover the deficiency in funds. In 1976 the FUTA tax base 
was increased from $4,200 to $6,000 and the net FUTA tax rate was 
increased from 0.5% to 0.7%. In 1982 the FUTA tax base was increased 
from $6,000 to $7,000. The net Federal tax rate was increased from 0.7% 
to 0.8% on a ``temporary'' basis until general revenue funds that had 
been advanced to pay extended benefits were repaid. Although all 
general revenue advances were repaid in 1987, the ``temporary'' surtax 
to be paid by employers was continued and is scheduled to sunset again 
at the end of 2009.
    Stresses on the Federal-State UI system in the past 16 months have 
not been experienced since the 1970s and early 1980s. We should look to 
the history of that period as some indication of what to expect in the 
coming years.
    State UI claims increases and State legislation in the 1970s and 
1980s resulted in significant State UI tax increases in addition to the 
FUTA tax increases in this period. As a point of comparison the 
national average State UI taxes for 1979 as compared to total wages was 
1.284% and rose to 1.37% in 1984. The national average State UI taxes 
for 2007 were only 0.665% of total wages.
    With none of the ``UI Modernization'' expansion provisions included 
in the Recovery Act and no additional Federal reimbursement we were 
already headed for a period in the next two years in which State UI 
taxes on average are likely to more than double for many employers, and 
employers with lower experience rates will suffer even greater 
increases.
    Again, employer taxes are the exclusive source of the funds in the 
FUA. The FUA is the fund that was tapped for this special distribution. 
The laws that would have to be enacted in order for Louisiana to 
receive the distribution from the FUA change the fundamental purpose of 
our Federal/State UC system. Any attempt to enact the provisions 
necessary to receive the monies authorized from the FUA constitutes a 
major break with the understanding that Louisiana's employers had 
regarding the use of those Federal taxes when they paid them.
    Louisiana's employers have no quarrel with providing benefits to 
persons with a demonstrated attachment to the workforce, whose 
unemployment arose from factors within the workplace, and whose 
attempts to become re-employed are genuine and aggressive. However, 
they will not accept providing benefits to persons not truly connected 
to the workforce, who leave their employment for personal reasons, or 
who choose to restrict their re-employment options. That is what the 
expansions within the Act would do.
    It is time to pause and consider the negative impact that the 
Recovery Act's UI provisions will have on employer taxes, which will 
soon be felt on their bottom lines. Please consider instead making 
revisions that may actually reduce cost and enable the country to save 
the jobs we still have and to create new jobs.

                                 

    Chairman MCDERMOTT. Thank you for your testimony.
    We now have a witness who actually identifies herself as an 
economist, and we're not going to hold that against you, in 
spite of what people have said about economists up here.
    Heidi Shierholz is the economist for the Economic Policy 
Institute.
    Dr. Shierholz.

STATEMENT OF HEIDI SHIERHOLZ, PH.D., ECONOMIST, ECONOMIC POLICY 
                           INSTITUTE

    Dr. SHIERHOLZ. Good morning, Chairman McDermott, Ranking 
Member Linder, and Members of the Subcommittee. I appreciate 
the opportunity to appear before you today to share my views.
    Next month, the current economic downturn will become the 
longest recession since the Great Depression. This recession is 
now in its 16th month, and the labor market is still shedding 
over 600,000 jobs per month.
    The depth of this crisis, a crisis that will, before it's 
over, be the longest and steepest economic downturn in over six 
decades, highlights the need for unprecedented levels of 
assistance for the millions of hardworking, productive 
Americans who are unable to find the work they need to maintain 
the living standards of their families.
    Since the start of the recession in December 2007, the 
unemployment rate has risen from 4.9 percent to 8.5 percent. 
The increase in unemployment over this time is the largest 15-
month percentage point increase in unemployment since 1975. In 
particular, it exceeds the increase in unemployment experienced 
during the deep recession of the early 1980s.
    There are now 13.2 million unemployed workers in this 
country, and the widespread job loss shows no signs of slowing 
down. On average, 23,000 workers were added to the jobless 
rolls every single day of the first quarter of 2009.
    With the severity and duration of this recession, long-term 
unemployment, which is defined as being unemployed for more 
than 6 months, is growing even faster. In March, 3.2 million 
American workers, nearly one out of every four of the 
unemployed, had been unable to find a job for over half a year.
    This figure shows the percent of the labor force unemployed 
for 6 months or more, currently at a 25-year high.
    A primary reason workers are getting stuck in unemployment 
is the dramatic decline in job openings. At the start of the 
recession in December 2007, there were 4.3 million job 
openings. In February of this year, there were 3 million, a 
decline of over 30 percent.
    As the number of unemployed has continued to rise, this 
means that there are more and more unemployed workers for every 
job opening. This figure shows that, in February, there were 
over four unemployed workers for every available job, a huge 
increase since the start of the recession, when there were only 
1.7 job seekers per job opening.
    As I mentioned, there are currently 13.2 million unemployed 
workers in this country, but that number, large as it is, 
actually understates labor market weakness, because it only 
counts jobless workers as being unemployed if they are actively 
seeking work.
    Marginally attached workers are defined as jobless workers 
who want a job, they're available to work, they have searched 
for work in the recent past, but they are not currently 
actively seeking work, so they're not counted as officially 
unemployed.
    Since the start of the recession, the number of marginally 
attached workers has increased by 64 percent, to 2.2 million. 
If these workers were counted as unemployed, the unemployed 
rate in March would have been 9.8 percent.
    So, the next question is, what can we expect going forward?
    Note in this plot, this is the unemployment plot, note in 
this plot that after the--the shaded bars there denote 
recessions, and what jumps out here is that, after the end of 
official recessions, the unemployment rate keeps rising.
    So, after the end of both the recession of the early 1990s 
and the recession of the early 2000s, the unemployment rate 
continued to rise for over a year, and unemployment didn't get 
back down to its pre-recession levels for an additional four 
years.
    So, we can expect the unemployment rate to continue to rise 
for at least the next year, reaching 9 percent by this summer, 
9.5 percent by the fourth quarter of this year, and crossing 
into double digits early next year.
    With double-digit unemployment rates, we could expect the 
number of long-term unemployed workers to climb from its 
current level of 3.2 million to well over 4 million.
    The unemployment rate will likely average around 9.5 
percent for 2010 and will remain elevated for years to come, 
continuing the hardship faced by America's working families.
    The unemployment insurance provisions in the Recovery Act 
are exactly the kind of assistance that working families need, 
and it happens that they are also exactly what the macro-
economy needs.
    When an economy is floundering in a recession, even with 
interest rates near zero, as they are today, policy makers are 
essentially left with one tool in their kit for fighting 
recession: Government spending to boost demand. This can happen 
either through tax cuts or through Government spending the 
money itself.
    So, while there is variation, which was discussed before, 
in sort of bang-for-the-buck estimates of different kinds of 
stimulus spending, among economists, there is a generally 
accepted hierarchy of the effectiveness of stimulus spending, 
and I will show you in this plot, shows that hierarchy along 
with the economic benefit for each dollar spent as estimated by 
Mark Zandi of Moody'sEconomy.com.
    So, this hierarchy shows that, aside from food stamps, 
Government spending on extending unemployment insurance 
provides the most economic benefit to the economy of any form 
of stimulus spending.
    The reason unemployment insurance is such good stimulus is 
that it gets money to people who are most likely to have 
depleted their savings and to tend to have no choice but to 
quickly spend essentially every dollar they receive on 
necessities found in their local economy.
    In other words, virtually every dollar spent on extending 
unemployment insurance goes directly and immediately toward the 
purchase of local goods and services. Extending and expanding 
unemployment insurance benefits is one of the most efficient 
things lawmakers have done to help pull the macro-economy out 
of its nosedive.
    The United States is currently facing what will ultimately 
be the longest and steepest downturn since the Great 
Depression. This crisis calls for unprecedented levels of 
assistance for the millions of American workers who have little 
hope of finding a job in this dramatically weakened labor 
market.
    Fortunately, assisting workers most hurt by the downturn is 
also excellent economic policy, since extending unemployment 
insurance is one of the most efficient forms of stimulus 
spending available.
    It will take years for the U.S. labor market to fully 
recover, but the unemployment insurance provisions in the 
Recovery Act take an important step toward keeping the families 
of eligible unemployed workers afloat, while at the same time, 
providing the economy with much-needed stimulus.
    Thank you, and I'm more than happy to answer any questions 
you may have.
    [The statement of Dr. Shierholz follows:]
   Statement of Heidi Shierholz, Ph. D., Economist, Economic Policy 
                               Institute
    Good Morning Chairman McDermott, Ranking Member Linder, and 
distinguished Members of the Subcommittee on Income Security and Family 
Support. My name is Heidi Shierholz and I am a labor market economist 
at the Economic Policy Institute; I appreciate the opportunity to 
appear before you today to share my views.
    Next month, the current economic downturn will become the longest 
recession since the Great Depression. The ten post-war recessions prior 
to this one have averaged 10.4 months in length, with the longest being 
16 months. The current recession is now in its 16th month, and the 
labor market is still shedding over 600,000 jobs a month. The impact of 
this recession on the labor market is documented below. The depth of 
the crisis--a crisis that will, before it's over, be the longest and 
steepest economic downturn since World War II--highlights the need for 
unprecedented levels of assistance for the millions of hard-working, 
productive Americans who are unable to find the work they need to 
maintain the living standards of their families. Furthermore, as 
documented below, assistance to those most hurt by the downturn--
specifically, the unemployment insurance provisions in the recovery 
act--is also excellent economic policy, since these are the families 
most likely to immediately spend that money on necessities found in 
their local economy, which is precisely the kind of stimulus that is 
needed to help pull the U.S. economy out of its nosedive.
The Unemployment Crisis
    Since the start of the recession in December 2007, the unemployment 
rate has increased from 4.9% to 8.5%. The increase in unemployment from 
December 2007 to March 2009 is the largest 15-month percentage point 
increase in the unemployment rate since 1975--in particular, it 
surpasses the increase in unemployment experienced during the deep 
recession of the early 1980s. There are now 13.2 million unemployed 
workers in this country--5.6 million more than there were at the 
beginning of the recession--and the widespread job loss shows no signs 
of slowing down. On average, 23,000 workers were added to the jobless 
rolls every single day of the first quarter of 2009. Figure 1 shows the 
unemployment rate over the last 20 years; the dramatic increase of the 
current recession is clear.
Long-term unemployment
    With the severity and duration of this recession, long-term 
unemployment--defined as being unemployed for more than six months--is 
growing even faster. In March, 3.2 million American workers--nearly one 
out of every four of the unemployed--had been unable to find a job for 
over half a year. Figure 2 shows the percent of the labor force 
unemployed for six months or more, currently at a twenty-five year 
high. The extension to unemployment insurance in the recovery act is a 
crucial lifeline to the families of the long-term unemployed.
Figure 1
[GRAPHIC] [TIFF OMITTED] 50601A.035


Figure 2
[GRAPHIC] [TIFF OMITTED] 50601A.036


    A primary reason workers are getting stuck in unemployment is the 
dramatically diminished number of job openings. At the start of the 
recession in December 2007, there were 4.3 million job openings; in 
February 2009 (the latest data available), there were 3 million, a 
decline of 31.4%. As the number of unemployed has continued to rise, 
this means that there are more and more unemployed workers for every 
job opening. In February, there were over four unemployed workers for 
every available job, almost two and a half times the number at the 
start of the recession. Figure 3 shows the number of unemployed workers 
per job opening since 2001 (the job openings data are only available 
since December 2000). The February value is nearly 50% higher than the 
highest value of the series prior to the current recession.
Figure 3
[GRAPHIC] [TIFF OMITTED] 50601A.037


    An important point about a recession this long and severe is that 
all subgroups of the labor market are experiencing substantial 
unemployment and, in particular, substantial long-term unemployment. 
The following chart shows unemployment and long-term unemployed for the 
first quarter of 2009 by selected demographic groups. The unemployment 
rate shows that while young workers, blue collar workers, and workers 
with lower levels of schooling are seeing the highest unemployment 
rates, all groups are experiencing extensive unemployment. In fact, as 
the second column of data in the chart shows, older workers, white 
collar workers, and workers with higher levels of education are 
disproportionately affected by long-term unemployment. In other words, 
while more educated and experienced workers are less likely to become 
unemployed, they are more likely to get stuck in unemployment for long 
periods if they do lose their jobs. No subgroups of the labor market 
are sheltered from an economic downturn as deep as the recession this 
country is currently facing.


----------------------------------------------------------------------------------------------------------------
                                 Unemployment and Long-term unemployment, 2009Q1
-----------------------------------------------------------------------------------------------------------------
                                                                                             Share of unemployed
                                                                                                who have been
                                                                         Unemployment rate  jobless for over six
                                                                                                   months
----------------------------------------------------------------------------------------------------------------
                                     All                                    8.8%                     22.5%
================================================================================================================
                                     16-24                                 16.1%                     20.0%
Age                                  25-54                                  8.1%                     22.3%
                                     55 +                                   6.2%                     28.2%
----------------------------------------------------------------------------------------------------------------
                                     Blue collar                           14.9%                     19.4%
Occupation                           Service                                9.2%                     22.7%
                                     White collar                           5.6%                     24.1%
----------------------------------------------------------------------------------------------------------------
                                     High school or less                   13.0%                     22.3%
Education                            Some college                           7.8%                     22.3%
                                     Bachelor's degree or higher            4.4%                     23.6%
----------------------------------------------------------------------------------------------------------------
Note: Data not seasonally adjusted

Source: Author's analysis of Current Population Survey microdata

Underemployment
    As mentioned above, there are currently 13.2 million unemployed 
workers in this country. That number, large as it is, actually 
understates labor market weakness because it only counts jobless 
workers as being officially unemployed if they have actively sought 
work in the last month. Thus, to the extent that jobless workers have 
stopped looking for work (or never started) because they felt they 
would not be able to secure meaningful work given current labor market 
conditions, the official unemployment rate understates labor market 
weakness. Since the start of the recession, the number of ``marginally 
attached'' workers has increased by 64%, from 1.3 million to 2.2 
million. Marginally attached workers are defined as jobless workers who 
want to work, are available to work, have looked for work in the recent 
past, but are not currently actively seeking a job, and are therefore 
not counted as officially unemployed. If these workers were counted as 
unemployed, the unemployment rate in March would have been 9.8%.
    Another aspect of employment during recessions is that when 
employers need to cut labor costs, they cut not just entire jobs, they 
also cut hours for workers who keep their jobs. There are currently 
over nine million ``involuntary'' part-time workers in this country--
workers who want full-time jobs but are unable to get the hours they 
need. This is nearly double the pre-recession number of involuntary 
part-timers. An important comprehensive measure of slack in the labor 
market is the ``underemployment rate'', which includes not just 
unemployed workers, but also marginally attached and involuntary part-
time workers. In March, the underemployment rate was 15.6%. This means 
that 24.4 million workers--one in six workers in this country--are 
either unemployed or underemployed. Figure 4 shows underemployment over 
the last 10 years (data on underemployment as currently measured are 
only available since the mid-nineties).
Figure 4
[GRAPHIC] [TIFF OMITTED] 50601A.038

Over four million long-term unemployed by early next year
    After the official end of the recession of the early nineties, the 
unemployment rate continued to rise for more than a year, and 
unemployment didn't return to its pre-recession levels for another four 
years after that. After the end of the recession of 2001, the 
unemployment rate continued to rise for a year and a half, and 
unemployment didn't return to near pre-recession levels for an 
additional three and a half years. If current laws and policies 
governing Federal spending and taxes do not change (specifically, if we 
do not see substantial additional stimulus) we can expect the 
unemployment rate to continue to rise for at least the next year, 
reaching 9% by summer, 9.5% for the fourth quarter of this year, and 
crossing into double-digits sometime early next year. With double-digit 
unemployment rates, we could expect the number of long-term unemployed 
workers to climb from its current level of 3.2 million to well over 
four million. The unemployment rate will likely average 9.5% for 2010, 
and remain elevated for years to come, continuing the hardship faced by 
America's working families.
Benefits to the macroeconomy of unemployment insurance
    When an economy is floundering in a recession even with interest 
rates near zero as they are today, policy makers are essentially left 
with one tool in their kit for fighting recessions--direct Government 
spending to boost demand. This can happen either through tax cuts--
Government giving money back to households to boost their spending--or 
through the Government spending the money itself. While there is 
variation in ``bang-for-the-buck'' estimates of different types of 
stimulus spending, among economists there is a generally accepted 
hierarchy of the economic benefits of various stimulus provisions. 
Figure 5 shows that hierarchy, along with the economic benefit for each 
dollar spent as estimated by Mark Zandi of Moody's Economy.com. The 
hierarchy shows that aside from food stamps, Government spending on 
extending unemployment insurance provides the most economic benefit to 
the economy of any form of stimulus spending. In other words, extending 
and expanding unemployment insurance benefits is one of the most 
efficient things the Government can do to help pull the macroeconomy 
out of its nosedive. The reason extending unemployment insurance is 
such good stimulus is that it gets money to people who are the most 
likely to have depleted their savings, and who tend to have no choice 
but to quickly spend essentially every dollar they receive on 
necessities found in their local economy. In other words, virtually 
every dollar spent on extending unemployment insurance benefits goes 
directly, and immediately, towards the purchase of local goods and 
services, providing an extremely efficient demand boost. The CBO 
estimates that 40 billion dollars will be spent on the unemployment 
insurance provisions in the recovery act. Using Zandi's estimate of 
$1.64 for the economic impact of one dollar of expanded unemployment 
insurance benefits, that translates into 66 billion dollars of stimulus 
to the U.S. economy. Not only is extending and expanding UI benefits 
the right thing to do for the people hurt most by this economic 
downturn, it is also excellent economic policy.
Conclusion
    The United States is currently facing what will ultimately be the 
longest and steepest economic downturn since the Great Depression. 
There are currently 13.2 million unemployed American workers, nearly a 
quarter of whom have been unemployed for at least six months, and the 
economy is still losing 600,000 jobs a month. This recession calls for 
unprecedented levels of assistance for the millions of American workers 
who have little hope of finding a job in this dramatically weakened 
labor market. Fortunately, assisting workers most hurt by the downturn 
is also excellent economic policy, since extending and expanding 
unemployment insurance is one of the most efficient forms of stimulus 
spending available. It will takes years for the U.S. labor market to 
fully recover, but the unemployment insurance provisions in the 
recovery act take an important step towards keeping the families of 
eligible unemployed workers afloat, while at the same time providing 
the economy with much-needed stimulus.
    Thank you and I am more than happy to answer any questions you may 
have.
Figure 5:
[GRAPHIC] [TIFF OMITTED] 50601A.039


                                 

    Chairman MCDERMOTT. Thank you all for your testimony.
    I was going to ask some other questions, but Dr. Shierholz, 
you got me, because you're really talking about the future.
    Everyone is saying, ``Well, the stock market is up today, 
it's up 50 points, or last week it was up 125 points, or 
whatever, the recession is over.''
    I know that people want to believe that spring is here and 
that the daffodils indicate that there will be no more snow, 
but what I try to understand is, when do you think you can 
begin to say the recession is over, and what will be the signs 
that will show that that's happening?
    It looks like there's a lag----
    Dr. SHIERHOLZ. That's right.
    Chairman MCDERMOTT [continuing]. In unemployment. So, where 
does one----
    Dr. SHIERHOLZ. This is a good question.
    So, here's what happens. Important background to this 
question is that the population is growing all the time, and so 
we actually have to add jobs every month just to keep up with 
population growth.
    So, just to tread water, just to keep unemployment from 
rising in the face of an ever-expanding workforce, the economy 
has to add 127,000 jobs every month.
    So, the economy output, the stock market, other kind of 
measures may start, will start growing first, but in order to 
have unemployment actually decline, we have to see really 
strong growth. We actually have to add at least 127,000 jobs 
every month to keep unemployment from continuing to rise.
    Just like you said, that's what we've seen in recent 
recessions, unemployment continues to rise, because while the 
economy starts growing, it just doesn't immediately get growing 
fast enough.
    Those will be the first signs. The first sign we'll see is 
maybe a pickup in construction, in durable goods manufacturing, 
when we start to see lessening of the job losses, maybe we 
start to add some jobs in those areas, we will start to be able 
to say a recovery has taken hold.
    The macro-economy will start to look better before your 
constituents, before Main Street feel better.
    Chairman MCDERMOTT. What is it that--or what kind of 
predictability is there in your saying it's going to be out 
there for all of next year, or all of this year and into next 
year, well into next year?
    Dr. SHIERHOLZ. So, one of the things we can do is look to 
past recessions, and we know that, even if we had the output 
start growing, if all of a sudden we had GDP growing, 
everything was fixed in the economy, if the unemployment rate 
grew in the same way it grew after the end of the last two 
recessions, it would still reach 9.8 percent.
    We know that right now GDP is growing way below trend, we 
are still losing 20,000 jobs a day, so if Government spending 
and taxes do not change, we can definitely expect that it will 
go up into double digits.
    Chairman MCDERMOTT. Let me switch just a minute to Mr. 
Emsellem.
    We've heard people suggest here that if we don't pay--I 
guess the Governor of Alabama was quoted as saying that he 
didn't want to add unemployment benefits because that would 
somehow say to potential employers who might want to move into 
Alabama that, ``There's a lot of benefits you're going to have 
to pay, and in our State, you won't have to pay those 
benefits.''
    To what extent is there any evidence that a safety net is 
viewed as a negative in the decision to move to a State, or to 
an area, to bring a new plan?
    Mr. EMSELLEM. I'm not aware of any empirical evidence that 
testifies to that. It's an argument that's talked about a lot, 
that actually influences a lot of State legislatures, because 
States are in such serious competition with each other, 
especially neighboring States, over bringing business in.
    Your State, Washington, my State, California, compete at a 
very high level to bring very serious quality jobs to their 
communities, and those States are providing really quality 
benefits to their workers.
    So, I think the argument, and Mr. Uhalde, I think, made the 
point well, is that the more that you invest in the workforce, 
the more that you invest in programs like unemployment 
insurance, the better workers feel about making the shift to 
different States, and that really, I think, in the long term, 
is what helps the economy.
    Chairman MCDERMOTT. Thank you.
    Mr. Linder will inquire.
    Mr. LINDER. Thank you, Mr. Chairman.
    I would like to take just a little time to respond to some 
of the comments made in the last series of questions.
    Our opposition, our concern about these programs is not 
because we're mean-spirited, hard-hearted, and cruel. It's that 
we think it's not helping those who need help.
    I'll give you some quotes from people who are not 
recognized as reliable Republican supporters.
    Larry Summers, Secretary of the Treasury in the Clinton 
Administration, said: ``To fully understand unemployment, we 
must consider the causes of record long-term unemployment. 
Empirical evidence shows that two causes are welfare payments 
and unemployment insurance.''
    He also said: ``Unemployment insurance extends the time a 
person stays off the job.''
    Lawrence Katz, chief economist for the Department of Labor 
under the Clinton Administration, said: ``Changes in the level 
of benefits and changes in potential length of benefits have 
substantial effects on the mean duration of unemployment of UI 
recipients.''
    He said: ``This is a surprisingly large effect. There are 
large spikes in the escape rate from unemployment at 26 weeks 
and at 39 weeks for UI recipients, spikes of similar magnitude 
at 26 weeks and 39 weeks are not apparent for UI non-
recipients.''
    ``There are times that the expiration of unemployment 
benefits typically helps the economy, forcing people to find 
work eventually.''
    The Congressional Budget Office said: ``Extending the 
duration of benefits or increasing their size means that at 
least some recipients may remain unemployed longer.''
    Those are not my feelings or quotes, those are observations 
by other people.
    Dr. Shierholz, your organization, EPI, published a 
publication January 11th of last year, which said:
    ``Because the United States is either already in a 
recession or it's headed for one, policy makers need to act now 
to craft an effective economic stimulus package to spur growth 
in job creation. Without a stimulus of sufficient magnitude, 
the U.S. economy is likely to see a decline in growth or even a 
formal recession leading to higher unemployment, declining or 
stagnant wages, and a host of other economic problems.''
    ``A package that provides $140 billion of stimulus would 
begin to reverse our economic course by creating an additional 
1.4 to 1.7 million jobs.''
    As I recall, the package that we passed was $162 billion. 
How did we do? Did we create 1.4 to 1.7 million new jobs since 
last January, or did we lose 5 million?
    Dr. SHIERHOLZ. We lost 5 million jobs since last January. 
The question is, how many would we have lost if we hadn't had 
that stimulus?
    We know that those rebate checks are not the most effective 
kind of stimulus we can do, but they're not bad, because a 
refundable rebate gets money into the hands of people who are 
likely to spend it, though we do know that the evidence shows 
that at least a third of those rebate checks were saved, and so 
that reduces the amount of stimulus that goes into the economy.
    This question that we discussed before, it's very difficult 
to say where the economy would have been without that, but we 
know it had an impact. We saw retail sales bump up around the 
time of those rebate checks. We know that there was an 
employment effect.
    So, I believe that, while we have lost 5 million jobs in 
the last 15 months, that we would have lost more had it not 
been for that.
    Mr. LINDER. Thank you.
    You also predict that we're going to have a 9.5 percent 
unemployment rate through 2010?
    Dr. SHIERHOLZ. That's right.
    Mr. LINDER. The Obama budget says it's going to be 7.9 
percent on average in 2010. Those are significant differences.
    What kind of impact will it have on the GDP?
    Dr. SHIERHOLZ. So, the CBO estimates that GDP is going to 
be growing at 7 percent below its potential for 2009 and 2010, 
and at 5 percent below its potential in 2011. That's a----
    Mr. LINDER. My question is----
    Dr. SHIERHOLZ [continuing]. Trillion dollar difference.
    Mr. LINDER [continuing]. What impact on GDP will the 
difference between 9.5 percent unemployment and 7.9 percent 
unemployment have?
    Dr. SHIERHOLZ. Oh, that's an interesting question.
    I don't know exactly. It will be--what is 9.5 unemployment 
versus 7----
    Mr. LINDER. 7.9.
    Dr. SHIERHOLZ [continuing]. 7.9 percent unemployment. It 
indicates a much larger contraction, a much larger loss of 
hours worked in the economy by productive Americans. So, it 
would have a big impact.
    I would have to think through what the actual percentage 
point was, but it would mean significantly lower growth.
    Mr. LINDER. Would you try and do that and send it to me?
    Dr. SHIERHOLZ. I would be happy to.
    Mr. LINDER. Thank you.
    Thank you, Mr. Chairman.
    Chairman MCDERMOTT. Thank you.
    Mr. Davis of Illinois will inquire.
    Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman.
    Commissioner Thurmond, could you tell us how the 
modernization in the unemployment insurance will prevent the 
State of Georgia from having to raise taxes?
    Mr. THURMOND. Thank you, Mr. Davis.
    The most under-appreciated aspect of the UI stimulus is the 
tax relief afforded insured employers through stimulus 
investment that protects the solvency of State UI trust funds.
    For instance, Georgia, based on our amended statute, will 
receive approximately $220 million in stimulus incentive. The 
present balance of our trust fund is about $470 million. We 
expect to generate an additional $400 million in contributions 
from Georgia employers.
    We're presently paying out, on average, about $150 million 
a month. Without the stimulus, we would be in immediate threat 
within the next 6 months of becoming insolvent in our State.
    In order to generate $220 million, absent the stimulus 
incentive, we would have to raise employer taxes by 45 percent.
    Mr. DAVIS of Illinois. Thank you very much.
    Mr. Walsh, let me ask you, why are unemployment insurance 
benefits so critical, not only for workers, but also for 
communities, and especially for business?
    Mr. WALSH. That's a very good question, and my answer would 
be, the simple fact is, when unemployment benefits are paid, 
that goes to a struggling worker and their family, and most of 
the time, that is put immediately back into the economy.
    $288 a week is what the average payment in 2008 was in Iowa 
for an average unemployment check. That's not enough to live 
on.
    People are having to deplete their savings, they're having 
to sell their vehicles, and make other arrangements any way, 
borrow money from family, in most of those cases.
    This is a little bit of money that can be put into that 
family's pocket, that will generally go out immediately. They 
use it to buy groceries, they use it to pay their rent, they 
use it to buy things, goods and services in their local 
communities.
    In that way, it not only protects that family, that 
unemployed worker, but it also protects that community.
    We have a lot of small communities in Iowa that would be 
just absolutely devastated. We would have grocery stores and 
small businesses and all kinds of businesses. It was $100 
million roughly that, with extended unemployment, emergency 
unemployment compensation, that's gone into the Iowa economy 
since last July, and I can only imagine what our Iowa 
communities would look like right now if we didn't have those 
additional payments going into Iowa communities.
    Mr. DAVIS of Illinois. Thank you very much.
    Mr. Emsellem, would you say that it's fair to suggest that 
the UI provisions in the Recovery Act are probably the most 
important changes that we've seen in unemployment insurance 
since the Great Depression?
    Mr. EMSELLEM. I think, all put together, if you put the 
modernization provisions together, the benefit increase, the 
extra benefits, it's probably the most historic legislation 
since the program was created in the thirties.
    I'm not aware of anything more comprehensive that responds 
as immediately. It was there, right on time, and that was a 
huge accomplishment for this Congress. So, in that sense, too, 
it was historic.
    Oftentimes, these extensions take a long time to get going 
and to get the money out the door and all that, in prior 
Congresses. This time, it didn't work out that way, and that 
was a huge accomplishment.
    Mr. DAVIS of Illinois. Thank you very much.
    Mr. Mitternight, let me just ask you, you indicated that 
there was no direct impact that you've seen on your business in 
terms of additional orders.
    Would you concede that there might have been some indirect 
impact? Say, if a person went to the barber shop and got a 
haircut, the barber might have a little more money and might be 
able to place an order, or if we went to church and put a 
little money in the collection plate, that the preacher may 
have the money to place an order, that there would have been, 
then, some indirect impact on your business?
    Mr. MITTERNIGHT. I would concede, that, any influx of cash 
flow in any method is going to help generate more business. I 
think that's what's lacking in the economy.
    Obviously, businesspeople look for new business. We do 
commercial air conditioning, so, I can't directly answer that 
question, but in the long term, yes, it does have an impact on 
cash flow.
    The thing that concerns us is what that influx of payment 
to the--extending benefits and paying more money, what it does 
to our bottom line, when we have to come up with the money to 
pay for those things.
    Fortunately, Louisiana has a fairly solvent fund right now, 
and we've gotten to that stage for a couple of reasons, first 
off, because of some steps that were taken several years ago 
when our fund was not in a good situation, and also due to some 
of the rebuild effort that's still taking place in the New 
Orleans area and throughout parts of Louisiana, so we are still 
a little bit lagging behind the rest of the country as far as 
unemployment. Our unemployment rates are starting to rise now, 
and we are seeing the downturn.
    The thing that concerns us is some of the other elements 
that this bill tacks onto the employers to have to pay for, and 
that, somewhere down the road, we have to pay the piper for 
these things that are being passed out, we're going to go back 
to the 1970s and 1980s, when unemployment premium rates were 
increased, the maximum amount of income was raised from $4,000 
up to $7,000 now, so it comes directly out of the employers 
pocket. So, that's the thing that concerns us.
    Mr. DAVIS of Illinois. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman MCDERMOTT. Thank you.
    Mr. Lewis of Georgia will inquire.
    Mr. LEWIS. Thank you, Mr. Chairman.
    Commissioner Thurmond, and maybe all members of the panel, 
is there anything more that Congress could do to make it easier 
for States to distribute UI benefits to unemployed workers? We 
may have a supplement bill coming down the pike.
    So, is there something that you would recommend that we do 
to make it easier, to make it simple, to make it a little more 
convenient?
    Mr. THURMOND. Thank you, Congressman, for the question.
    First, let me, before I state that, let me reiterate how 
appreciative we are of the work that has already taken place, 
and the great benefits that have been provided to the citizens 
of Georgia.
    The biggest challenge that we face right now is 
implementing the State extended benefit component. Beyond 
regular UI benefits, Tier 1 and Tier 2, you all, through your 
great wisdom, and I support it, provided funding for States to 
trigger into the State extended benefit programs.
    This program in Georgia was last operationalized in the 
early 1980s, and at that point, it was primarily a paper 
system, and since then, through the support of the U.S. 
Department of Labor and other entities, we've gone to an 
electronic system, and Georgia, as well as some other States, 
are being challenged to operationalize this paper system in an 
electronic environment.
    Our goal is your goal, which is to get the benefits to the 
people who qualify as quickly as possible.
    Some of these provisions are going to make it extremely 
difficult to operationalize this component of the program, and 
that is one thing that we would like to at least have some 
discussion or encourage the Congress to look at, so that we 
could more quickly provide support for the people who need it 
the most, and the people who will qualify for this component 
are individuals who will have exhausted State benefits, Tier 1 
and Tier 2 of the extended benefits, and consequently, would be 
the people in the greatest need of support.
    Mr. LEWIS. Well, I'm sure you will have the support of most 
Members of this Committee. The chairman has been a real warrior 
in this whole area.
    Would others like to respond?
    Mr. WALSH. Yes, just very quickly.
    I would echo what Commissioner Thurmond said in thanking 
you. The biggest factor that's made it easier for us this time 
around is the fact that there were administrative dollars 
attached, and there's been full funding for the contingency 
funds, and that has helped us tremendously in trying to 
implement these changes.
    Obviously, the biggest barrier that we have in implementing 
these changes effectively is the fact, and there was discussion 
on it earlier, that in Iowa, we're on a legacy mainframe 
system, an older computer system that we're trying to 
modernize, and that's a very difficult task to do during times 
like these.
    The one other minor thing that I would point out that would 
be, I think, helpful from a State's perspective, is that with 
the emergency unemployment compensation, there was a 
requirement that there was a 1.5 times high quarter in the base 
period. That's a different standard than we use in the State. 
We use 1.25 times in the State.
    To have to recalculate the benefits, especially when you're 
on a legacy mainframe system, is very difficult, and we would 
submit that a more efficient and fairer way to do this would be 
just to allow the State to use their standard that they have 
adopted, in our case being the 1.25.
    In Iowa, the fact that there was a different requirement 
put on for the emergency unemployment compensation resulted in 
the denial of about almost 900 Iowans from receiving the 
emergency unemployment compensation, and these are people who, 
they don't understand.
    They understand they were entitled to unemployment, they 
understand that there was an emergency bill passed to extend 
those benefits. Then it's hard to explain to them why they're 
denied at that point in time.
    The biggest factor is that it's just, it's extremely 
inefficient for us, and the hours of programming time that went 
into going back and trying to make that fix was extremely 
challenging for us, to say the least.
    Mr. EMSELLEM. I would echo the comments. The 1.5 times 
requirement, the extra requirements imposed on people 
collecting emergency unemployment benefits under the Federal 
law, compared to what's in State law. There are also extra work 
search requirements.
    So, for folks who are collecting these extended benefits, 
even though they've been out of work for this period of time, 
and we're reaching record levels of unemployment, they've got 
to produce even more evidence of work search.
    This whole program was basically gutted in the 1980s, and 
there's a real opportunity now, the same reason why all these 
States, these 13 States are not tapping into the extra money 
because it requires a change in the formula to go for--to adopt 
a formula that says at 6.5 percent, we'll take the extra 
benefits.
    All that is a function of what's wrong with this extended 
benefits program, all these things we're discussing, but 
there's a real opportunity here to take another look at fixing 
the extended benefits program, if we're going to keep using it.
    I would also say you've got the appropriation coming up. 
That's a huge issue, because yes, the State has got a big chunk 
of money, really, really needed, $500 million.
    The reason why the States are in the situation they're in 
now is because they built up really fast in response to the 
last recession, they staffed up, they did everything humanly 
possible to get benefits out the door, and then the 
administrative money went back down really quickly after the 
recession was over, so they had to cut back and retrench, and 
there was no money there to sustain a serious infrastructure to 
pay out the benefits.
    So, obviously, the appropriation is huge, and then way more 
leadership, as much leadership as possible from the Department 
of Labor and all the good States, to figure out all the 
mechanics of processing benefits better--the phone systems, the 
Internet systems.
    It's an entirely new age of processing benefits, the 
computers. There's a real opportunity to join forces to figure 
that out.
    Right now, a lot of the States are pretty much left on 
their own to figure these issues out, so with more 
appropriation, with more help from the Federal, from the Labor 
Department, there's a chance to really build a stronger system 
that will sustain itself come next recession. That's really the 
important thing to be looking toward.
    Mr. LEWIS. Thank you, Mr. Chairman.
    Chairman MCDERMOTT. I don't like to hear there's going to 
be another recession, but nevertheless, Mr. Meek will inquire.
    Mr. MEEK. Thank you very much, Mr. Chairman.
    I'm really pleased, once again, on the second round of 
questioning, that we're having this discussion and panel of 
witnesses. I want to thank you for coming before Congress. I 
think it's a great honor to do so, and especially today.
    We're talking about people that were working, that would 
like to work, that have become victims of this economy that 
we're in now. As public servants, we try to assist these 
individuals, many of whom are our constituents, who are trying 
to pull their own weight.
    This unemployment insurance modernization provision that we 
have now, and I think it's very interesting, and Commissioner, 
I want to thank you for bringing to light the Governor's 
comments.
    The chairman had the Governor's comments, and when he 
signed the legislation in Georgia, of saying that this is to 
take the burden off of Georgia businesses, and I'm in the 
Southeast United States too, and my family is from Tallahassee, 
so we step on the same red clay y'all step on in Georgia, plus 
my cousin is Representative James from Montezuma, Florida, I 
mean Montezuma, Georgia, and so we've spent many a day running 
through those peach fields.
    I'm going back to the serious reason why we're here. I want 
you to talk a little further, because I'm really trying to 
understand why, Mr. Lewis, that the State of Florida would 
refuse to pass the necessary legislation to take advantage of 
not only the $444 million that we have put forth to be able to 
help us in these very hard economic times, but also not even 
look at the provision of saying that we can pass this 
legislation, these provisions for now, and if we find that 
they're not useful, later, then we can do away with those 
provisions.
    Now, I think that that's a win-win situation, even if it's 
a philosophy issue, and in Florida, just like Georgia and many 
other States like it, especially States that somewhere touch 
the coast of the eastern seaboard, we have a lot of part-time 
workers.
    We have folks that are popping sheets and waiting on people 
and doing a number of other things, who have been laid off 
because of the economic slowdown. When we had our earlier 
witness, Mr. Chairman, I talked about those that had full-time 
jobs, their benefits have depleted or they got that part-time 
job to be able to help, and now they've lost their part-time 
job, and they find themselves in the situation where they're 
not able to take advantage of what they're reading in the paper 
that we have made available to them.
    So, I'm asking this entire panel to help me with the 
arguments, because there's legislation filed in the State 
legislature in the House, and also in the Senate.
    When you run into these kinds of situations, and folks 
start saying, ``Well, I'm more loyal to my own personal 
principle,'' meanwhile, they're not maxed out on their credit 
cards, they're not waiting in line for a job, they know that 
they're going to have employment tomorrow.
    So, it's mighty comfortable when you're under the amber 
lights in an air-conditioned building versus someone who's 
trying to figure out how to make ends meet.
    Help me with the arguments. That's what I'm asking the 
panel. I'm at that point now.
    Mr. THURMOND. Thank you.
    First of all, Congressman Meek, I spoke with Representative 
James just last week, and he's very proud of your 
accomplishments, and I'll give him your best as soon as I get 
back to Georgia.
    In Georgia, the majority party is the Republican party, 
they control the House, the Senate, and the Governor's Mansion. 
I'm a three-term elected Democratic labor commissioner.
    So, when we were presented with this opportunity, the 
challenge was clear. We could not pass it unless we had 
bipartisan support.
    During my time in the legislature, dealing with some of 
these same issues, quite frankly, back in the late 1980s, when 
Mr. Linder and I served together, so how do you--the question 
is, how do you do it?
    The first step was to really focus the attention on where 
the attention should be, and that is on men and women who have 
lost their jobs through no fault of their own. Number one, if 
you weren't working; number two, unless you lose your job 
through no fault of your own, you can't qualify.
    I've said it time and time again. If we can't help working 
men and women in this country, then we got a serious problem. 
Now, how do you do it?
    The first thing was to move beyond the ideologies, to be 
quite frank, and look at the specific issues.
    One of the key issues that we had to address with the 
Governor and the House and the Senate, I did personally, was 
the cost, the short-term and long-term cost of part-time worker 
amendments, as well as the extended training benefit.
    Back when I was first elected, even from the House, there 
were issues concerning the cost of allowing part-time workers 
to receive benefits.
    It's an urban legend in many of these States that if a 
part-time worker loses his or her job, he or she can't qualify 
for UI benefits. That's just wrong.
    There are millions of Americans who were working part-time, 
who have been laid off, who are receiving benefits today, all 
across this country. That was a difficult realization to get 
through.
    The only change that this modernization amendment allows is 
that a part-time worker who was otherwise monetarily qualified 
would be able to, in the work search test, look for another 
part-time job.
    In Georgia, in 2008, this is what we presented to the 
legislature. There were 792 Georgians who lost their jobs, who 
were working part-time when they were laid off. Of those, only 
209 were denied benefits, because they refused to look for 
full-time work.
    So, the change, Mr. Chairman, is simply to allow a person 
who was working part-time to, during their work search, look 
for another part-time job.
    It's an urban legend that this changes in a really 
fundamental way the status of part-time workers. As a matter of 
fact, whether you're full-time or part-time has absolutely 
nothing to do with whether or not you can basically qualify for 
unemployment insurance benefits. It is a monetary 
determination.
    In Georgia, you have to have earned, I think it's $1,334 in 
two of the last five quarters. It has nothing to do with 
whether or not you worked eight hours a day or 4 hours a day or 
2 hours a day.
    Once we were able to explain that, and to tell the 
employers, you are paying taxes on your part-time employees. If 
you're paying taxes on the employee, then why in the world 
shouldn't the employee be able to draw the benefit if he or she 
loses a job?
    We were proud that the chamber representatives, business 
advocates, after we answered the question, ultimately came and 
supported the legislation, and played a big role, quite 
frankly, in getting it passed in the House and the Senate.
    The first thing was, what is the true cost of the proposal 
on extended--and by the way, based on our projections, the cost 
of this particular component of the Modernization Act in 
Georgia is $300,000 a year.
    Mr. MEEK. Mr. Chairman, I know we're out of time, but I'm 
pleased that we have this panel here, because it's very timely, 
especially in Florida's case.
    We have a number of folks that are out of work. Many of 
these individuals, the only jobs that are out there are part-
time jobs, and especially if they came from--even if they came 
from a full-time job, people just want to go to work. They want 
to be able to assist their families.
    That's one of the reasons why, Mr. Chairman, the President 
flew down to Fort Myers, Florida, because of the unemployment 
rate there. We have a lot of service workers that are there, 
that are working part time.
    Commissioner, I want to thank you for helping me make 
additional arguments. I know I've entered a letter in the 
record for the Committee, but you've helped me come up with 
more justification on why Florida, a neighboring State, should 
take advantage of this.
    What we've also heard from some of our witnesses, the 
dollars that they'll receive in unemployment benefits while 
they're looking for another job will be able to assist 
businesses and help our economy and help the State with 
revenue, and those dollars are not used, from previous 
testimony here today, are not used to go into some sort of 
savings account or some sort of IRA. They're going directly 
into the cost of living that eventually will save jobs and 
create jobs to help our economy bounce back.
    So, again, Mr. Chairman, thank you.
    Chairman MCDERMOTT. We thank all the witnesses.
    I would assure those of you who raised questions about 
things that were not changed, at least one I can remember we 
got changed out of the House, but we had to give it back to the 
Senate.
    So, the list of things that we intend to try and fix in 
this system is not done yet, and we'll see you again.
    Thank you very much.

    [Whereupon, at 12:33 p.m., the Subcommittee was adjourned.]

    [Questions for the Record follow:]

    Questions from Ranking Member Linder to Dr. Shierholz follow

    [GRAPHIC] [TIFF OMITTED] 50601A.040
    

                                 

    Questions from the Subcommittee to Mr. Uhalde follow

    [GRAPHIC] [TIFF OMITTED] 50601A.041
    
    [GRAPHIC] [TIFF OMITTED] 50601A.042
    
    [GRAPHIC] [TIFF OMITTED] 50601A.043
    
    [GRAPHIC] [TIFF OMITTED] 50601A.044
    

                                 

    Following the hearing, Ranking Member Linder inserted an additional 
statement for the Record

[GRAPHIC] [TIFF OMITTED] 50601A.045

[GRAPHIC] [TIFF OMITTED] 50601A.046


                                 

    [Submissions for the Record follow:]

Dear Chairman McDermott and Ranking Member Linder:
    The U.S. Chamber of Commerce, the world's largest business 
federation representing more than three million businesses and 
organizations of every size, sector, and region, appreciates this 
opportunity to provide a statement for the record as part of the 
committee's ongoing oversight of unemployment insurance (``UI''), 
especially during a time of economic uncertainty. For the reasons 
described below, the Chamber opposes any move to force States as a 
condition of receiving special incentive distribution payments to 
permanently expand the eligibility of individuals to receive UI 
compensation, which would create a disincentive for individuals to 
return to work, hamper job creation, and increase the tax burden on 
employers.
    The American Recovery and Reinvestment Act (``Recovery Act'') 
reserved $7 billion in the Federal Unemployment Account (``FUA'') for 
States that enact permanent legislative changes to ``modernize'' their 
UI systems. States are eligible to receive one-third of the State's 
share of the $7 billion by adopting an alternative-base period, and the 
remaining two-thirds by enacting two of the four provisions outlined in 
the bill. The four provisions include: prohibiting the denial of UI 
compensation to individuals who limit their availability to only part-
time work; expanding UI eligibility to individuals who quit work for a 
``compelling family reason''; extending the length of benefits to 
individuals who are participating in training programs; and adding 
dependents' allowances to the amount of UI compensation. Further, the 
Recovery Act provides $500 million in administrative funding, including 
amounts for States' administrative costs in dealing with the influx of 
the additional individuals who would be eligible for compensation.
    The Chamber believes that forcing States to adopt laws that do not 
disqualify a worker from UI compensation for separation of employment 
if it is for a ``compelling family reason'' is an egregious change to 
the UI system. This drastic change expands eligibility for UI 
compensation to an increased number of individuals who were not laid 
off because of tough economic times. Rather, this is an effort to force 
States through Federal requirements to alter and expand their UI 
programs when previous proposals at the State level failed because 
stakeholders readily agreed that the system and its eligibility 
requirements were already properly balanced without such expansions. 
These changes will greatly undermine the original goal of UI to provide 
assistance to workers who lose their job through no fault of their own 
in connection with their work, and moves the UI system from a temporary 
insurance program for employees, to a Government benefit that 
compensates for unemployment.
    Not only does expanding UI coverage under the Recovery Act directly 
conflict with the original tenets of the UI system, it prevents 
economic recovery. Further expanding and extending benefits at this 
point in the recovery actually discourages individuals from re-entering 
the workforce because they continue to receive unemployment 
compensation. Businesses will see a dramatic increase in taxes needed 
to pay for the expansion and extension of benefits, preventing them 
from creating new jobs. Further, forcing States to adopt certain 
expansions in order to receive additional Federal funds will hamper 
States' future efforts to improve their systems.
    The Chamber is equally concerned with how Congress intends to 
replenish the FUA, from which the $7 billion in incentive money will be 
distributed. Due to the $9 billion that States have already borrowed to 
shore up their systems as a result of the increase in UI claims and the 
money being spent for emergency and extended benefits under the 
Recovery Act, the U.S. Department of Labor projects that over $16 
billion will need to be borrowed from the General Revenue in FY 2010 in 
order to eliminate the deficit in UI accounts. This will place an extra 
burden on other Government programs that rely on such funding and slow 
our economic recovery.
    In addition, the President's FY 2010 budget projects Federal and 
State unemployment insurance tax receipts to increase from $44 billion 
in 2009 to $53 billion in 2010, and then to jump to $67 billion by 
2013, a 52% increase from 2009.
    Borrowing against the General Revenue, coupled with a projected 52% 
increase in UI tax receipts over four years, signals only one thing:a 
greater tax burden on employers.
    Employers are likely to be asked to pay increased Federal 
Unemployment Tax Act (``FUTA'') taxes in order to re-fill the FUA and 
meet the President's budget projections. The FUTA tax is entirely paid 
by employers, as there is no Federal payroll withholdings from 
employees' wages. In addition to the increase in the FUTA tax, State UI 
taxes will also likely increase in part due to federally required 
expansions. In short, despite the uncertainty in the economy, employers 
of all sizes are likely to be compelled to pay the entire amount needed 
to restore the FUA to appropriate levels.
    Businesses across the country that are simply trying to survive in 
these difficult times want to improve their economic position and be 
able to hire new employees and do their part to revive the economy. To 
stimulate economic recovery across the country we should be investing 
in measures to encourage individuals to actively seek and accept work, 
eliminate barriers to employment, and stimulate the creation of new 
jobs. The expansion of UI eligibility appears to move in the opposite 
direction on all of these key points with dramatic increases in taxes 
and the permanent continuation of UI entitlement expansions.
    The federally imposed UI entitlement expansions and increases in 
the FUTA tax will delay economic recovery and will stifle the ability 
of businesses to grow. The Chamber urges you to consider these 
important concerns and looks forward to working with you on this 
important issue.

Sincerely,

Randel K. Johnson

Vice President, Labor, Immigration & Employee Benefits

U.S. Chamber of Commerce

Cc:  Members of the Subcommittee on Income Security and Family Support

                                 
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