[Senate Hearing 111-723]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 111-723
 
                      HOW TO CREATE AND SAVE JOBS 

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

                                HEARING

                                before a

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            SPECIAL HEARING

                    JANUARY 21, 2010--WASHINGTON, DC

                               __________

         Printed for the use of the Committee on Appropriations


       Available via the World Wide Web: http://www.gpo.gov/fdsys

                               __________

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                      COMMITTEE ON APPROPRIATIONS

                   DANIEL K. INOUYE, Hawaii, Chairman
ROBERT C. BYRD, West Virginia        THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            ARLEN SPECTER, Pennsylvania
TOM HARKIN, Iowa                     CHRISTOPHER S. BOND, Missouri
BARBARA A. MIKULSKI, Maryland        MITCH McCONNELL, Kentucky
HERB KOHL, Wisconsin                 RICHARD C. SHELBY, Alabama
PATTY MURRAY, Washington             JUDD GREGG, New Hampshire
BYRON L. DORGAN, North Dakota        ROBERT F. BENNETT, Utah
DIANNE FEINSTEIN, California         KAY BAILEY HUTCHISON, Texas
RICHARD J. DURBIN, Illinois          SAM BROWNBACK, Kansas
TIM JOHNSON, South Dakota            LAMAR ALEXANDER, Tennessee
MARY L. LANDRIEU, Louisiana          SUSAN COLLINS, Maine
JACK REED, Rhode Island              GEORGE V. VOINOVICH, Ohio
FRANK R. LAUTENBERG, New Jersey      LISA MURKOWSKI, Alaska
BEN NELSON, Nebraska
MARK PRYOR, Arkansas
JON TESTER, Montana

                    Charles J. Houy, Staff Director
                  Bruce Evans, Minority Staff Director
                                 ------                                

 Subcommittee on Departments of Labor, Health and Human Services, and 
                    Education, and Related Agencies

                       TOM HARKIN, Iowa, Chairman
DANIEL K. INOUYE, Hawaii             ARLEN SPECTER, Pennsylvania
HERB KOHL, Wisconsin                 THAD COCHRAN, Mississippi
PATTY MURRAY, Washington             JUDD GREGG, New Hampshire
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
RICHARD J. DURBIN, Illinois          RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              LAMAR ALEXANDER, Tennessee
MARK PRYOR, Arkansas
                           Professional Staff

                              Erik Fatemi
                              Mark Laisch
                            Adrienne Hallett
                             Lisa Bernhardt
                       Bettilou Taylor (Minority)
                      Sara Love Swaney (Minority)

                         Administrative Support

                              Teri Curtin























                            C O N T E N T S

                              ----------                              
                                                                   Page

Opening Statement of Senator Tom Harkin..........................     1
Statement of Hon. Chet Culver, Governor, State of Iowa...........     3
    Prepared Statement of........................................     9
Statement of Lawrence Mishel, Ph.D., President, Economic Policy 
  Institute......................................................    21
    Prepared Statement of........................................    24
Statement of Jerry D. Weast, Ed.D., Superintendent, Montgomery 
  County Public Schools..........................................    35
    Prepared Statement of........................................    37
Statement of Marlena Sessions, Chief Executive Officer, Workforce 
  Development Council of Seattle-King County.....................    41
    Prepared Statement of........................................    43
Prepared Statement of the American Federation of State, County 
  and Municipal Employees........................................    61
Prepared Statement of Jerry S. Heppes............................    67


                      HOW TO CREATE AND SAVE JOBS

                              ----------                              


                       THURSDAY, JANUARY 21, 2010

                           U.S. Senate,    
    Subcommittee on Labor, Health and Human
     Services, and Education, and Related Agencies,
                               Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:37 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Tom Harkin (chairman) presiding.
    Present: Senators Harkin, Murray, Reed, Pryor, Cochran, and 
Alexander.


                opening statement of senator tom harkin


    Senator Harkin. Good morning. The Subcommittee on Labor, 
Health and Human Services, and Education, and Related Agencies 
of the Appropriations Committee will come to order.
    This morning, our hearing is about jobs and about what this 
subcommittee or its jurisdiction needs to be looking at in 
terms of getting our appropriations bill together for the next 
year or what we ought to be looking at, what we need to do to 
make sure that the gains we made under the so-called stimulus 
bill, the Recovery Act of last year, that we don't lose those 
gains and, in fact, build upon them.
    I will just have a short opening statement, and then we 
will turn to our witnesses.
    From all indications, the U.S. economy is showing some 
growth, but it is still a recession to 27 million Americans out 
there that are underemployed or unemployed. Despite the growth 
in the economy, businesses are reluctant to hire.
    A lot of people are asking a very simple question. ``If you 
can bail out Wall Street, why can't you help out on Main 
Street?'' A very poignant question. It needs to be answered. So 
the purpose of this hearing, as I said, is to discuss what the 
Federal Government can and should do in the short term to get 
people back to work and to save those jobs that were kept going 
under the Recovery Act.
    As I said earlier, we have two problems. We have the short-
term problem, but we also have a long-term structural problem. 
Some of those changes--for instance, improving education, 
reforming healthcare, fostering green technologies, other 
things--will take a longer period of time, and I look forward 
to the debate on how we accomplish that in the HELP Committee, 
which I also chair. But the focus here is that people are 
hurting now, and we need to create new jobs now, in the months 
immediately ahead.
    Some people say, well, we threw all that money out there in 
the Recovery Act, and it didn't do any good. Unemployment went 
up. Well, I couldn't disagree more.
    Most economists--and we will hear from some of them this 
morning--give the Recovery Act a major share of credit for 
jump-starting the moribund economy. There is no question in 
anyone's mind that our economy and the unemployment rate would 
be far worse if Congress had not acted boldly by passing a 
major jobs package just a year ago.
    According to the Economic Policy Institute (EPI), the 
Recovery Act saved an estimated 1 million to 1.5 million jobs 
last year, and the State Fiscal Stabilization Fund (SFSF), 
appropriated by this subcommittee, saved or created almost 
400,000 jobs.
    But the problem--and we will hear about it poignantly from 
our first witness this morning, Governor Culver--is that State 
and local revenues always lag behind the national economy when 
we are recovering from a recession. And State and local 
governments are facing huge shortfalls in revenue. Indeed, some 
States expect a budget gap that will be more than one-third the 
size of their total budget.
    Meanwhile, the Congressional Budget Office (CBO) says that 
the benefits of the last Recovery Act will peak about the first 
half of this year, and after that, the effects will diminish. 
Now that means that many of those jobs that we saved will be 
endangered unless we do something and do something quickly.
    Now there are a lot of specific things we can do. We will 
talk about some of those this morning. Everything from school 
renovation and construction to green jobs, to public service 
jobs, to summer youth employment--all of that is part of the 
picture that we need to look at in terms of the short-term 
approach. So we will be exploring all of those ideas and 
perhaps more. I am always looking for suggestions on what we 
should be doing.
    And with that, I will leave the record open at this point 
for an opening statement by Senator Cochran, and I would yield 
to Senator Murray, if Senator Murray had an opening statement.
    Senator Murray. Mr. Chairman, thank you very much for 
holding this hearing.
    I think we are at a critical time, as many people we 
represent are waking again this morning worried about whether 
or not they are going to have a job, be able to get a job, or 
whether they have the training for the kinds of jobs that are 
out there.
    We have an opportunity, I think, as we put together a jobs 
package, to really focus on making sure that the people in this 
country have the capability of getting the jobs of the future 
that we know are coming, but they are hard to find today, and 
they are especially hard if you don't have the skills for them. 
So I really appreciate that we are having this hearing and look 
forward to hearing from all of our witnesses.
    Senator Harkin. Thank you very much, Senator Murray.
    Well, our lead-off witness this morning is Governor Chet 
Culver of my home State of Iowa. Governor Culver became 
Governor, the 40th Governor in January 2007 after serving two 
terms as Iowa's Secretary of State.
    He began his career as an environmental and consumer 
advocate in the Iowa attorney general's office. After receiving 
his master's degree, he then taught government and history at 
Roosevelt and Hoover High School in Des Moines, where he also 
coached football and basketball.
    He has a remarkable record since assuming the governorship, 
raising teacher pay to the national average, making preschool 
available to thousands of Iowa children, improving the State's 
fiscal position, overseeing the rebuilding of Iowa after the 
State was hit by record tornadoes and historic floods, during 
which time Governor Culver provided outstanding leadership for 
all our fellow Iowans.
    Last year, he created what is now known as I-JOBS, an $830 
million initiative to rebuild infrastructure, create jobs, and 
stimulate the economy. And so, I think it is wise for us to 
hear from a Governor of a State about what is happening in the 
States, what kind of problems they are facing coming up this 
year.
    A lot of States, their legislatures are going to meet, some 
of them in very short sessions, and they have to be looking 
ahead to next year's budget. And so, they need some indication 
from us about what we are going to be doing so that they can 
make their budget decisions in our States.
    So I am just very pleased and proud to introduce a life-
long friend and my Governor, Governor Chet Culver.
STATEMENT OF HON. CHET CULVER, GOVERNOR, STATE OF IOWA
    Governor Culver. Thank you very much.
    Chairman Harkin, Ranking Member Cochran, Senator Murray, 
and members of the subcommittee, I really appreciate the 
opportunity to be here today, and it is an honor and privilege 
to talk to you about the steps that we can take to assist 
displaced workers, create and retain jobs in America.
    Before I move on to my testimony, I want to take a moment 
to thank the chairman of this subcommittee for all of the hard 
work he has done on behalf of Iowa. Our State has no greater 
champion than Senator Harkin, whether it is his work in 
shepherding through the last two farm bills, providing money to 
modernize our schools through the appropriately named Harkin 
grants, or the work he has done on healthcare reform. Tom 
Harkin has fought every day on behalf of all Iowans, and the 
people of Iowa are grateful for his service.
    So thank you very much, Senator.
    As you know, this worldwide economic downturn has been 
challenging to the States, every county, and municipalities 
across the country. No one has been immune from these economic 
realities that we are dealing with. According to the Center for 
Budget and Policy Priorities, 48 States still face shortfalls 
in current fiscal year 2010 of nearly $193 billion, or 28 
percent of State budgets, and project gaps of $350 billion for 
fiscal year 2011. These are the largest shortfalls on record.
    When the recession began in December 2007, Iowa's 
unemployment rate was 3.7 percent. Today, it is 6.6 percent, 
still one of the lowest in the United States. However, right 
now, there are roughly 110,000 Iowans drawing unemployment 
benefits, nearly triple where they were just 2 years ago. So we 
have gone from about 35,000 to about 110,000 people in the last 
24 months collecting unemployment.
    One of the most disturbing trends we are seeing in Iowa is 
the long-term unemployment situation. Currently, nearly 40,000 
Iowans are on extended unemployment benefits, which means they 
have exhausted their State benefits which usually last 26 
weeks. Many of these workers have now collected more than a 
year's worth of benefits. We attribute this to the length and 
the depth of the recession.
    So, too many Iowans right now are simply having trouble 
connecting with work. This includes many former manufacturer 
workers whose jobs have gone overseas. And unfortunately, too 
many plant closings continue. In fact, just this week, the 
residents of Sioux City, Iowa, have been informed of the 
closing of the John Morrell packing plant there, which could 
result in 1,400 jobs lost.
    So because of these economic realities, I believe, as 
elected officials, we must redouble our efforts and focus on 
job retention and job creation to help those looking for work. 
Here are a few steps that I believe we can take to assist 
displaced workers and create and retain jobs.
    Number one, it is critically important to extend the 
Federal Emergency Unemployment Compensation program until our 
economy is able to make a meaningful recovery. Ideally, Federal 
benefits should be continued through the end of 2010 to give 
our economy time to make a significant recovery and create more 
jobs.
    Number two, my fellow Governors and I appreciate the fact 
that Congress is considering additional action to help States 
fully recover from this worldwide economic downturn. So I have 
with me today a letter signed by 23 of my colleagues asking for 
your assistance in regards to extending the increased Federal 
Medicaid Assistance Program (FMAP), and the SFSF.
    I would ask that a copy of this letter be put into the 
record.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    Governor Culver. Continuation of FMAP and SFSF that were 
enacted as part of the American Reinvestment and Recovery Act 
(ARRA) would be beneficial to all of the States. The government 
services stabilization funds, which made up nearly 20 percent 
of each State's total allocation, were extremely helpful 
because of the flexibility. The education stabilization funds 
made up the rest of our allocation.
    In Iowa, we have been able to use these flexible government 
services funds in a variety of ways. We have spent money to 
give to counties through Iowa for infrastructure repair, public 
safety, nursing home inspection, elderly wellness, community 
college infrastructure improvements. The Iowa National Guard 
has benefited from these funds. Our correctional facilities and 
other vital services have also benefited.
    A greater percentage of SFSF funds toward government 
services in the future would really help. If we could bump that 
percentage up to 25 to 50 percent versus 18 percent in the last 
allocation, that would allow us to do more in terms of job 
creation. This flexibility will also ensure that these dollars 
are able to be used more quickly for the purposes in which they 
were intended when ARRA was passed--to maintain and create 
jobs.
    Speaking of ARRA, in Iowa, we have estimated--we have 
received about $2.5 billion. We are moving these funds in an 
effective and efficient manner. Of the $2.5 billion that we 
have been given, the State has obligated, appropriated, or 
disbursed $1.75 billion, or about 70 percent of the funds. We 
have disbursed nearly $1.2 billion, or almost 50 percent of 
these funds.
    We are moving quickly in order to expedite our economic 
recovery, which is consistent with the overriding goals of 
ARRA. ARRA has had a positive impact in Iowa during this 
economic downturn. In fiscal year 2010, we are using a total of 
$591 million in these funds, including $207 million for FMAP, 
$321 million for SFSF for education, and $63 million in SFSF 
for government services.
    In Iowa, these funds have helped keep our communities 
vibrant. They have also allowed us to keep our commitment in 
certain priority areas, including education and healthcare, 
especially for kids. In the first quarterly ARRA report filed 
in October 2009, Iowa reported that 5,323 jobs were either 
created or saved with these funds. In the area of education 
alone, there were 2,208 jobs that were saved.
    These jobs were throughout our education system, K-12, 
community college, and our institutions of higher education. 
They were not only teaching jobs, but librarians, janitors, 
secretarial staff, and other administrative staff that keep our 
schools moving every day.
    Since not every school district faces the same challenges, 
flexibility is the key to making sure SFSF funds are used for 
maximum effectiveness. The education stabilization funds run 
straight through the Iowa Department of Education to the local 
school districts, and we have 361 of them. That type of direct 
allocation allows local school districts the ability to make 
important decisions on how to best use these funds.
    And it is not just in education that ARRA is working in 
Iowa. Iowa has been recognized as a national leader in moving 
ARRA funds quickly in transportation. The United States House 
of Representatives Committee on Transportation and 
Infrastructure has ranked Iowa as one of the most effective 
States in putting these highway capital fund dollars to work 
quickly to create and retain jobs.
    As a matter of fact, as soon as the bill was signed by 
President Obama last February, Iowa contractors started calling 
back employees and hiring new ones. So it has had a tremendous 
impact in our State in a very positive way in terms of job 
creation and job retention. We have also helped save more than 
1,200 construction jobs across our State because of these 
funds.
    Finally, my third point relates to creating and retaining 
the green-collar jobs of the future. In Iowa, we are leading 
the way in renewable energy. Iowa is second in the Nation for 
installed wind capacity with currently 3,000 megawatts. And in 
2009, we produced 15 percent of all of our power from renewable 
sources.
    Iowa is also national leader in the manufacture of the 
three component parts of a windmill--turbines, towers, and 
blades. Nine wind energy companies have helped us create 2,300 
new manufacturing jobs in the State of Iowa since 2005. And 
more than 200 Iowa-based small businesses are now in the supply 
chain for these wind energy companies.
    If Iowa and other States are going to create more of these 
green-collar jobs in the future, extension of the wind energy 
tax credit, which expires at the end of 2010, is vital. Beyond 
wind energy, Iowa is first in the Nation in production of both 
ethanol and biodiesel. We now have 34 ethanol refineries and 14 
biodiesel refineries in operation statewide.
    So our biofuels industry is now helping to create jobs in 
manufacturing, agriculture, transportation, construction, and 
many other job sectors across the State. In fact, according to 
the Iowa Renewable Fuels Association, in 2008, biofuels 
production supported nearly 83,000 jobs throughout Iowa's 
economy and generated nearly $600 million in State tax revenue.
    However, if we want to continue to create jobs in our bio-
based economy in the future, I urge Congress to immediately 
extend the biodiesel tax credit. Unfortunately, this important 
tax credit expired on December 31 of last year. A multi-year 
extension of this tax credit is needed, and I hope it is a 
legislative priority for Congress.
    Because of the significance of this issue to my State and 
to this industry, today I have sent a letter to President 
Obama, urging his support for quick action on this vital 
extension.
    In closing, I respectfully ask members of this subcommittee 
and members of Congress to move forward with a jobs bill 
quickly. Time is of the essence, and as Senator Harkin noted, 
most Governors and State legislatures are currently in the 
process of putting together our fiscal year 2011 budget.

                           PREPARED STATEMENT

    In my case, we will adjourn sometime in April. We will be 
done with the budget discussion by the end of March or sooner. 
So if Congress is going to move forward with any additional 
SFSF, it would be helpful for our citizens to know as soon as 
possible.
    So, Chairman Harkin, members of the subcommittee, I thank 
you very much for giving me this opportunity to be here today, 
and I am happy to answer any questions at this time.
    [The statement follows:]
               Prepared Statement of Governor Chet Culver
    Senator Harkin, Ranking Member Cochran, and members of the 
subcommittee, thank you for allowing me to be here to today to speak to 
you about the job situation in Iowa, our State budgetary conditions and 
the need to continue the State-Federal job creation initiatives that 
were part of the American Recovery and Reinvestment Act (ARRA).
    Before I move on to my testimony, I want to take a moment of 
personal privilege and thank the chairman of this subcommittee for all 
the hard work he has done on behalf of Iowa. Our State has no greater 
champion than Senator Harkin. Whether it is his work in shepherding 
through the last two farm bills or the work he has done on healthcare, 
Tom Harkin has fought on behalf of all Iowans. Through his work on this 
subcommittee, Senator Harkin has helped modernize hundreds of Iowa 
schools with the appropriately named ``Harkin Grants''. In addition he 
has helped fund vital research at the National Institutes of Health 
that will help keep our Nation on the pathway to greater health. I 
simply do not have enough time to list all that you have done for our 
State, but on behalf of all Iowans, I simply want to say ``thank you''.
    Like the members of this subcommittee, my focus as Governor, is on 
jobs, jobs, jobs: attracting them, maintaining them, creating them, and 
helping those without them find them. I have made job creation and 
retention my top priority during our legislative session this year.
                              arra in iowa
    The worldwide economic downturn has been a challenge to nations, 
States, counties, and municipalities alike--very few have been immune 
from these significant economic difficulties. I want to thank the 
Congress for enacting ARRA in February of last year. The need for ARRA 
and the inclusion of funding for States was clear. It's hard to 
imagine, but economic conditions in States could be even more 
challenging had it not been for the Federal Government's investment in 
States through ARRA. In Iowa, we are putting these ARRA funds to work.
    In Iowa, we have estimated that $2.5 billion of ARRA funds will 
move through State government. And to address the challenges of this 
economic downturn, we are moving these funds in an effective and 
efficient manner. Of the $2.5 billion that we have estimated, the State 
has obligated, appropriated or disbursed $1.75 billion or 71 percent of 
those funds. We have disbursed nearly $1.22 billion or almost 50 
percent of the funds. We are moving quickly in order to expedite our 
economic recovery, which is consistent with the overriding goals of 
ARRA.
    ARRA has had a positive impact in Iowa even during this economic 
downturn. In fiscal year 2010, we are using a total of $591.6 million 
of ARRA funds, including $207.6 million for ARRA FMAP, $321 million for 
ARRA State Fiscal Stabilization Fund (SFSF) for education, and $63 
million in SFSF for government services.
    In Iowa, ARRA funds have helped keep our commitments to significant 
priorities, including retaining teaching positions in our schools. In 
the first quarterly ARRA report filed in October of 2009, Iowa reported 
that 5,323 jobs were either created or saved with ARRA funds. In the 
area of education, there were 2,208 jobs saved.
    These jobs were throughout our education system, K-12, community 
colleges, and our institutions of higher education. They were not only 
teachers, but librarians who provide vital learning resources to our 
students, janitors who help clean our classrooms, secretarial staff 
that help administer the schools, and cooks who provide nutritious food 
to our students.
    Since not every school district faces the same challenges, 
flexibility is the key to making sure SFSF funds are used to maximum 
effectiveness. The SFSF education funds run straight through the Iowa 
Department of Education to the local school districts. That type of 
direct allocation allows local school districts the ability to make 
important decisions on how best to use these funds.
    And it is not just in education that ARRA is working in Iowa. Iowa 
has been recognized as a leader in moving ARRA funds quickly in 
transportation. The United States House of Representatives Committee on 
Transportation and Infrastructure has ranked Iowa as one of the most 
effective States in putting ARRA highway capital funds to work to 
quickly create and retain jobs. As a matter of fact, as soon as ARRA 
had been signed by President Obama last February, Iowa contractors 
started calling back employees and hiring new ones. In the October ARRA 
report, we reported creating or saving 1,213 construction jobs related 
to ARRA transportation expenditures.
                            renewable energy
    This hearing is about creating and saving jobs and in Iowa, there 
can be no more vital sector of our economy in which to do that than in 
renewable energy. The Department of Energy (DOE) created several new 
ARRA programs that will help spur renewable energy job growth 
opportunities. These opportunities exist not just to the public sector, 
but also in the private sector--and it is not just with spending but 
with tax credits, too. For instance, the Department of Energy recently 
announced that ARRA tax credits were being provided to four renewable 
energy companies located in Iowa. These tax credits will result in the 
creation or retention of hundreds of jobs in our State. These are the 
types of programs that create jobs, and help solve the energy crisis by 
aggressively stepping up our wind and other renewable energy 
production.
    Another energy-related ARRA program that I would like to recognize 
is the DOEs ``Retrofit Ramp-Ups'' for energy efficiency. This program 
has the potential to provide energy efficiency opportunities to 
hundreds of homes and businesses throughout the Nation, while 
simultaneously creating new, private sector ``green'' jobs. The DOEs 
``Retrofit Ramp-up'' is an innovative approach to invigorating our 
Nation's energy efficiency efforts, and I encourage support of this and 
similar programs as Congress explores unique ways to save and create 
jobs.
    In Iowa, we are leading the way in renewable energy. Iowa is second 
in the Nation for installed wind capacity with 3,043 megawatts. Iowa is 
also a national leader in the manufacture of wind energy generation 
components. Nine companies have committed 2,300 manufacturing jobs to 
the State of Iowa, and Iowa communities in wind energy alone, since 
Clipper Windpower announced its decision to locate in Iowa in 2005. 
Wind energy has also been profitable for existing Iowa manufacturers. 
More than 200 Iowa companies are now supplying the wind industry, 
accounting for more than $50 million in new revenues annually.
    Beyond wind, Iowa is first in the Nation in production of both 
ethanol and biodiesel. We produce 26 percent of U.S. ethanol in 34 
refineries and 12 percent of the Nation's biodiesel in 14 refineries 
scattered across the State. Ethanol production capacity in the State is 
3.3 billion gallons per year and biodiesel production capacity is 325 
million gallons providing jobs in manufacturing, agriculture, 
transportation, construction, and many other job sectors across the 
State. According to the Iowa Renewable Fuels Association, in 2008 
biofuels production supported nearly 83,000 jobs throughout Iowa's 
economy and generated $576 million in State tax revenue.
    Speaking of biodiesel, I want to take a moment during my testimony 
today to urge Congress to immediately extend the biodiesel tax credit. 
In Iowa, the biodiesel industry is responsible for the creation of 
hundreds of jobs. A temporary absence of the tax credit could impact 
the production of this important renewable fuel. A multi-year extension 
of this tax credit is needed, and should be a legislative priority for 
Congress. Because of the significance of this issue to my State and to 
the industry, I have sent a letter to President Obama urging his 
support for quick action on this vital extension. Along with biodiesel, 
other critically important renewable energy tax credits, like the wind 
production tax credit, should be given long-term extensions. Long-term 
extensions would bring surety and increased private sector job creation 
opportunities throughout the various sectors of the renewable energy 
industry.
    As you can tell, I believe the renewable energy industry is vital 
to Iowa's economy, and we cannot have a conversation about 
strengthening Iowa's workforce without talking about strengthening our 
commitment to renewable energy as well.
              strengthening workforce development in iowa
    Since the recession began in December of 2007--when Iowa's 
unemployment rate was 3.7 percent--Iowa's seasonally adjusted 
unemployment rate has risen to 6.6 percent (in December of 2009). 
Because Iowa's economy is more agriculturally oriented--our total 
unemployment is kept lower. Farmers are always employed; in tough years 
they simply earn less. Right now, there are 109,937 Iowans drawing 
unemployment benefits, which is nearly triple where we were just 2 
years ago.
    One of the most disturbing trends we are seeing in the Iowa economy 
is the number of long-term unemployed. Currently, nearly 40,000 workers 
are on extended unemployment benefits which means they have exhausted 
their State benefits, which usually last 26 weeks. Many of these 
workers have collected more than 1 year's worth of benefits. This is 
disturbing because traditionally Iowans do not stay on unemployment for 
a long period of time because of our strong work ethic. We attribute 
this unusually long period of time to the length and depth of this 
recession.
    Many Iowans right now are simply having trouble connecting with 
work. Many do not have the skills needed to compete for the good paying 
jobs which were created in our economy before the recession. This 
includes many former manufacturing workers whose jobs have gone 
overseas. Even many highly skilled workers are not finding the 
opportunities while job creation has lagged. We believe it is crucial 
to extend the Emergency Unemployment Compensation program for Iowa's 
families and communities until our economy is able to make a meaningful 
recovery. Ideally, Federal benefits would be continued through the end 
of 2010 to give our economy time to make a significant recovery and 
create more jobs.
    In Iowa, our workforce system is undergoing a dramatic 
transformation under the leadership of Workforce Development Director 
Elisabeth Buck. She has undertaken an integration project to better 
coordinate workforce services. At the heart of the initiative is a 
mission to treat unemployed workers as job seekers instead of treating 
them like ``claimants.'' A crucial piece of this effort has been to 
utilize the ARRA funds for re-employment services to better connect 
struggling Iowans to work opportunities. Through Federal re-employment 
services funding, IWD is able to identify struggling Iowans early on 
and quickly call them into one-stops throughout the State. These 
workers are then educated about the changing nature of the workforce 
and given opportunities for free workshops on subjects like computers, 
job-seeking, resume drafting and labor market information. A strong 
emphasis is placed on short-term skills development and improvement. 
The ultimate goal is to reduce the time that workers spend on 
unemployment and connect them with work more quickly. In the end, 
everyone wins: workers are better off earning paychecks instead of 
unemployment checks, employers get the workers they need and the State 
trust fund stays healthy and in the black. Iowa strongly supports 
continued Federal funding for re-employment services.
    Another program that is showing progress in Iowa is our Voluntary 
Shared Work program. It has been extremely successful in averting 
large-scale layoffs in Iowa. Iowa is one of only 17 States which have 
innovatively used this program on behalf of Iowa businesses. In 2009, 
72 Iowa employers took advantage of this program to prevent mass 
layoffs and instead allowed more than 8,000 workers to collect partial 
unemployment checks while preserving those jobs. Iowa supports the 
efforts by the Federal Government to fund this program.
    One of the lingering effects of the economic downturn and the high 
unemployment rates is the effect it has on State and local revenues. 
Historically, States experience the worst fiscal conditions in the 
year(s) after a national recession ends.
                        state budget conditions
    According to the Center for Budget and Policy Priorities (CBPP), 48 
States have addressed and some still face shortfalls in fiscal year 
2010 of nearly $193 billion or 28 percent of State budgets--the largest 
gap on record. CBPP further projects combined gaps of $350 billion for 
2010 and 2011.
    These precipitous drops in State revenue have been difficult on 
State budgets and forced tough choices at the State level. Because of 
balanced budget requirements, States typically have limited choices in 
times of extended economic downturns. Many of these necessary actions 
can make the downturn more severe. I have taken raising taxes off the 
table, so as not to increase the burden on hard-working Iowans and 
instead, we have focused on reducing spending. I have taken several 
``belt tightening'' steps to help our State adapt to reduced revenues:
    I have cut spending significantly, instituted a far-reaching lean 
government initiative, ordered furloughs for noncontract employees, and 
put in motion several efforts to improve efficiency, eliminate 
redundancies, and identify wasteful spending.
    Along with these measures, we successfully negotiated a cost- and 
job-savings agreement with two of our State's largest unions: the State 
police officers and AFSCME. Fortunately, their members agreed to 
prevent significant layoffs and share in the sacrifice for the greater 
good.
    Each of these actions has been a challenge and has required 
sacrifice in the State and throughout State government. But, just like 
Iowa families have to make hard budget decisions when times get tough, 
so should State government. Because of these cost-saving initiatives, 
our State budget, today, is smaller than it was on the day I took 
office in 2007. I am proud of the resilience that Iowans have shown 
during these tough times and know that there are better days ahead.
                       extension of sfsf and fmap
    Unfortunately, even with distribution of ARRA funds and other 
innovative programs, States' budgets will continue to be challenged 
over the next 2 years. That is why I and my fellow Governors appreciate 
the fact that Congress is considering additional action to help States 
fully recover from this worldwide economic downturn. I have with me 
today a letter signed by 23 of my colleagues asking for your assistance 
in regards to extending the increased Federal Medicaid Assistance 
Percentage (FMAP) and the SFSF, and I would ask that a copy of it be 
put in the record.
    Continuation of the enhanced FMAP and the SFSF that were enacted as 
part of ARRA should be included in an appropriate legislative vehicle 
this spring, if not sooner. Given that State revenues remain at such a 
reduced rate, I ask that you give States the maximum flexibility when 
setting the criteria for drawing down these funds. The government 
services SFSF funds, which made up 18 percent of each State's SFSF 
allocation, were the most flexible dollars available to States through 
ARRA. In Iowa, we have been able to use these funds in a variety of 
areas--we have sent money to counties throughout Iowa for 
infrastructure repair, public safety, nursing home inspections, elderly 
wellness, community colleges, the Iowa National Guard, correctional 
facilities, and other vital services. A greater percentage of funds 
toward government services would be an improvement in a new iteration 
of SFSF. This flexibility will ensure that these dollars are able to be 
used more quickly for the purposes in which they were intended to 
maintain and create jobs.
    I ask that Congress move forward with jobs legislation quickly. 
Time is of the essence given the State legislative calendar. I am in 
the process of finalizing my fiscal year 2011 budget that our 
legislature will consider in the coming weeks. Our legislature has 
agreed to a shortened session due to budget constraints, which further 
heightens the time-sensitive nature of this request. Our session will 
likely be over by the first of April and thus our fiscal year 2011 
budget will have been enacted before our legislature departs. Iowa is 
not unique in this area. Many of my colleagues in other States are 
facing similar timelines and will have to enact balanced budgets that 
take into account the funding available at the time of enactment. The 
promise that more funding might be coming from the Federal Government 
will not be enough. Timely passage of an extension of ARRA's enhanced 
FMAP and SFSF provisions would greatly assist us in maintaining 
services and avoiding tax increases that could slow the Nation's 
recovery.
    To conclude my remarks, I would like to make one last statement 
regarding renewable energy. As you may have noticed I feel passionately 
about this subject and think that investment in all forms of renewable 
energy can be key to future job creation, both in the public and 
private sectors. As a follow-up to my testimony this morning, I will 
send specific recommendations for job creation in the area of renewable 
energy to each of your offices. I ask for your priority consideration 
of these recommendations.
    Again, Senator Harkin, thank you for the invitation to be here 
today, and I would be pleased to answer any questions you may have.

    Senator Harkin. Well, Governor, thank you very much for a 
very, I think, precise overview of exactly what we are trying 
to do with some of our programs here. And thank you for what 
you have done in Iowa with the recovery funds.
    I think you have really set the tone for what this hearing 
is about, and that is to see what we can do in the short term, 
what we have to do to keep the Recovery Act going. So I thank 
you for your leadership, and I know you speak for a lot of 
other Governors, too, who have similar problems in States 
around the country.
    I know I hear from my fellow Senators about their States 
and how they are facing the same kind of budget problems that 
we are facing in Iowa. And again, I can't help but point with 
pride to what Iowa has done in green jobs and in renewable 
energy. It has been fantastic. Fifteen percent of our power now 
from renewable energy in Iowa, and all the jobs it has created.
    You know, a lot of times, we wring our hands and bemoan the 
fact that we are not getting into manufacturing more in this 
country. Well, we are in Iowa. We are manufacturing every 
component.
    And I can still remember, Governor, just a few years ago 
when we started building wind turbines in Iowa. And I remember 
the blades were being shipped from Brazil. The turbines were 
manufactured in Austria, in places like Czechoslovakia and 
Austria. And now they are all being made in Iowa. So good 
manufacturing jobs coming back to this country, and I thank you 
for your leadership in that area.
    One area that I just kind of wanted to cover just briefly 
with you, Governor Culver. In your written statement, you 
described how Iowa is transforming its workforce system and 
using Recovery Act dollars to connect Iowans with opportunities 
in workforce. Just the other day also, Secretary Solis just 
released another $6 million, I believe?
    Governor Culver. Correct.
    Senator Harkin. To the State of Iowa, thereabouts, for--it 
seems to me, for workforce development, if I am not mistaken. 
Could you just elaborate a little bit on how Iowa is using 
their workforce development, how they are using some of the 
recovery funds to develop their workforce and to develop the 
new workers for the future?
    Governor Culver. Yes. Mr. Chairman, we have been--we have 
had some very good news in the last week. We have received two 
important grants from the Department of Labor. One was a $3.9 
million workforce development grant that will go to Western 
Iowa Tech Community College to help displaced workers and, more 
recently, a $5.9 million energy sector green jobs grant, which 
will allow us to employ Iowans to go out and do energy 
efficiency audits, to retrofit government buildings, to allow 
us to work on smart grid technology, to allow us to do more 
energy assessments.
    So this green job sector is actually growing in Iowa, even 
during this downturn. Some of our wind energy companies are 
hiring people again, which is a very good signal.
    I do think that it is important for members of this 
subcommittee to know how vitally important it is in every State 
to have a very aggressive workforce development piece of the 
equation. In our case, we have 15 workforce development offices 
all across the State of Iowa. Those offices need to be funded.
    We have transformed those offices so they are much more 
connected, high tech. They have now become one-stop shops so 
that people can receive on the ground locally any number of 
services from these workforce development offices.
    It is no longer just coming in and standing in line and 
filing for unemployment. These staff members will help with 
resumes. They will help on job skill assessments. And every 
State, I believe, needs to have that component and especially 
in terms of recovery.
    So if those dollars, if those Federal dollars from the 
Department of Labor aren't being put to good use at these 
workforce development offices and if these services aren't 
being offered, it will delay recovery that much longer. So we 
are very proud of the work that Director Liz Buck is doing, who 
heads up our workforce development agency, and these workers 
are working around the clock to provide these essential 
services for displaced workers.
    Senator Harkin. Well, thank you. I have been greatly 
encouraged by what I have seen in Iowa, what you have done with 
the workforce development teams in Iowa, and how they have been 
operating under Director Buck. They have been working really 
well and connecting people with the jobs, getting them the 
information they need perhaps for further education, that they 
need to be trained for different things.
    It has just been great because, as you know, we have seen a 
great transition in our State in the last several years, well, 
last maybe couple of decades in the type of work that we are 
doing in Iowa. We still are agriculturally based, but a lot of 
those jobs have left agriculture, and now we are moving more 
and more into manufacturing.
    Thank you, Governor Culver. I didn't know if any of our 
fellow Senators had any questions for the Governor.
    Senator Murray.
    Senator Murray. Thank you, Mr. Chairman.
    And thank you, Governor.
    And I have to say, my State, too, received a $6 million 
grant yesterday through the Department of Labor. We are very 
excited about it. I was actually out in Seattle a couple of 
weeks ago and was on the ground seeing some of these workers, 
one of which was a former electrician. He had been laid off and 
hadn't worked for some amount of time.
    He was trained as an auditor. He went into homes in a 
neighborhood and audited the homes to say you are leaking air 
out of these windows, and here is what you can do. Here are 
ways to insulate your home. They can test the home to see where 
exactly they are losing energy and then through grants help the 
homeowner to fix their home, home by home, making a difference 
for our environment. Certainly making a difference for cost, 
heating, and for many of these families that they were working 
with while putting people to work.
    And these grants that you just got and that my State got 
will really help train a lot of people for these kinds of 
positions. There is a huge demand for it. They do need special 
training. It is going to put people to work, and it is going to 
help homeowners, businesses, and the environment in the future. 
So we are very excited about it in the State of Washington, 
too, and I am glad Iowa is going to be able to use that as 
well.
    Governor, I just had one broad question. You mentioned in 
your testimony some great work that is being done by Elizabeth 
Buck and your Iowa workforce development. In my experience in 
Washington State with our workforce development system, we see 
that it is a very effective component with our State and local 
efforts to create jobs and put people to work.
    Can you elaborate on some things that are working in Iowa, 
some innovations and best practices within your workforce 
development system that we might benefit from?
    Governor Culver. Yes, thanks for the question, Senator 
Murray.
    One of the other things that we have done, in addition to 
modernizing the services that we offer, we have reached out to 
the private sector, and we have formed consortiums across the 
State to partner with these employers to determine with more 
specificity what job skills they are looking for. There has 
been in the past a real disconnect between the skills and the 
workforce that many of these employers need. I will give you 
one example.
    A couple of years ago, I called a manufacturer, an owner of 
a manufacturing company. I asked him how his business was 
doing. He said it was booming. They could hire 100 additional 
employees if they could find the right skill set.
    And the first question I asked him is, well, have you 
called the community college 2 miles from your business and 
talked to them about this? And the answer was ``No.'' There was 
no coordination there.
    So we have really addressed that and brought people to the 
table, large employers, small businesses, and it is proving to 
be very, very beneficial. And we have 15 terrific community 
colleges across the State. So whatever we can do, whatever 
model we developed in central Iowa, which is where this started 
in the Des Moines area, this consortium, we are now trying to 
replicate that in other parts of the State. And it is proving 
to be successful.
    Senator Murray. Well, thank you for that, Governor.
    And Mr. Chairman, as you and I have talked about, with 
workforce investment, it has been my experience everywhere that 
there is a disconnect between what employers need and the skill 
sets they want to hire and what some of our education system is 
focused on in educating our kids for.
    That is why I think these workforce boards are so 
important, putting together public and private people so those 
community college folks are sitting down with the employers in 
their own community to talk about what skills they need to be 
developing in their own communities for jobs in the future.
    And I think that has to be extended into other areas down 
to our high schools and middle schools, where the kids in those 
communities and the teachers and the principals are working 
together with those. And I have been working on legislation to 
do that, Mr. Chairman.
    So your experience is mine, and I think that is something 
that we can really focus on to help get our economy back on 
track, making sure that we are doing the skill set training for 
our young people and for older workers in the skills that are 
needed to get this economy back on track. And who knows it 
best? The employers who are out there working. They have got to 
be at the table with them.
    Governor Culver. And if I could give one quick example, 
another example. In Davenport, at the community college there, 
I was there last week. They have partnered with the local 
hospital to come up with a surgical tech program at the 
community college.
    These students, when they graduate after 2 years, will make 
$30,000, guaranteed. With overtime, they can make $40,000. They 
now have 30 people on the waiting list in the surgical tech 
program, and we help them with a State grant to expand their 
program there at the community college.
    And I met these students. They are excited about this 
opportunity and what it means to their family. Twelve months 
ago, they didn't know what they were going to do. Now they are 
on a career pathway.
    Senator Murray. They see a path, yes.
    Governor Culver. They are making a positive contribution to 
their community. They are doing something. They are saving 
lives in that emergency room in the future.
    So we can create these jobs. It is just a matter of being 
strategic about how we do it and where we make these 
investments.
    Senator Murray. Well, thank you. And I will share--my 
legislation is actually called Career Pathways to bring 
together local community, business, labor, education folks to 
start planning and working toward those skills. So we will 
share that with you, but your experience is mine. So I look 
forward to working with you on that.
    Governor Culver. Thank you, Senator.
    Senator Murray. Thank you, Mr. Chairman.
    Senator Harkin. Thank you.
    Thank you, Senator Murray.
    I just might point out, as you can see, this is Senator 
Murray's one area of great interest and expertise. So I have 
asked Senator Murray to sort of head up our Workforce 
Investment Act (WIA) reauthorization not on this subcommittee, 
but on the HELP Committee. And hopefully, we can get to that, 
hopefully, pretty soon. And so, I have asked Senator Murray and 
Senator Enzi, our ranking member, to put together a bipartisan 
package to move us ahead, and these are some of the new things 
I think that we have to be looking at in WIA.
    So I thank you.
    Former Governor, now Senator Alexander. Did you have 
anything for Governor Culver?
    Senator Alexander. Thanks, Mr. Chairman.
    I would like to explore one area, if I may? To explore one 
area with the Governor, if I might?
    First, welcome. We have many fond memories of Iowa. I have 
been to almost every crossroads in Iowa, as have most United 
States Senators at one time or another. It is a great State.
    I would like to ask a question about the relationship of 
Medicaid spending and higher education. I mean, Iowa has great 
universities--Iowa State, the University of Iowa--and then you 
just talked about the community colleges, many of which I have 
seen and which are so important.
    Thirty years ago, when I had your job in Tennessee, my 
greatest problem was trying to get down to the end of the 
budget process, and it was usually a choice between expanding 
dollars for Medicaid or putting money into higher education. 
And that problem has gotten worse and worse and worse and 
worse.
    President Obama's budget director, before he was budget 
director, warned that the lack of State support for public 
higher education is damaging it, and it is causing, making it 
harder for students to afford. We see in California tuition up 
32 percent. And I am sure that a big part of that is because 
the Governor and the legislature get down to the end of the 
budget process, everything goes to Medicaid or healthcare, and 
there is nothing left for the University of California.
    I wanted to get your perspective on that, if I might, in 
two areas, and then I will listen to whatever you have to say. 
One criticism of the stimulus package, the so-called stimulus 
package, earlier was that it had a lot of requirements in it on 
States--you talk about flexibility some in your testimony. I 
mean, the Wall Street Journal--and you might expect this from 
the Wall Street Journal editorial board. But they list all 
sorts of ``encourage new spending, $80 billion more in Medicaid 
that will vanish in a couple of years, more spending for 
unemployment insurance, the Davis-Bacon Act, raising State 
building costs, maintenance of effort,'' which means you have 
to spend more.
    But Lieutenant Governor Ravitch of New York, a Democrat, 
wrote a very thoughtful piece the other day when he said the 
Federal stimulus has provided significant budget relief to 
States, but the relief is temporary. It makes it harder for 
States to cut expenditures. In major areas such as 
transportation, education, healthcare, stimulus funds come with 
strings attached. These strings prevent States from 
substituting Federal money for State funds, require States to 
spend minimum amounts for their own funds, prevent States from 
tightening eligibility standards for benefits.
    Because of these requirements, Lieutenant Governor Ravitch 
says, States, instead of cutting spending in transportation, 
education, and healthcare, have been forced to keep most of 
their expenditures at previous levels and use Federal funds 
only as supplements. The net result is the Federal stimulus has 
led States to increase overall spending in these core areas 
which, in effect, has only raised the height of the cliff from 
which State spending will fall if stimulus funds evaporate.
    So my question is, in Iowa, what has been your experience? 
If there were to be some second program for jobs, what advice 
would you have for Congress about all these requirements for 
State spending and the effect it might have on higher 
education?
    And then, specifically, what do you think about the idea of 
a healthcare bill in Congress that would expand Medicaid and 
then send a significant bill for that expansion to State 
governments?
    Governor Culver. Well, thank you, Senator Alexander.
    The maintenance of effort requirement has been challenging 
for the States to meet and, in fact, I am asking for a waiver 
on that extension for education. We have had to cut our budget. 
We just did a 10 percent across the board. I am required by law 
to balance my budget. We are going to do that.
    So that has been an issue with Governors. We have been 
assured that we will have a waiver option if we can make the 
case, and I believe most Governors will. So that should be 
addressed. If there is an extension in the future for education 
stabilization, for example, that maintenance of effort 
requirement can be problematic because States have to reduce 
their expenditures.
    However, I think it is still a good combination. I mean, we 
used about $340 million in education stabilization funds in 
this current--in fiscal year 2010, even though we reduced the 
overall education budget by 10 percent. But that really allowed 
us to keep jobs, about 2,300 of them as a result, even though 
we had the overall cut in education. So it is still critically 
important to get those funds for education stabilization and 
for FMAP.
    Related to healthcare, we used about $207 million this 
fiscal year to cover our obligations in Medicaid. That, again, 
saved a lot of important jobs, allowed us to continue to 
provide these essential health services to Iowans that needed 
them, even though, again, our overall cut to the healthcare 
budget was significant.
    So I really believe that especially in these two areas of 
education and healthcare, without that financial assistance 
from the Federal Government, as the chairman noted in his 
opening comments, it really would have resulted in a much more 
serious problem across the country in terms of employment.
    With respect to your second question, Governors have 
expressed concern about the cost that the States might incur 
related to healthcare reform. However, I think there is quite a 
bit of consensus, certainly among the Democratic Governors, 
that the current Senate bill would be a better option in terms 
of the impact financially it would have on the States. And we 
are hoping that we can have flexibility to work with the 
Department of Health and Human Services, for example, on 
certain aspects of our healthcare effort to minimize further 
the cost to the States.
    We have had a very good working relationship in Iowa for 
the last 10 years with the Department of Human Services. They 
have allowed us a lot of flexibility. We have been able to 
create some programs that have actually saved us money. So that 
ability to partner in the future with the Federal Government, 
the Department of Human Services, and Health and Human Services 
in particular, could minimize the cost as well to the States 
long term.
    Senator Alexander. Thank you, Mr. Chairman.
    Senator Harkin. Thank you, Senator.
    Thank you very much, Governor Culver, for your testimony 
and for being here this morning. Thank you for your great 
leadership in our home State of Iowa.
    And I didn't say this at the beginning, but your full 
statement will be made a part of the record in its entirety, 
and I will put that letter in there from the 23 Governors you 
had. I will make sure that is in the record, too. So we thank 
you very much, Governor Culver, for leading this off this 
morning.
    Governor Culver. Thank you, Chairman Harkin. Ranking Member 
Cochran, welcome. And thanks for the opportunity to be here 
today as well.
    Senator Cochran. Mr. Chairman, thank you very much for 
convening the hearing and leading it off with an outstanding 
witness in Chet Culver. We had the pleasure and honor of 
serving with your father here in the Senate and developed a 
close friendship with him and have known you for quite a while.
    Congratulations to you on your service as Governor of the 
State of Iowa. And we particularly appreciate your insights 
into the subject that we are considering today.
    There are tax incentives for States that take initiatives 
in this area, particularly ethanol and some other substitute 
fuels that we are learning to deal with and use to good 
advantage to help deal with our energy needs. What would happen 
in your State in terms of participation in the ethanol and 
other programs like that if the tax changes that had been made 
by Congress are reversed or modified in some way that would 
deny you the benefit of those tax breaks?
    Governor Culver. Well, the biofuels industry is now an $8 
billion industry in Iowa. It supports roughly 80,000 jobs, 
directly or indirectly. So, in my testimony today, I talked 
about the importance of extending the biodiesel tax credit that 
expired on December 31.
    Obviously, we are open to changes in how that credit 
applies. We understand there is competing interest, but we need 
some type of credit, I think, to support that $8 billion 
industry. For some period of time in the future, they are going 
to continue to need that type of support, and same with the 
ethanol credits as well.
    But I think, as the chairman will tell you, Iowa is very 
interested in being a team player. I think we understand that 
we need diversification in terms of our renewable energy 
portfolio. We need all types of biofuels, whether they are 
cellulosic, ethanol, biodiesel, and we need to keep pushing in 
terms of the research and development, in terms of second- and 
third-generation renewable energy fuels.
    This is an exciting time for our country. So we have to 
keep those industries alive that have proven to have a positive 
economic impact on our country and search for new alternatives 
at the same time.
    Senator Cochran. Thank you very much.
    Governor Culver. Thank you, Senator.
    Senator Harkin. Thanks, Governor Culver.
    And now we will call our second panel--Dr. Lawrence Mishel, 
Dr. Jerry Weast, and Marlena Sessions.
    Dr. Mishel is president of EPI in Washington. He joined EPI 
in 1987. He has researched, written, and spoken widely on the 
economy and economic policy as it affects middle and low-income 
families and is the principal author of a major research 
volume, ``The State of Working America.''
    He earned his bachelor's degree at Penn State, his master's 
at American University, and his Ph.D. in economics from the 
University of Wisconsin.
    Dr. Jerry Weast is superintendent of Montgomery County 
Public Schools, the largest school district in Maryland, the 
16th largest in the United States and, as I was just reminded 
before the hearing started, is also where Governor Culver 
graduated from high school in Montgomery County. So they have 
that connection.
    Dr. Weast is currently in his third 4-year term as 
superintendent of Montgomery County, and he has led the 
district's effort to close the achievement gap among children 
of all races. He has been named superintendent of the year in 
both Maryland and North Carolina, having served as 
superintendent of schools in eight school districts over a 40-
year career in public education.
    And for purposes now of introduction, I would turn to 
Senator Murray.
    Senator Murray. Well, thank you very much, Senator Harkin. 
I really want to thank you for the opportunity to invite 
Marlena Sessions from my home State of Washington here to talk 
about what more we can do on the jobs legislation that we are 
working on.
    You know, often times here, we get caught up in the numbers 
and the timelines when we talk about job recovery acts, and we 
forget how important the work of individuals is in 
administering this massive undertaking. And I want to tell you, 
Marlena Sessions is one of the people in my State whose work 
and dedication make her impossible to forget.
    Marlena is the CEO of the Workforce Development Council of 
Seattle-King County. This is an area that is a major economic 
driver for my home State. Marlena coordinates efforts in worker 
training, youth employment, worker placement, on-the-job 
training, and a lot more.
    Last year, there were more than 120,000 visits to One-Stop 
employment centers in King County. That is a 30 percent 
increase from the year before. But even with that tremendous 
increase of new job seekers using the system, the Seattle-King 
County Workforce Development Council continues to be nationally 
known for its award-winning approach to workforce development, 
its strong partnerships with other systems and entities, and 
its commitment to self-sufficiency for all, from laid-off 
workers to our young people.
    That is why I am really pleased that Marlena is here today 
to talk with us and share her thoughts because I know that she 
has a great understanding of how education and training and 
employers and labor and local communities work together, just 
as I was talking about with Governor Culver, and how we need to 
utilize these relationships to create jobs quickly.
    This summer, I had the opportunity, firsthand, to see how 
Marlena can move swiftly to get jobs programs up and running 
when she helped create a youth employment program in King 
County that employed 900 workers only 4 months after the 
funding of the program was approved as part of our Recovery 
Act.
    I know that, like me, Marlena believes that providing new 
skills to job seekers is the most important bridge between 
unemployment and a stable job, and I know that as we now work 
to create new legislation to boost job creation, she is 
uniquely prepared to help us find some solutions that will 
really help our workers, both young and old, find jobs.
    So I am pleased that you are here with us today, Marlena. 
Thank you for traveling all the way across the country on a 
different time zone to help share with us some of your thoughts 
this morning. Thank you very much, and I think we will learn a 
lot from her.
    Thank you, Mr. Chairman.
    Senator Harkin. Thank you, Senator Murray.
    And we will start--as I was introducing them, we will start 
with Dr. Mishel first. All of your written statements will be 
made a part of the record in their entirety. I ask you to sum 
them up, and what I would like to say is I will try to give 
each of you up to 10 minutes, up to 10 minutes each, and then 
we will open it for questions and stuff after that.
    So whoever is running my clocks back here, if you could 
make sure we give at least 10 minutes to each person.
    Welcome. Dr. Mishel, let us start with you.
STATEMENT OF LAWRENCE MISHEL, Ph.D., PRESIDENT, 
            ECONOMIC POLICY INSTITUTE
    Dr. Mishel. Thank you very much, Mr. Chairman.
    And thank you, Ranking Member Cochran and the other members 
of the subcommittee, for this opportunity to talk about this 
very important topic of the jobs crisis and how to address it.
    I am here today on behalf of the Economic Policy Institute 
(EPI), as well as the Jobs for America Now coalition.
    As you all know, we are in the worst jobs crisis since the 
Great Depression. The unemployment rate is at 10 percent now. 
All the projections I see suggest that it is going to be rising 
throughout the year, topping out at 10.5 percent or even more 
by the end of the year.
    And this is in spite of the fact that these projections 
assume that there is going to be the renewal of the 
unemployment insurance/COBRA program, which has not yet been 
legislated for throughout the year. That program itself would 
create around 900,000 jobs, according to our estimates.
    We expect job growth to actually resume sometime in the 
spring, and unemployment will rise even though we will be 
creating jobs because you need to create at least 100,000 jobs 
a month to absorb a growing population. So we have to get job 
growth much more than that.
    I would suggest a target for the end of the year that we 
take the action now that will get us robust job growth, that 
will get the unemployment rate actually moving steadily down 
and, hopefully, attain a level no higher than 9.5 percent at 
the end of the year. So that means policy action on top of 
renewing the unemployment insurance (UI) system. That will mean 
creating at least an additional 1.5 million jobs, which will 
take around $150 billion of expenditure above and beyond the UI 
renewal.
    But I think we have to aim higher than that because there 
are two factors that are going to militate against getting job 
growth right now and getting the unemployment rate down. One is 
what I would call the missing labor force. Since the recession 
began, there are about 3.5 million people absent from the labor 
force that we would expect to be in. The labor force has 
actually shrunk by 2 million since last May alone.
    Now these people are not counted as unemployed. When we 
start seeing job growth, these people could be expected to 
start coming back into the labor force. This will make it 
harder to get the unemployment rate to go down and could even 
drive the unemployment rate up. So that means I think we need 
to aim for at least another 1 million jobs more than what I 
have already said just to think that maybe one-third of these 
people are going to come back in.
    The second factor is that we have seen very fast 
productivity growth. This means employers are able to increase 
their output without adding jobs. If this high productivity 
growth sustains itself--and I certainly hope it does--it is 
going to make it that much harder to get jobs.
    Therefore, my suggestion is that we are going to have to 
shoot for $200 billion to $250 billion more of expenditure to 
create jobs above and beyond the UI renewal. I think that is 
what the American people expect you to do, to take decisive 
action to generate jobs. We are not going to have that many 
more chances to get things going, and we are going to start 
running out of bullets if we get a second dip in this 
recession, which is around a 15 to 20 percent chance according 
to some economists.
    EPI has put together an American jobs plan, which I am 
describing today. It is a plan to create 4.6 million jobs 
through 5 different types of actions. The first is certainly a 
no-brainer, and that is to renew the UI and COBRA program.
    Right now, there are 6.4 unemployed persons for every job 
opening. The fact that people are not finding jobs is not their 
fault. Giving these people support is not only humane, it 
actually helps support spending throughout the economy, 
creating jobs throughout the private sector. So this is a no-
brainer to do.
    Second, as was discussed earlier with Governor Culver, 
there needs to be relief for State government and, I think, 
also directly to city governments, which did not necessarily 
gain as much from the last round of assistance. We are 
suggesting $150 billion between the two of them, which includes 
FMAP, other items.
    If nothing is done, you can expect to see 1 million jobs 
lost this summer and fall as States and local governments pare 
back on the services they provide, and we estimate that half 
the jobs lost will be in the private sector. It is not just 
public sector workers because the State and local governments 
use private sector firms for construction, for healthcare, for 
many other different things. And as people lose their jobs who 
directly provide services in the public sector and private 
sector, that we can support spending throughout the rest of the 
economy.
    Third, we think that if you want to create jobs, you can do 
it directly. We think there are about 250,000 jobs can be 
created through infrastructure and through school renovation 
and rehab, which I imagine Dr. Weast will address as well. I 
would hope that we could have schools all across the country 
rehabbing and modernizing this summer.
    There is a big backlog that school districts have. What 
they need is money to get them going on this. Providing them 
loans, as some people have suggested, won't really help all 
that much.
    Fourth, we think 1 million jobs can be created directly 
through public service jobs, providing money to mayors as we 
have done twice in the past in the Great Depression and in the 
1970s. It is a very cost effective and efficient way to get 
jobs by providing money directly to local governments, to 
nonprofits, for things like cleaning up abandoned and vacant 
properties, staffing emergency food programs, Head Start work, 
child care, early childhood education, working in parks and 
playgrounds, et cetera.
    These need to be new jobs. They cannot supplant the work 
that is already done by public employees. It has to be done at 
decent labor standards, but it is something that is going to be 
needed for many years to come.
    Last, we have suggested a jobs tax credit that could be 
provided to help move employers to provide jobs at this moment.
    Let me address a serious concern, and that is deficits. 
That is a concern of the American people and of all the 
policymakers. First, we need to understand why we have a large 
deficit right now. The reason we have a large deficit is 
because we have a large recession. In a recession, we get fewer 
taxpayers. Companies don't make as much money. They cut back on 
their taxes.
    Expenditures automatically rise for unemployment insurance, 
food stamps, Medicaid, and such. The way we need to--so what we 
know is as long as we have high unemployment, we are going to 
have high deficits. And second, what we know is the first step 
toward deficit reduction is actually to generate jobs to create 
more taxpayers.
    It is also really important to understand that doing 
nothing, that not addressing this jobs crisis, imposes large 
costs on our economy and on America's families. Persistently 
high unemployment leaves scars. The families that are affected, 
their children are hurt. That actually hurts their own 
educational advancement.
    Young workers who come into the labor market at this moment 
in time will have lower earnings for their entire lives as a 
result of having to deal with the high unemployment they face. 
Plus, high unemployment leads firms to scale back on their 
innovation and on their investment. This limits our potential 
future growth.
    So there is a huge cost of doing nothing, as well as a cost 
of doing something.
    Last, it is also possible to pay for a job creation 
package. No economist would advise that taxes to support the 
job creation package would be implemented during the recession 
itself, but you can do something which legislates things that 
happen, let us say, in the third year of a 10-year budget 
window.
    We have suggested a financial transactions tax, which you 
might describe as a modest sales tax on Wall Street 
transactions. It can reap around $100 billion to $150 billion a 
year and more than pay for the jobs spending that is needed now 
to get America moving again.

                           PREPARED STATEMENT

    This sector caused us this crisis. They are doing very 
well. We seem to be on the hook for them, regardless of what we 
want. So they might as well be paying some money, year in and 
year out, on their activities and support the jobs that America 
needs.
    So thank you very much, Mr. Chairman, Senator Cochran, and 
I look forward to engaging in discussion after the testimony.
    Thank you.
    [The statement follows:]
               Prepared Statement of Dr. Lawrence Mishel
                              introduction
    On behalf of the Economic Policy Institute (EPI) and the Jobs for 
America Now Coalition, 68 organizations representing tens of millions 
of Americans, I thank you for the opportunity to testify on the urgent 
need for a large and effective job creation program.
    The United States has already experienced the sharpest rise in 
unemployment and the longest recession since the Great Depression in 
the 1930s. This ``great recession'' is doing great harm to many lives, 
will impoverish millions, and do great damage to a generation of 
children, indeed permanently scarring them in ways not easily overcome. 
It is also doing damage to our long-run growth potential. Consequently, 
the key priority for economic policy must be to generate millions more 
jobs this year and start the unemployment rate on a steep downward 
trajectory. In the absence of additional policy action we can expect 
the unemployment rate to climb throughout the year, reaching 10.5 
percent or above by the end of the year. For reasons explained below, 
we can expect the unemployment rate to keep increasing even when the 
expected positive job growth materializes in the early spring.
    The administration and Congress' effort to offset the recession was 
bold and effective and, given the extreme situation, needed to be the 
largest policy intervention in the economy in several generations. It 
has undoubtedly slowed the economy's freefall and restored economic 
growth starting in the summer. However, current projections suggest 
that unemployment will remain very high and be above 8 percent at the 
end of 2011. There are strong economic and moral reasons to work to 
create more jobs so as to avoid this high, persistent unemployment: 
much more must be done to generate robust job growth, restore incomes, 
create consumer demand, and generate sustained economic growth.
    Congress has the tools to create millions of jobs over the next 12 
months. It also has the responsibility. The public is rightly demanding 
action, and there is no excuse--not the budget deficit, not fears of 
inflation, not feasibility--for failure to act.
    In fact, given the economic realities, only a large-scale 
intervention by the Federal Government can generate sufficient 
employment demand and economic activity to sustain healthy job growth 
and markedly reduce unemployment.
    This testimony will discuss:
  --The recession--why it happened and how deep it is.
  --The persistent unemployment ahead.
  --The damage being done by high unemployment.
  --What the recovery plan does and how it's working?
  --Why that isn't enough, why we need to do more, and what can be 
        done?: a 5-point plan to create more than 4.6 million jobs; and
  --Reconciling concerns about the fiscal deficit with the need for job 
        creation.
             structural problems--a long, slow train wreck
    The United States did not wreck its economy overnight. Developments 
over the last 30 years and deep structural problems lie at the heart of 
the current economic crisis. Foremost among those problems is a huge 
growth in inequality of wealth and incomes, greater than in any other 
advanced nation, and the greatest inequality of our history. It is this 
inequality that laid the foundation for the crisis we are in, and 
addressing this inequality will be essential for establishing a firm 
foundation for growth.
Unbalanced Growth
    Since 1989, the bottom 90 percent of Americans received only about 
16 percent of all the income growth in our economy. On the other hand, 
the top 1 percent obtained three-and-a-half times as much--56 percent. 
Even more astonishing, the upper tenth of the top 1 percent, 
representing about 13,000 households, reaped more than a one-third of 
all the income growth of the last 20 years. That appalling 
accomplishment was no accident--it took concerted political power and 
policy to accomplish this vast, upward redistribution of income. It was 
because of this unbalanced growth that the economy's growth heavily 
depended upon consumption based on the inflated asset values of stocks 
and housing and from consumer debt.
    The feverish growth of the financial sector and its compensation 
helped drive this unparalleled inequality. By diverting capital from 
the productive sectors of the economy, pouring money into the kind of 
derivative trading and securitization that ultimately brought down the 
economy, economic policy and financial deregulation over the last two 
decades helped enrich a narrow slice of society to a degree unseen 
since the Gilded Age. They also generated tremendous risk that resulted 
in our current economic calamity.
Productivity/pay Disconnect
    At the heart of this dynamic is the fact that in recent decades the 
typical worker became much more productive, but received hardly any of 
the benefits of the greater amount of goods and services she produced. 
Productivity--the ability to produce more per hour worked--grew 
throughout the last 60 years. But it was only in the early postwar 
period that the compensation of the typical worker grew in tandem with 
greater productivity. Since 1973, there been a huge and growing gap 
between the two.
    The gap was greatest in the 2002 to 2007 recovery, when 
productivity surged at historically high rates, but the hourly 
compensation of both high school and college graduates did not grow at 
all.
    It should not be surprising then that this last business cycle, 
from 2000 to 2007, was the first on record where the typical working 
family was no better of at the end of the recovery than it was before 
the recession began.
    To summarize, things weren't going well long before the current 
recession. Moreover, it will be necessary to address these structural 
inequalities in order to establish a basis for robust, sustained growth 
coming out of this economic crisis.
                          the great recession
Unemployment/Underemployment
    The recession officially started in December 2007, but unemployment 
started rising earlier in the spring of 2007 and has now more than 
doubled to 10.0 percent. The steep rise in unemployment we have seen, 
up 5.7 percentage points, is even greater than the rise in unemployment 
in the deep recession of the 1980s. Of course, the unemployment rate 
doesn't capture the folks who are working part-time but want full-time 
work or those who are not included in the labor force but want a job. 
Adding them in shows an underemployment rate of 17.3 percent--27 
million people. In addition, roughly 3.5 million people dropped out of 
the labor force over the last 2 years, and they are not counted either 
as unemployed or discouraged. I will discuss this ``missing labor 
force'' below as I describe the challenges ahead.
We Are Now Short 10.6 Million Jobs
    We've lost 8.1 million (incorporating the announced data revision) 
jobs so far, a 5.8 percent drop in total employment and the sharpest 
drop in employment of any recession since the 1930s. However, ``this 
number understates the magnitude of the hole in the labor market by 
failing to take into account the fact that the labor market should have 
added jobs since December 2007 simply to keep up with population 
growth. This means the labor market is currently 10.6 million jobs 
below what would restore the pre-recession unemployment rate.''\1\
---------------------------------------------------------------------------
    \1\ Shierholz, Heidi. 2010. ``Labor Market Closes 2009 with no Sign 
of Robust Jobs Recovery,'' EPI Jobs Picture, http://www.epi.org/
publications/entry/jobs_picture_20100108/
---------------------------------------------------------------------------
Wage Deceleration
    High unemployment adversely affects those who have jobs as well, as 
wages grow more slowly. Furloughs, reduced hours, and losses in 
benefits are other ways people are impacted. Gallup reports that one-
third of workers fear their wages will be reduced, and a survey 
conducted for EPI by Hart Research Associates found that 44 percent of 
households have already experienced job loss or cuts in pay or hours. 
Wage growth in the first half of 2009 was at a historically low rate.
Unemployment--The Full Picture
    So far, I've dealt with ``averages'' and we all know that there is 
no ``average person'' walking around on the streets. Unemployment 
affects different populations differently. While average unemployment 
is 10.0 percent, it is 60 percent higher for blacks (16.2 percent), 
almost one-third higher for Hispanics (12.9 percent) and below average 
for Asians and Whites. Men are experiencing 11 percent unemployment, 
blue-collar workers have higher unemployment (14.3 percent) than the 
national average, and white-collar unemployment is at 6.7 percent, 
which may seem low but is higher than at any time during the 1980s 
recession and the highest since the 1930s. College graduates have half 
the average unemployment (5.0 percent), but it is the highest on record 
(with data going back to the early 1970s).
    Our latest measures of underemployment by demographic group are 
from November 2009, and they show that when overall underemployment was 
at 17.2 percent there was underemployment among blacks and Hispanics, 
respectively, of 24.3 percent and 25.1 percent. Those with high school 
degrees had underemployment of 21.2 percent.
Long-term Unemployment Explodes
    The statistic that most stands out in the current recession is the 
high rate of long-term unemployment: 6.1 million people have been 
jobless for more than 6 months, 4 percent of the total labor force. 
This far surpasses the previous peak of 2.6 percent set in June 1983. 
The cause of this lengthening unemployment is clear: there are no jobs 
available. More than six people are looking for work for every job 
vacancy.
    Needless to say, if Congress had not acted to extend unemployment 
benefits to a maximum of 99 weeks, millions would have been cut off 
from their only source of income. More than 2 million workers have 
already been unemployed for more than a year.
    Unfortunately, there are still more job losses and rising 
unemployment ahead.
                         the unemployment ahead
    I anticipate that unemployment will keep rising until mid-2010 or 
even until the end of 2010, topping out at 10.5 to 10.7 percent. 
According to many forecasts the unemployment rate may still be as high 
as 8 percent at the end of 2011. Eight percent is higher than 
unemployment had been for the 25 years before this recession, and I 
consider that an unacceptably high unemployment rate that policy must 
address.
    When the unemployment rate reaches 10.5 percent, we will have an 
underemployment rate of 18 percent each month. Since people flow into 
and out of unemployment we'll have over one-third of the workforce 
unemployed or underemployed at some point during 2010. In the African-
American and Hispanic communities, about 40 percent of the workforce 
will be unemployed or underemployed at some point in 2010.
                             the pain ahead
    So, there is a great deal more pain in the pipeline. Families will 
have fewer family members working, and they will work fewer hours each 
week at lower hourly wages and with fewer benefits. This will continue 
for a number of years.
    Hardest hit will be children, whose poverty will rise by half, from 
the 18 percent level in 2007, to 27 percent. For black children, 
poverty will likely rise from the already unacceptable level of a one-
third in 2007 to more than one-half in the year or two ahead.
    The recession will cause income declines among families at all 
income levels, but hit low-income families the hardest. We already know 
that the median family's income fell by 3.6 percent in 2008, the 
largest 1-year decline since 1967 (See Heidi Shierholz, Income Picture, 
September 2009, http://www.epi.org/publications/entry/
income__picture__20090910/). This decline happened as unemployment rose 
from 4.6 percent in 2007 to 5.8 percent in 2008, a rise of 1.2 
percentage points. We also know that the unemployment rate rose three 
times faster between 2008 and 2009 (up 3.5 percentage points to 9.3 
percent) than in the prior year so it is inescapable that incomes fell 
sharply in 2009. A very conservative estimate based on historical 
relationships is that over the 4 years from 2008 to 2011, the average 
low-income family will have income averaging 7.2 percent, or $1,200, 
less than they earned in 2007 before the recession, a total loss of 
more than $4,600. On average, middle-class family will see losses of 
roughly $3,500 a year for those 4 years with incomes in this period 5.6 
percent below their 2007 levels.
    These estimates are for all families, those that do and do not 
directly experience periods of unemployment. The situation will, of 
course, be much worse for those families that directly experience 
unemployment.
                            the recovery act
    Matters would have been far worse if Congress had not passed the 
American Recovery and Reinvestment Act last year. The Recovery Act has 
been effective, pumping more than $250 billion into the economy and 
generating about 200,000 jobs each month since April--roughly 2 million 
jobs overall. The fact that the job situation remains so dismal only 
reflects how deep a hole the flawed policies that led to this recession 
had dug. For the most part, those who deny the effectiveness of the 
recovery package are the very ones who supported the anything-goes, 
free-market policies that pushed us into this huge hole.
The Deep Hole
    The economic downturn is far worse than what economists (myself 
included) predicted in November 2008. The consensus predicted 
unemployment would hit 6.9 percent in the first 3 months of 2009, but 
it actually hit 8.1 percent in the first quarter and reached 8.5 
percent in March--before the ink was even dry on the recovery 
legislation. The loss of $14 trillion in housing and stock market 
wealth, the credit freeze, and business retrenchment were worse than 
economic forecasters anticipated.
GDP Decline
    The economy was headed steeply downward last winter and in early 
2009. The Recovery Act interrupted that decline and created actual 
growth starting last summer. In the second quarter of 2009, the 
domestic economy's only area of positive growth was Government 
consumption and investment, which increased by 6.7 percent over the 
previous quarter. Private consumption and investment both fell in that 
quarter. Without the Recovery Act, nondefense Federal Government 
expenditures would likely have fallen as they did the quarter before, 
State and local governments would not have been able to expand spending 
at their highest rate since 2002 (3.9 percent), and private consumption 
spending would have fallen even further as it would not have been 
buoyed by the increased transfer payments and tax cuts the Recovery Act 
provided. The result would have been a contraction of GDP of 3.7 
percent rather than the actual 0.7 percent decline. Therefore, the 
Recovery Act saved between 600,000 and 750,000 jobs in that quarter 
alone.
    In the third quarter the economy expanded by 2.2 percent. Without 
the Recovery Act this quarter would surely have seen either stagnation 
or outright contraction again. Estimates for the fourth quarter suggest 
that economic growth continued, perhaps at an even stronger pace.
    It is important that the manner in which the Recovery Act had this 
impact not be an abstraction. It came about because there were efforts 
to support household income to allow spending to be greater than it 
would have been. This is due to the one-time payments to those on 
Social Security, to higher food stamps, and from the unemployment 
benefits and COBRA assistance to the unemployed. Second, the fastest 
and largest impact came from the relief to State governments, which 
prevented layoffs and boosted employment in both the public and private 
sectors. Third, there was some Government spending on infrastructure 
that boosted demand. Last, various temporary tax cuts--such as the 
Making Work Pay tax cut that limited the taxes withheld from paychecks 
starting in April 2009--helped boost spending as well.
                         more needs to be done
    The fundamental problem in the economy today is excess capacity--
both too many people unemployed and facilities underutilized. In fact, 
capacity utilization for total industry stood at 71.3 percent in 
November, a rate 9.6 percentage points below its average for the period 
from 1972 through 2008. The solution is to increase demand. When the 
housing and stock bubbles collapsed, people lost wealth and income and 
cut back. Businesses lost customers and pared back. Exports fell as the 
world economy declined. That vicious cycle is continuing, though at a 
slower pace, and that's why Government has to intervene. Businesses 
won't invest and start hiring until consumer demand picks up, which 
won't happen with 27 million people unemployed or underemployed.
    Obviously, the overwhelming need is to create jobs--millions of 
them, as quickly as possible. As long as employers are creating only a 
single job for every six unemployed workers, consumer sentiment and 
unemployment will not improve, and the recession will continue.
The Jobs Challenge
    To be effective at bringing down the unemployment rate, job 
creation policies must not only focus on those policies that provide 
the most bang for the buck, but must also be big enough to have a 
significant impact. Unless Congress approves a job creation plan of 
sufficient scale, the unemployment rate will be higher in the summer 
and winter of 2010 than it is today. It should be noted that these 
projections assume that Congress will extend the unemployment insurance 
program throughout the year, so making progress on unemployment will 
take significant additional policy action.
    What will it take to keep the unemployment rate from rising through 
next fall? Moody's Economy.com forecasts 10.5 percent unemployment in 
the last half of 2010, which implies that roughly a million more people 
will be unemployed by the end of the year. This projection assumes that 
legislation already passed--including Recovery Act provisions and the 
homebuyers' credit--will have a positive impact and assumes there will 
be a renewal of the unemployment insurance/COBRA package, which also 
helps create jobs (about 900,000 according to our estimates) and reduce 
unemployment. The projection shows 400,000 more jobs in the last 
quarter of 2010 relative to the last quarter of 2009.
    There are two special challenges at this moment in time that may 
make lowering unemployment even more difficult than these projections 
imply: fast growing productivity and the ``missing labor force.''
    Consider the ``missing labor force'' first. As mentioned above, the 
labor force has actually shrunk over this recession rather than grow 
proportionate to the increase in the working-age population. What this 
means is that there is a large group of people not currently counted as 
unemployed--the missing labor force--who reasonably can be expected to 
start looking for work when job growth resumes. For instance, the labor 
force has contracted by 810,000 since December 2007 instead of growing 
by the 2.6 million that could have been expected (with 0.9 percent 
annual growth). That means the labor force is missing more than 3.5 
million workers, more than 2 percent of the labor force. Since May 2009 
the labor force has declined by an astonishing 1.9 million. When these 
workers restart their job searches (as job growth returns), they will 
either drive the unemployment rate up or make it more difficult to 
obtain reductions in the unemployment rate.
    The second challenge is the recent spike in productivity growth. 
This means that employers are able to produce more goods and services 
with the same number of employees. Consequently, it will take faster 
growth in overall demand and economic activity in order to generate job 
growth. This spike in (nonfarm business) productivity is very large, 
growing 8.1 percent and 6.9 percent, respectively, in the most recent 
two quarters. Productivity has grown 4 percent more than the last year. 
Some have interpreted this spike as employers retrenching more than 
necessary, implying that we'll get strong employment growth as overall 
growth continues (employers will have to hire rapidly to increase 
production because they have cut into the bone already). I do not think 
that interpretation is correct. I have been impressed by the recent 
research of Robert Gordon of Northwestern University, which shows that 
this productivity spike is the continuation and deepening of a trend 
observed in the last two recessions. In this light, the productivity 
growth is not a fluke but expected behavior that will make it extremely 
difficult to generate a substantial number of jobs in the recovery. 
Gordon's research helps explain why we have had two successive 
``jobless'' recoveries and why we should expect a repeat performance in 
this recovery.
    So, how many jobs must we create in order to see unemployment fall 
rather than continuing its upward trajectory? To see 9.7 percent 
unemployment at the end of the year we would need at least 1.2 million 
more jobs than we expect to see. There will be roughly 1 million jobs 
generated (lowering unemployment by roughly 0.67 percent) for each $100 
billion of additional (beyond unemployment insurance/COBRA) spending 
targeted at job creation, say through State and local government 
assistance or infrastructure spending. That would put unemployment next 
fall at today's 10 percent rate. However, if just 1 million of the more 
than 3.5 million workers in the ``missing labor force'' restart their 
job searches, then $100 billion in spending on job creation will not 
lower the unemployment rate at all. If productivity growth continues to 
be above that expected in the projections, then even more will need to 
be done. It will require about $200-250 billion of additional spending, 
above and beyond full-year UI/COBRA renewal, to assure that 
unemployment would peak by spring or summer and start falling 
thereafter.
    We should also consider the longer-term context. To return, within 
2 years, to even the December 2007 pre-recession 4.9 percent 
unemployment rate, we'd need to create roughly 550,000 jobs every month 
for the next 24 months. This would require obtaining GDP growth of 
roughly 7 percent, significantly higher than the expected 3 percent 
growth over the next 2 years. To put this in perspective, the Nation 
hasn't experienced a rate of job growth this rapid and sustained since 
1950-51, two of the best years on record for job creation in the U.S. 
GDP growth in those 2 years averaged 8.2 percent.
    Clearly, any job creation proposals must be laser-focused on 
creating the maximum possible number of jobs for every dollar spent. 
But they must also be part of a job creation package that is big enough 
to have a major impact and return the economy to where we can rely on 
private sector growth.
Serious, Large-scale Job Creation will Require a Five-part Approach
    First, Congress must strengthen the safety net and provide relief 
for those directly impacted by the recession. There is a direct boost 
to GDP (and therefore to employment) from unemployment compensation, 
COBRA continuation, and food stamps. As a new CBO report, ``Policies 
for Increasing Economic Growth and Employment in 2010 and 2011'' makes 
clear, paying unemployment compensation is among the most effective 
ways to boost demand and create jobs. All of the Recovery Act 
provisions to improve and extend benefits to the unemployed (including 
a total of 99 weeks of unemployment compensation) should be renewed for 
another year. We predict that a full-year renewal will create about 
900,000 jobs, while CBO estimates that about 700,000 jobs would be 
created, on the assumption that each $1 billion of aid to the 
unemployed creates 7,000 jobs.
    Action to renew these programs is urgently needed, since under 
current law they expire on February 28. If the program expires, 
millions of the unemployed will lose benefits, since almost 40 percent 
have been unemployed for more than the normal 26-week period of benefit 
payments.
    Second, Congress should provide more fiscal relief to the States. 
Helping State and local governments avoid job cuts is as effective as 
creating new jobs. Nothing is more clearly an obstacle to recovery than 
another round of public employee job losses and cutbacks in State 
spending on goods and services contracted out to the private sector. As 
Paul Krugman puts it so well, we cannot afford to have the States 
become 50 little Herbert Hoovers, cutting back spending and raising 
taxes as the economy struggles to recover. With budget gaps expected to 
exceed $450 billion in 2010 and 2011, the States and local governments 
need Federal revenue sharing as never before. EPI researcher Ethan 
Pollack estimates that if Congress does not intervene, and State and 
local governments close their budget gaps by cutting spending, GDP 
growth will be reduced by about 4.5 percent more than the next 2 years, 
at a cost of more than 3 million jobs. We can expect to see State and 
local government efforts to close their fiscal imbalances lead to 
large-scale layoffs and cutbacks this spring and an even larger 
retrenchment this summer and early fall. We estimate that half the jobs 
lost through fiscal retrenchment would be private-sector jobs that 
either directly provide services to citizens (think highways and 
healthcare), inputs to State services, or are supported by the spending 
(restaurants, supermarkets, etc.) done by those who deliver services. 
These actions would also, of course, badly erode needed public 
services. This damage can and must be avoided.
    We recommend that Congress provide $150 billion to State and local 
governments, an investment that, we estimate, would save or create 1.0-
1.4 million jobs. CBO's job creation estimates are lower but still 
large, assuming that each $1 billion of fiscal relief to the States 
will create 3,000 to 7,000 jobs over the next 2 years, for a total of 
450,000 to 1.05 million jobs.
    Third, this subcommittee should fund the direct creation of public 
service jobs--putting unemployed people to work doing jobs that will 
benefit their communities. Twice in the past during times of high 
unemployment, the United States successfully turned to large-scale 
programs of direct job creation. We can build on those successes to 
increase employment and household income in the communities most 
severely affected by the economic downturn. In doing so, we can reduce 
the need for unemployment compensation and health coverage for the 
unemployed while improving health, housing, education, job readiness, 
transportation, and public infrastructure.
    With a goal of putting a million people back to work, the program 
should be funded at $40 billion per year for 3 years, with funding 
allocated to local governments and States using a modified Community 
Development Block Grant formula.
    The U.S. Department of Labor should allocate funds and oversee the 
program at the Federal level. Projects would be selected for funding by 
the highest local elected official based on the ability of the project 
to provide immediate employment to community residents, its benefit to 
the community, and the management capacity of the applicant.
    Local governments would design public-sector programs or select 
projects proposed by nonprofit organizations and public-private 
partnerships that can quickly employ residents of the targeted 
communities while delivering a needed service.
    During the first 6 to 9 months, the program could fund fast-track 
jobs. Projects would be limited to a discrete list of activities, in 
order to allow for quick implementation and large-scale employment. 
This ``fast-track'' authority should be carefully defined to prevent 
abuses and limited to four areas that reflect national priorities and 
demonstrate a high-potential impact for aggregate job creation: 
neighborhood/community improvement; child health and development; 
access to public services; and public safety.
    Fast-track jobs could include, for example:
  --Painting and repairing schools, community centers, and libraries;
  --Clean-up of abandoned and vacant properties to alleviate blight in 
        distressed and foreclosure-affected neighborhoods;
  --Staffing emergency food programs to reduce hunger and promote 
        family stability;
  --Work in Head Start, child care, and other early childhood education 
        programs to promote school readiness and early literacy; and
  --Renovation and maintenance of parks, playgrounds, and other public 
        spaces.
  --After 9 months, the program would move into the full implementation 
        phase, and projects would be identified based on a planning 
        process that would involve community input. Priority for 
        funding under the longer-term phase would be given to 
        employment projects that:
    --Integrate education and job skills training, including basic 
            skills instruction and secondary education services;
    --Coordinate to the maximum extent feasible with pre-apprenticeship 
            and apprenticeship programs; and
    --Provide jobs in sectors where job growth is most likely and in 
            which career ladders exist to maximize opportunities for 
            long term, sustainable employment for individuals after 
            program participation.
    Jobs would be made available broadly to the unemployed, but local 
governments would be permitted to target the program to those most in 
need, such as those unemployed for more than 6 months or people 
residing in a high-poverty community.
    It is critically important that the jobs created be new jobs that 
add to total employment, and not substitutes for jobs currently held by 
public employees. Experience shows that local governments will be 
tempted to replace employees paid by local taxpayers with employees 
paid with Federal funds. To prevent this, there must be strict rules 
against substitution and strong enforcement along with the State and 
local fiscal relief also proposed as part of this plan.
    To ensure the maximum job creation, 80 percent of funding for each 
project must be spent on wages, benefits and support services (such as 
child care) for individuals employed. To ensure that the jobs do not 
undermine local labor standards, the projects must pay prevailing wages 
and benefits.
    During the Great Depression in the 1930s, public job programs 
employed millions of people and left a legacy of improvements in the 
national parks and forests, hundreds of thousands of miles of new 
roads, 35,000 public buildings, urban art and murals, soil 
conservation, and many other valuable contributions to national life 
and prosperity. A smaller program in the 1970s employed 750,000 people 
at its peak, gave on-the-job training that boosted the long-term income 
of hundreds of thousands of young people and urban residents, and 
performed valuable services in thousands of communities.
    We know from those experiences that a large-scale jobs program can 
be geared up quickly and help put a million of our citizens back to 
work in jobs that will improve their communities and contribute to 
shared prosperity.
    We recommend that the Federal Government spend $40 billion per year 
over the next 3 years to directly create jobs that put unemployed 
Americans back to work serving their communities. Each $40 billion 
could put about a million people to work.
    The fourth component of our plan is increased investments in school 
repair and modernization. I know this has long been an interest of 
Chairman Harkin, but the time has come to think big and to act. A bold 
plan to address one of America's most pervasive infrastructure problems 
could quickly put hundreds of thousands of people to work while 
improving the safety and education outcomes for millions of children. 
Investment in the repair and maintenance of the Nation's 97,000 public 
school buildings would boost the recovery and deliver long-term 
benefits to the economy.
    In 1995, the Government Accountability Office did an extensive 
survey and analysis and found that America needed $113 billion ($159 
billion in today's dollars) to bring its school building inventory into 
good repair. Although the United States. expended nearly $550 billion 
for public school construction from 1995 to 2007 ($770 billion in 
today's dollars), most of these funds were spent to build new schools 
and additions to meet the space needs of nearly 5 million additional 
public school students. While thousands of new buildings were built, 
the 86,000 already existing school buildings were neglected. Most 
school districts were unable to catch up or keep up with the 
maintenance, repair or capital renewals needed to support the health, 
safety, or educational requirements of staff and students.
    A detailed analysis by the 21st Century School Fund of school 
district spending on maintenance, repair, and capital renewals revealed 
that the Nation's deferred maintenance deficit has worsened 
considerably since 1995. Nearly $300 billion of required maintenance in 
our pre-kindergarten through 12th grade public school buildings has 
been neglected. This is an average of about $41 per square foot of 
space and $5,400 per student.
    Chronic deferred maintenance, repair and capital renewals can 
result in unsafe drinking water; unsafe food storage and kitchen 
equipment; inoperable building door locks; infection risk and asthma 
from exposures to mold under carpets; unrepairable alarm systems; and 
danger from structural problems. Gyms, pools, and libraries are closed 
because of leaky roofs and other maintenance problems.
    Without adequate funds, school buildings are maintained as part of 
a ``run to fail'' system-neglecting preventive and routine maintenance 
and doing upgrades and replacements of major building systems, 
component and finishes only in response to crisis.
    Maintenance and repair work are labor intensive. Making progress on 
the most critical needs with an investment of $30 billion--just 10 
percent of the most urgent deferred maintenance--could provide 
important, productive work to nearly 240,000 workers in the private and 
public sectors. Currently, 1.5 million construction workers are 
unemployed and the market for new construction remains severely 
depressed. Both small businesses and their employees desperately need 
the work.
    We recommend that your subcommittee allocate $30 billion to school 
districts for school modernization, using the Elementary and Secondary 
Education Act's title I formula to ensure that the money reaches every 
school district quickly and efficiently.
    It is critical to recognize that half-measures like guaranteeing 
local government construction borrowing won't work. The process to 
approve the issuance of new bonds, which often includes a public 
referendum, is too slow to create jobs this summer when school repairs 
could be done with the least disruption of classroom activities. 
Equally important, the poorer districts that most need the money and 
jobs would be the least likely to borrow. And most districts are 
forbidden by statute to borrow for maintenance and repair of 
facilities, which are considered part of operations. They can borrow 
only for their capital budget, for the long term, which limits loans 
for purposes such as new construction and the purchase of assets with a 
useful life as long as the term of the bond.
    Finally, Congress should enact a new job tax credit to spur job 
creation in both the private and nonprofit sectors. According to our 
estimates, a tax credit for firms equal to 15 percent of expanded 
payroll costs would lead them to hire an additional 2.8 million 
employees next year. The cost of this program would be relatively low. 
Net revenue losses to the Federal Government would total an estimated 
$28 billion in the first year, but half of these costs would likely be 
recouped in lower spending on unemployment insurance, Medicaid 
spending, and other safety net programs. Such a credit should be:
  --Wide-ranging, designed to stimulate a wide range of jobs across 
        economic sectors and across all kinds of firms, regardless of 
        size or current profitability.
  --Temporary, to encourage job creation when the labor market is 
        weakest and to limit the cost to the Treasury.
  --Large enough so that it will lead firms to hire new employees, and 
        cause a significant number of jobs to be created economy-wide.
  --Efficient. The tax credit should target new job creation as much as 
        possible and not simply be a handout to businesses.
    In line with these principles, we suggest a broad-based refundable 
tax credit for employers that expands their workforce in 2010 and 2011. 
In the first year the credit would be equal to 15 percent of the net 
increase in that portion of a firm's payroll subject to Social Security 
taxes. In the second year the credit would drop to 10 percent. This 
would encourage firms to hire sooner rather than later, and would 
provide a significant incentive for expanded employment.
    To ensure that the credit is most effective at stimulating new 
hiring and to ease implementation, the credit would be calculated as a 
percentage of the increment to firms' Social Security payroll tax 
expenses over a base amount. We suggest using firm's payrolls in the 
four quarters prior to enactment (adjusted for inflation), and 
calculating the tax credit based on the incremental increase in the 
expenses for payroll taxes paid. This could be implemented by providing 
the tax credit as part of the employers' quarterly filing of their IRS 
form 941, which they use to report Social Security and Medicare payroll 
taxes. Adding a few lines to the form 941 would allow a wage credit to 
be implemented relatively simply. This credit would be refundable so 
even firms that are not profitable would benefit. It would also be 
provided quarterly so it would help firms' cash flow immediately after 
hiring.
    The credit should also be broad-based. The wage credit should be 
extended to all private firms, nonprofit organizations, and State and 
local governments.
    By applying the credit based on total Social Security payroll 
taxes, the credit would also reward expansion of work hours as well as 
employment. The credit should also be based on that portion of wages 
that is subject to Social Security payroll taxes to ensure that the 
credit does not apply to wages increases for very high wage earners.
Impact
    The job creation tax credit would have a very significant impact on 
job creation. Using estimates of how wage costs influence employer 
hiring, we find that the credit would lead to the creation of 1.4 to 
2.8 million new jobs in the first year, and slightly less in the 
following year as the tax credit is reduced.
    Even in a down economy many firms expand their workforce, even 
without a tax credit, so much of the credit will inevitably go to firms 
that would have expanded anyway. Nevertheless, the cost of our proposal 
is relatively modest. The revenue loss from the credit would be limited 
by of setting increases in revenue from corporate tax receipts and 
individual tax payments. We estimate the gross revenue cost to be $80 
billion in the first year. Given our estimate of 1.4 to 2.8 million 
jobs created, the gross cost per net new job would be between $28,600 
and $58,000. Taking into account the positive effects on GDP and 
reduced expenditures for unemployment compensation and other safety net 
programs would greatly reduce the net cost per new job, making a job 
creation tax credit a very efficient job creator.
               the deficit is not a reason to fail to act
    The initiatives I have outlined above necessitate increased 
spending or lower revenue over the next couple of years, and thus they 
will add to the Federal debt in the short run. While we do face longer-
term budgetary challenges, we cannot be paralyzed into inaction-
deficits are both necessary and appropriate with unemployment at 
current levels.
    In fact, the best way to get our fiscal house in order is to ensure 
we have a vibrant, growing economy and enough jobs and taxpayers so 
that we as a Nation can start to address the long-term budget. In other 
words, a major job creation initiative is complementary to any strategy 
for addressing our future fiscal imbalances.
Experts Agree Deficits are Appropriate and Desirable in Recessions
    During times of economic contraction and/or high unemployment, 
deficits will naturally increase. As incomes and profits fall, tax 
revenues will decline as a share of the economy. Greater unemployment 
and lower wages will increase spending on a variety of social supports 
including unemployment insurance and Medicaid. These ``automatic'' 
reactions to recessions imply that deficits will increase. Further, 
policies enacted specifically to combat recession (through, e.g., 
infrastructure spending or tax cuts) will have an impact on the deficit 
as well, at least for the time-limited existence of such efforts.
    Textbook economics as well as expert opinion are in agreement that 
deficits that arise from both the automatic reactions as well as from 
deliberate, counter-cyclical policy changes are appropriate and 
desirable to reduce the size and duration of the recession. See 
examples below for illustrations from experts who are thought to be 
``deficit hawks'':
    David Walker, President and CEO of the Peter G. Peterson 
Foundation:

    ``I think it's very important to separate the short term from the 
structural. It's understandable to run deficits when you have a 
recession, a depression or unprecedented financial services and 
housing-type of challenges and crises that we've had. That's not what 
I'm concerned about.'' \2\
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    \2\ January 11, 2009, Interview with National Public Radio at 
http://www.npr.org/templates/story/story.php?storyId=122436097&ft=1&f=3

    Gene Steuerle, Senior Fellow, The Urban Institute, and co-director 
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of the Urban-Brookings Tax Policy Center:

    ``Contrary to much debate, getting the long-term budget in order 
does not require avoiding stimulus in bad times; it only means 
reasonable reductions in those levels in good times.'' \3\
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    \3\ November 30, 2009, National Journal Experts Blog at http://
economy.nationaljournal.com/2009/11/obama-and-the-deficit_1.php

    Greg Mankiw, Harvard Professor and Former Chairman of the Council 
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of Economic Advisors under George W. Bush:

    ``It is a textbook principle of prudent fiscal policy that deficits 
are an appropriate response in times of war and recession.'' \4\
---------------------------------------------------------------------------
    \4\ July 16, 2003. Ask the White House blog at http://georgewbush-
whitehouse.archives.gov/ask/20030716.html

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    Isabell Sawhill, Senior Fellow, Brookings:

    ``It is important to stimulate the economy now and not worry about 
the deficits needed to do this but we should simultaneously be enacting 
legislation that will gradually phase in spending cuts and revenue 
increases over the next decade.'' \5\
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    \5\ May 13, 2009, Brookings Transcript at http://www.brookings.edu/
events/2009/0513 _budget_chat.aspx

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    Concord Coalition:

    ``It may be appropriate for government to spend more than it taxes 
during downturns in the business cycle. The Concord Coalition has 
always recognized the importance of fiscal stimulus, so long as the 
stimulus is timely, targeted, and temporary.'' \6\

    \6\ December 19, 2002, ``A More Responsible Fiscal Course'' at 
http://www.concordcoalition.org/issues/facing-facts/more-responsible 
fiscal-course.
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Long-term Impact
    Discussions of economic recovery and deficits often portray 
recovery spending as boosting the economy in the short-term while 
having negative impact on long-term growth through higher debt levels.
    However, as a substantial body of economic literature shows, 
benefits from a recession-fighting effort can have long-lasting 
positive impacts. Further, because debt is paid of over a very long 
period of time, and because interest rates are very low, the 
consequences of debt increases during recessions can be minimal.
    According to a recent report by my EPI colleague, John Irons:\7\
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    \7\ John Irons, ``Economic Scarring: The Long-Term Impacts of the 
Recession,'' Briefing Paper #243, Economic Policy Institute, September 
30, 2009, at http://www.epi.org/publications/entry/bp243/.

    [T]he consequences of high unemployment, falling incomes, and 
reduced economic activity can have lasting consequences. For example, 
job loss and falling incomes can force families to delay or forgo a 
college education for their children. Frozen credit markets and 
depressed consumer spending can stop the creation of otherwise vibrant 
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small businesses. Larger companies may delay or reduce spending on R&D.

    In each of these cases, an economic recession can lead to 
``scarring''--that is, long-lasting damage to individuals' economic 
situations and the economy more broadly.
    A recession, therefore, should not be thought of as a one-time 
event that stresses individuals and families for a couple of years. 
Rather, economic downturns will impact the future prospects of all 
family members, including children, and will have consequences for 
years to come.
    As such, the benefits of a recovery effort can be very high in both 
the short-run and the long-run. Over time, the additional borrowing to 
finance these costs would add to the national debt. However, with 
interest rates at very low levels, and since the costs are spread out 
over many years, the long-term impact of recovery-related deficit 
spending would be minimal.
    According to a simple example presented by Brad DeLong, a 
University of California economics professor, $100 billion in extra 
government purchases would yield $150 billion of increased production 
and incomes, at a cost of just $800 million a year in additional 
payments. According to DeLong: ``It's not a free lunch. but it is a 
very cheap lunch: like getting a 2 lb. lobster with all the trimmings 
for $1.95.'' \8\
---------------------------------------------------------------------------
    \8\ J. Bradford DeLong, ``The Simple Arithmetic of Boosting 
Government Purchases,'' October 8, 2009, at http://delong.typepad.com/
20091008d-epi.pdf
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Paying for Recovery: Financial Transactions Tax
    As noted above, we should not be concerned about deficits in the 
short-run. However, there are longer-term challenges that face the 
Nation and the budget. It is thus reasonable to put in place today 
revenue options that would be used to pay for recovery efforts over a 
longer horizon.
    The spending required by a jobs plan would likely occur primarily 
within the first 2 years after its enactment; in years 3 through 10, 
all of this spending could be recouped through a financial transactions 
tax.
    According to a recent EPI report by my colleague Josh Bivens:\9\
---------------------------------------------------------------------------
    \9\ Full details at American Jobs Plan, at http://www.epi.org/
index.php/american_jobs/paying_for_the_plan

    ``An intelligently designed financial transactions tax should be a 
key item on the policy menu. Those concerned about the state of the job 
market today and the state of the deficit tomorrow should embrace a 
proposal that calls for increased action to boost employment in the 
next 2 years that is paid for with the implementation of an FTT. The 
economic bottom line is that a financial transactions tax is a 
progressive revenue-raiser that is likely to be either efficiency-
neutral or even efficiency-enhancing. Few other revenue-raisers can 
---------------------------------------------------------------------------
make this claim.''

    A financial transactions tax could raise considerably more than 
these estimates--0.8 percent to 1.6 percent of GDP according to a 2002 
study--by taxing a wider range of assets than stocks. In 2009, that 
range would amount to $113-226 billion. In short, the tax can be a 
significant revenue-raiser.
Deficit Reduction Will Require Economic Growth and Low Unemployment
    History shows us that a strong economy and low unemployment are a 
prerequisite for deficit reduction. Without an adequate revenue base--
which is unachievable in an economy with high unemployment and 
substantial unused capacity--it is exceedingly difficult to bring tax 
revenues in line with desired spending.
    As noted above, deficits arise from weak economic conditions. For 
example, between January 2008 and August 2009, the baseline CBO deficit 
projection rose by $1,380 billion, with more than half of this increase 
stemmed from changing economic conditions.\10\ Policies put in place to 
combat the recession, including TARP and the Bush-era recovery act, 
made up most of the rest. Thus a return to economic growth will play a 
large role in reducing deficits.
---------------------------------------------------------------------------
    \10\ Josh Bivens, ``Budgeting For Recovery--The Need to Increase 
the Federal Deficit to Revive a Weak Economy,'' January 2010, at http:/
/www.epi.org/publications/entry/bp253/
---------------------------------------------------------------------------
    Given the large and persistent costs of economic recession and 
stagnation, the risks associated with doing too little to create jobs 
far outweigh the risks associated with greater deficits in the short-
term. Congress's first priority thus needs to be to enact a jobs 
package of sufficient size to reduce employment and create a robust 
recovery. Doing so is not at odds with efforts to address our fiscal 
imbalances; rather, job creation is totally complementary to and 
consistent with efforts to lower our longer-term deficits.
The Public Understands This Better Than the Congress
    Many Members of Congress believe that the Recovery Act and the 
bailout of the financial sector exhausted our ability to act or at 
least exhausted the public's appetite for intervention. Neither is 
true.
    Several recent polls, including one conducted by Hart Research for 
EPI, show that the American people understand the need to act. While 
they believe the Recovery Act helped the economy and want it continued, 
they also want to see more direct action to create jobs. Large 
majorities support a public jobs program and job creation tax credits, 
and a majority supports more aid to the States. The public feels that 
Congress has helped the banks and financial institutions and should now 
act boldly to help average Americans find jobs. Given a choice between 
deficit reduction or more spending to create jobs, voters support more 
job creation by 2 to 1.
                               conclusion
    We face a national jobs crisis that requires immediate attention 
and a bold response. The jobs recovery won't happen by itself. If 
Congress doesn't act quickly and at sufficient scale, high and damaging 
unemployment will continue for years.

    Senator Harkin. Thank you very much, Dr. Mishel.
    And now we will turn to Dr. Weast.
STATEMENT OF JERRY D. WEAST, Ed.D., SUPERINTENDENT, 
            MONTGOMERY COUNTY PUBLIC SCHOOLS
    Dr. Weast. Good morning, Senator Harkin, Ranking Member 
Senator Cochran, and Senator Murray.
    My mother was a one-room schoolteacher in Kansas, where I 
grew up. And she told me it was a small world, but I didn't 
realize until I came today how small it was.
    Governor Culver graduated from one of our high schools, 
BCC. Senator Pryor graduated from another one, Whitman High 
School. My wife came from Tennessee. And a great UT graduate, 
she bleeds that orange blood. And I grew up in Kansas on a 
farm. So I am right next to Iowa and was a school 
superintendent in Montana. So I know a lot about the Washington 
area.
    So it is a small world for a schoolteacher. And that is 
what I come to you as. I want to thank you for the valuable 
help that you have given our children because they are going to 
grow up and do great things. And please don't withdraw that 
help right now at this critical juncture.
    I think you have got to think about how you can use the 
Federal education funding as a strategy to lever up. You have 
the school lunch program coming up for reauthorization, and 
right now, we are not breaking even on that. In my district, we 
are losing a couple of million dollars because the cost of the 
meal and commodities have gone up so quickly that we are not 
able to offset what the cost is to serve it.
    And that is in a district that has gained almost 4,000 
students on free and reduced lunch just this year. So poverty 
is affecting us.
    How you use the IDEA reauthorization and funding for 
special education because a lot of our ARRA money is targeted 
right at that, and that will make a big difference.
    What you are going to do with title I for those 4,000 new 
poverty children. We would have really been hurt if we didn't 
have the ARRA funds because more kids, less money. Need didn't 
go away.
    The Elementary and Secondary Education Act, hugely 
important to us. And Race to the Top, how you allocate those 
funds.
    If you can kind of put them all together in some way to 
give us the energy and flexibility, not only can we hold jobs, 
we can actually get on with our mission of preparing these 
children to be high-wage work ready and college ready.
    And that is really important. I don't care if you are in 
Kansas, Iowa, Washington, Montana, et cetera. What we do in a 
small country of 300 million to compete in a world with 6 
billion is going to be hugely important in the next 10 to 15 
years, especially with the deficits we are running up. Because 
these kids in school today are going to be paying the bill and 
taking our place, and it is really important we don't cut back 
right now.
    We are the 16th largest school system in the country. What 
is not known too much is that we represent 160 different 
countries. It is all about location. So everybody that comes, 
they come to the Washington area, they settle in Montgomery 
County. We now have children speaking 130 different languages, 
no majority group, and a great deal of issue with poverty 
rising, almost 4,000 a year, and 2,500 more kids coming to 
school this year than we did last year.
    We are proud of our accomplishments. It takes a good 
teacher in every classroom, just like my mom taught in that 
one-room school. They won't go to work without a good principal 
and at a good system.
    Our African-American students, for example, now represent 3 
percent of all the college-ready advanced placement tests in 
the entire United States of America, 3 percent. They are only 
10 percent of the population of African Americans in the State 
of Maryland, which is ranked by Education Week number one. But 
40 percent of all the tests for advanced placement that scored 
college ready came right out of that district.
    Our Hispanic population is graduating from college within 6 
years after graduating from our high school at double the rate, 
almost triple the rate of the Hispanic population in America. 
So we really need to keep that going. That is the energy that 
drives our hub.
    The ARRA funds provided us with an ability to save 400 jobs 
or create jobs. The ARRA funds especially helped us with 
special education students.
    Now we have had an 87 percent increase in just 5 years on 
children diagnosed with autism, 87 percent. We have almost 
1,500 of those students--that is a rather large high school in 
anybody's State--in our system right now. The ARRA funds helped 
us to start to address that because that growth is exponential, 
and you are going to rob from Peter to pay Paul if you don't 
keep that funding stream going.
    We were able to save 82 teacher positions, 43 para-educator 
positions, and help all of our 16,800 students with 
disabilities. Just in that one area alone, that is 125 jobs.
    With these 4,000 almost students coming to us in title I, 
we were able to concentrate our funds and add more schools into 
the title I because they were about 60 percent poverty just to 
get in. We were able to create more than 13 more full-day Head 
Start classes and move our schools up so we could address 
almost 400 more children in early childhood education because 
that is making a huge difference on getting them ready for this 
college trajectory.
    The achievement gap, we find, is an opportunity gap--an 
opportunity to have a good early childhood education, an 
opportunity to have a stimulating environment where you get 
lots of oral language. If we can keep them on that track, we 
can put them on our college and high-wage work track. And then 
when they graduate career and tech ready or they graduate to 
have an option to go to a college, they are fully prepared and 
don't have to get into remediation.
    And we know that for every one that we can get through 
college, that is $1 million in lifetime earnings over a high 
school graduate, $1 million. So if we can put out 1,000 more of 
our 10,000 graduates college ready, that is like $1 billion a 
year.
    So this is good investment. It is good investment in the 
infrastructure. I didn't mention that Mr. Mishel's children 
also go to Montgomery County, Montgomery Blair High School. And 
it is a good investment to invest in job-ready construction, 
ready to go right now.
    Because when you have that growing district, you always 
have to keep remodeling, and we are not keeping up right now, 
folks. Fifty to 70 years is what we are keeping a building in 
service. Can you imagine that with your house? The air 
conditioning or the windows or almost everything needs to be 
replaced, and those buildings that we had 70 years ago, they 
have got walls about 3 feet thick that you can't really run the 
electrical conduit too well through. And the plumbing was kind 
of one or two places in each restroom rather than the 10 or 12 
that you need because of the size of the school.
    So there is a lot to be done, but I want to thank you for 
what you have done. I want you to be cautious about the funding 
cliff that has created because if we put it to immediate use 
and we don't find a way through that, and we don't get the 
reauthorization of the ESEA or the title I or any of those 
things, if they are not synchronized, school districts all over 
will have another big falloff in 2012.

                           PREPARED STATEMENT

    And so, try to remember synchronization of your funding is 
important. It is making a huge difference, and that huge 
difference translates into real children who are prepared for 
that next step, and some day they may be sitting on this 
committee as a Senator or testifying as a Governor or a famous 
economist.
    Thank you.
    [The statement follows:]
                Prepared Statement of Dr. Jerry D. Weast
    Good morning, Senator Harkin, Senator Cochran, and members of the 
subcommittee. I am Jerry Weast, superintendent of schools for 
Montgomery County, Maryland. Thank you for this opportunity to testify 
on behalf of the Montgomery County Public Schools on the impact of 
Federal stimulus aid under the American Recovery and Reinvestment Act 
(ARRA) on K-12 education and the funding issues that we face at the 
expiration of ARRA. In our community, the Federal stimulus aid saves 
the jobs of teachers while improving the quality of education for all 
children. My message is: Thanks for your valuable help for our kids, 
but please don't withdraw it at such a critical juncture. We can't 
afford to go backwards on the progress that we have made.
                               background
    Montgomery County, Maryland, Public Schools (MCPS) is the Nation's 
16th largest school district. Located just outside Washington, DC, the 
district serves 142,000 students with approximately 22,000 teachers, 
support professionals, and administrators. The district is proud of its 
accomplishments during the last decade in improving the level of 
student achievement and closing the gap between White and Asian-
American students and African-American and Hispanic students. Our 
district is very diverse with no single racial or ethnic majority. 
African Americans comprise 23 percent of the students, 23 percent are 
Hispanic, 16 percent Asian American, and 38 percent White. The families 
of our students come from 164 countries and speak more than 130 
languages. More than 40,000 students are eligible for Free and Reduced-
price Meals, up nearly 4,000 just this year, a record for our district. 
We have improved performance with 78 percent of students taking Honors 
or Advanced Placement (AP) courses. The percentage of African-American 
and Hispanic students who score a 3 or higher on AP exams surpasses the 
national percentage for all students. In fact, only New York City has 
more African-American students who score college ready on AP exams than 
Montgomery County and they have nine times more African-American 
students than we do. Nearly half of our graduates go on to complete 
college within 6 years, almost double the national average.
    The new Federal ARRA law provides States and localities an 
opportunity to strengthen academic progress and avoid some of the most 
harmful cuts to education and other public services. The law 
particularly recognizes the importance of protecting education from the 
most painful reductions that could occur because of the economic 
recession. In Maryland, unemployment has risen sharply and State and 
local tax revenues are down. I am very pleased that Governor Martin 
O'Malley moved quickly to use the fiscal assistance the law provides to 
protect funding for State aid to education. He devoted the State fiscal 
stabilization funding included in the new law to protect funding 
formulas under the State's Bridge to Excellence in Public Schools Act. 
However, with the State facing a $2 billion potential shortfall in 
fiscal year 2011, it will prove challenging to maintain the level of 
State aid to education. Continued Federal support is crucial to 
permitting school districts such as Montgomery County to keep moving 
forward to improve achievement for all students.
    Montgomery County has received $28 million from the State fiscal 
stabilization fund during the first year of implementation. This alone 
saved approximately 200 jobs that would have been lost had State aid 
been cut as originally anticipated in the Governor's budget.
    The law also includes specific increases for education grants to 
local school districts based on established formulas for title I, 
special education, and other established programs. This provides 
immediate help to many of our must vulnerable students, those impacted 
by poverty and disabilities. We have targeted Federal funds at 
improving early childhood programs. MCPS has received $12 million for 
title I and $33 million for the Individuals with Disabilities Education 
Act (IDEA) over 2 years. This additional grant revenue has enabled us 
to save or create 150 jobs. This aid redeems the long-stated, but 
shortchanged promises by the Federal Government to these students. It 
is aligned with the MCPS strategic plan to close the achievement gap 
that disproportionately affects these students.
    The Montgomery County Board of Education moved quickly to include 
this Federal aid in its fiscal year 2010 operating budget. Within a 
week of passage, I presented a plan to the Board of Education. This 
gave elected officials and the public a very clear and specific idea of 
how MCPS is using the additional Federal funding. It allowed us to 
begin work with schools on the practical steps to get stimulus money to 
the classroom as fast as possible. Much of this additional funding, 
however, takes the form of targeted grants that do not impact the 
fiscal shortfall faced by the county or the State. Federal grant funds 
do not replace unrestricted local funding.
    Let me highlight some of the specific way in which our school 
district has utilized Federal funds to improve educational quality.
                           special education
    MCPS was fortunate to receive approximately $33 million in ARRA 
funds. MCPS is a district that believes in the strategic planning 
process as an effective way to improve student achievement. We stay 
informed about strategies that work--collect and analyze data--and then 
focus funds on the areas that will make the biggest difference as we 
move our students along the path to college and career readiness.
    IDEA ARRA funds are making a difference in MCPS. We were able save 
or create 90 jobs. We added about 30 special education teachers and 40 
paraeducators to better meet the needs of our 16,800 students with 
disabilities. An additional 20 special education teacher positions were 
saved through ARRA. A staffing model that helps students to receive the 
support that they need in their neighborhood school, known as hours-
based staffing, was expanded.
    Hours-based staffing is a service delivery model that provides 
equitable and appropriate staffing of special education teachers and 
paraeducators based on the total number of direct instructional service 
hours on student Individualized Education Programs (IEPs). This 
staffing model addresses the individualized instructional needs of 
students and provides resources for more flexible programming options 
such as co-teaching and supported general education classes, as well as 
special classes for students who may require this level of 
instructional support. Hours-based staffing supports the provision of 
special education services within neighborhood schools rather than in 
segregated settings. When you consider the range of needs of preschool 
through high school students who qualify for special education, you can 
easily imagine how critical these positions are at the individual 
school and student level.
    Staffing has never been more important as the complexity of student 
needs continues to increase. For example, we serve more than 1,496 
students who are diagnosed with autism spectrum disorder, an increase 
of about 87 percent in just 5 years. We have very high functioning 
students with Asperger's Syndrome who need support in their full-
inclusion academic classes, as well as students who require one-to-one 
support and sophisticated communication devices to make their needs 
known. We thank you on behalf of our students and their families as the 
quality of each child's education was enhanced through these much 
needed human resources.
    Human resources are a priority for us, even though we are well 
aware of the impending ``funding cliff.'' As a part of our goal to have 
a highly effective teacher in every classroom, we focused ARRA dollars 
on professional development. We followed our systemic plan and required 
professional development for special and general education teachers on 
effective co-teaching practices, including funds for enhanced planning 
time. We identified effective intervention programs in reading and 
mathematics, purchased materials, and again made sure that initial 
professional development and follow up on how to implement the 
interventions was provided. We looked at the needs of our staff to work 
with special populations with unique needs, such as children with Down 
Syndrome, and ensured that this training was provided over time to 
incorporate the most training that would have long-term impact aligned 
with what we know about effective professional development.
    To support the implementation of our curriculum, we purchased 
selected materials for schools and therapists to further incorporate 
the principles of Universal Design for Learning (UDL) (i.e., Braille 
writers for our students with visual needs). We initiated a UDL pilot 
program that incorporates teacher training on effective teaching 
practices with the integration of technology into the instructional 
program.
    The social-emotional needs of our students and the importance of 
school climate were our focus as we increased the number of schools in 
our district that implement the Positive Behavioral Interventions and 
Supports (PBIS) program. PBIS was first made available through the 
United States Department of Education. It is having a lasting impact on 
our schools and our students. We also established a collaborative 
program for our students with emotional or behavioral issues, working 
with our local Mental Health Association.
    We built a user-friendly system to capture required student data 
through the IEP team process. This data will greatly enhance our 
ability to provide information to parents and to plan effectively for 
students, particularly in the area of staffing and supports. Finally, 
we purchased new standardized assessments for use by our school 
psychologists that increased efficiency by making use of software 
systems that automate scoring, allowing them to spend more time with 
students and families, and less time hand-scoring somewhat cumbersome 
evaluations.
    When Public Law 94-142 was enacted, Congress' intent, through a 
phasing in of funding, was for States to reach full funding by fiscal 
year 1981. Although Congress has not yet met its financial obligation, 
States embraced the intent of the law to educate students with 
disabilities using evidence-based educational practices. Consequences 
to this funding shortfall resulted in States and local districts 
providing full support for this unfunded Federal mandate.
    With the addition of ARRA funds, MCPS was able to more 
appropriately fund those services to which students with disabilities 
are entitled.
    Without the ARRA allocation, key programs and priorities will need 
to be re-examined. With special education student projections on the 
rise, current staffing models will need to be re-evaluated to ensure 
the appropriate delivery of services to students with IEPs. 
Professional development opportunities will lack the funding needed to 
train the large numbers of teachers, paraeducators, and related 
services provides who interact with students with disabilities on any 
given day. All school systems, including MCPS, will be challenged to 
support nationally recognized educational practices such as UDL and 
assistive technology.
    ARRA funding has temporarily and partially provided the level of 
funding originally intended for special education, removing an undue 
burden on local taxpayers and jurisdictions. With continued funding for 
special education services through ARRA, there will be less of a burden 
on the local taxpayer, States, and local jurisdictions. Congress will 
be closer to meeting the long-established funding level. Because of 
ARRA, MCPS was able to more appropriately fund services for students 
with disabilities which include, but are not limited to, increased 
allocations of special educators and paraeducators, enhanced 
professional development, expansion of UDL, and the development of an 
in-house special education student data system.
                                title i
    ARRA funds were used to provide assistance to MCPS schools that 
have a high concentration of students highly impacted by poverty, 
mobility, and limited English proficiency. In order to help improve 
teaching and learning for students most at risk of failing to meet 
State standards and to close the achievement gap, the funds were used 
to support the comprehensive summer program in seven title I ARRA 
schools. The summer school instructional program gives students an 
opportunity to preview the upcoming grade level standards in reading 
and mathematics for rising kindergarten through grade five students. 
There is no cost to families for this program.
    We used ARRA funds to expand 8 half-day Head Start classes to a 
full day and continue to fund the existing 13 full-day Head Start 
classes. The full-day program provides additional instructional time in 
21 classes for 420 students from low-income families living at or below 
the Federal poverty level. The full-day curriculum helps students 
master the foundational knowledge and skills necessary for optimal 
school learning in kindergarten and beyond.
    We increased the number of high-poverty schools receiving title I 
Federal funds from 28 to 30 and maintained funding for five title I 
schools that may have been eliminated from title I. We increased 
support for homeless and neglected students in MCPS. Funds provide 
tutoring and materials to students in shelters and alternative 
programs.
    These programs created or saved a total of 56 jobs. We added a 
total of 13 positions, including 8 teaching positions in reading and 
mathematics for all students including those with limited English 
proficiency (LEP) and 4 paraprofessional positions to support students 
with the instructional program in reading and mathematics, and a parent 
community coordinator position for outreach to families.
    We saved a total of 43 positions, including 27 teaching positions 
in reading and mathematics for all students including those with 
limited English proficiency, 14 paraprofessional positions, and 2 
parent community coordinators.
    If ARRA funding is discontinued, we will have to eliminate the 
added and saved positions despite continued increases in the number of 
eligible students. We will have to reduce the number of full-day Head 
Start programs, reduce the number of students able to attend summer 
school programs, and reduce the number of parent outreach programs, 
especially English literacy classes for parents. With the growing 
number of families that do not speak English, we must increase parent 
involvement activities to include more English literacy classes for 
parents whose native language is not English and programs that assist 
parents in helping their children with academic homework and projects. 
We must offer alternative/extended day and year programs for students 
who would not be involved in academic activities beyond the school day.
                           other arra funding
    Finally, the unrestricted Federal funds enabled us to avoid $28 
million of planned reductions. We restored academic intervention 
teachers to help schools with students not achieving at expected 
levels, teacher positions in the exciting Middle School Magnet 
Consortium that is providing accelerated instruction in our neediest 
middle schools, and we avoided some planned reductions of counselors 
and of staff development or reading teachers in our smaller elementary 
schools. MCPS also received ARRA grants to increase services to 
homeless children and youth, and for school lunch equipment 
replacement. We also expect to compete for ARRA innovation grants to 
expand our successful initiatives for an accelerated integrated 
curriculum as a national model.
                        future funding concerns
    Despite the additional Federal aid, balancing the budget was 
possible only because of significant reductions elsewhere in the 
budget. Our employees sacrificed $89 million in cost-of-living wage 
increases and we reduced $31 million from the budget through painful 
but necessary reductions. In order to achieve additional savings this 
year, we are cutting more than $30 million of spending. Our central 
administrative costs are less than 2 percent of the budget, one of the 
lowest proportions in Maryland. The Federal ARRA aid has not provided 
local districts with a free ride or an excuse not to make painful 
cuts--ARRA has saved us from even more draconian cuts that would have 
reduced essential classroom services.
    We realize, however, that the current Federal support is temporary, 
that we face a ``funding cliff.'' Under current law, ARRA support ends 
in fiscal year 2012. To avoid a fiscal crisis then, we are maximizing 
one-time spending that can support long-term educational improvement 
without a permanent commitment of local funds. This includes teacher 
training, school materials, and equipment, and technology.
    The end of Federal stimulus support could create a significant 
crisis for our district. Our county faces a $70 million shortfall this 
fiscal year because of sharply deteriorating tax revenue. Although 
unemployment in Montgomery County is significantly less than in much of 
the rest of the Nation, it has nearly doubled this year to 
unprecedented levels. Next year, the county faces a potential budget 
gap of $600 million. As property values have deteriorated, the 
recession also threatens future property tax revenue over the long 
term. Our recovery is likely to be very slow. This means that our 
fiscal crisis will likely worsen in fiscal year 2012 and could continue 
for several years.
    A discontinuation of Federal support in education and other areas 
also will create a major crisis for the State budget. Maryland is 
facing a $2 billion shortfall for fiscal year 2011, which will mean 
major cuts at the State level and a reduction in State aid to 
localities, nearly all of which is for education. The Montgomery County 
Board of Education is determined not to give up or lose ground in the 
improvements in student performance that we have made over the last 
decade. Continuing Federal help targeted at our most vulnerable 
students will allow us to prevent the most damaging reductions and 
continue to stimulate the economy by avoiding as many layoffs as 
possible.
    This is good for our county now and valuable for our children over 
the long-term. Let's not lose sight of the fact that the entire Federal 
education funding strategy is critical to every student's success. All 
of the funding, whether it be for IDEA, title I, the Elementary and 
Secondary Education Act, Race to the Top and even the funding for 
school lunches, needs to be aligned to give sequence and energy to our 
goal of preparing every child for college.
    I would like to point out that every student who graduates from 
college can expect to earn $772,000 more than a high school graduate 
over a lifetime of work. Our graduates who go on to graduate from 
college at a higher rate than the national average can expect to earn a 
total of nearly $1.5 billion more over a lifetime of work. That makes a 
quality education one of the best investments we can make. Your help 
can make a critically important difference in achieving improved 
academic results.
    Thanks for the opportunity to present our views on these important 
issues at this public hearing. I welcome your questions.

    Senator Harkin. Thank you very much, Dr. Weast. Thank you. 
Very poignant testimony.
    Now we turn to Ms. Sessions.
STATEMENT OF MARLENA SESSIONS, CHIEF EXECUTIVE OFFICER, 
            WORKFORCE DEVELOPMENT COUNCIL OF SEATTLE-
            KING COUNTY
    Ms. Sessions. Thank you, Senator.
    Chairman and honorable members of the subcommittee, thank 
you so much for inviting me to participate in today's hearing. 
I am honored and grateful for this opportunity to talk with you 
about one of our time's most vital issues, which has obviously 
been stated over and over this morning--creating and saving 
jobs.
    I also want to thank you for the work that you have already 
done on behalf of jobs, job training, saving jobs, and creating 
jobs. I would like to begin with the story of a young man in 
our summer jobs program in Seattle last summer.
    Ryan, age 24, was on a work release from prison and 
searching for a job. He estimated that he submitted his resume 
to more than 200 different fast food restaurants up and down 
our Puget Sound area, but his conviction was very much a 
barrier.
    Fortunately for Ryan, someone told him about the summer 
jobs program. He jumped at this opportunity and joined a group 
of about 90 young people exploring the industrial trades 
through classes and paid internships.
    Ryan's internship was at a maritime supply company called 
Washington Chain. The company certainly did not intend to hire 
any new employees, but having seen Ryan's work ethic and 
willingness to learn, at the end of the summer, they found a 
place for him as a permanent employee in a union job with a 
future.
    During the summer program, Ryan made $8.55 an hour. He 
worked through September on that, was hired permanently at $15 
an hour, again in a union job, permanent job. And in fact, in 2 
years could be making between $22 and $25 an hour.
    We went out to Washington Chain to see Ryan, and we got 
this wonderful picture of him standing amidst huge piles of 
metal chain that will end up on Navy vessels. And when I see 
it, I think of the chains that would have been around his 
future if not for this opportunity to work and learn valuable 
skills. For the first time, he can support himself and his 
young children. And as Ryan told us, ``I was just waiting for a 
door to open.''
    That is what education and training is all about. When 
people have the skills that employers need, doors open and jobs 
are created. It is critically important for our economy and our 
country that we continue to invest in skill training, in K-12 
education, and in targeted subsidies that encourage hiring.
    What I would like to emphasize is that our public workforce 
system has the infrastructure and connections to use 
investments in job training to put paychecks rather than 
unemployment checks into the hands of Americans. The summer 
jobs program of 2009 is an example of an innovative way to 
create jobs. More than 300,000 jobs were created for young 
people across the country with Recovery Act funds.
    Our Nation's local workforce boards, all 575 of them, put 
this funding into motion immediately and effectively. In 
Seattle-King County, 900 low-income young people had summer 
jobs at more than 260 employers of all kinds, who stepped 
forward to participate.
    The results were tremendous in terms of skills learned and 
money earned. Young people learned to weld, to drive forklifts, 
provide customer service, design public health campaigns, write 
a resume, and be on time. And very importantly, they learned 
that there is a much bigger world of employment out there than 
they knew.
    Across the country, youth work experience has been shown to 
increase academic success, civic responsibility, and work 
readiness. This past summer in particular, we saw young people 
also enhance our struggling economy by taking what would 
normally perhaps be discretionary income and their paychecks 
home to support family members. Subsidized work is a solution 
that works.
    In Seattle, about one-third of the older, out-of-school 
youth like Ryan transitioned directly to permanent jobs through 
the summer jobs program. I have to say that was a bit of a 
surprise to us, and it is a model now that we will continue to 
employ in every summer program that we do.
    By committing to Federal investments in summer jobs, like 
the bill recently introduced by Senator Murray, we open doors 
for youth that would otherwise be closed to them.
    Another way that we can open doors for workers of all ages 
is through on-the-job training (OJT). OJT allows an employer to 
hire someone and then receive support for a portion of that 
employee's wages and/or the cost of training for a temporary 
period. This is a very effective tool that helps job seekers 
get in the door and get up to speed while getting paid.
    For businesses, it offsets the expense and risk of training 
a new hire and often enables job creation earlier in the 
business hiring cycle. Increasing resources for OJT will help 
to jump-start our economy and create jobs.
    The local workforce boards have proved, most recently 
through the Recovery Act funding, that we can very quickly and 
effectively get funding out and working in the community. When 
it comes to OJT, we can tap into strong connections that we 
have already made with employers and industry sectors.

                           PREPARED STATEMENT

    We know that skill training and job creation go hand-in-
hand, and I hope you agree that we must continue to invest in 
the skills of our workforce in employer incentives like on-the-
job training and in work experience that our young people need 
in order to continue learning and earning.
    Thank you again very much for the opportunity to speak to 
you.
    [The statement follows:]
                 Prepared Statement of Marlena Sessions
    Chairman and honorable members of the subcommittee: Thank you for 
inviting me to participate in today's hearing. My name is Marlena 
Sessions and I am the CEO of the Workforce Development Council of 
Seattle-King County, as well as a member of the board of trustees of 
the U.S. Conference of Mayors Workforce Development Council. I am 
honored and grateful for this opportunity to talk with you about one of 
our time's most vital issues: creating and saving jobs.
    I would like to begin with the story of a young man in our 
stimulus-funded jobs for youth program in Seattle last summer. Ryan, 
age 24, had not made good choices in the past. He was on work release 
from prison and searching for a job. He had submitted his resume to 
about 200 different fast-food places, because he had few job skills. 
Once employers found out about his conviction, he was out of the 
running.
    Fortunately for Ryan, someone told him about the summer jobs 
program. He jumped at this opportunity to join our SoDo, Inc. program. 
In this partnership between a youth-services provider and a community 
college, about 90 young people explored the industrial trades. They 
spent 3 weeks on campus in classes, followed by 3 weeks in a paid 
internship with a private company.
    Ryan's internship was at a maritime supply company called 
Washington Chain. His wages were paid by the summer program. The 
company certainly did not intend to hire any new employees, but at the 
end of the summer, having seen Ryan's work ethic and willingness to 
learn, they found a place for him as a permanent employee--in a union 
job with a future. For the first time, he can support himself and his 
young children.
    When we went to Washington Chain to interview Ryan, he was about 50 
feet up in the air, running a crane that moves gigantic mounds of metal 
chain destined for Navy vessels. We have a wonderful picture of him 
standing among these huge piles of chain. When I see it, I think of the 
chains that would have been around his future if not for this 
opportunity to work and to learn valuable skills. As Ryan said, ``I was 
just waiting for a door to open.''
    Doors opening: To me, that is what education and job training is 
all about. When people have the skills that employers need, doors 
open--and jobs are created.
    It is critically important for our economy and our well-being as a 
country that we continue to invest in skill training--in K-12 education 
that is the foundation of further education and training--and in 
targeted subsidies that encourage employers to open their doors to new 
hires.
    And while it isn't directly an issue for workforce boards, I feel 
it's important to point out that we need to make sure that class sizes 
don't balloon, that students are able to attend college, and that 
critical programs that help prepare our students for college and 
careers don't disappear. The last disbursement of State fiscal 
stabilization funds significantly helped keep teachers in their jobs 
and keep programs running, but State and local deficits have continued 
to worsen since then. Federal support for education and teachers as 
States work to balance their budgets is essential, and I would 
encourage that a jobs package offer some support in this direction.
    But what I would like to emphasize today is that our public 
workforce investment system has the infrastructure and connections to 
take investments in job training and use them to put paychecks--rather 
than unemployment checks--into the hands of Americans.
    The stimulus--funding summer jobs program of 2009 is an example of 
an innovative way to create jobs and of the role of the workforce 
investment boards in making it happen. More than 300,000 temporary jobs 
were created for young people across the country with $1.2 billion of 
Recovery Act funds. Our Nation's workforce investment boards put this 
funding into motion immediately and effectively.
    In Seattle-King County, our program provided jobs for 900 young 
people. All were low-income; two-thirds were youth of color and more 
than half were African American. Almost 70 percent were deficient in 
basic math and reading skills. About 16 percent had a disability.
    As they did around the country, employers in Seattle-King County 
stepped up to offer jobs. More than 260 local employers, including 
private, public and nonprofits, participated. The results were 
tremendous in terms of skills learned, money earned, and inspiration to 
continue learning. Young people learned to weld, to drive forklifts, to 
provide customer service, to design a public-health campaign, to write 
a resume, to be on time--and they learned that there is a much bigger 
world of employment out there than they knew.
    Across the country, and not just in the summer of 2009, youth work 
experience has been shown to increase academic success, civic 
responsibility, and work readiness. And yet, youth employment was at a 
60-year low even before the recession, which has further decimated 
their opportunities in the job market.
    Subsidized work is a solution that works. In Seattle, through the 
summer jobs program, about one-third of older, out-of-school youth like 
Ryan transitioned directly to permanent jobs. Summer jobs do turn into 
real jobs when employers work directly with young people, teaching and 
guiding them in a context that extends and expands on what is taught in 
the classroom. By committing to Federal investments in summer jobs, 
like the bill recently introduced by Senator Murray, we can ensure that 
these opportunities continue and expand. By paying the wages while 
students work in these jobs, we open doors that would otherwise be 
closed to them.
    Another way we can open doors for workers of all ages is through 
on-the-job training. On-the-job training (OJT) allows an employer to 
hire someone and then receive support for a portion of that employee's 
wages and/or the cost of his or her training. OJT can be structured in 
several ways, and local workforce boards around the country are already 
operating OJT programs. Especially when streamlined for less burden on 
the employer, a formal OJT program is an effective tool that helps 
jobseekers get in the door and get up to speed while getting paid, 
while offsetting for the employer the expense and risk of training a 
new hire. It often enables business to create jobs earlier in the 
business cycle, thereby increasing productivity sooner and jumpstarting 
more hiring.
    Increasing the capacity of our workforce system to deliver OJT will 
help to jump-start our economy and create jobs--and we firmly believe 
that the most effective way to implement these investments is through 
the existing system: the local workforce investment boards (WIB).
    The local WIBs have proved, most recently through the Recovery Act 
funding, that we can very quickly and effectively get funding out and 
working in the community. When it comes to OJT, we can tap into the 
strong connections we already have with employers, especially through 
our sector partnerships, which allow us to work across an industry 
rather than only firm by firm. And we can ensure that OJTs are linked 
to a plan for employee retention after the training period is over by 
connecting with all the resources of the one-stop system.
    As a local WIB, we can make these connections. We are governed by a 
business-led board that invests public funds strategically in training 
for skills that employers need and that are part of a pathway to long-
term self-sufficiency. We bring employers together with colleges, K-12 
educators, economic development, and many other stakeholders to most 
effectively use our resources in the community.
    We know that skill training and job creation go hand in hand. I 
hope you will agree, as you hear from businesses and individuals and 
organizations throughout the country, that we must continue to invest 
in the skills of our workforce; in incentives like OJT that encourage 
employers to hire; and in work experience that our young people need in 
order to continue learning and earning throughout their lives.
    Thank you again very much for the opportunity to speak today.

    Senator Harkin. Thank you for the story about Ryan. It was 
even more poignant when I read it last night because he is, in 
the popular parlance, an ex-con. And people who are released 
from prison, serve their time, they have a tough time finding 
jobs, and they just need a good break. They need to have that 
door opened for them.
    So thank you for the story.
    Ms. Sessions. Thank you, Senator.
    I have to tell you, we do check up on our youth after they 
have been placed. We have been checking up on Ryan. He is doing 
very well on the job, continues to.
    Senator Harkin. That is great.
    Senator Murray has been here diligently since the 
beginning. I know you have an appointment, and I would yield to 
you for questions first.
    Senator Murray. Well, Mr. Chairman, thank you very much.
    And thank you to all of our witnesses. This is really 
helpful as we move forward.
    I, too, am really touched by the story of Ryan and the door 
that opened for him because of our summer job program that we 
did under economic recovery. He is one example.
    I have heard many stories as I have gone around my State in 
local communities of people like Ryan who have had doors closed 
to them, never thought there was an opportunity, and because of 
that work-based experience that they have gotten, it has helped 
to re-engage them with their community and teach them about the 
demands of the workplace and expose them to new career 
opportunities and possibilities. And I just think it is one of 
the best investments that we can make.
    You talked a lot about Ryan and what that did for him as an 
employee. Can you talk a little bit about employers and in your 
experience some of the participating employers and maybe doors 
that this opened for them as well?
    Ms. Sessions. Absolutely. One of our hallmarks in the 
workforce development system, especially locally in the State 
of Washington, is something called an industry skill panel. 
This is a very simple concept, bringing together like employers 
in a similar industry and, as the Governor mentioned earlier, 
bringing together training facilities who may never have talked 
between each other.
    So we actually have a maritime skills panel that is newly 
convened that has come to the table and said to us in Seattle 
area, in 2 to 5 years, they are actually going to have a very 
large aging-out of their workforce. There is going to be a need 
for everything from a deck hand to a marine engineer, and they 
don't quite know what to do about that.
    Actually, just yesterday morning, for the first time in our 
area, a local community college president and her workforce 
deans came to the table of the industry skill panel around 
maritime, and they started to coordinate curriculum and 
actually meet the needs head on. So these are the kinds of 
things that employers are telling us you, as a workforce 
system, convene us in times we have never had the chance to do 
in real time, make the solution available to the industry and 
to their needs. So one example, Senator.
    Senator Murray. And an excellent one, it goes right back to 
what the Governor was saying. When we bring together private 
employers and local communities to talk about the kinds of jobs 
that are available in their communities, that is how we can 
best create economic opportunities in the future, and these 
were great.
    So I appreciate what you are doing about that, and perhaps, 
could talk to us a little bit about some of the models local 
boards can use or build upon to especially focus on OJT 
because, to me, that is really important. It is not just having 
a class. It is really OJT. If you can talk a little bit about 
your experience with that for us?
    Ms. Sessions. Absolutely. Thank you, Senator.
    Following along from a skill panel model, those employers 
are telling us in areas such as manufacturing in the State of 
Washington, small manufacturing firms to very big ones, 
interactive media, also known as video gaming, video game 
creators are telling us we are starting to see it turn around. 
We think we might be ready to start hiring, but we might wait 6 
months. We might wait till the summer.
    And in fact, when we have done informal polls at these very 
same convening tables, they have said, oh, that would probably 
be the tipping point for us, frankly. If we had some OJT funds 
to pay for the training or even to pay, offset the cost of 
other employees' training on the job with new employees, that 
would do it to start hiring again.
    So we are hearing that very much firsthand that small 
manufacturers, such as Red Dot Corporation, which makes heating 
and cooling mechanisms, all the way to PACCAR, making trucks, 
are saying we are thinking about it. We are on the verge. We 
are seeing something. This would give us that over the edge 
that we need.
    Senator Murray. So these dollars are coming at a very 
critical time when businesses want to think things are doing 
better, but they are a little bit afraid, and don't have the 
private investment right now. So youth training, and OJT 
dollars that come from us allow them to hire, employ or put 
somebody back to work, and then build on their workforce as 
well and their economic opportunity.
    So I think these are really important that we continue to 
invest in that. So thank you very much, Ms. Sessions, for being 
here and sharing that with us.
    But I did want to ask Dr. Weast while I have you for a 
second, you mentioned in your testimony important investments 
in homeless education, and it is a group of students that we 
often forget. They are much more difficult to deal with. Yet 
those are the kinds of examples, those students who we make a 
small reach-out to now that we can help get back on track and 
in a better place.
    Can you, just for our subcommittee, describe how you use 
some of the economic recovery funds to serve homeless students, 
and what is important for us to focus on there?
    Dr. Weast. First of all, we have got about 700 students 
that wear that tag. And I hate to tag them. We have people who 
I personally know that are sleeping on couches, just renting a 
couch so they can get their kids to school and doing everything 
they can to find these scarce jobs.
    The thing that I hear from homeless parents more than 
anything else is they want stability. They want a good teacher 
in every classroom, and they don't want their kids labeled. 
Just because you come from tough socioeconomic circumstances 
doesn't mean that you should get an inferior education.
    Some of their children have issues that we did with early 
childhood. They need more daycare, you know? And while you 
don't want to do daycare, we want to get them ready for school. 
So our Early Head Start programs that we opened up, making it 
full time is very helpful for their parents while they are out 
there seeking work.
    It is very helpful for us because we are getting our kids 
ready to go to kindergarten. Adaptive kinds of programs when 
they move around so we can keep the staffing up there. 
Recognizing and keeping them in their home school will make it 
more stable. So being able to run those buses and work it so 
they can stay----
    Senator Murray. Transportation dollars in particular----
    Dr. Weast. Yes, right.
    Senator Murray [continuing]. to keep them at a school so 
they are not moving around?
    Dr. Weast. Right. Right. Providing them with extra training 
to our vocational programs because they have an immediate need 
for everybody in the family to work, to try to get back on 
their feet.
    So there are a lot of ways that we go about doing it, but 
the biggest way that we go about doing it is the high 
expectations we have of their children. Expecting them to 
learn, to be on that track to be college and high-wage work 
ready is the best favor we are doing for them as a parent and 
as a child.
    And keeping our engagement up and always remembering that 
you have got to do a little bit of something different. One 
size doesn't fit all. And the ARRA funds enabled us to keep our 
issue on poverty, which is where they tend to live in the area 
because it is high poverty, keeping our attention on IDEA or 
special education, early childhood education. All of that works 
together.
    And then working with our workforce investment board (WIB). 
We actually started health clinics in some of our elementary 
schools and tied it in with always being there, 24/7, and 
working with the after-school programs for activities and 
holding fairs, working with them to help them speak different 
languages, to learn English, construction English or English to 
work in the hospitals, lots of programs.
    Those will all be impacted in a State that is $2 billion 
behind if we don't keep the ARRA funding going.
    Senator Murray. Okay. Thank you.
    Well, Mr. Chairman, in some of our States, we have seen an 
80 to 90 percent increase in homeless students. All of our kids 
are being impacted by the economy, but as that population 
grows, some of the ARRA funds that we put out there were 
extremely important. So I just wanted to do that.
    Excellent testimony from all of you, and thank you, Mr. 
Chairman, for accommodating me. You have given us a lot of good 
input as we move forward to make sure that our people get the 
kinds of skills that get the good jobs that put them back in 
the workforce and get our economy moving again. So thank you 
very much.
    Senator Harkin. Thank you, Senator Murray.
    I thank all of you for being here and for just excellent 
testimony from all of you.
    Dr. Mishel, let me start with you. I am intrigued by 
something you wrote in your written testimony, which I read 
last night. You said you believe that the huge growth in 
inequality of wealth and incomes laid the foundation for the 
current economic crisis. Can you elaborate on that just a 
little bit? What does that mean? How could that have led to the 
present economic crisis?
    Dr. Mishel. Well, thank you very much for your question.
    As I pointed out in the testimony, more than the 20 years 
prior to the recession, only about 15, 16 percent of the income 
growth went to the bottom 90 percent of American households. 
And you ask yourself in that kind of situation, how did we 
actually get growing demand for goods and services? How did we 
actually get economic growth?
    And the answer is that growth came about because there were 
people consuming based on a sense of inflated assets in their 
housing, in the stock market, or because they had to go into 
debt, partly from borrowing against perhaps inflated assets.
    You know, that was an unstable growth, and that fell apart. 
And it makes the challenge going forward how do we get growth? 
I mean, some people say we have to save and invest. I think 
part of what we also have to do is earn and spend.
    One of the key problems we have had over 30 years is that 
the benefits of economic growth haven't accrued to a typical 
worker, that wage growth and compensation growth for a typical 
worker has lagged far behind the growth of productivity, never 
more so than in the recovery leading up to this recession. From 
2002 to 2007, the hourly compensation of both high school 
workers and college-educated workers did not grow at all, even 
though productivity grew around 11 percent.
    So moving forward, we have to find a way to get workers to 
actually benefit from economic growth so that when they spend, 
they are spending based on their earnings, not based on some 
asset bubble or greater debt.
    Senator Harkin. Yes, one figure you had here that just 
leaped out at me and I had not seen this before, but you said 
that since 1989--you just mentioned that here--the bottom 90 
percent received about 16 percent of all the income growth. 
What is even more startling than that is that the upper 0.1 of 
1 percent, the upper 0.1 of the top 1 percent, representing 
about 13,000 households, reaped more than one-third of all the 
income growth of the last 20 years.
    Dr. Mishel. Pretty stunning, huh?
    Senator Harkin. Stunning.
    Dr. Mishel. And it didn't happen by accident. I mean, this 
is the result of conscious policies that skew growth that is 
based on political power and policy, and it is what, I think, 
fundamentally has to change.
    Senator Harkin. Talk about redistribution of wealth, that 
is massive redistribution of wealth.
    Dr. Mishel. Kind of like a class war, huh?
    Senator Harkin. Yes. Wow. I have never seen that figure 
before, and I hadn't thought about it in that context that is 
right. That what we have built, we have built our consumption 
based upon basically debt or bubble assets, that type of thing, 
rather than just earnings.
    Why is it that productivity has gone up over the last 
several years--usually when productivity goes up, workers' 
income goes up to match some of that productivity gain. But you 
are saying that they didn't get any of that productivity gain, 
and they didn't see that in their paychecks.
    Dr. Mishel. Yes. Since roughly the late 1970s, there was 
prior to this recession, you know, around 80 percent growth in 
productivity, and the hourly compensation of workers grew 
around--of a typical worker grew around 9 percent. Most of that 
happened in that short period of time in the late 1990s when 
there was robust wage growth. Other than that, it has been 
pretty stagnant.
    And in my view, it is because policy, frankly, under both 
Democrats and Republicans, have not put having good jobs, good-
quality jobs at the center of economic policy. In fact, we have 
constructed policies that undercut the ability to have a good 
job just about everywhere. Weakening unions, low-wage imports, 
deregulation, allowing the minimum wage to decline to very low 
levels.
    Because we have thought that these kinds of policies make 
things cheaper for people to buy and were going to make people 
better off in that way. But in effect, what we have done is we 
have undercut people's ability to earn a good paycheck to buy 
the things. And so, things are really out of balance, and I 
think it means we have to put having people earn a good living 
at the center of economic policy.
    Senator Harkin. Let me ask one other question. Again, we 
are looking at the money that we have got to start putting into 
a new Recovery Act for job creation, and I try to keep my focus 
here on the short term. Long term, we have to do other things. 
But this subcommittee is interested right now in the short 
term.
    Where do we get the most bang for the buck? If we are going 
to spend some billions of dollars here--I don't know how many. 
We haven't decided on that yet. You say we need to spend at 
least $200 billion, and that is short term.
    Dr. Mishel. Above and beyond UI renewal.
    Senator Harkin. Above and beyond, yes.
    Dr. Mishel. Because that is going to take around $100 
billion to renew that program for all during the year.
    Senator Harkin. Yes.
    Dr. Mishel. Well, bang for the buck, I mean, the UI, and 
CBO just came out with its ratings, always is above. And I 
always find it bewildering why there is a hesitancy to just 
renew that for the whole year to give people some certainty. As 
I said, it creates 900,000 jobs besides being humane.
    The relief to the State governments was the thing that 
happened earliest and biggest to really help turn around the 
economy this past year. That is a very effective thing. You 
know, I think some direct job creation by Government would be 
the most cost effective at all.
    CBO also said that one of the most effective things you can 
do is to do a jobs tax credit. I think it is something you 
should only do for a year or two. It is very similar to what 
Ms. Sessions was saying. If we are at the tipping point where 
employers are thinking about hiring or not, a little bit of 
help could get them going.
    We have fashioned it so that it can't be gamed. It is based 
on how many payroll taxes you pay, and it could give a very 
effective boost for not all that much money.
    Senator Harkin. Of course, a bad problem is the gaming of 
the system. I mean, you may want to hire people anyway, but as 
long as you can get the jobs tax credit, why not take that, 
too, see?
    Dr. Mishel. Well, Senator, you are right. There is an 
optics problem because many firms will actually benefit from a 
tax credit that might have been doing the hiring anyway. But 
even if that is the case, if only one of out the 5 jobs was 
created because of the jobs tax credit, and let us say you are 
only spending $8,000 per job, the new job is very inexpensively 
created, let us say, $25,000, $30,000. So it is definitely 
worth doing.
    And I take--I think, hopefully, people are taking this 
attitude. You know, we have a dire emergency. I think we have 
to do whatever we can to really get things going. All of our 
problems are going to be worse if we don't get jobs going.
    And so, this is really the moment to make sure we finally 
get the unemployment rate going steeply down, and I think that 
means doing a lot of different effective things and doing it at 
the scale that can really matter.
    Thank you.
    Senator Harkin. Dr. Weast, let me ask you about the school 
construction. You mentioned that. If we were to put money into 
school construction and renovation, could you put that money to 
use this summer?
    Dr. Weast. That is a no-brainer. Absolutely. Local jobs, 
schools are way behind and have all of this build-up. Like I 
say, we need--we are keeping schools in session 20, 30, 40--no, 
50, 70 years. So it is local jobs, immediate turnaround, go 
green. We are going green on all of our schools because that 
helps the students go green and lowers your carbon footprint.
    Put arrays on top. We are now producing 1 Meg of 
electricity off our roofs because there is all this available 
roof area that we can turn around and generate our own 
electricity and sell back and lower our cost.
    So it is environmental. It is carbon footprint friendly. It 
is local jobs because these are local contractors. It 
immediately puts people back to work.
    But it has got to be done and in a direct investment 
because the systems are already starved for money right now. So 
if it is on a loan, that will be problematic to us. But if it 
is on a direct investment, you betcha. We are ready to go.
    Senator Harkin. Well, Dr. Weast, I am just going to take a 
minute of time here probably just to talk about that. Because 
back in 1991 and 1992, I made a short run for President. Some 
of you may have missed it. That is okay.
    Real short. But one of the things that was in my platform 
was I called it a blueprint for America, and part of it was 
school construction and reconstruction. That sort of had its 
genesis in my father, whose WPA card I still have in a framed 
thing on my wall in my office, who worked in building schools. 
And some of the schools that he built on WPA are still being 
used in Iowa today.
    And I thought, gee, and then there was a study that came 
out in the late 1980s about how much was needed to bring 
schools up to standards, just fire and safety standards, let 
alone modernization. And so, I started on that. Well, I didn't 
get very far with it.
    And then President Clinton came to office, and I had 
introduced legislation at that time and, in fact, went to see 
the President about this to say that this is something that he 
had to really get hot on. It creates jobs, build new schools. I 
could never get it done. I could never convince President 
Clinton or others to do this.
    I worked very hard on it. We finally--the last year of the 
Clinton administration, we got it in the budget for $1 billion 
nationwide. That was cut down to $750 million. So just a drop 
in the bucket. But it went out for 1 year, and then the next 
administration came in, the Bush administration came in, and 
they didn't want to do that either. So it has been a lonely 
struggle for me for more than 20 years trying to get school 
construction.
    So what I did is I said, well, the heck with it. If I can't 
get this nationally, at least I will try it in Iowa. And so, 
listen, I am not embarrassed to say this. I got earmarks for 
the State of Iowa to go to school construction. And we started 
it in 1989, I think it was, 1988 when I finally gave up on the 
Clinton administration of actually doing this, I said, well, we 
will do it on our own.
    So went out to Iowa in 1988. I think 1989 was the first 
year. So we have got all this experience. Every year, we have 
gotten money out there, about $130 million so far. That has 
translated into somewhere between $600 million and $1 billion 
of construction.
    Now why is that? Well, because a lot of times, school 
districts are pressed for money. They put a bond issue out 
there, and people vote it down. Well, they got these grants. 
Now they can get a grant of $500,000. That is a big chunk of 
change. So the only way they can get that is if they agree--and 
so, they pass the bond issue, and they come up with the local 
money.
    So we have had a good experience in our State in what has 
happened with this money and how it has been used. We put it in 
two pots. We have had--anything like this, it takes a while to 
develop the best ways to do it. So it goes out to the Iowa 
Department of Education, two pots. One pot is for construction 
and renovation. The other pot is for fire and safety. The fire 
and safety pot needs no match. The other pot, you have to have 
a match, local match. And those matches vary, sliding scale.
    The other thing that we found, and it occurred to me after 
looking at some of these projects, is one of the good things to 
add about that school construction, aside from, first of all, 
the jobs are all done locally. You can't ship them off to 
India. They have got to be done there. So you employ local 
people and contractors and businesses.
    But when you think of the materials that go into building a 
new classroom or building a new school, think about the cement 
and the re-rods. Think about the conduit and the lighting. 
Think about the wall board, the plumbing, the air conditioning, 
heating, the tiles on the floor. Ninety percent or more of that 
is made in America.
    It is made in this country. So you get a great bounce off 
of that dollar. This stuff, I mean, all of your electrical 
switches and your conduits and your wiring and plumbing, all 
that is made in America. So sort of by default, it is a ``buy 
America'' program when you do something like that.
    And then what do you get out of it? You get a school that 
is bright and modern, cheerful. And so, this is something that 
I just think--and quite frankly, I thought that I had hit the 
jackpot in the recovery bill. I said here is the deal. We will 
put it in the recovery bill. I got $16 billion in the recovery 
bill for school construction, $16 billion.
    What happened to it? One Senator didn't like it, and 
because we needed a vote to pass it, that was dropped. Sixteen 
billion dollars would have done a heck of a lot for schools in 
this country. And so, we are going to keep trying, and so I 
take this time because I think people need to be educated on 
this as to what it will do to long-term benefits to better 
schools.
    The heating systems, we have got schools in Iowa that had 
these old oil burners and things like that. And they got this 
money, and they put in the new heat pumps underground. The 
savings they are making every year just on their annual budgets 
for energy is remarkable, remarkable. So----
    Dr. Mishel. Senator Harkin.
    Senator Harkin. Yes?
    Dr. Mishel. May I just note that $16 billion, I would 
estimate that would actually increase GDP by around $26 
billion, and you would get around $10 billion back in revenues 
from that. So, actually, you know, it does all those different 
things, and you get a great return in terms of the effect on 
education, local jobs, and a fair amount of that money actually 
comes back in revenue.
    Ms. Sessions. And those are green jobs as well.
    Senator Harkin. What?
    Ms. Sessions. Those are green jobs.
    Dr. Weast. They are green jobs, and I will say that it is 
priceless. You have been to ribbon cuttings before on these 
schools.
    Senator Harkin. Oh, sure.
    Dr. Weast. There is great pride at the local. Parents, the 
children, they love it, especially on a green school. They will 
teach you all about the environmental. It saves energy. Its 
carbon footprint goes down. So that helps that.
    The teachers, half of our teachers are walking out of 
schools in 5 years, quitting. It is one of the biggest dropout 
rates in the country. Give them a better workplace. Give them a 
better workplace, and you will retain them better. Give them 
the tools, and they can work with our children better.
    So I would say thank you, thank you, thank you. It is 
priceless. And let us know who blocked it. We will talk to 
them.
    Senator Harkin. No.
    We just need to educate people. That is all.
    Dr. Weast. Be happy to educate them.
    Senator Harkin. About this, and I hope in the next recovery 
bill, I can once again try to run this up the flagpole, so to 
speak, and get the money out. I could use those figures. I 
don't know how he figured that so fast. I could sure use that.
    Dr. Mishel. A good education.
    Dr. Weast. A good education.
    Senator Harkin. I have taken way too much time.
    Thad.
    Senator Cochran. Well, Mr. Chairman, thank you.
    I want to congratulate the panel for adding depth and 
firsthand knowledge based on your experiences to our hearing. 
It has been interesting hearing your testimony, and I have 
enjoyed reminiscing a little bit about the fact that my parents 
were both schoolteachers, and my dad had the same job in Hinds 
County, Mississippi, as you do here in the Baltimore area, 
Montgomery County School District.
    And I remember they loved teaching. My mother even would 
teach at night sometimes in a special commercial college when I 
was in law school and needed some extra financial help to help 
pay my way through law school. So our family has been the 
beneficiaries in many ways of our government--local, State, and 
national governments' contribution to improving education 
opportunities for children.
    There are a lot of spillover effects that affect a lot of 
families all over America. So my first reaction to this panel 
is thank you. We appreciate what you do to contribute to 
improving our educational opportunities for children and adults 
looking to improve their lives and to helping make our country 
a better place to live. I appreciate it very much.
    I don't really have any specific questions. I guess, for 
Dr. Weast, my dad had that same job in Hinds County, balancing 
teacher interests, balancing community interests, school 
construction. So much falls under the direction and supervision 
of a county superintendent of education. I know you don't make 
as much money as a CEO of a big corporation, but you certainly 
do have the challenges that someone in a position like that 
would have.
    I wonder if you have any observations on what we, as a 
Federal Government, could or properly should do to try to help 
support these initiatives that your district has undertaken in 
trying to help improve education here in this metropolitan 
area?
    Dr. Weast. Well, thank you, Senator Cochran.
    I hear what you say. The superintendency has not changed 
since your dad was in it. The sword of Damocles is hanging over 
you every day, you know? Whether it is a call-off for a snow 
day or balance interests or how to make a size 9 budget fit a 
size 5 shoe, you are always trying to figure it out how to do 
that.
    But I would say that the best things you can do is pay 
special attention to Senator Harkin's interest in the 
construction. I think you really did hit the jackpot there. I 
think that if you really do that, you will get that quick 
turnaround. And you will make education better, and you will 
show that we have an interest in our children.
    These children, as I said, are going to have to pay off 
this huge debt. They are going to have to create new jobs that 
we haven't even thought about. And if you take a look at any 
10- or 12-year cycle that they are going through, look what has 
changed in the last 10 or 12 years. We didn't carry BlackBerrys 
around 12 years ago, and now most of your communication is on 
all these assistive devices.
    So we are really training up the future. So investments in 
the equity issues like title I are hugely important to us 
because of the poverty and the homelessness and all of the 
economy is wreaking havoc on parents, and a lot of the growth 
in the poverty is with children in this country. For the first 
time, we are seeing that turnaround dramatically heading the 
wrong direction.
    Good meals, extended health to children, getting them 
healthy. Because if they can't see or hear or have problems 
with their health--and I have got an area of our county that 
their primary health provider is the emergency room, and that 
is not really beneficial because it doesn't help them very 
much.
    Investments in local jobs that we create things. Again, I 
go back to the construction. And then don't overlook the power 
of a good teacher. Keeping your universities strong. That 
investment is very important. And targeting your investments to 
teacher training and principal training to catch up with the 
21st century because a lot of us came out a while back, and 
things have changed a lot. So keeping current in that.
    So I would hope that you would continue to try to emphasize 
quality teachers, quality principals, working in a good 
environment that translates into green schools or futuristic 
kind of things in support of the technology infrastructure so 
we can share across each other. And know that we all have a 
stake in this. The stake is huge right now.
    Because when I go into that kindergarten classroom and that 
first grade classroom, I know they are going to be that class 
of 2020 or 2024 or something like that, and they are going to 
come out where everything kind of hits. All of the social 
programs and the costs with them and all of this debt and all 
of this energy, they are going to have to face that.
    And I think what your dad and mother did was important. 
What we are doing is important, but it is even more important 
for the next generation.
    Senator Cochran. Thank you very much. Very eloquent 
response.
    And for the entire panel, thank you for contributing so 
much to our hearing.
    Senator Reed. Thank you very much, Mr. Chairman, and thank 
you for excellent testimony.
    And Dr. Weast, I join all my colleagues. You have a very 
important job in the school system. My dad had a more important 
job. He was a school custodian. And you know if the school is 
not clean, nothing works. So thank you very much for what you 
do.
    Dr. Mishel, we understand that this is a devastating 
economy, but there are pockets which are much, much worse than 
other places. My home State has 12.7 percent unemployment. 
Michigan is above us, Tennessee. It is not localized. It is 
across the country.
    And many of the formulas that we used in the Recovery Act 
don't reflect at all this differential. The highway formula, 
for example, has nothing to do really with unemployment rates. 
And I wonder, as we approach this next round, whether we should 
consciously--and I hope we can--take into consideration those 
areas which have unemployment rates in double digits and your 
views.
    Dr. Mishel. I think--Senator, I think that is a very good 
point. I might just add that the 10 percent unemployment we 
have and the high unemployment that is expected, I know it is 
going to raise child poverty by at least 50 percent, which was 
18 percent in 2007, up toward 27 percent and continuing.
    And for African-American children, it is going to be at 
least half. At least 1 out of every 2 black kids is going to be 
poor over the next few years.
    I think one element of our jobs plan lends itself very well 
to the kind of targeting that you are suggesting, and it is the 
direct job creation by local governments because we can target 
that aid to the unemployment rate. And one reason I favor it so 
much is because even as the unemployment rate gets better 
nationally, there is going to be--areas are going to be 
devastated for years to come--Michigan, Rhode Island, South 
Carolina, California, Nevada. Many, many States, this is an 
equal opportunity disaster.
    So I think it is really important to do things because some 
of the things we are going to do will need to be extended for 
years. Most of it should be for this year and next year, but 
some forever. Not maybe forever, but for many years to come.
    So I applaud your effort to try to find something that 
could be targeted toward what we would call distressed 
communities.
    Senator Reed. Well, thank you.
    There is another aspect, and it is a program that I think 
Washington State has, which is work share, which allows the 
States to take a portion of their unemployment funds and 
partner with private industry. If the employer will keep the 
person at work for at least part time and continue benefits, 
then the State will pay the sort of the unemployment that they 
would have gotten.
    And this is just a win-win. It keeps people working. It 
takes pressure off the unemployment trust fund. And as you 
pointed out, the unemployment trust fund has a huge bang for 
the buck in terms of paying out. So I think do you have any 
ideas on that, Doctor?
    Dr. Mishel. Well, I think it is a good idea. I think it is 
very inexpensive to get a lot of help out there. I mean, I 
think it needs to be coupled with efforts to really expand the 
demand for goods and services. So, as a standalone thing, but I 
view it very much the way I view the jobs tax credit. If we are 
going to do a lot to get demand for goods and services growing, 
then this will help both preserve jobs and get an extra boost.
    Senator Reed. Thank you.
    Ms. Sessions, you have a program like this in Washington 
State. Can you comment upon it?
    Ms. Sessions. It is a nice model, Senator Reed. Absolutely.
    So I believe 17 States are involved with some sort of a 
work share. And the other perhaps intangible benefit for 
employer and the employee is they have really good employees. 
They do not want to lay them off. They don't have to. They can 
reduce their hours, keep that loyalty intact, and keep the 
longevity of that employee intact, hopefully while unemployment 
compensation is coming in.
    Senator Reed. No, we have the same experience in Rhode 
Island. The employers really like this program, and I think for 
the reason you point out. They don't lose valuable employees.
    And the employees, I was at a factory up in northern Rhode 
Island, and they--a husband and wife are participating. But 
they essentially said that without that, they would have lost 
their home already. They were two working people with good 
jobs. They have a mortgage, and they would have lost the home.
    And having lost the home and the job, they would have been 
from the middle class to poverty in months. And that, we can 
avoid that, I think.
    Again, let me commend you, Dr. Weast, for your comments 
about school construction, and let me also commend the 
chairman. He was relentless in this battle to get targeted 
funds for municipalities and counties that have school systems 
to do this. And I want to thank you, Mr. Chairman, because what 
we have found since, and it varies State by State. But there is 
sometimes the money goes to the States, but if the State 
doesn't have the capacity to get the money out--if they don't 
have the workers in the food stamp program to process 
applications, that money doesn't go out.
    If they don't have the people in the weatherization 
department, if they don't have the people in the board of 
education or the Department of Education that can do what they 
must do to approve your plans, the money sits there.
    Dr. Weast. I would be remiss if, as we are putting all 
these people back to work--and I want to say what Larry said a 
minute ago. We are going to see a huge increase in children in 
poverty, and it is going to hit disproportionately minority 
children. Those are the children right now who don't have 
adequate daycare or early childhood education.
    If you want a good bang for the buck--now our economists, 
our scholars, our international scholars have all studied 
this--you get a great return on investment in early childhood 
education. So while you are building those buildings, put an 
early childhood wing on them. It will make a big difference 
because one of the big problems I will bet you find with your 
employees that you are putting back to work or what Larry was 
talking about economically is they are afraid about what 
happens to their kids when they are out looking for work or 
what happens to their kids when they do get a job.
    Especially since all of that money didn't rain down in 
those 90 percent, they can't afford the daycare. And that 
creates the opportunity gap that shows up on the achievement 
gap.
    Senator Reed. Right. I have one other question, if I may, 
Mr. Chairman? And that is to Dr. Mishel. You talked, and I 
think very perceptively and insightfully, about essentially no 
increase in wages for working Americans, and that is--I think I 
agree with you. That was the prelude to this problem, I mean 
one of them.
    But one of the arguments we hear is that all of the 
productivity gains and the extra money that would have been 
used for wage increases went to healthcare. Now that is not 
entirely correct as there are lots of people that got no wage 
increases, and they didn't have healthcare either. But can you 
comment upon that in sort of technical aspect?
    Dr. Mishel. Thank you very much for the opportunity.
    In fact, I just released a paper 2 weeks ago on this very 
topic, which I will be glad to make available. You know, 
economists do tend to believe that there is a tradeoff between 
higher healthcare costs and wages. I personally don't believe 
it is a one-to-one tradeoff.
    But even if you accept that there was a one-to-one 
tradeoff, you see that in the late 1990s there was a growth of 
productivity, and there was a growth of wages at that time for 
the first time in a generation. But what you find is that there 
was an acceleration of overall compensation growth, not just 
wage growth.
    So healthcare is around 7 percent of the total compensation 
bill. It is not big enough, in and of itself, to move the dial 
about overall wages for most workers. It could be a benefit, 
but it is a vast exaggeration to say that healthcare is the 
driver either up or down of wages. And many of the economists 
that have been contending that it was, after reading my paper, 
I am glad to say they have recanted, at least privately.
    So I would be glad to share that with you. Evidence is 
overwhelming that what we really need to do is to drive overall 
compensation. Healthcare is a very important thing. Anyone who 
has bargained a contract will tell you that it is a difficult 
thing to get wage increases. It is a difficult thing to give 
out wage increases when you are also responsible for providing 
healthcare.
    I am an employer myself. I understand that. But it is not 
to be the start and end of what is going on.
    Senator Reed. Thank you.
    Thank you very much, Mr. Chairman. Thank you.
    Senator Harkin. Thank you, Senator Reed. You talked about 
the high unemployment among the youth in this country. What 
should we be looking at in terms of the summer jobs? Like 
AmeriCorps, things like that? Well, that is more of the longer 
term.
    But I am just thinking about like summer youth jobs. What 
is the best thing we can do there?
    Ms. Sessions. Senator, are you meaning in what areas, what 
industries, what sectors?
    Senator Harkin. Yes.
    Ms. Sessions. I would open it up broadly to the community 
at the local level to help decide that, and regional 
economists, workforce boards are always looking at what the 
next thing is 2 years out, 3 years, 5 years out, and I would 
say it is a vast range.
    And I think only flaw I would say about public sector 
employment from the past in terms of youth is it was a little 
bit too much in a box of let us have the kids go out in crews 
and do something. And in fact, nowadays, they are doing and 
learning very 21st century skills, and I would just say keep 
those boards and those economists on the cutting edge there to 
open up lots and lots of opportunities.
    Senator Harkin. Dr. Weast, do you have any comment?
    Dr. Weast. We do a lot of summer youth employment 
ourselves, and so we work through our WIB. I would try to 
channel my money through an existing organization out there 
that will put it to work the quickest and also have the 
adequate supervision. So we just are keeping meaningful 
employment, but also building the skills that create the 
engagement so they can see themselves visioning into a job in 
the future.
    I mean, that is the biggest connection. When I am working 
with fifth graders, I want them to see themselves in a future 
with a job that they want to do that is highly engaging. So 
making that connection, and that youth employment does a really 
good job on that. We know that kids that work or have 
meaningful work tend to translate into getting out of school 
and not dropping out and seeing themselves in the future.
    Dr. Mishel. Senator, it maybe doesn't even need stating, 
but when we have high unemployment, the unemployment rate for 
youth is extraordinarily high. And one of the things we have 
done over the last 30 years is we have dismantled a lot of our 
capacity to do things like public service jobs, like youth 
employment, because these things have been eliminated.
    So when we get into a crisis, then we want to do these 
things, but the infrastructure or the capacity isn't there. So 
we need to do something on a permanent basis that we can scale 
up at these moments. We did a big program last summer, which I 
think was very effective. Surprisingly, we didn't hear anything 
about it from the media, but, in fact, it was there and 
providing a lot of jobs.
    And you can't motivate a child to do well in school to be 
able to succeed in the future when there is--the future is 
really remote that they are going to get a job. So it actually 
works very much to incentivize kids to do well in school if 
they know they are going to be able to get a leg up. So I 
really applaud any efforts to provide youth jobs.
    Ms. Sessions. Senator, last word on that?
    Senator Harkin. Yes.
    Ms. Sessions. We did do a very big youth program last 
summer, more than 300,000 young people employed. The engine has 
been built. It won't be hard to get that going again this next 
summer. It is all ready to go.
    Senator Harkin. So you could do that right away?
    Ms. Sessions. Absolutely. We are working on it right now. 
Yes.
    Senator Harkin. See, that is the other thing. We haven't 
talked too much about that today. But I am looking at and what 
our subcommittee will look at is how much money we need to put 
up front just for summer youth employment, like for this 
summer, next summer.
    Ms. Sessions. We are ready. Yes.
    Senator Harkin. And you think this money could be used 
wisely and well right away?
    Ms. Sessions. Absolutely.
    Senator Harkin. Well, there is the longer term. That is the 
short term. I did want to say also that maybe better 
investments in AmeriCorps and things like that, these are 
longer term types of things for youth. But that might help 
alleviate at least some of the problems of the high 
unemployment rate among young people.
    I have had great experiences with AmeriCorps in our State 
during our recent floods and things like that when they came 
out to Iowa. We have a training site in Iowa at a school. So it 
seems to me, these are also things where you get a lot of bang 
for the buck.
    Well, that is really all I wanted to cover here today. I 
wanted to open this year with this subcommittee and with my 
other committee on the HELP Committee looking at jobs. That is 
what everybody is reading about. It is in the papers--jobs, 
jobs, jobs. Well, we have got to be about it, and we have got 
to be about how much.
    Dr. Mishel, how much--if you just dribble a little bit out 
there, that is not going to do anything. Then we have this huge 
debt hanging over our heads. We have a debt limit increase bill 
on the floor right now, and we are struggling to get the votes 
to pass it. And we have to do that.
    Our country has never defaulted since the deal was struck 
with Alexander Hamilton and Thomas Jefferson, a historical 
story. We have never defaulted. And yet we are in danger of 
that right now. If we don't get the votes to pass the debt 
limit, we are in danger of defaulting, and I don't know what 
that means.
    People paint that in apocalyptic terms. I don't know. I am 
not an economist. But I know it would be something that we have 
never done before, and it could have some devastating impacts 
on our ability to raise capital in the future. So we have got 
that hanging over us.
    But I agree with Dr. Mishel that in these times like this, 
these are the times when you do have to borrow from the future 
so that we build the infrastructure, both educationally--
developmentally, educationally, physical infrastructure so that 
the youth today from whom we are borrowing--we are borrowing 
from their future earnings--so that when they make their future 
earnings, they will have a better society, better 
infrastructure, better education, better support services so 
that they can pay the money back in the future.
    Dr. Mishel. Never a better time to borrow it. Low interest 
rates now.
    Senator Harkin. What?
    Dr. Mishel. It is a great time to borrow. Very low interest 
rates.
    Senator Harkin. They are around zero.
    Dr. Mishel. Great investment.
    Senator Harkin. It is a great time to borrow money.
    Dr. Weast. True story on high schools. We are building high 
schools that are costing about $100 million. We can get them 
now for $75 million. We just bid some. So the same structure 
that we built 2 years ago, we can build it about 30 percent 
cheaper, and we can get a free elementary school on the side. 
So you are right on target on that construction right now.
    Senator Harkin. You get jobs.
    Dr. Weast. Yes, we get jobs. I mean, what is there not to 
like?
    Senator Harkin. As I said, think about in terms of all the 
stuff that goes into that, most of it is made in America. So 
you get other jobs down the line that other people are working 
on that are made here. You don't import a lot of that stuff.
    Well, thank you all very much. It has been a great panel, 
and it has been very enlightening. You are all doing great jobs 
out there.
    And Dr. Mishel, if I could have from you how you figured 
that in terms of how much money going out from school 
construction and what comes back, I had not looked at that 
before.
    Dr. Mishel. And your point about that there is very few 
imports in school construction is very apt. It is very 
important.
    Senator Harkin. Yes, no one ever makes that point. So you 
get that dollar spending more in our economy than just going 
overseas somewhere.

                         CONCLUSION OF HEARING

    Well, thank you all very much. I really appreciate it. We 
kicked off the first of our hearings on this in a great manner.
    The subcommittee will stand recessed.
    [Whereupon, at 11:39 a.m., Thursday, January 21, the 
hearing was concluded, and the subcommittee was recessed to 
reconvene subject to the call of the Chair.]


             MATERIAL SUBMITTED SUBSEQUENT TO THE HEARINGS

    [Clerk's Note.--The following testimonies were received 
subsequent to the hearing for inclusion in the record.
  Prepared Statement of the American Federation of State, County and 
                          Municipal Employees
    This statement is submitted on behalf of the 1.6 million members of 
the American Federation of State, County and Municipal Employees 
(AFSCME) for the official record of the Senate Appropriations 
Subcommittee on Labor, Health and Human Services, and Education, and 
Related Agencies January 21, 2010 hearing, entitled ``How to Save and 
Create Jobs.''
    A thorough discussion on how to preserve and create jobs must 
include state and local fiscal relief. Across the country, States are 
facing an estimated $34 billion in mid-year fiscal year 2010 budget 
shortfalls and a $140 billion budget shortfall for fiscal year 2011. 
Many States have already announced plans to eliminate public sector 
jobs, reduce public services, and scale back Medicaid coverage if they 
do not receive immediate Federal assistance. These State budget cuts 
will have a ripple effect throughout the economy and, according to 
economic estimates, could result in the loss of 900,000 jobs.
    To preserve jobs and prevent future losses, AFSCME urges the 
subcommittee to invest in State and local fiscal relief and extend the 
Federal Medicaid assistance (FMAP) provided by the American Recovery 
and Reinvestment Act (ARRA) for at least 6 months.
ARRA is Working; Efforts Should be Continued
    ARRA provided $87 billion in fiscal relief to States and localities 
through an increase in FMAP and $48.3 billion for State Fiscal 
Stabilization Fund block grants. This relief was crucial to the 
stabilization of State and local economies. Not only did it help States 
meet Medicaid and education obligations at a time when revenues 
dramatically dropped, it allowed funds to be redirected toward much 
needed public services and benefits. Without ARRA assistance, State 
budget cuts and State tax increases would have been much larger.
    ARRA funds preserved and created jobs. The Department of Education 
found that 318,000 jobs were saved or created by ARRA's Fiscal 
Stabilization fund, as of September 30, 2009. While official reports 
are not available on the impact of FMAP funds, the President's Council 
of Economic Advisors found a strong relationship between increased FMAP 
contributions and jobs.
Increased FMAP Funds Are a Proven Stimulus
    Medicaid represents the largest source (17 percent) of State 
general revenue expenditures and is a highly effective method for 
delivering Federal funds to States. An analysis by Mark Zandi, chief 
economist of Moody's Economy.com, demonstrates that of all the options 
available to Congress, State fiscal relief through general aid or a 
temporary increase in the Medicaid matching rate to State governments 
generates one of the greatest economic returns. Specifically, every $1 
increase in spending for general aid to State governments will generate 
$1.41 in increased real gross domestic product.
States Continue To Face Budget Shortfalls
    While Federal assistance provided by ARRA is lessening the need for 
harmful budget cuts, the funds are set to expire on December 31, 2010, 
well before State economies are projected to stabilize and mid-way 
through most States' 2011 fiscal year. The end of these funds will 
trigger a $39 billion increase in State Medicaid costs for 2011. 
Governors are now preparing 2011 budgets, and if Congress does not act 
quickly to extend relief, States will have to impose additional budget 
cuts in essential services, including public safety, education, and 
healthcare services to balance their budgets.
    Every State, except Vermont, requires States to impose cuts or 
raise reviews to balance their budgets and comply with balanced budget 
laws. Most States, unlike the Federal Government, begin their fiscal 
year in July. For the current fiscal year 2010, States used a 
combination of budget cuts, reserve funds, tax increases, and Federal 
ARRA funds to create a balanced budget in July of 2009. Unfortunately, 
actual revenues have failed to meet even the most pessimistic of 
projections.
    According to the Center on Budget and Policy Priorities (CBPP), 39 
States have identified mid-year 2010 budget gaps totaling $34 billion 
and will need to impose additional budget cuts. Mid-year budget cuts 
will be in addition to budget cuts enacted in the beginning of the 
fiscal year and further deplete any reserve funds that could be carried 
over into fiscal year 2011. These budget cuts will be taking place 
while States prepare for fiscal year 2011. For fiscal year 2011, the 
CBPP estimates State deficits will total at least $180 billion. 
Deficits are projected to continue with a $120 billion shortfall in 
fiscal year 2012 and stabilize by 2013.
    In addition to deficits, States are grappling with increased 
unemployment. For every 1 percent that unemployment rises, 2.5 million 
Americans lose employer-sponsored health coverage and enroll in 
Medicaid. Increased Medicaid enrollment will further strain State 
budgets, therefore, the best option to protect healthcare among the 
newly unemployed and help States maintain coverage is to increase 
Federal funds for Medicaid.
Conclusion
    Increasing funding for State and local governments will stabilize 
their budgets, strengthen the national economy, maintain vital public 
services, and preserve and create jobs. Specifically, AFSCME urges 
Congress to extend State and local ARRA funds now, before States 
release fiscal year 2011 budgets and enact further cuts.
    AFSCME is not alone in making this request. As the attached letter 
shows, numerous national, State, and local organizations support 
extending FMAP and State fiscal stabilization assistance until at least 
June 30, 2011.
                                 ______
                                 
                                                  January 20, 2010.
Hon. Harry Reid,
Majority Leader, U.S. Senate,
Washington, DC.
Hon. Mitch McConnell,
Minority Leader, U.S. Senate,
Washington, DC.
Hon. Nancy Pelosi,
Office of the Speaker, House of Representatives,
Washington, DC.
Hon. John Boehner,
Office of the House Republican Leader, House of Representatives,
Washington, DC.
    Dear Leader Reid, Senator McConnell, Madam Speaker, and 
Representative Boehner: As you are aware, the American Recovery and 
Reinvestment Act (ARRA) provided $87 billion in fiscal relief to States 
and localities through an increase in Medicaid assistance (FMAP) and 
additional funds for the State Fiscal Stabilization Fund (SFSF). This 
relief has helped stabilize State and local economies, save and create 
jobs, and cover critical Medicaid and education services at a time when 
State revenues precipitously dropped due to the economic downturn.
    The additional FMAP assistance provided under ARRA is scheduled to 
expire on December 31, 2010. By this time, States will also have 
largely exhausted the SFSF. Unfortunately, with the economy in the 
midst of an uncertain recovery, States are currently faced with 
shortfalls totaling $140 billion in fiscal year 2011. Most States, 
unlike the Federal Government, begin their fiscal year in July, which 
means States are already being forced to plan spending cuts and tax 
increases for fiscal year 2011. Many States have already announced 
plans to eliminate public sector jobs, decrease funding to safety-net 
providers and scale back Medicaid coverage if the ARRA fiscal relief is 
not extended. These State budget cuts will have a ripple effect 
throughout the economy and, according to economic estimates, could 
result in the loss of 900,000 jobs.
    The undersigned organizations urge you to act now to avoid further 
job losses by fully extending the FMAP and State fiscal stabilization 
assistance in ARRA until at least June 30, 2011.
    Thank you for your consideration and we look forward to working 
with you on this and additional measures that will preserve our social 
safety net and ensure a timely economic recovery.
            Respectfully yours,
National Organizations
    9to5, National Association of Working Women; ACCSES; AFSCME; 
Alliance for Children and Families; American Association of Children's 
Residential Centers; American Association of Geriatric Psychiatry; 
American Association Dance Therapy; Association American Group 
Psychotherapy Association of People with Disabilities; American 
Association on Intellectual & Developmental Disabilities; American 
Counseling Association; American Dance Therapy Association; American 
Group Psychotherapy Association; American Health Care Association; 
American Hospital Association; American Humane Association; American 
Network of Community Options and Resources; American Occupational 
Therapy Association.
    American Physical Therapy Association; American Psychological 
Association; Amerigroup; Amputee Coalition of America; APSE; 
Association for Ambulatory Behavioral Healthcare; Association of 
Assistive Technology Act Programs (ATAP); Association of Jewish Family 
& Children's Agencies; Association of University Centers on 
Disabilities; Bazelon Center for Mental Health Law; Black 
Administrators in Child Welfare Inc.; Brain Injury Association of 
America; Bread for the World; Burton Blatt Institute; Campaign for 
Community Change; Children's Defense Fund.
    CLASP (Center for Law and Social Policy); Clinical Social Work 
Association; Coalition on Human Needs; Community Access National 
Network; Community Action Partnership; Consortium for Child Welfare; 
CORE: Coalition for Residential Education; Corporation for Supportive 
Housing; CWLA; Dialysis Patient Citizens; Disability Rights Education 
and Defense Fund; Easter Seals; Every Child Matters Education Fund; 
Families USA; Family Preservation Community Services Family Voices; 
First Focus; Foster Family-based Treatment Association; HIV Medicine 
Association.
    IAFF; International Federation of Professional and Technical 
Engineers (IFPTE), AFL-CIO, CLC; The Jewish Federations of North 
America; Lutheran Services in America; Medicaid Health Plans of 
America; Mental Health America; Mobile MD; NAACAC, the Association for 
Addiction Professional; NACAC = North American Council on Adoptable 
Children; National Alliance of State and Territorial AIDS Directors; 
National Alliance on Mental Illness; National Association for 
Children's Behavioral Health; National Association for Public Health 
Policy; National Association of Area Agencies on Aging (n4a); National 
Association of Children's Hospitals; National Association of Councils 
on Developmental Disabilities.
    National Association of Counties; National Association of County 
Human Services Administrators; National Association of Directors of 
Developmental Disabilities Services; National Association of 
Psychiatric Health Systems; National Association of Public Hospitals 
and Health Systems; National Association of Social Workers; National 
Association of State Directors of Special Education; National 
Association of State Head Injury Administrators; National Association 
of State Mental Health Program Directors (NASMHPD); National Center for 
Law and Economic Justice; National Collaboration for Youth; National 
Council for Community Behavioral Healthcare; National Council of Jewish 
Women; National Council on Independent Living (NCIL); National 
Disability Rights Network National Education Association; National 
Health Care for the Homeless Council.
    National Immigration Law Center; National Latina Health Network; 
National Multiple Sclerosis Society; National Organization of State 
Associations for Children; National Priorities Project; National 
Respite Coalition; National Senior Citizens Law Center; National 
Women's Law Center; NETWORK, A National Catholic Social Justice Lobby; 
OMB Watch; OWL--The Voice of Midlife and Older Women; Paralyzed 
Veterans of America Presbyterian Church (U.S.A.); Project Inform; 
Psychiatric Institute of Washington; RESULTS; School Social Work 
Association of America;.
    SEIU; The Arc of the United States; The National Advocacy Center; 
The Salvation Army Family & Community Services; The Xaverian Brothers; 
Treatment Access Expansion Project; United Cerebral Palsy; United 
Neighborhood Centers of America; United Spinal Association and National 
Spinal Cord Injury Association; Voices for America's Children; YWCA 
USA.
State and Local Organizations
    (AK) Alaska Center for Public Policy; (AK) HIV /AIDS Services for 
African Americans in Alaska; (AL) Alabama Arise; (AL) Legion of Mary; 
(AL) Southwest Alabama Mental Health and Mental Retardation Board, 
INC.; (AL) YWCA Central Alabama; (AZ) Arizona Association of Counties, 
Inc.; (AZ) Arizona Council of Human Service Providers; (AZ) Arizona's 
Children Association; (AZ) Family Service Agency; (AZ) Stand Together 
and Recover Centers, Inc.; (CA) 9to5 Bay Area; (CA) 9to5 Los Angeles; 
(CA) Avant-Garde Foster Family and Adoption Agency; (CA) Binational 
Center for the Development of Oaxacan Indigenous Communities (CBDIO); 
(CA) California Alliance of Child and Family Services; (CA) California 
Church IMPACT; (CA) California Institute for Mental Health; (CA) 
California Latinas for Reproductive Justice (CLRJ); (CA) California 
Mental Health Directors Association.
    (CA) California National Organization for Women; (CA) California 
Pan-Ethnic Health Network; (CA) California Senior Leaders Alliance; 
(CA) California State Association of Counties; (CA) CARA (California 
Alliance for Retired Americans); (CA) Catholic Charities of Santa Clara 
County; (CA) Center for Children and Family Futures; (CA) Community 
Action Partnership of San Bernardino County; (CA) County Welfare 
Directors Association of California; (CA) El Hogar, Inc.; (CA) Family 
Care Network, Inc.; (CA) Having Our Say; (CA) Hillview Mental Health 
Center, Inc.; (CA) Independent Living Resource Center; (CA) Jewish 
Family Service; (CA) Jewish Family Services of Silicon Valley; (CA) 
Kanana Fou Church; (CA) Lifelong Medical Care; (CA) Maternal and Child 
Health Access; (CA) Mental Health America of Los Angeles.
    (CA) National Council of Jewish Women, California; (CA) Opportunity 
House; (CA) Parent Voices of Sonoma County; (CA) Sacramento 
Occupational Advancement Resources Inc.; (CA) Senior Volunteers; (CA) 
Shasta Community Health Center; (CA) Sonoma County Commission on Aids; 
(CA) St. Mary's Center; (CA) United Way of California; (CA) United Way 
of Santa Cruz County; (CA) United Way of Silicon Valley; (CA) Valley 
Housing Foundation; (CO) 9to5 Colorado; (CO) Centennial Mental Health 
Center; (CO) Colorado Behavioral Healthcare Council; (CO) Community 
Reach Center; (CO) Jefferson Center for Mental Health; (CO) Mental 
Health Center of Denver; (CO) San Luis Valley Comprehensive Community 
Mental Health Center; (CO) The Mental Health Center Serving Boulder and 
Broomfield Counties.
    (CT) Birmingham Group Health Services, Inc.; (CT) Center for Social 
Research; (CT) City of Bridgeport, Social Services Department; (CT) 
Connecticut Association for Human Services (CAHS); (CT) Connecticut 
Immigrant and Refugee Coalition; (CT) Connecticut Legal Services; (CT) 
Connecticut Legal Rights Project; (CT) Connecticut Oral Health 
Initiative; (CT) CT Coalition for Justice in Education Funding; (CT) CT 
Council of Family Service Agencies; (CT) Family Services of Greater 
Waterbury, Inc.; (CT) FSW, Inc. CT; (CT) Glastonbury and Portland 
United Methodist Charge; (CT) Greater Hartford Legal Aid; (CT) Jewish 
Federation Association of Connecticut (JFACT); (CT) Legal Assistance 
Resource Center of CT; (CT) Middlesex Coalition for Children; (CT) 
Morris Foundation, Inc.; (CT) National Association of Social Workers, 
CT Chapter; (CT) New Haven Family Alliance, Inc.
    (CT) New Haven Legal Assistance Association; (CT) POOR PEOPLE'S 
ALLIANCE; (CT) The Village for Families and Children; (CT) Vecinos 
Unidos; (DC) District of Columbia Behavioral Health Association; (DE) 
Children & Families First; (DE) Recovery & Prevention Resources of 
Delaware and Morrow; Counties, Inc.; (FL) Family Counseling Services of 
Greater Miami, Inc.; (FL) Florida CHAIN; (FL) Prader-Willi Syndrome 
Association (USA); (FL) Rural Health Partnership; (GA) 9to5 Atlanta; 
(GA) Families First, Inc.; (GA) Georgia Association of Homes and 
Services for Children; (GA) Georgia Rural Urban Summit; (GA) The 
Association County Commissioners of Georgia; (GA) The Methodist Home 
for Children and Youth; (HI) Child & Family Service; (IA) Comprehensive 
Systems, Inc.; (IA) Exceptional Opportunities, Inc.
    (IA) G & G Living Centers, Inc.; (IA) Goodwill of the Heartland; 
(IA) Handicapped Development Center; (IA) Hills & Dales; (IA) Howard 
Center, Inc.; (IA) Iowa Association of Community Providers; (IA) Iowa 
State Association of Counties; (IA) Krysilis; (IA) New Choices Inc. 
Home Health; (IA) New Choices, Inc.; (IA) New Hope Village; (IA) Nishna 
Productions, Inc.; (IA) Progress Industries; (IA) REM Iowa; (IA) REM 
Iowa & Nebraska MENTOR; (IA) Story County Community Life Program; (IA) 
SW IA Latino Resource Center; (IA) The Homestead; (IA) The North 
Central Sheltered Workshop, dba LifeWorks Community Services; (IA) 
Village Northwest Unlimited.
    (IA) West Fork Services, Inc.; (IL) AIDS Foundation of Chicago; 
(IL) Chaddock; (IL) Chicago Democratic Socialists of American; (IL) 
Child Care Association of Illinois; (IL) CJE SeniorLife in Illinois; 
(IL) Community Behavioral Healthcare Association of IL (CBHA); (IL) 
Goodwill of the Heartland; (IL) Grassroots Collaborative; (IL) 
GriffinCenter; (IL) Health & Disability Advocates; (IL) Heartland 
Alliance for Human Needs & Human Rights; (IL) Illinois Association of 
Rehabilitation Facilities; (IL) Illinois Community Behavioral 
Healthcare Association; (IL) Illinois Maternal and Child Health 
Coalition; (IL) Jewish Child and Family Services; (IL) Jewish 
Federation of Metropolitan Chicago; (IL) Kids Hope United; (IL) 
Lawrence Hall Youth Services; (IL) Lutheran Advocacy--Illinois.
    (IL) Lutheran Social Services of Illinois; (IL) Metropolitan Family 
Services; (IL) Northeast Chicago Chapter Older Women's League (OWL); 
(IL) Sinai Health System, Chicago; (IL) The H Group; (IN) Agape Respite 
Care, Inc.; (IN) Centerstone of Indiana; (IN) Centerstone Research 
Institute; (IN) Cummins Behavioral Health Systems, Inc.; (IN) Family 
and Children's Center, Inc.; (IN) Family Service Association; (IN) 
Family Service Association of the Wabash Valley, Inc.; (IN) IARCCA An 
Association of Children & Family Services; (IN) Indiana Catholic 
Conference; (IN) Lampion Center; (IN) LifeSpring, Inc.; (IN) Oaklawn 
Psychiatric Center, Inc.; (KS) Kansas Association of Counties; (KS) 
Kansas Children's Service League; (KS) Trinity In-Home Care.
    (KY) Bellewood Presbyterian Home for Children; (KY) Boys and Girls 
Haven; (KY) Children's Alliance; (KY) Communicare; (KY) Family & 
Children's Place; (KY) KVC Behavioral HealthCare Kentucky; (KY) Necco; 
(KY) Pathways, Inc.; (KY) Presbyterian Child Welfare Agency; (KY) SAFY 
of Kentucky, Inc.; (KY) Seven Counties Services, Inc. (KY) Spectrum 
Care Academy; (LA) Agenda for Children; (MA) Association for Behavioral 
Healthcare; (MA) Family Services of Central Massachusetts; (MA) Family 
Services of Greater Boston; (MA) Health Care for All; (MA) 
Massachusetts Family and Child; (MA) Riverside Community Care; (MA) 
ServiceNet, Inc.
    (MA) The MENTOR Network; (MD) AIDS Action Baltimore; (MD) Alliance, 
Inc.; (MD) Center for Children, Inc.; (MD) Community Behavioral Health 
Association of Maryland; (MD) Eastern Shore Psychological Services, 
LLC; (MD) Health Care for the Homeless, Inc.; (MD) Maryland Addictions; 
Directors Council; (MD) Maryland Association of Counties; (MD) Maryland 
Association of Resources for Families and Youth; (MD) Maryland Budget & 
Tax Policy Institute; (MD) Maryland Citizens' Health Initiative; (MD) 
Maryland Coalition of Families for Children's Mental Health; (MD) 
Maryland Disability Law Center; (MD) Maryland Society for Clinical 
Social Work; (MD) Mental Health Association of Frederick County; (MD) 
Mental Health Association of Maryland; (MD) Montgomery County 
Federation of Families for Children's Mental Health; (MD) Omni House 
Inc.; (MD) Pro Bono Counseling Project.
    (MD) Sheppard Pratt Health System; (MD) Simon Publications; (ME) 
Maine Equal Justice Partners; (MI) Bay-Arenac Behavioral Health; (MI) 
Catholic Social Services of Oakland County, Inc.; (MI) Eagle Village, 
Inc.; (MI) Elder Law of Michigan, Inc.; (MI) Family Service Agency of 
Mid Michigan; (MI) Judson Center; (MI) LifeWays; (MI) Livingston County 
Community Mental Health Authority; (MI) Michigan Association of 
Counties; (MI) Michigan Unitarian Universalist Social Justice Network 
(MUUSJN); (MI) Oakland County Community Mental Health Authority; (MI) 
West Michigan Community Mental Health System; (MN) Association of 
Minnesota Counties; (MN) Growth & Justice; (MN) Legal Services Advocacy 
Project; (MN) Minnesota Association of Community Mental Health 
Programs, Inc.; (MN) Minnesota Citizens for Tax Justice.
    (MN) Minnesota Council of Nonprofits; (MN) Minnesota Kinship 
Caregivers Association; (MN) National Association of Social Workers, 
Minnesota Chapter; (MN) Pillsbury United Communities; (MN) RESULTS-
Domestic, Minnesota; (MN) Take Action Minnesota; (MN) The Arc of 
Minnesota; (MN) The Minnesota Council of Child Caring Agencies; (MN) 
Therapeutic Services Agency, Inc.; (MO) Children's Foundation of Mid 
America; (MO) Family Counseling Center of Missouri, Inc.; (MO) Pathways 
Community Behavioral Healthcare, Inc.; (MO) Preferred Family 
Healthcare; (MT) Intermountain; (NC) Action for Children North 
Carolina; (NC) Children and Family Services Association, NC; (NC) 
Family Service of the Piedmont; (NC) Footprints Carolina, LLC; (ND) 
Dakota Boys and Girls Ranch; (NE) ADAPT NE.
    (NE) Child Guidance Center; (NE) Kolb Foundation for Disability 
Education; (NE) Nebraska Association of County Officials; (NE) Sisters 
of Mercy West Midwest Community; (NJ) Bonnie Brae; (NJ) Center for 
Family Services, Inc.; (NJ) New Jersey Alliance for Children, Youth and 
Families; (NJ) New Jersey Association of Mental Health Agencies, Inc.; 
(NJ) New Jersey Policy Perspective; (NJ) New Jersey Tenants 
Organization; (NJ) Statewide Parent Advocacy Network of New Jersey; 
(NM) Community Action New Mexico; (NM) Family Voices; (NM) New Mexico 
Association of Counties; (NM) New Mexico Center on Law and Poverty; 
(NM) New Mexico Voices for Children; (NV) Community Chest, Inc.; (NV) 
Health Access Washoe County; (NV) Nevada Association of Counties; (NV) 
Nevada Health Care Association.
    (NV) NV Lawyers for Progressive Policy; (NV) Planned Parenthood Mar 
Monte; (NV) Planned Parenthood of Southern Nevada; (NV) Progressive 
Leadership Alliance of Nevada; (NV) SAFY (Specialized Alternatives for 
Family & Youth) of Nevada; (NY) Abbott House; (NY) ARISE; (NY) ARISE 
Child and Family Services; (NY) Behavioral Health Services North; (NY) 
Catholic Family Center; (NY) Center for Independence of the Disabled, 
New York; (NY) Citizens' Committee for Children of New York, Inc.; (NY) 
Community Healthcare Network; (NY) Council of Family and Child Caring 
Agencies; (NY) Early Care & Learning Council; (NY) Families and 
Children's Association; (NY) Fiscal Policy Institute; (NY) Gray 
Panthers of Suffolk County; (NY) Greater New York Labor-Religion 
Coalition; (NY) Healthcare Association of New York State.
    (NY) Hillside Children's Center; (NY) Hope House Inc.; (NY) Human 
Services Council of New York City; (NY) Hunger Action Network of NYS; 
(NY) Jewish Board of Family & Children's Services; (NY) LaSalle School; 
(NY) Liberty Resources, Inc.; (NY) National Jobs for All Coalition; 
(NY) New York Association of Psychiatric Rehabilitation Services; (NY) 
New York City AIDS Housing Network (NYCAHN); (NY) New York City 
Coalition Against Hunger; (NY) New York State Association of Counties; 
(NY) New York State Council for Community Behavioral Healthcare; (NY) 
New Yorkers for Accessible Health Coverage Center for Independence of 
the Disabled; (NY) New Yorkers for Fiscal Fairness; (NY) Office of 
Peace and Justice Sisters of Charity of New York; (NY) Parsons Child 
and Family Center; (NY) Spectrum Human Services; (NY) Temple Beth Am; 
(NY) The Children's Village.
    (NY) Therapeutic Communities Association of New York State; (NY) 
UJA-Federation of New York, Inc.; (NY) United Neighborhood Houses; (NY) 
Violence Intervention Program, Inc.; (OH) Alcohol and Drug FREEDOM 
CENTER of Knox County; (OH) Butler Behavioral Health Services; (OH) 
Community Mental Health and Recovery Board of Licking and Knox 
Counties; (OH) Community Services of Stark County; (OH) Community 
Solutions Association; (OH) Community Support Services, Inc.; (OH) 
Crossroads; (OH) Health Recovery Services Inc.; (OH) Mental Health 
Services for Clark and Madison Counties, Inc.; (OH) Ohio Association of 
Child Caring Agencies (OACCA); (OH) Ohio Council of Behavioral Health & 
Family Services Providers; (OH) Results Columbus; (OH) Specialized 
Alternatives For Families & Youth of America, Inc.; (OH) Stop Targeting 
Ohio Poor; (OH) The Neighborhood House, Inc.; (OH) Townhall II.
    (OK) Association of County Commissioners of Oklahoma; (OR) 
Association of Oregon Counties; (OR) Benton County Mental Health (OR) 
Disability Navigators Inc.; (OR) Full Access; (OR) Impact NW; (OR) 
Independence Northwest; (OR) Living Opportunities, Inc.; (OR) Looking 
Glass Youth and Family Services, Inc.; (OR) Oregon Alliance for Retired 
Americans; (OR) Oregon Council on Developmental Disabilities; (OR) 
Oregon Developmental Disabilities Coalition; (OR) Oregon Disabilities 
Commission; (OR) Oregon State Council for Retired Citizens; (OR) 
Southern Oregon Adolescent Study and Treatment Center; (OR) The Oregon 
Rehabilitation Association; (OR) United Seniors of Oregon; (PA) 
CareLink Community Support Services; (PA) Community Services Group; 
(PA) County Commissioners Association of Pennsylvania.
    (PA) Family and Community Service of Delaware County; (PA) Family 
Answers; (PA) Family Service Association; (PA) Family Services of NWPa; 
(PA) Family Services of Western Pennsylvania; (PA) JEVS Human Services; 
(PA) Jewish Family and Children's Service of Greater Philadelphia; (PA) 
Jewish Federation of Greater Philadelphia; (PA) Lenape Valley 
Foundation; (PA) Methodist Home for Children; (PA) Parental Stress; 
(PA) Pennsylvania Hunger Action Center; (PA) Pennsylvania Jewish 
Coalition; (PA) Pennsylvania Partnerships for Children; (PA) Pressley 
Ridge; (PA) UCP/CLASS; (RI) Gateway Healthcare, Inc.; (RI) Ocean State 
Action; (SC) Carolina Youth Development Center; (SC) Children's Trust 
of South Carolina.
    (SD) South Dakota Association of County Commissioners; (SD) South 
Dakota Association of County Officials; (SD) South Dakota Council of 
Mental Health Centers, Inc.; (SD) South Dakota Council of Substance 
Abuse Directors, Inc.; (TN) Advantage Behavioral Health; (TN) 
Centerstone of Tennessee; (TN) Tennessee Association of Mental Health 
Organizations; (TN) Tennessee Respite Coalition; (TN) The Tennessee 
Conference on Social Welfare; (TX) ACCESS MHMR; (TX) Border Region 
Metal Health Mental Retardation Center; (TX) Center for Public Policy 
Priorities; (TX) DePelchin Children's Center; (TX) Family Service 
Association of San Antonio, Inc.; (TX) Family Services of Southeast 
Texas; (TX) Houston Peace News; (TX) La Fe Policy Research & Education 
Center; (TX) LifePath Systems; (TX) Senior Community Outreach Services, 
Inc.; (TX) Tarrant County CHIP Coalition.
    (TX) Texans Care for Children; (TX) Tri-County MHMR; (UT) Anti-
Hunger Action Committee; (UT) Bear River Mental Health Services, Inc.; 
(UT) Coalition of Religious Communities; (UT) Disabled Rights Action 
Committee; (UT) Legislative Coalition for People with Disabilities; 
(UT) Salt Lake Community Action Program; (UT) Southwest Behavioral 
Health Center; (UT) Utah Association of Counties; (UT) Wasatch Mental 
Health; (VA) Institute of Social Medicine & Community Health; (VA) 
Loudoun Community Health Center; (VA) Prevent Child Abuse Hampton 
Roads; (VA) Prevent Child Abuse; Virginia; (VA) Project Community, 
Inc.; (VA) Virginia Association of Counties; (VA) Virginia Association 
of Personal Care Assistants, Local 5; (VT) VT Affordable Housing 
Coalition; (WA) Family Service Spokane.
    (WA) International Community Health Services; (WA) Navos; (WA) 
Northwest Federation of Community Organizations; (WA) Triumph Treatment 
Service; (WA) Washington Community Action Network; (WA) WFSE 304/
Council 28; (WA) Willapa Behavioral Health; (WA) Women's Coalition of 
Washington; (WI) 9to5 Milwaukee; (WI) Coalition of Wisconsin Aging 
Groups; (WI) Family Services of Northeast Wisconsin; (WI) One Wisconsin 
Now; (WI) Respite Care Association of Wisconsin; (WI) St. Rose Youth & 
Family Center; (WI) Wisconsin Association of Family and Children's 
Agencies; (WI) Wisconsin Council on Children and Families; (WI) 
Wisconsin Jewish Conference and Wisconsin Personal Services 
Association; (WV) County Commissioners Association of West Virginia; 
(WV) West Virginia Association of Counties.
                                 ______
                                 
                 Prepared Statement of Jerry S. Heppes
    This written testimony is submitted after the hearing conducted on 
January 21, 2010. Senator Harkin, Ranking Member Cochran, and members 
of the subcommittee I am the CEO of the Door and Hardware Institute 
(DHI). Our written testimony will underscore several key points that 
were discussed during the January 21, 2010 hearing as well as to offer 
additional perspective.
Introduction to Our Organization
    To provide some background information, DHI is an IRC section 
501(c)(6) membership association founded in 1975 with a core purpose to 
advance life safety and security of the built environment throughout 
North America. DHI represents the architectural openings trade--a $6 
billion industry--with more than 5,000 members. Membership consists of 
individuals, consultants and corporations involved in the writing of 
architectural specifications, and the manufacturing and distribution of 
products (doors, frames, architectural hardware, and access control) in 
all commercial buildings. DHI is uniquely devoted to the interests of 
the door and hardware industry with its professional certifications, 
publications, advocacy, and educational programs.
    Our members write the specifications, consult, and provide product 
for the architectural openings (doorways) in schools. Schools are 
comprised of many particular complicated openings which provide 
security, life safety, and ADA compliance. Specifying long-term and on-
going maintenance is also part of our responsibilities. As much as 30 
percent of a distributors business can be dedicated to schools (K-12, 
colleges, and universities).
Recessions Impact on Construction
    As we are all well aware, the construction industry has been 
severely impacted by the current recession. In fact, according to 
Stephen E. Sandherr, the Chief Executive Officer of the Associated 
General Contractors of America, construction spending declined by $137 
billion last year, and now is the lowest in 6 years.\1\ The forecast 
for 2010 is just as bleak: McGraw Hill estimates a 3.1 percent 
decrease; Reed Construction Data estimates an 8.5 percent decrease; and 
the American Institute of Architects Consensus Forecast (AIA consensus 
forecast comprised of McGraw Hill, Global Insight, Portland Cement 
Association, Moody's Economy, and Reed Construction Data) estimates a 
13.4 percent decrease. All of these decreases are for nonresidential 
construction. Specific to schools, the estimates are: AIA consensus, 
-5.6 percent; McGraw Hill, -5.4 percent; and Reed Construction Data, 
-3.4 percent.\2\
---------------------------------------------------------------------------
    \1\ Construction NEWS Associated General Contractors of America 
2010 Construction Industry Employment and Business Forecast Media 
Conference Call Remarks, Stephen E. Sandherr, CEO, January 20, 2010.
    \2\ AIA Non-Residential Construction Forecast, January 14, 2010.
---------------------------------------------------------------------------
Job Creation
    During testimony, the topic of job creation through school 
construction was briefly touched upon. It is important to further 
explore the job creation opportunity and I thought it would be helpful 
from the perspective of one segment of the institutional construction 
industry.
    What type of impact has the recession had on jobs? The construction 
industry is only 5 percent of the U.S. workforce, however according to 
Mr. Sandherr, construction workers shouldered 20 percent of nonfarm 
layoffs last year. He continues to state that the latest Federal 
figures make clear, the depression-like conditions in the construction 
industry are one of the main factors dragging overall employment.\1\ 
These are staggering numbers.
    What type of impact does this have on one segment of the 
construction industry such as our industry? The typical door and 
hardware distributor requires one employee for every $287,000 in 
sales.\3\ According to Brian K. Edwards, Chief of Staff of Montgomery 
County Schools, Montgomery County spent $250 million of construction in 
2009. Doors and hardware average 2.5 percent of the construction cost 
which means, based upon the sales per employee number referenced above, 
in 2009 Montgomery County school construction yielded (secured or 
created) 21 jobs in our industry in one county. Please consider that 
this is one county in one State. Magnify this number across the country 
and to all of the industries (the remaining 97.5 percent of the cost of 
the job) involved in a construction project and the job creation 
possibilities are impressive through school construction.
---------------------------------------------------------------------------
    \3\ Door and Hardware Institute 2008 Profit Report; Profit Planning 
Group.
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    School construction involves a great number of professions, 
industries, and products, perhaps more than any other building type. 
This is because there is a specific end-user with a specifically 
detailed user population. At the onset of a school project, be it a new 
facility, addition, or renovation, the benefit to designers and 
engineers is immediate. Architects, site planners, and consulting 
engineers (civil, structural, mechanical, and electrical) are put to 
work right from the first notice to proceed.\4\
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    \4\ James W. Emr, AIA, President, Smolen Emr + Associates 
Architects.
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    After the design and construction documents are complete the 
contractors and material suppliers join the design team in the benefits 
of school construction. Virtually every construction trade is involved 
in the construction of the base building and interior fit out of a 
school. The shell building incorporates major trades such as 
excavation, steel, concrete, masonry, windows, paving, roofing, and 
utility contractors.\4\
    Unlike a speculative office or commercial building a school then 
has full interior fit out. This project scope will typically include 
all build-out of metal stud, gypsum wall board, CMU partitions, 
lighting, plumbing, plumbing fixtures and of course, literally, 
hundreds of doors/frames and hardware sets in a typical school. Built 
in furniture, case work, and equipment is also designed and installed 
as part of the construction project. Finishing contractors can include 
flooring, carpet, paint, wall coverings, tile, ceilings, and window 
treatments. This interior work employs material suppliers, 
manufacturers, transportation companies, and installation 
contractors.\4\
    A school will also typically include specialty designers, systems, 
equipment, and contractors. These can include kitchen/food service, 
information technologies, audio/visual, and theater/lighting/acoustics. 
Special teaching programs--such as science, technical education, and 
automotive--also include all the associated special design, equipment, 
and contractors. The list goes on and on.\4\
    However, this is not the only reason to support school 
construction.
Funding Cliff
    One of the concerns raised during the hearing was the ``funding 
cliff'' for the American Recovery and Reinvestment Act (ARRA) set to 
expire in 2012. The concern surrounds creating obligations for States 
to continue programs funded by the ARRA which conclude in 2012. The 
Montgomery County Superintendent testified that to avoid a fiscal 
crisis for their State, the county is maximizing one-time spending that 
can support long-term educational improvement without a permanent 
commitment of local funds.\5\ The superintendent stated verbally during 
his testimony that utilizing the funds from the ARRA school 
construction was a ``no brainer.''
---------------------------------------------------------------------------
    \5\ Testimony of Dr. Jerry D. Weast, Superintendent of Schools, 
Montgomery County Public Schools, Hearing of the United States Senate 
Appropriations Committee, January 21, 2010.
---------------------------------------------------------------------------
    A ``no brainer'' because, as he stated, school construction creates 
a program with an ``immediate turnaround.'' Construction, whether new 
or renovation, produces a benefit for years to come; both 
``statically'' in terms of the economic infusion into the communities 
with jobs and ``dynamically'' with improved conditions for educating 
America's next generations and presumably aesthetically by increasing 
community value. The superintendent stated that school buildings are 
being utilized for up to 70 years. This translates into a real need for 
funds for ongoing renovations as well as the long-term benefits of 
construction.
Additional Residual Value
    In addition, the jobs that are created in construction assist small 
businesses. This community has recently been identified by many 
political representatives, including President Obama, as a segment of 
our country that we must assist as they create a minimum of 65 percent 
of the jobs in our country. The construction industry is primarily 
comprised of small businesses.
    In addition, the majority of construction products are made in 
America; an additional consideration and consistent with advancing 
jobs. In fact the numbers of job creation noted earlier do not even 
consider the impact on the manufacturers of construction products.
    As of late, there has been increased attention, both organically 
among Americans wishing to ``do more'' as well as by elected officials 
recognizing the need for increased focus on environmental issues, 
toward green construction. The benefits range from increased 
sustainability and healthy learning environments to decreased energy 
cost.
    Finally, as suggested above, although admittedly an ``intangible'' 
benefit, Congress, local governments, and all concerned Americans have 
focused on the quality of education provided in our country in light of 
an ever more competitive world. Clearly, the environment in which 
learning occurs can contribute to their likelihood of success.
    What better time to support school construction with so many 
residual values.
Decreased Construction Cost
    Finally, there is another pragmatic reason to invest in school 
construction--decreased cost. The estimates of decreased pricing range 
as high as 75 percent. In fact Superintendent Weast stated that they 
were able to build a high school and with the savings build an 
elementary school as well. Why not take advantage of these cost savings 
to advance education.
    The reasons to support school construction and renovation are 
compelling.
Life Safety and Security
    Finally, allow me to address a final powerful topic that was not 
considered during the hearing but is on the minds of every educator as 
well as parent of a student.
    Since 9/11 our country has become intensely focused on security. 
Often when facility managers have taken steps to increase security in 
the buildings' doorways they have done so at the compromise of life 
safety--a dangerous trend. This is due to a lack of knowledge and 
comprehensive understanding of the applicable building codes which 
govern the opening as well as product application and capability. The 
result can often be disastrous whereby the doorway may be more secure, 
but does not provide the intended egress which ensures life safety.
    Furthermore, since events such as the shootings at Columbine High 
School and Virginia Tech, society has become concerned for the safety 
of our children in schools. Accordingly, schools are faced with 
complicated life safety and security issues like never before. 
Administrators, principals, teachers, parents, educational facility 
mangers, and school designers are faced with addressing the demand for 
security solutions every day. Of course, school life safety is a 
problem that requires sound psychological solutions as well as 
effective physical security solutions.
    The psychological solutions are complicated and rapidly changing, 
making them difficult to address. Fortunately, physical security 
changes are readily available within existing products, technology and 
design and can make an impact. A paradigm shift needs to take place by 
putting a greater importance on the architectural opening (doorways) 
and the significant role these products play in improving life safety 
and security through specification design, product implementation and 
ongoing maintenance. Every school uses doors and hardware, but few are 
designed to take full advantage of the immense role these products can 
play in creating safer environments for our children to learn. Access 
control only goes so far, oftentimes it is simply the door and the 
locking hardware that provide the last barrier between an intruder and 
our children.
    In 2007, DHI, through their efforts with the National Fire 
Protection Association, was successful in adding a requirement to the 
2007 Edition of NFPA 80 Standard for Fire Doors and Other Opening 
Protectives for periodic annual inspections, by knowledgeable 
individuals, of fire door assemblies. In 2008 DHI was able to expand 
that requirement into NFPA 101, The Life Safety Code, to require 
inspections of doors which provide safe egress (exit) in the following 
occupancies: educational facilities, day cares, and places of assembly.
    With these codes in place, thousands of jobs will be created or 
maintained since these updated codes require that these fire and life 
safety inspections be performed by knowledgeable individuals. There are 
literally millions of doors that have never been inspected. Money for 
training, repair, and/or replacement of doors will put people to work. 
The end result is that we have a self-sustainable project that, in the 
end, will provide thousands of jobs, update thousands of schools 
through renovations, and provide a safe learning environment for our 
children. As you can see, there is immediate payback on numerous 
fronts.
    Over time, this will enable our industry to work with the building 
community to correct these types of code violations and to begin to 
offer better solutions for the balance of life safety and security. It 
is these types of solutions that we must continue to develop as there 
should be no greater priority for our Government than protecting our 
students and citizens. What a better use of our funds.
    Unfortunately, to date, during the process of maintaining existing 
schools, or designing new schools, the life safety and security 
features that doors and locks provide tend to be overlooked as to the 
crucial role they can play. This results in: designs which do not take 
advantage of simple life safety and security solutions; costly and 
unnecessary changes during the life of the building; and band-aid 
solutions which satisfy only an emotional response.
    In the study produced by a Virginia Tech Review Panel appointed by 
the Virginia Governor Timothy M. Kaine in an effort to respond to the 
terrible events of April 16, 2007 a recommendation is offered by the 
panel in regards to improving the security infrastructure of 
universities across the county. Emergency Planning Recommendation 11-1 
states:

    ``Universities should do a risk analysis (threat assessment) and 
then choose a level of security appropriate for their campus. How far 
to go in safeguarding campuses, and from which threats, needs to be 
considered by each institution. Security requirements vary across 
universities and each must do its own threat assessment to determine 
what security measures are appropriate.''

    The Virginia Tech Review Panel addresses doors and locking systems 
and specifically noted that in regards to Virginia Tech ``most 
classrooms, such as those in Norris Hall, have no locks. Staff offices 
generally do have locks, including those in Norris Hall''. It further 
states that ``some universities have locks on classroom doors, but they 
typically operate by a key from the hallway. They are intended to keep 
students and strangers out when they are not in use and often cannot be 
locked from the inside.'' This illustrates the lack of knowledge within 
the university systems with regards to simple solutions. A report 
generated after the Columbine event noted the use of classroom function 
locks which enable teachers to lock the doorways from inside the 
classroom resulting in saved lives. These ``intruder function'' 
classroom locks have been on the market for quite some time and 
illustrate the need for our industry to be working closer with 
Educational Facilities to properly secure their campuses with simple 
solutions.
    The Virginia Tech Review Panel also addressed ``lockdowns'' noting 
that they are not always feasible. However, there are sophisticated 
systems in place that can provide workable solutions to produce an 
effective lockdown.
    Please consider the impact that funding the advancement of life 
safety and security in schools could have on our country.
Conclusion
    In summary, school construction has tremendous benefits for our 
society. We have noted job creation, long-term facility benefits, 
projects with immediate payback and a finite end, support of the green 
movement, ADA compliance, and the advancement of life safety and 
security. School construction makes sense.

                                   - 
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