    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

             IMPLEMENTATION OF 2012 UNEMPLOYMENT INSURANCE REFORMS

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

                                    HEARING

                                   before the

                        SUBCOMMITTEE ON HUMAN RESOURCES

                                     of the

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

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 16, 2013

                                   __________

                               Serial No 113-HR03

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                         U.S. GOVERNMENT PUBLISHING OFFICE

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                          COMMITTEE ON WAYS AND MEANS

                         DAVE CAMP, Michigan, Chairman

    SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
    KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
    PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
    DEVIN NUNES, California              JOHN LEWIS, Georgia
    PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
    DAVID G. REICHERT, Washington        XAVIER BECERRA, California
    CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
    PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
    JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
    TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
    VERN BUCHANAN, Florida               RON KIND, Wisconsin
    ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
    AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
    LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
    ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
    KENNY MARCHANT, Texas                LINDA SANCHEZ, California
    DIANE BLACK, Tennessee
    TOM REED, New York
    TODD YOUNG, Indiana
    MIKE KELLY, Pennsylvania
    TIM GRIFFIN, Arkansas
    JIM RENACCI, Ohio

            Jennifer M. Safavian, Staff Director and General Counsel

                      Janice Mays, Minority Chief Counsel

                                     ______

                        SUBCOMMITTEE ON HUMAN RESOURCES

                    DAVID G. REICHERT, Washington, Chairman

    TODD YOUNG, Indiana                  LLOYD DOGGETT, Texas
    MIKE KELLY, Pennsylvania             JOHN LEWIS, Georgia
    TIM GRIFFIN, Arkansas                JOSEPH CROWLEY, New York
    JIM RENACCI, Ohio                    DANNY DAVIS, Illinois
    TOM REED, New York
    CHARLES W. BOUSTANY, JR., Louisiana

                                C O N T E N T S

                                   __________

                                                                       Page

    Advisory of April 16, 2013 announcing the hearing................     2

                                   WITNESSES

    Bill Starks, Director, Unemployment Insurance Division, Utah
      Department of Workforce Services, Testimony....................     7
    The Honorable Tommy Williams, Texas State Senator, District 4,
      Testimony......................................................    17
    Rich Hobbie, Executive Director, National Association of State
      Workforce Agencies, Testimony..................................    25
    Larry Kidd, Principal/Chief Executive Officer of Reliable
      Staffing Services and RSS Professional, LLC, Testimony.........    39
    Judy Conti, Federal Advocacy Coordinator, National Employment Law
      Project, Testimony.............................................    49

             IMPLEMENTATION OF 2012 UNEMPLOYMENT INSURANCE REFORMS

                                  ----------

                            TUESDAY, APRIL 16, 2013

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                               Subcommittee on Human Resources,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 2:25 p.m., in
    room 1100, Longworth House Office Building, the Honorable Dave
    Reichert [Chairman of the Subcommittee] presiding.
        [The advisory of the hearing follows:]

    HEARING ADVISORY

       Chairman Reichert Announces Hearing on the Implementation of 2012
                         Unemployment Insurance Reforms

    1100 Longworth House Office Building at 2:00 PM
    Washington, April 9, 2013
        Congressman Dave Reichert (R-WA), Chairman of the Subcommittee on
    Human Resources of the Committee on Ways and Means, today announced
    that the Subcommittee will hold a hearing reviewing the implementation
    of reforms to the unemployment insurance system contained in Public Law
    112-96, The Middle Class Tax Relief and Job Creation Act of 2012. The
    hearing will take place at 2:00 P.M. on Tuesday, April 16, 2013, in
    room 1100 of the Longworth House Office Building.

        In view of the limited time available to hear witnesses, oral
    testimony at this hearing will be from invited witnesses only.
    Witnesses will include public and private sector experts on
    unemployment benefits and policies designed to promote reemployment.
    However, any individual or organization not scheduled for an oral
    appearance may submit a written statement for consideration by the
    Committee and for inclusion in the printed record of the hearing.

    BACKGROUND:

        In March 2013 (the most recent official data), the U.S.
    unemployment rate was 7.6 percent, with 11.7 million individuals
    unemployed, of whom 4.6 million were long-term unemployed--defined as
    unemployed for 27 weeks or longer. As of the week ending March 16,
    2013, approximately 5.2 million individuals were collecting State or
    Federal unemployment benefits.

        The Federal-State Unemployment Insurance (UI) program, created by
    the Social Security Act 1935, assists unemployed individuals by
    offering weekly unemployment benefit checks while they search for work.
    In order to be eligible for benefits, jobless workers must have a
    history of attachment to the workforce and must be able and available
    for work.

        As a result of a series of laws enacted since 2008 to provide
    Federal extended benefits on a temporary basis, the maximum number of
    weeks of total unemployment benefits payable per person grew by late
    2009 to a record 99 weeks, including up to 73 weeks of federally-funded
    benefits. Today, long-term unemployed individuals in most States are
    eligible for a maximum of 63 weeks of total benefits. From July 2008
    through December 2012, a total of $208 billion was spent on Federal
    extended unemployment benefits, with most of that cost supported by
    general revenues.

        On February 22, 2012, the President signed P.L. 112-96, The Middle
    Class Tax Relief and Job Creation Act. This legislation extended and
    reformed the Federal Emergency Unemployment Compensation (EUC) program
    for the remainder of 2012, which was subsequently extended through
    December 2013. This legislation also included landmark reforms to the
    permanent unemployment program, such as creating new job search
    requirements for Federal benefits, permitting States to have new
    flexibility to seek ``waivers'' to promote pro-work reforms, allowing
    States to screen and test certain UI applicants for illegal drugs,
    requiring ``reemployment eligibility assessments'' (REAs) for the long-
    term unemployed, and requiring States to recover more prior
    overpayments of UI benefits. The initial implementation of these 2012
    reforms was previously explored during a Human Resources Subcommittee
    hearing in April 2012.

        In announcing the hearing, Chairman Reichert said, ``Fourteen
    months ago, Republicans and Democrats in the House and the Senate
    agreed on commonsense reforms to the unemployment insurance system
    designed to help more Americans return to work sooner. The President
    signed those policies into law, but the administration has since been
    selective in implementing some policies and has created barriers to
    successfully helping states take action on other policies. This hearing
    will help us evaluate how the administration has implemented the 2012
    reforms and determine what we can do to help more Americans collect
    paychecks instead of unemployment checks.

    FOCUS OF THE HEARING:

        The hearing will focus on the implementation of reforms to
    unemployment benefits enacted in P.L. 112-96, The Middle Class Tax
    Relief and Job Creation Act.

    DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

        Please Note: Any person(s) and/or organization(s) wishing to submit
    for the hearing record must follow the appropriate link on the hearing
    page of the Committee website and complete the informational forms.
    From the Committee homepage, http://waysandmeans.house.gov, select
    ``Hearings.'' Select the hearing for which you would like to submit,
    and click on the link entitled, ``Click here to provide a submission
    for the record.'' Once you have followed the online instructions,
    submit all requested information. ATTACH your submission as a Word
    document, in compliance with the formatting requirements listed below,
    by Tuesday, April 30, 2013. Finally, please note that due to the change
    in House mail policy, the U.S. Capitol Police will refuse sealed-
    package deliveries to all House Office Buildings. For questions, or if
    you encounter technical problems, please call (202) 225-1721 or (202)
    225-3625.

    FORMATTING REQUIREMENTS:

        The Committee relies on electronic submissions for printing the
    official hearing record. As always, submissions will be included in the
    record according to the discretion of the Committee. The Committee will
    not alter the content of your submission, but we reserve the right to
    format it according to our guidelines. Any submission provided to the
    Committee by a witness, any supplementary materials submitted for the
    printed record, and any written comments in response to a request for
    written comments must conform to the guidelines listed below. Any
    submission or supplementary item not in compliance with these
    guidelines will not be printed, but will be maintained in the Committee
    files for review and use by the Committee.

        1. All submissions and supplementary materials must be provided in
    Word format and MUST NOT exceed a total of 10 pages, including
    attachments. Witnesses and submitters are advised that the Committee
    relies on electronic submissions for printing the official hearing
    record.

        2. Copies of whole documents submitted as exhibit material will not
    be accepted for printing. Instead, exhibit material should be
    referenced and quoted or paraphrased. All exhibit material not meeting
    these specifications will be maintained in the Committee files for
    review and use by the Committee.

        3. All submissions must include a list of all clients, persons and/
    or organizations on whose behalf the witness appears. A supplemental
    sheet must accompany each submission listing the name, company,
    address, telephone, and fax numbers of each witness.

        The Committee seeks to make its facilities accessible to persons
    with disabilities. If you are in need of special accommodations, please
    call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
    business days notice is requested). Questions with regard to special
    accommodation needs in general (including availability of Committee
    materials in alternative formats) may be directed to the Committee as
    noted above.

        Note: All Committee advisories and news releases are available on
    the World Wide Web at http://www.waysandmeans.house.gov/.

        Chairman REICHERT. Welcome. This hearing is now in order. I
    want to welcome you to today's hearing on the progress of
    reforms enacted last year designed to help more unemployed
    individuals, especially the long-term unemployed, get back to
    work.
        Reforms enacted in 2012 were aimed at connecting those in
    need with the resources necessary to succeed. Today we will
    take a look at what the administration and States are doing to
    implement these reforms. As we saw in the most recent
    disappointing jobs report, there is much more that needs to be
    done to help the unemployed get back to work. Overall, we are
    still 2.5 million jobs short of where the President predicted
    we would be at the end of 2010 under his trillion-dollar 2009
    stimulus plan.
        Too many people are out of work. Currently, 4.6 million
    people, or 40 percent of the unemployed, are without a job for
    6 months or longer, an unprecedented level prior to this
    administration. Sadly, many Americans who have fallen on hard
    times find themselves without the guidance or resources needed
    to identify work opportunities.
        When you take into account the unaccounted millions who
    have lost hope and given up on looking for work altogether, the
    official unemployment rates skyrockets to over 11 percent. This
    is unacceptable. We cannot sit idly by when people need help
    finding jobs. We must do more to lift people up and instill
    hope in those who need it most, so no one falls through the
    cracks.
        Solutions exist and we can make changes that lead to more
    hope, opportunity, and employment. That is why, 14 months ago,
    Republicans and Democrats agreed on commonsense reforms, which
    President Obama signed into law, to help more Americans get
    back to work and provide for their families. Under those
    reforms, for the first time States can apply for waivers to pay
    people for working or getting training to go to work instead of
    simply receiving an unemployment check. However, instead of
    helping States test innovative ways to help people get back to
    work, the Department of Labor issued 24 pages of grueling
    application requirements, and actually a longer application
    process than applying for health care under the new health care
    law. These requirements have completely discouraged States from
    applying altogether.
        Even though a senior Department of Labor official testified
    before this Subcommittee last April indicating that DOL would
    consider revising their requirements if no States applied, the
    Department has yet to make any changes to simplify things for
    States trying to help people find work. The 2012 reforms also
    now allow States to screen and test unemployment insurance
    recipients for illegal drugs, starting with those who lost
    their job due to drugs or who need to pass a drug test to land
    a new job. Such reforms ensure that those who break the law
    through substance abuse are not receiving benefits over law-
    abiding citizens truly in need of help.
        It is interesting that while DOL was able to issue 24 pages
    of lengthy, demanding regulations for waiver applicants, the
    Department has yet to issue a single page of guidance to States
    that would allow them to screen for drug tests. In addition to
    helping people find work, the 2012 reforms also ensure that all
    long-term unemployment benefit recipients are actively engaged
    with the States to find work, and that States must check on
    recipients to determine what services and activities they need
    to get back to work.
        As we will learn in today's hearing, this type of
    meaningful interaction between States and recipients helps
    struggling individuals discover opportunities for success. A
    year ago, this subcommittee met to discuss the early
    implementation of these commonsense reforms, but we are left
    with more questions than answers, many of which are still
    outstanding.
        Today, we are checking back in. We are hearing from the
    State and local officials and employers who have been directly
    involved in the implementation of these reforms. But mostly we
    are looking for guidance on what we can do to help more
    Americans collect paychecks instead of unemployment checks. All
    Americans deserve answers about how these policies are working
    and what else we can do to help.
        And, Mr. Doggett, we recognize you for 5 minutes to make
    your opening statement.
        Mr. DOGGETT. Thank you so much, Mr. Chairman. You will
    recall that the last time this Subcommittee got together, it
    was because of criticism that the administration was just
    offering too much leniency and flexibility to the States, and
    today's hearing seems to focus on the administration offering
    too little flexibility for waivers from another program.
    Sometimes I get the feeling that for our Republican colleagues
    the porridge is either too hot or too cold but never just right
    so long as it is President Obama's administration that is doing
    the serving.
        Rather than refight all of our past battles, I believe that
    we should be focused on what policies we have adopted in the
    past that have been effectively implemented to help unemployed
    Americans and what else can we do to advance that goal in the
    future.
        Unfortunately, as we meet today, there are about 90,000
    Texans who are among about 2 million Americans who have had or
    will have their unemployment insurance check cut by about 10
    percent, which is a pretty good hit for someone who is out
    looking for a job and trying to survive with their family in
    the meantime. And really those who are unemployed today in
    America have faced a bit of a triple whammy. They get their
    unemployment check cut, they are subject to cuts in job
    training and in employment services, which are being reduced at
    the very time they need help finding work, and according to the
    Congressional Budget Office, the overall effect of
    sequestration will be a reduction in the number of jobs that
    are out there and a reduction in economic growth for those
    seeking to enter the job market.
        We all talk about wanting to get people back to work, but
    if we fail to provide folks with the tools to do it, it is just
    so much talk. I look forward to hearing today from Judy Conti
    about at least one area that is part of the need to strengthen
    our Nation's employment service system to provide early and
    intensive personal assistance to those who are unemployed.
        Last year Congress did enact a series of changes in our
    unemployment insurance law that I think were overall a step in
    the right direction. Senator Ron Wyden came to this
    Subcommittee and I joined with him in working on a provision
    that is helpful to a few people who are unemployed in special
    situations where the focus can be on opening their own business
    rather than continuing to search for a job. There is some
    indication that these programs have resulted in more people
    being employed than those who are traditional unemployment
    insurance recipients.
        The same is true concerning a reform that we adopted
    concerning work sharing. Though not many new States have signed
    onto the program, the 26 that have these programs seem to have
    had some success. There was a provision relating to providing
    waivers under the UI program, and a provision that dealt with
    drug testing for a limited group of applicants. While I think
    the evidence is still lacking as to whether the savings from
    such testing exceed the cost of the testing, I am pleased that
    Senator Williams is here from Texas because if we are to
    effectively implement this program, it would appear to me that
    he has done an effective job of doing it in a bipartisan way
    with some good, reasonable safeguards in the legislation.
        I thank you, Senator, for your leadership on that issue.
        Again, as we sit here today, we just need to realize that
    when it comes to helping the unemployed, our first and most
    immediate goal should be to find a sensible and balanced
    alternative to the budget cuts encompassed in the sequestration
    that is now in effect and to recognize that the best remedy for
    unemployment is a strong economy and that when things are done
    that blunt economic growth, they hurt the unemployed first and
    foremost.
        Mr. Chairman, I look forward to hearing from all of our
    witnesses and to working with you on the objectives that you
    have laid out. Thank you very much.
        Chairman REICHERT. Thank you, Mr. Doggett.
        Chairman REICHERT. And without objection, each Member will
    have the opportunity to submit a written statement and have it
    included in the record.
        I want to remind our witnesses to please limit your oral
    testimony to five minutes; however, without objection, all of
    the written testimony will be made a part of the permanent
    record. While Mr. Doggett and I get to make our political
    statements at the beginning, as you can tell, everyone on this
    panel joins with you in trying to make a real concerted effort
    to get people back to work. That is the bottom line that you
    heard from both of us today. And we are fortunate to have you
    here as our panelists. We hope to learn from you and find ways
    that we can accomplish that.
        So, Mr. Starks, Bill Starks, is the director, Unemployment
    Insurance Division, Utah Department of Workforce Services.
    Welcome.
        The Hon. Tommy Williams, Texas State Senator from District
    4. Welcome.
        Rich Hobbie, executive director, National Association of
    State Workforce Agencies. Thank you for being here.
        Larry Kidd, principal/chief executive officer of Reliable
    Staffing Services and RSS Professional Services. And Judy
    Conti, Federal advocacy coordinator, National Employment Law
    Project. Welcome to you also.
        Mr. Starks, please proceed with your testimony.

      STATEMENT OF BILL STARKS, DIRECTOR, UNEMPLOYMENT INSURANCE
            DIVISION, UTAH DEPARTMENT OF WORKFORCE SERVICES

        Mr. STARKS. Thank you, Mr. Chairman and Members of the
    House Human Resource Subcommittee. I appreciate the opportunity
    to provide you with our observation on last year's UI reforms,
    reemployment opportunities, and share some of our discoveries
    that have shown some promising results.
        We had four significant discoveries through a pilot program
    that have some important implications and suggest we are now in
    an era where we can cost-effectively better serve and engage
    our UI claimants and achieve improved employment outcomes.
        First, we found there is a large job search readiness gap.
    Utah performed a control group study of about 505 claimants in
    our REA program. They initially rated their job search
    readiness at about a D-plus average. Through online workshops,
    we were able to improve that to a B-plus average. We learned
    that job search readiness gaps were larger than what we thought
    and present a bigger opportunity than we knew.
        Second, we found that many claimants who are not engaged
    can become engaged. We implemented an online work search
    readiness training program that involves about a 1- to 3-hour
    commitment for 2 weeks. About 31 percent of our claimants
    refused to participate. However, once their benefits were
    suspended, 25 percent of them completed it.
        Third, we found that the claimants returned to work sooner
    by engaging in meaningful work search activities. Claimants
    that participated decreased their duration on unemployment by a
    full week, producing significant savings to our trust fund.
        Lastly, our claimants not only responded well, they liked
    the tools. They voluntarily completed about a third more of the
    online workshops than they were required.
        Utah has designed a triaged approach to reemployment. We
    use online engagement immediately and graduate to staff-
    assisted engagement over time. We invested some of our ARRA
    funds to upgrade our job exchange system. We implemented a
    statewide online overview, evaluation and workshop system. We
    developed a Reemployment Support Services system that allows
    employment center staff to select claimants to engage in staff-
    assisted workshops, employment counseling, and job fairs.
        We implemented the REA program, and it is producing about
    $2 in savings for every dollar invested. We implemented REAs on
    EUC claimants; however, we discovered engaging the claimants in
    the early stages of the process would provide far greater trust
    fund savings.
        Utah's average UI duration went from a high of 18.2 weeks
    in 2009 to 13.5 weeks at the end of 2012 as a result of some of
    these initiatives, and Utah has had a fairly strong economy.
    Last year's act also required EUC claimants to register for
    work and engage and document an active work search. Utah
    requires this for all claimants and believes these requirements
    are good public policy and supports their enactment.
        Last year's act also provided that DOL could enter into
    agreements with up to 10 States to provide demonstration
    projects that expedite reemployment and save unemployment
    dollars. The act limits the projects to subsidies for employers
    providing training, such as wage subsidies and direct
    disbursements to employers who hire claimants. However, the
    second provision requires that the disbursements are only
    permissible if the individual's new wages exceed their prior
    weekly benefit amount and they only be used to pay the
    difference between the new weekly wage and the prior weekly
    benefit amount. In our opinion, this provision is a flaw and
    Congress should consider eliminating it.
        We implemented our own employer hiring incentive program in
    2010 called the Utah Back to Work program providing a $2,000
    hiring incentive to employers. Initially this appeared to be an
    ideal demonstration project; however, under the provisions
    within the law, it would be extremely difficult to market, as
    well as administer that program.
        In summary, virtually all data suggests that the sooner a
    State becomes actively involved in engaging UI claimants in
    reemployment activities, the sooner the claimants return to the
    workforce. We feel they need to establish clear and meaningful
    expectations for the claimants, that reemployment is a priority
    that requires a full-time commitment. Claimants need to be held
    accountable when directed to reemployment activities and
    understand that there are consequences if they choose not to
    participate.
        We would also like you to consider allowing States to use a
    small percentage, for example, 5 to 10 percent of any net trust
    fund savings generated from any enhanced reemployment or
    integrity efforts. And then finally, understand that all
    claimants are not committed to getting back to work. If we
    encourage them with meaningful tools and support, the vast
    majority of the claimants can become engaged and improve their
    job readiness.
        Thank you.
        Chairman REICHERT. Thank you, Mr. Starks.
        [The prepared statement of Mr. Starks follows:]

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        Chairman REICHERT. Senator, you are recognized for 5
    minutes.

    STATEMENT OF HON. TOMMY WILLIAMS, TEXAS STATE SENATOR, DISTRICT
                                   4

        Mr. WILLIAMS. Thank you, Mr. Chairman, Members. I am State
    Senator Tommy Williams. I represent the southeast portion of
    Texas, the southeast corner of the State, and the suburban
    areas on the northern and eastern parts of the greater Houston
    area. My Senate district overlaps Congressman Brady. He is my
    neighbor and my Congressman. I serve, as well as the 800,000
    constituents I represent, I serve as chairman of the Senate
    Finance Committee, and we have jurisdiction over the State's
    $196 billion biennial budget and all State tax policy.
        I am pleased to have an opportunity to appear before the
    Committee today and to testify about the Middle Class Tax
    Relief and Job Creation Act, Public Law 112-96. The bill
    contained major provisions, as you know, related to
    unemployment insurance and TANF benefits. There have been two
    bills that have been filed in the 83rd legislature in Texas
    that would enact drug testing provisions for certain
    unemployment insurance claimants authorized by House Resolution
    3630. I am the author of Senate Bill 21, which relates to drug
    screening and testing as a condition for receiving unemployment
    compensation benefits by certain individuals. Its House
    companion is carried by Representative Brandon Creighton.
    Senate Bill 21 passed out of the State Senate 31 to nothing on
    Thursday, April the 11th. The bill had broad bipartisan
    support. It would require applicants for unemployment insurance
    benefits to submit to drug screening if their only suitable
    work is for an occupation identified by the U.S. Secretary of
    Labor as one that regularly requires drug testing.
        If the applicant's drug screening indicates that person has
    used illegal drugs, they can and would be required to submit to
    and pass a drug test before being eligible to receive
    unemployment insurance benefits. If the individual is required
    to take a drug test and tests positive, they would be
    ineligible for benefits and they must retake and pass the drug
    test no sooner than 4 weeks after the failed test in order to
    become eligible for unemployment insurance.
        There are also provisions that would allow people who had a
    false positive to challenge the test. The bill also allows
    those who test positive to continue receiving unemployment
    benefits if they enroll and attend a drug treatment program. I
    expect this bill will receive broad bipartisan support in the
    Texas House as it did in the Senate and for it to be on the
    Governor's desk in a few weeks.
        The Texas Senate also passed Senate Bill 11, which subjects
    high-risk TANF applicants to drug testing, and those who fail
    the drug test would be disqualified from TANF benefits for 1
    year. However, applicants who fail the drug test could reapply
    for benefits if they enter a drug treatment program. Applicants
    who tested positive for drugs three times would be permanently
    disqualified from receiving any TANF benefits.
        Senator Jane Nelson, author of Senate Bill 11, modified her
    original bill to address concerns that children would be hurt
    if TANF applicants flunked the drug test. The Senate version
    allows TANF benefits to continue helping dependents through is
    a third party known as a protective payee, if an adult
    applicant tested positive for drugs. This legislation also
    received broad bipartisan support and passed the Senate 31 to
    nothing on Wednesday, April the 10th.
        The bill would also remove all sanctions if an adult
    recipient who tested positive for drugs passes a new drug test
    after 6 months. The bill requires the Health and Human Services
    Commission to use the most efficient and cost-effective drug
    screening assessment tool that is developed jointly with the
    Department of State Health Services based on validated
    controlled substance use and assessment tools.
        It is my understanding that the Labor Department has not
    yet written regulations for the drug testing program. It is our
    hope that these regulations would be issued soon so that the
    State of Texas can implement the program when these two bills
    become State law on September 1st.
        Public Law 112-96 also creates a new cost-neutral waiver
    authority providing States with unprecedented flexibility on
    how they use their unemployment benefits to promote the type of
    pro-work reforms that led to successful welfare program reform
    in the nineties. Our State submitted a request on February the
    24th of 2012. It was denied on March 16th of that same year.
    And on April 19th, the DOL issued another statement providing
    guidance on unemployment insurance demonstration products.
        Representative Burkett has introduced House Bill 3005 in
    the Texas House which would amend the labor code to allow the
    Workforce Commission to use money in the Unemployment
    Compensation Fund for reemployment demonstration projects
    pursuant to an agreement or waiver. We already have a very
    highly successful program in Texas called Back to Work that has
    been championed but our Lieutenant Governor, and under that
    program more than 5,000 employers have made nearly 31,000 hires
    as of October 29th, 2012.
        Overall, 57.6 percent of the Texas Back to Work claimants
    were still employed in the quarter after the incentive period
    ended. The percentage jumps to 83.8 percent when you look at
    those placements which were successful. The Texas Back to Work
    placement program is $595 cheaper on average than the total
    benefit cost for a similar claimant who is not placed.
        Thank you, Mr. Chairman, and thank you, committee Members,
    for allowing me to update you on this, and I will be glad to
    take any questions.
        Chairman REICHERT. Thank you.
        [The prepared statement of Mr. Williams follows:]

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        Chairman REICHERT. Mr. Hobbie, you are recognized.

        STATEMENT OF RICH HOBBIE, EXECUTIVE DIRECTOR, NATIONAL
                ASSOCIATION OF STATE WORKFORCE AGENCIES

        Mr. HOBBIE. Good afternoon, Chairman Reichert and Ranking
    Member Doggett and Members of the Subcommittee. I am Rich
    Hobbie, executive director of the National Association of State
    Workforce Agencies, known as NASWA. Our organization was
    founded in 1937, and since 1973 it has been a private nonprofit
    corporation financed by annual dues from Member States and
    other revenue. On behalf of NASWA, I am pleased to comment on
    implementation of the Middle Class Tax Relief and Job Creation
    Act of 2012.
        First, State workforce agencies have done an extraordinary
    job reacting to unprecedented challenges of the great
    recession, processing record numbers of claims and programming
    numerous law changes. The unemployment insurance system has
    paid claimants nearly a half trillion dollars from 2008 to
    2012. But chronic Federal underfunding of UI program
    administration has left States with legacy computer systems
    averaging 25 years old. Upgrading a typical State UI benefit
    and tax system has been estimated to cost between $45 million
    and $100 million.
        NASWA urges Congress to enact the NASWA UI administrative
    financing reform proposal that guarantees States at least 50
    percent of the Federal Unemployment Tax Act revenue for
    administrative purposes.
        Second, States applaud Congress for funding reemployment
    services and reemployment eligibility assessments, known as RES
    and REA. States have moved aggressively to meet with over 9
    million emergency unemployment compensation or EUC claimants
    since the enactment of the Job Creation Act to comply with the
    in-person eligibility assessment requirement. States reported
    several startup problems, a short time period to plan and
    implement the program, the need for extensive cross training of
    staff, initially high claimant no show rates, and a lack of
    meeting space. However, most of these issues have been
    resolved.
        Based in part on this experience, NASWA strongly supports a
    permanent REA/RES program to assist jobless workers return to
    work. Recent evaluations demonstrate these programs increase
    employment and reduce unemployment insurance duration and are
    cost effective.
        NASWA recommends the Federal Government create a capped
    mandatory spending grant to States for REA and RES to ensure
    steady and sustainable funding. We know this might be hard in
    the current budget environment, but this would be a positive
    reform for workers, employers, and the government.
        Three, sequestration, which began on March 1st, applies to
    some mandatory programs. The EUC sequestration amount
    represents a significant portion of nondefense spending
    reductions, perhaps as much as 10 percent. But what seemed to
    be a simple percentage change of benefit amounts is complex for
    many States. A recent NASWA survey asked when States could
    implement sequestration of EUC. A third of States said they
    could implement quickly, but many States said that changes
    could not be implemented timely or with minimal cost. There
    still are as many as 10 States that do not know how they will
    make the changes.
        Four, on the nonreduction rule applied to weekly benefit
    amounts, NASWA recommends elimination. States should have the
    flexibility to determine unemployment benefit amounts.
        Five, NASWA does not have a position on drug testing, but
    State administrative funds are already constrained and funding
    might have to come from other UI administrative activities or
    other sources.
        Six, on the demonstration projects, USDOL guidance seems to
    be a mirror of Federal law. Federal law and guidance do raise
    concerns for States, however. States would have to shift scarce
    administrative resources to plan, build, manage, evaluate, and
    regularly report on the approved projects. Projects could not
    result in any increased cost to the State UI trust fund, and
    calculating a wage subsidy based on different weekly benefit
    amounts for each claimant also could be a challenge for States
    and employers.
        Seven, before the Act, 22 States had short-time
    compensation programs. Since then, three additional States have
    implemented the program.
        Eight, on self-employment assistance, NASWA partnered with
    the USDOL for a national webinar to promote SEA programs.
    Fourteen States participated in that webinar, but only four
    States have active programs as of now.
        Nine, on data exchange standardization, NASWA agrees that
    data in various publicly funded programs could be collected,
    stored, and exchanged more efficiently.
        NASWA and its Members are currently engaged in two
    successful standardized data exchange systems, the State
    Information Data Exchange System between employers and States
    and the Interstate Connection Network among States.
        Mr. Chairman, thank you for the opportunity to testify. I
    look forward to answering questions.
        Chairman REICHERT. And thank you.
        [The prepared statement of Mr. Hobbie follows:]

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        Chairman REICHERT. And now the chair will recognize Mr.
    Renacci to introduce our next witness.
        Mr. RENACCI. Thank you, Mr. Chairman.
        Today I have the privilege of welcoming a fellow Buckeye to
    the Committee.
        Welcome, Larry, and thank you for being here.
        Mr. Kidd has a unique perspective. Not only is he a
    business owner himself, but Larry's business is putting Ohioans
    back to work and helping employers locate talent. Larry was
    recently appointed by Governor Kasich to the board of JobsOhio,
    a nonprofit corporation that helps create jobs in Ohio. He has
    firsthand knowledge about the difficulties facing the
    unemployed, as well as the difficulties employers face during
    periods of long-term unemployment.
        Larry, I appreciate you taking the time away from your
    business to give us your perspective. I hope we hear from you
    and the other witnesses about how we can help make State
    unemployment programs more efficient and effective for job
    seekers, job creators, and the taxpayer.
        I yield back.
        Chairman REICHERT. Thank you, Mr. Renacci.
        Chairman REICHERT. Mr. Kidd, please continue with the
    testimony. You have 5 minutes.

     STATEMENT OF LARRY KIDD, PRINCIPAL/CHIEF EXECUTIVE OFFICER OF
          RELIABLE STAFFING SERVICES AND RSS PROFESSIONAL, LLC

        Mr. KIDD. Good afternoon, Chairman Reichert, Ranking Member
    Doggett, and other Members of the subcommittee. Thank you for
    the opportunity to testify before the Ways and Means
    Subcommittee on Human Resources. I am honored to be able to
    speak to you today. Again, my name is Larry Kidd, president and
    chief executive officer of Reliable Staffing Services of
    Jackson, Ohio. I graduated from Miami University in 1986 and
    earned an MBA from National University in 1989.
        From 1986 to 2003, I worked in various positions with three
    large corporations. During that period of time, I was promoted
    from an entry level employee to a director of a department. In
    2003, I left my director's position and became a partner in a
    small business, a third-party warehousing company. In 2 years,
    I was able to increase the business by two times. Consistently
    our team faced struggles in finding the right people for the
    right positions. I engaged the services of temporary staffing
    firms but found staffing firms could not meet our employment
    needs either.
        Having experienced the importance of finding and keeping
    key employees, my management staff and I formed a temporary
    staffing service, Reliable Staffing Services, or RSS. Our role
    was to recruit, screen, interview, hire, and place employees in
    client workplaces. As stated in our client agreements, RSS was
    the employer of record. This means that RSS was responsible for
    the FUTA, SUTA, worker's compensation, and all other employee
    costs.
        Our company's goal was to service our employment needs, but
    also to creatively supply a market that was underserved. As a
    former user of the temporary staffing service, my team was very
    familiar with the importance of finding the right people. In a
    short period of time, Reliable Staffing Service became one of
    the leading staffing suppliers in the region. In 2010, when the
    local economy experienced a downward shift, our clients'
    customer orders were abruptly cut back. This resulted in
    layoffs of our employees. Our team worked diligently and soon
    we were able to secure additional clients that needed our
    workers. We tried to call back many of the laid-off workers,
    but found that they were happy receiving unemployment benefits
    and chose not to accept our offers for employment.
        We contacted the unemployment offices to explain our
    dilemma and were told by the unemployment staff that they were
    just simply too many claims to process and they couldn't follow
    up on all the employees. This attitude made it very challenging
    to get former employees back to work.
        There were several reasons employees chose not to return to
    work. Number one was they claimed it was too far to drive;
    number two, they claimed that they were making too much money
    on unemployment to return to work; number three, they were
    uncertain of the length of the assignment; number four, they
    admittedly could not pass a drug test; or number five, they
    could not afford to take a pay cut.
        As a small business owner, I found regulation, cost of
    compliance, and taxes to be extraordinary. Often I found my
    biggest hindrance to my company's growth was not competition or
    the economy but burdensome government policy. In my staffing
    company, our cost structure is the cost of wages, cost of
    burden, plus our margin. We charge our clients based on these
    three items. If the cost of unemployment insurance increases,
    our company may or may not be able to pass these costs along to
    our client. If we cannot pass the cost along to the client, we
    must absorb the cost in our margins or simply lose the
    customer. This situation occurs more often than one may
    realize.
        Unemployment benefits should be short term and truly for
    the needy. Those unwilling to search for work or do not want to
    return to the workforce should not be eligible for unemployment
    benefits. Recipients of illegal drugs should be evaluated for
    treatment because they are likely unemployable.
        Unemployment should not be up to 99 weeks. Other programs
    should be implemented to keep recipients in the right frame of
    mind. Programs such as Ohio's Learn to Earn or on-the-job
    training programs are much better for the employee, the
    employer, and society. These programs help keep employees fresh
    and motivated.
        I have the utmost respect for the small business owner. In
    some ways the small business owner is our country's most at-
    risk employee. They carry the burden of growing a business,
    managing employees, properly applying government regulation,
    meeting customer demands, and creating that next best idea.
    Many times there is little or no return on investment for the
    small business owner. When increases in taxes, unemployment
    burden, or other governmental demands occur, the small business
    person must scramble to find a way to make it work.
        Please consider the impact increases have in unemployment
    burdens or other taxes have on them, the small business owner.
    Some reports State that 50 percent all employees work for the
    small business. If the risk does not equal the reward, small
    business people will not continue to take the risk with their
    new ventures.
        Chairman Reichert, Ranking Member Doggett and other Members
    of the Subcommittee, thank you for your time and allowing me to
    present my views today.
        Chairman REICHERT. Thank you for your testimony.
        [The prepared statement of Mr. Kidd follows:]

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        Chairman REICHERT. Ms. Conti, you are recognized for 5
    minutes.

    STATEMENT OF JUDY CONTI, FEDERAL ADVOCACY COORDINATOR, NATIONAL
                         EMPLOYMENT LAW PROJECT

        Ms. CONTI. Thank you, sir. Chairman Reichert, Ranking
    Member Doggett and Members of the Subcommittee, thank you for
    the opportunity to testify here today. My name is Judy Conti,
    and I am the Federal advocacy coordinator at the National
    Employment Law Project. We are a nonprofit organization that
    advocates on behalf of low income and unemployed workers.
        I would like to briefly summarize the four main points in
    my written testimony.
        First, nearly 4 years after the end of the great recession,
    4.6 million people have been out of work for 27 weeks or
    longer, and the average duration of unemployment stands at
    nearly 9 months. The Middle Class Tax Relief and Job Creation
    Act scaled back the Federally funded UI programs in a manner
    that resulted in a 43 percent reduction in benefits during a
    time in which nobody would argue that we have seen anything
    close to a 43 percent improvement in the jobs picture. And
    currently the average EUC payment is a mere $294 per week,
    which is hardly sufficient to cover even housing costs in most
    States for a family.
        But that, too, will face reduction as the sequester sets
    in. States that have already implemented the sequester have
    reduced benefits by an average of $31 per week, but the longer
    States take to implement the cuts, the steeper they will be
    from workers who are often barely scraping by.
        Simultaneous with the sequester, many States are making
    unprecedented reductions to State UI programs, further
    weakening the safety net at a time when too many families and
    communities still need it desperately. These cuts are
    counterproductive and cruel at a time when so many are still
    struggling so badly to get a foothold back on the economic
    ladder.
        Second, Congress carefully defined appropriate
    circumstances in which States could enact legislation requiring
    UI claimants to pass a drug test as a condition of eligibility
    for UI. And the Department of Labor, though it hasn't issued
    regulations, as I understand it, has been diligently advising
    States that have pending drug testing laws to make sure that
    their proposals are in conformity with Federal law, as Texas'
    is.
        It is worth noting, however, that drug testing UI
    applicants is a solution in search of a problem. As detailed in
    Mr. Hobbie's written testimony, drug testing is extremely
    costly, and in the few States that have enacted some sort of
    testing scheme for recipients of public benefits, in every
    instance the rate at which applicants tested positive was truly
    negligible. Workers aren't unable to find work because of drug
    use on some widespread basis, but rather because there is still
    only about one open job for every three unemployed workers.
    This is a waste of taxpayer money and an insidious stereotype
    of the unemployed that Congress sought to narrowly circumscribe
    and with good cause.
        The bill also authorized up to 10 States to experiment with
    reemployment programs that for the first time would apply UI
    trust fund accounts to wages and wage subsidies designed to
    return the long-term unemployed to jobs. Congress crafted this
    provision to protect the integrity of UI funding--that is the
    money that employers pay in, in the form of taxes--and to
    ensure that workers are guaranteed their fundamental rights
    under Federal, labor and employment laws.
        Though no State has sought such a waiver pursuant to the UI
    program letter released by the Department of Labor, we are
    confident that once States can demonstrate that programs will
    not compromise their UI trust funds, many of which are still in
    trouble, and will have the desired effect of finding workers
    good and permanent jobs, they will seek the waivers and the
    Department of Labor will grant them in appropriate
    circumstances.
        Third, as has been discussed, one silver lining of the
    great recession is that it sparked renewed interest in work
    sharing programs, a form of UI that gives employers the option
    of reducing employers' hours instead of firing people. The
    February 2012 legislation provided $500 million in incentive
    funding to enact and amend work sharing, and DOL has produced
    clear and timely guidance for States.
        In the current and coming legislative sessions, NELP will
    continue to work to raise the profile of this win-win option
    for workers and employers, and we hope to see many more States
    take it up next year.
        Finally, like our colleagues at Utah and in NASWA, NELP
    believes that many workers need more and more rigorous
    reemployment services at the onset of periods of unemployment,
    not just when they have reach the 27th week of unemployment. We
    recently published a paper on this issue called ``Getting Real:
    Time to Reinvest in the Public Employment Service,'' and we
    propose that Congress appropriate an additional $1.6 billion in
    annual funding for the Employment Service to serve workers and
    employers alike, and though this costs money, the savings seen
    in increased income taxes, reductions in UI, and the salary
    that workers will start receiving more than pays for itself.
        We live in troubling economic times, and if we are serious
    about an economic recovery that works for all Americans, we
    can't be penny-wise and pound foolish when it comes to
    supporting our Nation's unemployed workers.
        Thank you again for inviting me to testify, and I welcome
    questions from Members of the Subcommittee.
        Chairman REICHERT. Thank you.
        [The prepared statement of Ms. Conti follows:]

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        Chairman REICHERT. And thank you all for your testimony,
    and thank you also now as we move into the question phase for
    your patience as we ask you a few questions. So my first
    question is for--actually all my questions will be directed to
    Mr. Starks and Mr. Hobbie.
        Mr. Starks, your State, as we heard in your testimony, has
    a very aggressive approach to work research and early
    engagement of UI recipients. Can you walk us through how Utah
    helps people search for work and how that differs from other
    States? And what does everyone have to do, what do you have to
    do to offer help and assistance for people who are sincerely
    trying to find work but are having trouble quickly working
    their way through the maze of trying to find the right job that
    fits them?
        Mr. STARKS. In Utah, our work search standard was to do two
    work search contacts per week. We doubled that a couple of
    years ago. Claimants were able to file over the telephone or
    over the Internet for their weekly claims. In August of this
    year, we made Internet the only option, and that way we could
    document their four work searches.
        We felt it was reasonable for the claimants to do four. On
    average, that would only take a couple of hours per week.
    Internet is kind of the future for job applications, and we
    require them to register for work, too, as a condition for
    unemployment. So asking them to take another step doing online
    filing we didn't think, was unreasonable.
        One of the problems that we have had associated with that
    is verifying those work searches, too. It is one thing to, you
    know, require a claimant to document those work searches and it
    is another thing to verify those. It is often not a record that
    employers are required to document. And so when we are trying
    to verify those work searches, it can prove difficult
    sometimes.
        Chairman REICHERT. Well, how cost effective is this
    approach, compared to what you did in the past and maybe what
    some States are even still doing today?
        Mr. STARKS. You know, I don't have any numbers as far as
    the work search requirements. I can tell you that we think it
    is good public policy in that it helps screen out the claimants
    that don't want to engage in active reemployment activities. If
    they are serious about getting back to work, requiring four
    work searches we don't feel is unreasonable. However, we think
    that it should be left to the State to determine that.
        Chairman REICHERT. So what would be your advice to the rest
    of the country? Any lessons learned that you want to share
    today?
        Mr. STARKS. Asking claimants to do work search activities,
    I think it goes back to our whole program at Workforce
    Services, and that is getting jobs should be your full-time
    job, and everything that we are trying to do in Utah is around
    jobs. So, my recommendation is, is to engage the claimants
    early and often and you will see some positive results.
        Chairman REICHERT. Mr. Hobbie, do you have any response to
    those questions?
        Mr. HOBBIE. Yes, Mr. Chairman. There was a four-State study
    of reemployment services and reemployment eligibility
    assessments recently produced by IMPAQ International, and
    particularly promising there were the results in Nevada where
    provision of these services led to a reduction in 3 weeks of
    duration on unemployment insurance, at an average cost of about
    $300 per week. That is a gross savings of $900, and at a cost
    probably approaching $200 to no more that be $300. So there is
    an indication that the net savings there probably was at least
    $600 per claimant helping them go back to work sooner than they
    would otherwise and at jobs comparable to what they would have
    found if they had waited those 3 weeks.
        So the evidence we see indicates that these programs are
    effective at lowering unemployment, increasing employment, and
    they are highly cost effective. And they help employers, too,
    in the sense employers are finding workers that they are
    looking for sooner than they would otherwise.
        Chairman REICHERT. Thank you.
        Mr. Doggett, you are recognized.
        Mr. DOGGETT. Thank you very much.
        Senator Williams, on your proposal that is likely soon to
    become law in Texas, do you believe that it provides a model
    that other States could follow and that the Department of Labor
    should consider as it sets its guidelines?
        Mr. WILLIAMS. I do believe that, and I think that the
    sooner they set their guidelines, the more likely it will be
    that other States follow suit. We have a number of programs
    that have been successful that we are going back and trying to
    bring them into compliance with DOL requirements. So I think it
    would be very helpful for them to go ahead and get that
    guidance out there.
        Mr. DOGGETT. And you focused your requirement in accordance
    with the statute so that you were focused only on individuals
    that have been terminated because of unlawful use of a
    controlled substance and individuals for whom there is not
    suitable work in an occupation that does not regularly require
    a drug test.
        Mr. WILLIAMS. Well, I think what we focused on is that it
    would be an occupation that would require drug testing as a
    routine part of--as a condition of employment, and then we have
    directed the Workforce Commission to develop a set of screening
    questions that would help identify those people who need to be
    tested. So it is not limited only to people who were terminated
    for that reason. There could be other reasons that might show
    up in that screening assessment and it is yet to be drafted or
    implemented.
        Mr. DOGGETT. You also mentioned the denial by the
    Department of Labor of a Texas waiver application, and it is
    true that Texas was the early bird trying to secure the grant.
    In fact, they were so early, I believe they were within about
    48 hours of the signing of the law that Governor Perry sent a
    letter up, and back in March, shortly after that, last year,
    Secretary Oates replied that she regretted denying the
    application but that the guidance, so that all States would be
    on a level playingfield for applying, had not been completed
    and expressed the hope that Texas would resubmit its
    application and welcome States' ideas for demonstration
    projects. I believe that Texas has not resubmitted its
    application since receiving that letter.
        I would also want to note with reference to the effect of
    these cuts on our job training programs that Texas is projected
    to lose approximately $38 million in job training programs
    during this year under sequestration, and if it stays in effect
    it will be about $500 million over the course of sequestration
    over the next decade, which seems to me to be a real setback to
    trying to get folks to work.
        I want to ask Ms. Conti, with reference to your comments
    that an investment in these programs, in these reemployment
    services generates about $3.40 in lower government spending and
    higher revenue from more employment, if you could elaborate on
    specific programs and services that have proven successful in
    getting people reemployed.
        Ms. CONTI. Absolutely. Thank you for if question. In our
    paper ``Getting Real,'' we detailed four different things that
    for a relatively speaking modest of investment, $1.6 billion,
    we believe could really help return a lot of people to work.
    Expand job placement services, including increasing job
    listings on the public exchange and improved matching
    technology, basically having job counselors do what Mr. Kidd
    does, help set people, unemployed workers up with employers in
    the area that have open jobs and they have skills to fill those
    jobs. We believe that that could help an additional 700,000 job
    seekers, for example, for less than $500 million.
        We recommend that you interview an additional 1.5 million
    unemployment insurance applicants after they file the initial
    claim to create a job search plan. You know, we are in
    different times now. There are many people that have had either
    the same job for their whole work life or they have easily
    transitioned from one job to another, but we are in different
    economic times now, not just because people are applying for
    jobs more using technology as opposed to resumes or networking,
    but also because we just don't have a robust economy. And if
    people are looking for a job now like they were 5 or 6 years
    ago they are not likely to be successful. So we know that there
    are plenty of people out there that have good marketable skills
    to compete but don't know how to market themselves.
        There is a Worker Profiling and Reemployment Service that
    we recommend allocating an additional $540 million for, and
    this again is something that gets workers early and determines
    who are those that are likely to become the long-term
    unemployed and from the beginning gives them more intense
    services, including training where necessary.
        And finally, provide pretraining counseling for an
    additional 1 million people for about $540 million. This would
    be to help people pick the right training programs so that they
    get skills that are marketable in their local economies instead
    of studying for a certification that may not help them.
        Mr. DOGGETT. Thank you.
        Thank you, Mr. Chairman.
        Chairman REICHERT. Mr. Young.
        Mr. YOUNG. Thank you, Mr. Chairman.
        Thank you to all of our panelists for being here today. I
    really appreciate your testimony.
        Under the 2012 unemployment insurance reform, States are
    now required to establish job search requirements for everyone
    collecting State and Federal unemployment insurance benefits,
    from the first through the last week of benefits. Currently, in
    my home State of Indiana, our State legislators are working in
    a bipartisan way to implement a law that would be consistent
    with these new requirements. This would effectively require all
    Hoosiers to visit the same Work-One Centers that they would
    have to visit to receive Federal benefits, and extends it to
    State unemployment insurance benefits.
        With only the Federal unemployment insurance job search
    requirements already implemented, we have seen in the State of
    Indiana around a 70 percent statewide compliance rate with the
    job search requirements.
        My question to Mr. Starks and Mr. Hobbie is this: What
    additional efforts might our State adopt, might you recommend
    to them or might we, at the Federal level, in our conversations
    with State legislators indicate to them would be helpful in
    increasing this compliance rate? And can you conceive of
    incentives at the Federal level that might assist in increasing
    that compliance rate?
        And I know, Mr. Starks, you have already spoken to the
    important role that verification in the job search plays.
    Perhaps there are other things that come to mind.
        Mr. STARKS. Again, as far as work search goes, I don't know
    how much more I can add than I indicated earlier. We think it
    is reasonable for States to require that. However, we are a
    strong advocate also of State rights, and I think what is maybe
    good for Utah may necessarily not be good for another State. It
    works for Utah. It has created some unintended consequences
    that create some workload for us. If somebody doesn't complete
    their work search, then we have to send out a denial letter,
    then they have an opportunity to come and complete those work
    searches. But, you know, we still think it is good public
    policy. We are not going to not do it because it is going to
    create some work for ourselves.
        Mr. YOUNG. By way of follow-up, there is, of course, an
    incentive as a matter of good public policy to get more people
    to work and improving their own circumstances. It grows your
    own economy. It could save you, at the State level, a certain
    amount of money. Are there any additional incentives that you
    currently receive for a higher compliance rate with the work
    search requirements from the Feds?
        Mr. STARKS. No.
        Mr. YOUNG. Mr. Hobbie.
        Mr. HOBBIE. Thank you, Mr. Young.
        Mr. YOUNG. Yes, sir.
        Mr. HOBBIE. I have several ideas with respect to the
    additional efforts. One is NASWA, in partnership with all
    States, and in partnership with DirectEmployers Association, an
    association of over 600 major corporations, operates the
    National Labor Exchange, which is a job bank that is available
    nationally and in each State. It contains over 1 million job
    openings on any given day and they are updated every day. So I
    would urge all States to take advantage of the National Labor
    Exchange and work with employers who are not entering jobs into
    the State job bank to enter their jobs in there so that they
    become immediately available to workers seeking jobs in their
    States.
        Second, the work search amendments in the Job Creation Act,
    I think, could serve as a model for the regular State programs,
    too. And of course I respect what Mr. Starks said about States
    designing their own programs, but greater emphasis on looking
    for work, expecting claimants to seek work, and then providing
    some assistance through reemployment and eligibility
    assessments and reemployment services funded by the Federal
    Government. We do need additional funding to provide these
    additional services, but if we did, I think it would be far
    more cost effective. And then I would just like to add, in
    terms of incentives, the act also provided for demonstration
    projects, which we can get into later.
        Mr. YOUNG. Yes, sir.
        Mr. HOBBIE. I think there are some incentives that could be
    built into the current law that would improve the possibilities
    for those demonstrations at the State level, and I could get
    into detail on that later.
        Mr. YOUNG. Absolutely. And I would like to go on record as
    supporting the flexibility that I know is so important at the
    State level as well.
        I yield back. Thank you so much.
        Chairman REICHERT. Thank you, Mr. Young.
        Mr. Renacci, you are recognized for 5 minutes.
        Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the
    witnesses for being here.
        Last Congress I introduced the EMPLOY Act, a bill that
    would have allowed participating employers to receive a subsidy
    from the State for the wages paid to an individual eligible for
    unemployment compensation. This concept of my bill is similar
    to the one in the 2012 UI reforms included in the Middle Class
    Tax Relief and Job Creation Act. This act allowed States to
    apply for waivers in order to use unemployment funds to pay for
    reemployment programs.
        In April 2012, the Department of Labor issued 24 pages of
    burdensome application requirements. To the best of my
    knowledge, Texas has been the only State to apply for a waiver.
    This is concerning, as many States have been working diligently
    to expedite the reemployment of individuals receiving
    unemployment benefits.
        Mr. Hobbie, you have experience with regards to
    reemployment services and the impact these waivers would have
    on States. What changes could be made to improve the UI policy?
        Mr. KIDD. In our written testimony we indicate two changes
    that we think would be helpful that my association supports.
    One is to add a provision for reemployment bonuses for UI
    claimants to provide incentives for the individuals to go back
    to work sooner than they otherwise would with a bonus. And
    there have been evaluations of that approach that indicate that
    would be cost effective. Second, of course, I also mentioned
    additional Federal funding would be helpful.
        Third, the way the Job Creation Act is drafted, it embeds
    training with the wage subsidy in that particular paragraph.
    And what I would suggest there is you separate out the training
    and have two provisions. One would be for wage subsidies only
    and the other would be for wage subsidies with the training for
    a kind of on-the-job training program so that States could also
    run just a straight, simple wage subsidy program in addition to
    the on-the-job training program.
        And then also I think there is a problem with paying the
    subsidies off of the weekly benefit amount. Each individual has
    a different weekly benefit amount. That can be hard for States
    to administer. I would suggest following something similar to
    what Utah has done, or Texas, with just a flat amount that
    would be provided for a subsidy to an employer to employ an
    individual for a certain amount of time and then maybe an
    additional subsidy if that employee is retained an additional
    amount of time beyond that.
        And then, finally, I would also suggest the subcommittee
    take a look at Sections 1115 and 1110 of the Social Security
    Act, which provides permanent demonstration authority for other
    programs in your jurisdictions, such as Supplemental Security
    Income. There may be some provisions in there that you could
    use to set up a permanent demonstration authority for
    unemployment insurance, too, which is excluded from those
    provisions.
        Mr. RENACCI. Thank you. I am going to come to Mr. Williams
    before I do that.
        Mr. Kidd, earlier, in regards to drug testing, one of the
    witnesses testified that the number of individuals who test
    positive were negligible. In your business, do you do drug
    testing?
        Mr. KIDD. We do do drug testing.
        Mr. RENACCI. What is the percentage of people who test
    positive?
        Mr. KIDD. Between 15 and 20 percent.
        Mr. RENACCI. Would you consider that negligible?
        Mr. KIDD. I would not consider that negligible. And 80 of
    our clients require drug testing.
        Mr. RENACCI. And the biggest concern, of course, with
    someone who tests positive, is if they go out into the
    workforce and are working and they injure somebody, that is a
    problem not only for you, but for the business.
        Mr. KIDD. It absolutely is a problem. Many people forget
    that many of our employment clients are factory workers. And if
    you were to send somebody that is on an opiate or cocaine or
    something like that, and they are on a production line, it is
    very possible they could cut their hand off or drive a forklift
    into somebody and hurt somebody else, or even kill somebody. We
    are not going to take that risk, and neither will our client.
        Mr. RENACCI. Thank you. Thank you, Mr. Kidd.
        Senator Williams, it is clear that the waiver process has
    really been a deterrent for most States. I know Texas appears
    to be the only State that has applied. Ohio is not applying
    because of the waiver process and its complexities. As the only
    State that applied, do you believe it is time for the
    Department of Labor to go back to the drawing board and make
    the waiver application process more attractive to the States?
    And please explain what the waiver process has been like for
    your State of Texas.
        Mr. WILLIAMS. Well, I don't know that I can speak directly
    to the waiver process. I know it has been a lengthy thing. And
    it is my impression that once the DOL issued their guidelines
    that more of the States seemed to become discouraged about
    that.
        One thing I would encourage, though, is more flexibility.
    And I say that because what we have done with our job search
    requirements, for example, is that we allow our local workforce
    boards to set the number of job interviews that an applicant
    has to have on a monthly basis. And, you know, we have found
    that that has worked better, to allow them to set those. And
    our average is approaching five now. And so it has worked
    really well, and people are out looking for a job. I think it
    would work a lot better if they would just allow the States a
    lot more flexibility and allow us to move forward and, you
    know, get those impediments out of the way, is the key.
        Mr. RENACCI. Thank you, Senator.
        I yield back.
        Chairman REICHERT. Thank you.
        Mr. Davis, you are recognized.
        Mr. DAVIS. Thank you very much, Mr. Chairman. And I want to
    thank the witnesses for appearing.
        Ms. Conti, let me ask you, even with the most successful
    reemployment programs in place, do you agree that the most
    important factor in people returning to work is a strong
    economy that creates jobs for the unemployed? Do you believe
    that past threats of default on our Nation's debt, as well as
    the implementation of the sequester, has negatively affected
    our economic recovery and thereby hurt the ability of the
    unemployed to find work?
        Ms. CONTI. Absolutely, Congressman. Look, we all know that
    these demonstration projects, reemployment services, these are
    all things that can help around the margins, and we should do
    them because all of the workers that are unemployed in this
    country deserve every effort we can muster. But there is no
    replacement for a robust economy and one that works for
    everybody, where employers are creating jobs, where governments
    are making appropriate investments, not threatening default,
    not enacting or allowing to happen a sequester that was put
    into place in the first instance because it was so odious that
    nobody thought it would ever actually happen.
        So we find ourselves in interesting political times. We
    obviously have concerns about our debt and deficit that we
    can't ignore. But the biggest debt and deficit we have right
    now is the jobs deficit and the deficit that workers are
    feeling in terms of their ability to provide for themselves and
    their families. And there is nothing that is going to do any
    better for unemployed workers than a robust economy and one
    where we are making appropriate investments in public service
    employees, in infrastructure in this country, and making sure
    that we have our fiscal house in order.
        Mr. DAVIS. Thank you very much.
        Mr. Kidd, I noticed in your testimony you suggest that some
    Americans aren't going back to work because they were making
    too much money with unemployment benefits to return to work. Is
    there any indication of what ``some'' really means? Is that a
    lot of people? Or is that maybe two or three? Or half a dozen?
    I mean, it seems to me that the average weekly unemployment
    benefit is $300, and that only reaches about 70 percent of the
    poverty level for a family of four. So I am trying to
    understand how much is the many.
        Mr. KIDD. I appreciate the question. I cannot give you a
    percentage, but I can tell you that we are working in an area
    that at one time had an unemployment, one of the counties we
    serve, of over 17 percent unemployment. It was significant.
    There was a large plant closure. And I would argue that if we
    had an employee that was willing, flexible, and willing to work
    for the amount of money that our client offers, we could employ
    about anybody. We have over 90,000 open positions in Ohio, with
    an unemployment rate of about 7 percent.
        So there are jobs out there available. And even in our
    small community we could get them jobs if they applied and they
    were willing to be flexible with that. As a percentage, I don't
    know. I know it is less now than it was when we had 99 weeks on
    unemployment. They were very free to tell us that there is no
    way we are going to go back to work when we receive this
    unemployment benefit. First off, they were concerned how long
    the assignment lasts. At that time, gas prices were very
    expensive, and quite frankly some of them just didn't want to
    go back to work, so they chose not to accept our offers.
        Mr. DAVIS. I find that to be a very interesting
    observation. And I guess maybe what works in some economies or
    some locations. I can tell you that $300 wouldn't influence
    many people in the communities where I live to not take a job
    if they could actually find one. So chances are there are
    differences based upon cost of living and what takes place.
    Certainly would not happen in the community where I live.
        Ms. Conti, let me ask you, is it fair to say that the last
    year or so there has been a dramatic reduction in assistance to
    the unemployed? Last year, the duration of Federal UI benefits
    was significantly scaled back. And this year the sequester has
    cut the amount of the weekly Federal unemployment benefit.
    Also, you mentioned that each eight States have cut back on
    basic unemployment benefits, reducing them below 6 months for
    the first time in over 50 years. Do you think that these
    dramatic reductions in unemployment benefits are reflective of
    an equal improvement in the labor market?
        Chairman REICHERT. Ms. Conti, if you could answer briefly,
    please. The gentleman's time has expired.
        Ms. CONTI. Sure.
        Absolutely not. We all know that we are still struggling
    with unemployment that is far too high. We understand that our
    unemployment numbers are coming down not just because we are
    creating jobs, but also because too many people are leaving the
    workforce. They are discouraged. So we have not seen the kind
    of improvements that justify the kind of cuts that we have see
    in unemployment.
        Mr. DAVIS. Thank you very much.
        And thank you, Mr. Chairman.
        Chairman REICHERT. Thank you, Mr. Davis.
        Mr. Kelly, you are recognized.
        Mr. KELLY. Thank you, Chairman.
        And I thank all of you to being here.
        Actually, coming from the private sector--and, Mr. Kidd, I
    can appreciate what you are saying--it is very difficult to
    hire people today. You know, I worry the reason people are not
    employed is because some of them are unemployable. When I am
    back in Pennsylvania, in District 3, and I am going to these
    different places and talking to employers, and I say, what is
    the number one thing, because I see a sign up there that says
    now hiring, why are you not able to hire? And inevitably they
    come back to saying, the people who are applying can't pass a
    drug test.
        Now, I want you all to understand this. This is from being
    in the real world. When I talk to my insurance carrier, they
    suggest under loss control you should drug test people, but be
    very careful when you do that because alcoholism and drug
    addiction are considered diseases, and it could be
    discriminatory, what you are doing. So when you talk to people,
    Mr. Kidd, because you talk to them, and I got tell you, there
    are a lot of people right now willing, looking for people to
    employ. They can't do it because these people are unemployable.
        Now, is that what you are seeing? I mean, this isn't a
    myth. This is what actually happens on the ground when you are
    out talking to people, looking for folks to fill jobs, and
    understanding that there is a tremendous liability on that
    person who hires somebody and brings them in if something
    happens. Mr. Renacci talked about a safety issue. You brought
    somebody in and you knew of their condition, instead allowed
    them to go on the floor, and they are somehow involved in an
    accident, you are liable for that.
        Mr. KIDD. I absolutely agree with you. We do see a real
    issue with the whole drug situation. As part of the JobsOhio
    board of directors, I had a small roundtable of business people
    in our local community, and we had two employers that were
    1,200 and 1,500 each, two of the largest employers in the
    community. And we asked them, what is the biggest problem that
    you face? I thought it might be worker's compensation or even
    unemployment, but it wasn't. It was drugs. We can't get people
    to work. And we can't keep them once they are here because they
    will continue to fail a drug test.
        It is a big risk for employers to put somebody knowingly on
    drugs in a factory or any other kind of setting. And, you know,
    it is a dangerous situation. And it is not something that an
    employer is willing to take that risk. It just simply isn't.
        If I may make one quick statement about the drug situation.
    Jackson County is the largest prescription opiate problem in
    the whole State of Ohio. Jackson County is only a county of
    30,000 people. We have 131 per capita prescriptions per person
    a year, which is extraordinary. So I developed a drug task
    force to help solve this problem. And we continued, as you pull
    the onion back, you see more and more and more of it. And it is
    a huge problem for employers.
        Mr. KELLY. Let me ask, Mr. Hobbie and Senator Williams,
    now, in 2012, we did the unemployment insurance reforms. It is
    14 months later. You are still waiting for the regs. A lot of
    the States have gone out of session right now. So 14 months for
    the Federal Government. Nobody is alarmed by that because
    that's kind of the way these folks work. How do you proceed
    when you don't have the regs in place? How in the world do you
    begin to build a model when you don't know what the regs are
    going to be? And is this what you have experienced in the past.
        Mr. WILLIAMS. Well, it is a problem for us in Texas. We
    have a legislature that is in session for about 4\1/2\ months
    every other year. And so when the Federal Government takes so
    long to issue guidance, it makes it very difficult for us to
    make any adjustments to things so that we can comply with
    Federal law. So it is a huge impediment.
        Mr. KELLY. Okay.
        Mr. Hobbie.
        Mr. HOBBIE. I agree. And this happens repeatedly where
    there is an expectation that States implement a new law
    quickly, but there is a lag between the time the law goes into
    effect and States are expected to implement and the regulations
    come forth. The recent amendments to trade adjustment
    assistance were a good example of that. So States would very
    much like to have the regulations sooner, but they often don't
    get them. So they do what they can and they cope when the
    regulations finally come out.
        Mr. KELLY. And I would like to see the direction of the
    conversation go to talk about the benefits of being employed as
    to worrying about unemployment benefits. There is something
    wrong. We have the model upside down. And Mr. Davis hit on it.
    Until we have a dynamic and robust economy, we are not going to
    get people back to work. We can have this conversation and
    continue to have this conversation, but until you get some
    certainty for the job creators to look into the future and say,
    oh, you know what, I am going to make that move now, I am going
    to hire these folks, I am going to bring them in, I am going to
    train, I am going to pay them, and I am going to look to a
    brighter future.
        But that is the problem. I am so tired of hearing about
    unemployment benefits and not about the benefits of being fully
    employed. That is the key and that is what we should be
    concentrating on. Thank you all for being here.
        Thank you, Mr. Chairman.
        Chairman REICHERT. Thank you.
        Mr. Griffin.
        Mr. GRIFFIN. Thank you, Mr. Chairman.
        Thank you all for being here today.
        In my home State of Arkansas, the issue of drug testing for
    unemployment benefits has been a hot one in the State
    Legislature. And I want to ask you, Senator Williams, not in
    your testimony, but on your Web site you talked about, I think
    the term you used was drug testing as a reemployment strategy.
    Does that sound familiar? Basically, it is something that helps
    prepare people, the drug testing does, it prepares them for
    employment.
        I would ask if you could comment and elaborate on that and
    any other benefits that you are finding to drug testing for
    unemployment benefits.
        Mr. WILLIAMS. Well, in Texas we have long required that
    someone be ready and willing to go back to work and that they
    actively be seeking employment in order to be able to receive
    unemployment benefits in Texas. And so this has been a standard
    that we have held our applicants to for many, many years.
        I would say that if you are abusing illegal drugs or if you
    are abusing prescription drugs--and I would point out that that
    is a huge problem all over the country--you are not ready and
    able to go back to work, so you are not employable. And it is
    important for those people and for their families and really
    for the future of our country that we identify those folks and
    that they get in a program where they can get straightened out.
        The largest refinery in the Western Hemisphere was recently
    built in my senate district, in Port Arthur, Texas. And when I
    visited there 4 years ago, when that plant was under
    construction, I heard over and over again, we want to hire
    local folks but we can't find people that can pass the drug
    test. And we have that all over the State. We have a booming
    economy, and the biggest problem we hear, to hire truckdrivers
    in the State of Texas, is to find people who can pass the drug
    test. And so I would submit to you that it is a big problem,
    and this is something that we need a national policy to address
    this.
        Mr. GRIFFIN. I want to echo my friend, Mr. Kelly. I spoke
    with a major, major employer in my district. And I have central
    Arkansas, Little Rock and surrounding counties. And this
    particular employer is an industrial employer. And they told
    me, actually in a public hearing at the Clinton School, we had
    a jobs conference a couple years ago, and they said openly
    there that routinely they try to hire people, but those people
    fail the drug test. And this is an industrial context, so they
    can't take the risk of having people operate dangerous--
    potentially dangerous machinery, et cetera, when they can't
    pass a drug test. And so, that is a real problem in my
    district, I can tell you that.
        Let me ask you quickly, separate from the drug testing,
    pursuant to the act that we have been discussing here today,
    States can apply for waivers to design programs, pay people for
    working or training, et cetera. Now, my understanding from this
    hearing is that no State has yet applied. Do you know if Texas
    plans to apply, if there is some innovative program that they
    plan to seek approval for?
        Mr. WILLIAMS. Well, as I mentioned in my previous
    testimony, we do have a program that is our Back to Work
    program that has been successful, and we are trying to bring
    that in compliance with DOL guidelines in lieu of regulations
    being issued. But our State has long resisted, for instance,
    people who are self-employed. If they choose to go and start
    their own business, we don't feel like it is appropriate for
    those folks to be able to collect unemployment benefits from
    their former employer while they are trying to start their own
    business. So I would say that, beyond our Back to Work program
    and the Shared Work program, there is very little beyond that
    that we are involved in right now.
        Mr. GRIFFIN. Got you.
        Mr. Kidd, real quickly, the law specifically mentions one
    category open for testing people who need to pass a drug test
    to get a particular job, or to perform that job. In your
    experience, what share of employers require drug tests for that
    job, for a particular job?
        Mr. KIDD. I can think of very few jobs that shouldn't
    require it. Eighty percent of all our clients require it.
        Mr. GRIFFIN. Eighty percent, okay.
        Mr. KIDD. Eighty percent of ours do. And I would argue that
    the others should be doing it, too. And, quite frankly, we test
    them anyway because we want to make sure that they are going to
    be clean. First, it is a reflection on us. But second, we
    cannot afford the cost of the worker's compensation case if
    somebody gets hurt or somebody else dies. We just can't afford
    to do that, and we couldn't live with that with our conscience.
        Mr. GRIFFIN. Thank you.
        And thank you, Mr. Chairman.
        Chairman REICHERT. Thank you.
        Mr. Reed.
        Mr. REED. Thank you, Mr. Chairman. And not to belabor a
    point, but I did want to reference, Ms. Conti, in your
    testimony--and I am not asking you a question--you have come to
    the conclusion that drug use in the workplace is a negligible
    number. And, obviously, you have heard testimony from your
    colleagues or peers on this panel who disagree with you. I can
    also tell you that as co-chair of the Manufacturing Caucus, we
    have had people testify before us as employers repeatedly say
    it is a significant issue, not a negligible issue.
        And when I look at the citations within your testimony,
    where you refer to the support of your ``negligible''
    conclusion, you reference a welfare test for welfare
    recipients. We are talking about unemployment. Welfare and
    unemployment are completely different programs. So to use that
    as the basis for your conclusion that it is negligible I think
    is misleading. I don't take and give much weight to it, to be
    perfectly honest with you, because they are two different
    issues.
        Also, you cite a Huffington Post article that I note was
    written on June 6, 2012, just a few months after the law
    passed. So to come to a conclusion that somehow this reform is
    not producing in regards to unemployment and the issue of drug
    use in the workplace in a short 2- to 3-month window, to come
    to a conclusion that a negligible drug issue is the reality of
    the situation, I question that conclusion.
        Ms. CONTI. May I respond, sir?
        Mr. REED. It is my time. I appreciate it. But to make such
    a bold conclusion I find very troublesome. Because, you know
    what? I care about the people who are on unemployment. And if
    someone has a drug problem, I look at drug addiction as a
    medical condition, an illness, a mental health-related issue in
    certain circumstances. What we are talking about is trying to
    empower people to get back to work. That is what has made
    America great, is that work ethic, that pride.
        And so a lot of times I think we on this side of the aisle,
    people try to portray us as somehow trying to target people on
    unemployment. That is the farthest thing from the truth, ladies
    and gentlemen. We are talking about empowering people to
    overcome an obstacle that we believe is a significant problem
    and that many employers who have testified before me and other
    Members of this panel have indicated is a significant panel.
    And that is what we are talking about, is how can you in the
    unemployment program identify areas where those issues of drug
    use and abuse are there and make sure those employers and those
    employees get the help so that the people can get back to work.
        The question I wanted to focus on to the panel is on the
    physically requiring to show up reforms that were in the
    reemployment eligibility assessment policies back in the 2012
    reforms. And coming from a rural district of western New York,
    I see the benefits of using technology, allowing people to
    access the program that way because of transportation issues
    and things like that.
        But one thing I am also concerned about, I harken back to
    some memories I have when I was a law guardian, when I first
    started out my law practice, and I was assigned to represent
    kids. And I remember vividly an 8-year-old young man in the
    western portion of my home county, Steuben County in western
    New York. And we were sitting in his living room, and I am
    trying to have a conversation with him, just, you know, who are
    you, you know, I am who I am, and that type of thing. And I
    said, what do you want to be when you get older? And the
    response from an 8-year-old young man was, what are you talking
    about? I mean, it was the sum and substance, what are you
    talking about? We live here, check comes in the mail, and that
    is what we do.
        Now, I was expecting astronaut, firefighter, police
    officer. And then it struck me, as I sat in that living room
    with that 8-year-old young man, I said, why would I expect when
    that 8-year old man becomes 20, 21, that he has learned about
    adults working.
        And so when I look at that in-person requirement, it
    resonates with me that maybe what we are trying to do is to
    send a message to the people in the home so somehow we can
    break the cycle of dependency that we are seeing in America.
        And so, you know, I am running out of time, and I will get
    off my bully pulpit. But I am very interested in knowing how
    you deal--Mr. Starks, you are from Utah--how you deal with
    those rural issues and those competing issues that I just
    articulated there? How does it work? And has anyone studied or
    looked at the impact on the children in the households in
    regards to the life lessons that are being taught by not having
    that in-person requirement?
        Mr. STARK. The staff-assisted requirement that is included
    in the provision for the EUC REAs, even though we are a fairly
    rural state, about 80 percent of our population is within 50
    miles of Salt Lake City, and over 90 percent of our EUC
    claimants were actually within 50 miles of an employment
    center. So in Utah we covered the vast majority. We sent REA
    requirements to every claimant, every EUC claimant. However, if
    they did call up and indicate that they were more than 50 miles
    away, we would issue them a waiver for that REA. But they were
    few and far between.
        So it really didn't become too much of an issue in Utah.
    However, we support technology wherever it can be, you know,
    substituted. We typically find excellent results with
    technology, too.
        Mr. REED. Appreciate it. Time has expired. Thank you very
    much.
        Yield back, Mr. Chairman.
        Chairman REICHERT. Thank you.
        I would like to welcome the gentlelady from Tennessee, who
    is a fellow Member of the Ways and Means Committee, Ms. Black.
        Ms. Black, thanks for joining us today. Do you have a
    question for the panel?
        Mrs. BLACK. Yes, I do. Thank you so much, Mr. Reichert, for
    allowing me to be here with you today. I want to go just a
    little bit different direction, but still tying in with the
    conversation that has been had so far.
        According to the President's budget, which was released
    last week, in the last 5 years, counting both the State and the
    Federal unemployment benefits, the UI system has paid out
    almost $550 billion in benefits. That is an annual average of
    more than $100 billion in benefits through the system that
    previously paid out only about $35 billion in those same
    benefits. This I think is not only having a negative impact on
    some recipients, as we have heard today, but also on the system
    that administers these benefits.
        I want to go to my own home State of Tennessee. A recent
    audit that just occurred in the last couple weeks in
    Tennessee's unemployment insurance program revealed that the
    Department of Labor and Workforce in my home State had provided
    about $73 million in unemployment benefits to ineligible
    claimants over the last 3 years. And the audit went on to say
    that these overpayments had, and I quote, ``increased
    significantly over the past 3 years,'' close quote.
        Now, Congress has tried to address these issues. And in
    2011 we enacted bipartisan reforms to impose a 15 percent
    penalty for fraud cases. And then in 2012 we came back and we
    passed further reform so that States would recover more
    overpayments by reducing the current benefit checks. But,
    clearly, there is still more work that needs to be done here.
        I want you to begin answering this question for me, Mr.
    Hobbie, and then, Mr. Starks, if you will follow up. Now that
    benefit recipient is coming down and the receipts are coming,
    are States shifting workers away from getting benefits out the
    door and back to program integrity? And are error rates
    improving as a result? Mr. Hobbie, would you address that?
        Mr. HOBBIE. Yes. Thank you, Ms. Black.
        The system is still overwhelmed. Now, initial claims have
    come down. But because we have a continuing long-term
    unemployment problem, continued claims remain very high. So the
    workload in States is still high, but it is coming down. Some
    of the increases in overpayments in the system were due to the
    great recession. But, of course, that started the end of 2007
    and was ended in the summer of 2009. And you point out that the
    overpayments in Tennessee increased in the last 3 years.
        Mrs. BLACK. Last 3 years.
        Mr. HOBBIE. So that is a bit puzzling, that pattern there.
    I don't have enough knowledge about Tennessee to know what is
    going on there.
        I can say that as the claimant workload goes down, we do
    expect, and what has happened before, is States do shift
    workers back away from processing claims timely to some of the
    integrity activities.
        I should also note that the system used to estimate
    overpayments, called the Benefit Accuracy Measurement System,
    has some problems with it. And we at NASWA in individual States
    are working with the U.S. Department of Labor to try to improve
    that system. It wasn't originally designed to estimate
    overpayments. The sample sizes are somewhat small. It is not
    focused so much on overpayments. And as a result, the estimates
    are somewhat inaccurate, the confidence interval around them is
    really quite wide.
        So we are trying to work with the Department of Labor to
    improve that methodology, improve the accuracy, the estimates.
    Originally, when that so-called BAM System, B-A-M System was
    designed, it was designed as a system more to help States
    improve the integrity of their programs by providing them
    management information to improve their programs rather than
    calculating overpayment rates. But it subsequently has been
    used for the publishing of overpayment rates which, frankly,
    can't be compared from one State to the other, they can only be
    looked at within a State. But the overpayment rates have been
    high; they are coming down, to some extent. And we are trying
    to make some progress on it.
        Mrs. BLACK. If we would give the rest of the time to Mr.
    Starks.
        Mr. STARKS. Thank you. I would echo what Mr. Hobbie
    indicated. It is really difficult to compare one State against
    the other. For instance, if one State is more stringent on work
    search requirements, they are going to have, usually, a higher
    improper payment rate.
        I think with unemployment settling down, talking to my
    fellow directors, there is a much bigger effort on integrity. I
    think over 20 States now have implemented a treasury offset
    program where they are now intercepting Federal income tax
    refunds for overpayments. We have the SIDES initiative. In
    Utah, we are actually piloting two projects right now where we
    are actually looking at incarceration records for the prisons
    and county jails. We are also working with a large vendor that
    has data on about a third of the payrolls.
        Mrs. BLACK. I think my time has expired.
        But thank you again, Mr. Chairman, for allowing me to ask
    my question.
        Chairman REICHERT. Thank you.
        I would also like to welcome the gentleman from Texas, who
    is the chairman of the Health Subcommittee on the Ways and
    Means Committee.
        Mr. Brady, do you have a question?
        Mr. BRADY. Yes. Chairman Reichert, thanks very much for
    letting me join you today. And I want to applaud the leadership
    of Senator Williams, my state senator, for his leadership not
    only in chairing the Senate Finance Committee in Texas, but
    leadership on finding innovative ways to get people back to
    work.
        Today there are literally tens of millions of Americans who
    can't find a full-time job. There are millions more who have
    simply given up looking for work altogether. Yet we have jobs
    going unfilled in energy, in building trades, in
    transportation, simply because the applicants cannot pass a
    drug test. Last year at this time, Republicans, Democrats, and
    the White House came together and agreed it was time to find
    some solutions to get people job-ready, those who are on
    unemployment today. And we, together, in a bipartisan way,
    created a process where States could raise their hand and show
    us in demonstration projects and pilot programs exactly how we
    connect those who don't have a job with good-paying jobs that
    are available today. Yet here we are, more than a year later,
    no waivers have been granted because no applications have been
    submitted under a round that has created a very burdensome,
    very complex process that, in fact, won't work.
        So my question to Senator Williams and then to Mr. Hobbie
    is, if we can convince the Department of Labor to do their job,
    to follow the law as written, and the intent, to go back to the
    drawing board, coming up with the process that encourages
    States to step forward, Senator Williams, in your view, for
    Texas, which has already been recognized has having innovative
    programs to connecting local people to local jobs, if
    Department of Labor can get it right, is Texas still willing to
    raise their hand and implement a pilot program to help show us
    the way?
        Mr. WILLIAMS. Yes, sir, we are. And I would point out that
    when we rolled out this Back to Work program, our Lieutenant
    Governor traveled to 18 cities around the State promoting our
    Back to Work program. And so this is something that all of us
    in the legislature, from our leadership to the Membership, take
    very seriously. And removing those impediments and hurdles that
    we have would make a big difference in what we were able to do.
        I would also point out that I think there are some
    technical changes that need to be made. I think one thing that
    hasn't been touched on here about your program integrity is the
    sample size that you are using to test unemployment benefits
    for overpayment is set by the Department of Labor at 480. Now,
    what does that mean? In Rhode Island, they sample 480 people;
    in South Dakota, who doesn't have as many people as live in my
    senate district, they sample 480 people; and, in Texas, with 25
    million people, they sample 480 people.
        And so there are others, Mr. Temple and others, who could
    go into a lot of the details about what the Labor Department
    considers best practices that are also just a way to scratch
    the list off and check the box and say, we don't have
    overpayments by looking the other way. And so I think there is
    not only a need for waivers, but there is a need for the
    Department to recognize that States are the best ones to
    implement these programs and to give us the flexibility to
    monitor them and make sure that they are working appropriately.
        Mr. BRADY. Senator, thank you very much.
        Mr. Hobbie, we are sort of given the impression up here
    that States weren't interested in stepping forward to help us
    solve this problem, connect these workers with jobs, and that
    today, you know, a year later, States generally aren't all that
    interested. Do you think that is the case? Or do you think
    States need the right application process so that they can
    indicate their interest? Is the interest still there?
        Mr. HOBBIE. Mr. Brady, yes, the interest is there. States
    generally would like more flexibility from the Federal
    Government in implementing these demonstration programs, not
    only from the Department of Labor, but also under the law. And
    earlier I mentioned some changes that could be made, I think,
    to the current law which would make it more flexible for States
    such as Texas to operate the kind of demonstration programs
    they have had in the past.
        So, in general, I would say our Members are interested.
    They want more flexibility. But they also recognize the Federal
    Government wants accountability. With respect to
    accountability, the law requires sophisticated evaluation of
    the demonstration programs. It would be very helpful if the
    Federal Government would provide funding for those evaluations
    rather than having it come out of the Unemployment Trust Fund
    or from state administrative costs.
        Mr. BRADY. Well, I appreciate all the witnesses.
        Again, Chairman, you are holding this hearing because we
    want those who are unemployed to be job-ready on day one. And
    key to that is the growing number of jobs that require drug
    screening and drug testing, good-paying jobs. So thank you for
    continuing to shine a light on this problem.
        Chairman REICHERT. Thank you for joining us today, Mr.
    Brady.
        Well, thanks to all of you for your testimony. Your
    information is very helpful. Sometimes these hearings seem so
    sterile and formal, and you probably walk away and wonder if it
    was worth it. You can see there was a lot of interest here
    today, a lot of questions asked. We want to get this right. And
    what is worth it is getting, as everyone here has said, on both
    sides, getting people back to work. I mean, that really is what
    we all are here for.
        And accountability, Senator, you mentioned that, the
    Federal Government has an issue with performance measures,
    accountability, and, you know, on a program that spends
    billions of dollars every year, there are a lot of complicated
    processes involved in this issue. But that doesn't mean we
    should not proceed forward and find solutions to the problems
    that we are all facing and try to get people back to work.
        I will just mention this rather quickly. There are a lot of
    us on this Committee, on the Full Committee and some of us here
    today, who have had experience working with local government.
    Having been a part of the local government, my job was the
    sheriff in Seattle. And in dealing at local level, you know
    what is best for your community, you know what works in your
    community. And that has been a common theme today. I think that
    the Federal Government needs to understand even more so than
    some of us do that the Federal Government would be best letting
    you have that flexibility administering programs. Yes, with
    accountability and responsibility, but the ability to
    administer those programs tailored to your community so you can
    help the people that you know best get back to work and support
    their families.
        So, again, I appreciate all of your hard work. Continue to
    do that. And we will look to you for answers. And hopefully we
    can find solutions.
        If Members have additional questions for the witnesses,
    they will submit them to you in writing. And we would
    appreciate receiving your responses for the record within 2
    weeks.
        Chairman REICHERT. Thank you. This Committee stands
    adjourned.
        [Whereupon, at 4:03 p.m., the subcommittee was adjourned.]