[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

                          OF TODAY'S SYSTEM''



                               before the


                                 of the

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


                             SECOND SESSION


                           SEPTEMBER 7, 2016


                          SERIAL NO. 114-HR11


         Printed for the use of the Committee on Ways and Means



                         U.S. GOVERNMENT PUBLISHING OFFICE 

22-104                         WASHINGTON : 2017 
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001

                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
DEVIN NUNES, California              CHARLES B. RANGEL, New York
PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
PETER J. ROSKAM, Illinois            XAVIER BECERRA, California
TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida               MIKE THOMPSON, California
ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
TOM REED, New York                   DANNY DAVIS, Illinois
TODD YOUNG, Indiana                  LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
ROBERT J. DOLD, Illinois
TOM RICE, South Carolina

                     David Stewart, Staff Director

                   Nick Gwyn, Minority Chief of Staff



                    VERN BUCHANAN, Florida, Chairman

KRISTI NOEM, South Dakota            LLOYD DOGGETT, Texas
JASON SMITH, Missouri                JOHN LEWIS, Georgia
ROBERT J. DOLD, Illinois             JOSEPH CROWLEY, New York
TOM RICE, South Carolina             DANNY DAVIS, Illinois
TOM REED, New York

                            C O N T E N T S


Advisory of September 7, 2016 announcing the hearing.............     2


Michelle Beebe, Director, Unemployment Insurance, Utah Department 
  of Workforce Services..........................................    45
Walter Carpenter, MAI, CRE, President, Pinel & Carpenter, Inc....    20
Judith M. Conti, Federal Advocacy Coordinator, National 
  Employment Law Project.........................................    27
Cissy Proctor, Executive Director, Florida Department of Economic 
  Opportunity....................................................     8


Rep. Joseph Crowley..............................................    71


Rep. Vern Buchanan 1.............................................   101
Rep. Vern Buchanan 2.............................................   117


Center for Fiscal Equity.........................................   121

                          OF TODAY'S SYSTEM''


                      WEDNESDAY, SEPTEMBER 7, 2016

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:01 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Vern 
Buchanan [Chairman of the Subcommittee] presiding.
    [The advisory of the hearing follows:]

    Chairman BUCHANAN. The subcommittee will come to order.
    Good morning and welcome to today's hearing reviewing the 
challenges and the strengths of the Federal State unemployment 
insurance system.
    The purpose of this hearing is to highlight efforts being 
undertaken by those on the ground to address the program's 
integrity, trust fund solvency, and successful reemployment 
    Helping the unemployed to return to work as quickly as 
possible and preventing improper payments within the system 
will better serve employers who fund the system to keep taxes 
low, as well as workers who claim benefits by getting them back 
to work sooner.
    In 2015, more than 46 billion was levied from employers 
annually through State and Federal taxes to pay for benefits 
and program administration. Out of that, 32 billion in benefits 
were paid to 6.5 million beneficiaries.
    States are eager to do more to help the unemployed return 
to work quickly for the sake of workers and job creators. I am 
excited to hear from two States in particularly, Utah and my 
home State of Florida, who are rethinking the old unemployment 
office and transforming UI into reemployment systems.
    Florida has combined a number of agencies at the State 
level to create the Department of Economic Opportunity to 
provide its citizens with a more streamlined approach to 
services and even rebranded their UI benefits to be reemployed 
assistance. I am looking forward to hearing more from the 
department's executive director, Cissy Proctor, about some of 
the innovative steps the State has taken.
    As a business owner myself for 40 years, I know firsthand 
how important it is for a State's financial house to remain in 
order and the consequences of raising taxes on a company's 
bottom line.
    I am particularly pleased to have Mr. Walter Carpenter, a 
small-business owner from the Orlando area, who will provide 
members with a first-hand account of how policies thought up in 
Washington truly impacts a firm's ability to hire new employees 
and grow a regional economy.
    Finally, this hearing will also discuss the importance of 
properly targeting UI benefits to ensure they are going to the 
right person at the right time. In fiscal year 2015 alone, 
States improperly paid $3.5 billion in UI benefits or one out 
of every $10 sent out from the UI system. The Office of 
Management and Budget continues to designate the UI program 
under the annual list of high-error programs, and yet no real 
progress has been made to improve this percentage.
    To many States, UI agencies rely on discovering and then 
trying to recover UI payments after they occur. This pay-and-
chase approach is costly, time-consuming, and wasteful. It also 
means that only a fraction of improper payments are ever 
recovered. Since States' UI benefits are supported by payroll 
taxes on jobs, this misspending leads to higher taxes on jobs, 
reducing the very job creation the employee needs most.
    I welcome all our witnesses today and look forward to our 
    Now I yield to the distinguished gentleman, Mr. Doggett, 
for the purposes of an opening statement.
    Mr. DOGGETT. Thank you, Mr. Chairman, colleagues.
    Witnesses, we are pleased to have you here.
    Just as builders know to check the roof after a big storm 
to be ready for the next one, economic experts know that during 
periods of prosperity and job growth, like the one we are 
experiencing right now in most parts of the country, that is 
the time to make sure that our unemployment insurance system is 
ready for the next recession. We have accomplished much in this 
country, but we have never been able to totally suspend the 
business cycle, just as we don't totally suspend hurricanes and 
storms, and unless we are ready, the problems will only 
    Unfortunately, many States seem to be interested in tearing 
new holes in the insurance system, rather than getting ready 
for the next storm. Those State policies are dangerous not just 
for workers, but also for our national economy.
    Well-functioning unemployment insurance is our first line 
of defense in keeping economic downturns from spreading and 
worsening. As bad as the last recession was, it would have been 
far worse without unemployment insurance, and it would have 
been lessened had the efforts that Democrats made here in 
Congress to extend benefits for a longer period of time been 
    Extended unemployment benefits prevented 1.4 million home 
closures between 2008 and 2012, and we know from economic 
studies that every dollar of unemployment benefits paid 
produced about a dollar and a half to $2 in additional economic 
growth, stimulating the economy and preventing other workers 
from being laid off.
    Of course, we could have done much more had unemployment 
benefits been extended. The estimates are that we could have 
prevented the loss of about another 200,000 jobs.
    Unfortunately, the majority of States have ignored the 
lessons of the last recession. Certainly my State of Texas has 
ignored it, and they are not preparing their insurance programs 
for the next recession. Indeed, many are actively reducing the 
likely effectiveness of the unemployment insurance system.
    As of the end of last year, only 18 States in the entire 
country were prepared to pay a year of benefits in another 
recession. The rest of the States did not meet minimum 
standards of trust fund solvency.
    There are some significant exceptions that are doing their 
job. Utah, which is represented at our hearing today, is one of 
the few States that indexes its taxable wage base and has a 
solvent trust fund. My home State of Texas, like most States, 
would quickly run out of money to pay benefits in a recession. 
And while I am pleased to hear that Florida is continuing to 
improve the solvency of its trust fund, it has apparently done 
so largely by making collection of insurance benefits earned in 
Florida more difficult for unemployment workers to obtain than 
any other State in the country.
    Fifteen States have cut benefit levels, and the average 
unemployment benefit replaces significantly less than half of 
wages lost. More than 30 States have changed eligibility to end 
unemployment insurance altogether for some workers who receive 
other earned benefits or work in specific types of jobs. Nine 
States now provide less than 26 weeks of unemployment benefits, 
the lowest level in those nine States in about half a century.
    As the Government Accountability Office noted in a recent 
audit, with long wait times by phone and in person, abandoned 
calls, dropped calls, blocked calls, and long delays in claims 
processing, many States have also created practical barriers to 
the unemployed accessing the insurance that they are due to 
rely upon. This is a time when States are serving fewer workers 
and yet erecting more barriers.
    We all agree that the States should make their unemployment 
trust funds protected from fraud and errors. Individuals, 
employers, and identity thieves that steal from trust funds 
should be punished. But some States seem to have forgotten why 
they are safeguarding these funds, and that is to pay workers 
the benefits that they have earned when they collect them and 
need them.
    In addition, this Congress is failing to adequately fund 
the employment service, which plays a critical role in 
connecting the unemployed with new jobs and providing the 
skills necessary.
    The cost of a well-funded trust fund is reasonable for 
employers. Wyoming is a State that is doing its job. It has 
indexed its unemployment tax to maintain a steady trust fund 
balance and currently has the best-prepared trust fund in the 
country. And a Wyoming employer with a low layoff rate pays as 
little as $69 per employee per year in State unemployment 
taxes. As we saw in the last recession, the benefits of that 
modest investment for workers in our economy are substantial.
    It is time for some accountability from the States 
regarding why workers are not getting earned unemployment 
benefits and State trust funds are in the red, in deficit, and 
not prepared for the next recession, and it is way past time 
for Congress to take some action.
    Thank you, Mr. Chairman.
    Chairman BUCHANAN. Thank you.
    I see the full committee chairman has joined us. The chair 
would now like to recognize Chairman Brady for his statement 
and questions.
    Mr. BRADY. Thank you, Chairman Buchanan.
    Does this work?
    I am more mobile than I look.
    Okay. Thank you, Chairman Buchanan, for holding this 
important hearing on our unemployment insurance system. Thanks 
for letting me join you for a moment.
    One of the most important tenets of the law is that it 
requires a person applying for and receiving Federal 
unemployment payments to be able to work, to be available for 
work, and actively seeking work as a condition for eligibility.
    In 2012, the bipartisan Middle Class Tax Relief and Job 
Creation Act was signed into law by President Obama with broad 
bipartisan support. It overturned an outdated 1960s era 
Department of Labor ban on States screening and testing 
unemployment insurance applicants for illegal drugs. Under the 
law of the land today, States are allowed but not required to 
test unemployment applicants who either, one, lost their jobs 
due to drug use or are seeking a new job that generally 
requires new employees to pass a drug test.
    In a world where more and more industries and careers 
require workers who are drug free, especially in security-
sensitive professions with many directed, by the way, by 
Federal law, this important reform signed by President Obama 
made sound policy since then and continues to today. If you 
have lost a job due to drug use, you have established you are 
not fully able to work. If you can't take a new job because you 
can't pass a required basic routine drug test, you are not 
really available for work either. In both cases, you have 
forfeited your eligibility to receive unemployment payments 
subsidized by employers.
    Clearly, the intent of the 2012 law was that States could 
restrict benefits for such individuals who fail drug tests, as 
well as designed programs to help them overcome their drug use 
    This policy of reasonable State drug testing builds on the 
work of 20 States that already limit unemployment insurance 
benefits for people who refuse to take or fail an employer drug 
test or who have left previous employment issues with drugs. 
And according to a survey by the Society for Human Resource 
Management, more than half of all businesses drug test all 
their employees. So this is no longer the exception, it is the 
rule of the workplace.
    Upon enactment, my home State of Texas was the first to 
modify their State laws to begin the Congress-approved policy 
but was denied the ability to fully implement it because the 
Department of Labor was slow and had not yet issued regulations 
on the provision. Texas, by the way, has been awarded and 
honored by this White House for its work in matching local 
workers to local jobs through unemployment.
    In the four long years since the law was signed, other 
Members of Congress and I have met repeatedly with Labor 
Department and White House budget officials, written letters to 
Secretary Perez and others, held congressional hearings, 
attended numerous meetings and conference calls detailing our 
concerns over the administration's delays and widely panned 
draft regulations which prevent willing States and proven 
States from implementing the law as intended by Congress. 
Specifically, we thought the Labor Department's proposed rule 
in 2014 fell significantly short of achieving the intended 
purpose and would all but guarantee the law was not implemented 
as Congress intended.
    In August of this year, over 4 years after the drug-testing 
provision was signed into law, the Department of Labor issued 
its final rule, which, similar to the proposed rule 2 years 
earlier, severely limited the ability of States to implement 
this important policy, harming unemployed workers in their 
quest to find new employment. The Department of Labor's rule 
contradicts congressional intent, which aimed to assure 
employers that UI claimants reentering the workforce are truly 
able and available to work so more of them can be hired.
    Because I believe this administration reneged on Congress' 
clear wishes to allow States to screen and test for drugs 
today, I am introducing the Ready to Work Act of 2016. This 
bill is consistent with the congressional intent from 2012 to 
fulfill the promise of existing law. It removes the role of the 
Department of Labor to determine which occupations should be 
subject to this policy. This bill seeks to give control back to 
the States where decisions about the administration of 
unemployment insurance programs involve both applicants and the 
businesses that fund the system.
    If you are unemployed and using drugs, are unable or 
unwilling to pass a basic drug test for a job that requires 
one, you are not ready to work and are not eligible under the 
law for unemployment payments.
    Once again, thank you, Chairman Buchanan, for holding this 
hearing, and to our witnesses who are here today to talk about 
ways we can help more Americans return to work quickly, to 
match those who are unemployed with businesses eager to hire 
them. This is an important issue.
    With that, Mr. Chairman, I yield back. And thank you for 
allowing me to join you this morning.
    Chairman BUCHANAN. Thank you, Mr. Chairman.
    Without objection, other members' opening statements will 
be made part of the record.
    Today's witnesses panel includes four experts: Ms. Cissy 
Proctor, executive director for the Florida Department of 
Economic Opportunity; Mr. Walter Carpenter, President of Pinel 
& Carpenter, Inc.; Ms. Judith Conti, federal advocate 
coordinator for the National Employment Law Project; Ms. 
Michelle Beebe, director of unemployment insurance for the Utah 
Department of Workforce Services.
    We will begin with Ms. Proctor. Please proceed with your 
testimony. Thank you.


    Ms. PROCTOR. Chairman Buchanan, Members of the Committee, 
thank you for having me here this morning. And good morning to 
you all.
    My name is Cissy Proctor, and I serve as the executive 
director of the Florida Department of Economic Opportunity. And 
I appreciate the invitation to be here this morning to talk 
about the successes we are experiencing in Florida and about 
the strengths and challenges of Florida's unemployment 
insurance system, which we call reemployment assistance.
    For businesses and job seekers alike, Florida is a great 
place to be, because Governor Rick Scott and our legislature 
are committed to cutting taxes, reducing unnecessary 
regulation, and ensuring that Florida is open for business. 
Right now there are more than 250,000 job openings across the 
State. Private sector businesses have added more than 1.1 
million jobs over the last 5 years. Our unemployment rate is at 
a more-than-8-year low. Our GDP increase and private sector 
growth rate are beating the Nation. Our State has come a long 
way over the past 5 years and the private sector is confident 
in our future.
    During the Great Recession, our State's future looked very 
different. Unemployment increased to 11.2 percent. Private 
sector businesses lost more than 900,000 jobs. Jobs demand 
continued to fall, as did home prices, the number of visitors, 
and the number of new residents that called Florida home. Our 
GDP dropped significantly, and our reemployment assistance 
claims reached 700,000.
    And for those who lost a job, reemployment assistance 
provided short-term financial assistance, but did not get them 
to where they really needed to be, which is back at work.
    During this time, newspaper articles were trumpeting 
Florida's decline. ``Is Florida Over?'' asked the Wall Street 
    So how did Florida recover from this recession and see 
headlines change in the Wall Street Journal to ``The Model is 
Florida, Florida, Florida''?
    Under Governor Scott's leadership and commitment, he has 
provided unrelenting focus on job creation and getting every 
Floridian back to work. In 2011, one of Governor Scott's first 
actions, in coordination with the legislature, was to create 
the Florida Department of Economic Opportunity out of three 
separate agencies that worked on community and economic 
development, as well as workforce development and their silos.
    The newly created agency's mission became multifocused in 
these three areas to allow Florida's growth holistically. So we 
are looking at it holistically with connections between 
workforce training, economic development, and healthy 
communities. As we know, a well-trained and ready workforce is 
key to ensuring economic development as Florida continues to 
    And with a strong emphasis on getting the State's workforce 
headed in the right direction, the next step was to rebrand 
Florida's unemployment insurance program as reemployment 
assistance. This wasn't just window dressing. The goal of 
unemployment insurance is to be a bridge for individuals who 
lost their job through no fault of their own.
    But what happens when you get to the end of the bridge and 
there is nothing there? We chose to change the culture in 
Florida to ensure that the bridge of assistance connects job 
seekers to reemployment. And we know the most successful way to 
get job seekers back to work is to rely on a strong statewide 
workforce system, which we have done in Florida.
    I would like to shift the focus a little bit now to talk 
about identity theft and fraud in public benefit systems. This 
criminal combination is a huge challenge for the reemployment 
assistance program in Florida, but it is not just a Florida 
problem. The Federal Trade Commission recently announced that 
more than 49 percent of all identity theft reported in 2015 was 
related to government documents and public benefits fraud, and 
that is up from 38 percent in the previous year.
    The fraud we are seeing is not just the traditional one-off 
case where an individual knowingly misrepresents eligibility 
for assistance. This fraud we have exposed is criminal, and it 
threatens the integrity of the reemployment assistance program. 
Organized criminal enterprises are stealing or purchasing this 
personal information on the dark Web and then using it to get 
into our systems and steal public benefits.
    We realized this crisis at our agency, and we realized it 
would quickly undermine the reemployment assistance program. In 
early 2014, the agency's IT and reemployment assistance teams 
partnered to develop and implement a new system that analyzes 
unemployment claims data and detects patterns of fraud in real 
time. The system is called the Fraud Initiative Rules and 
Rating Engine, or FIRRE, and the results that we have seen are 
stunning and far beyond anything we would have expected to 
    In the past 2\1/2\ years, we have stopped more than 110,000 
illegal claims from being filed in Florida, which represents 
$460 million that would have been stolen from our system. And 
individuals may not even be aware that their identities are 
stolen as they are with the IRS tax returns when they file 
their claim or file for benefits.
    So fighting fraud is not only important to protect 
identities and ensure those who deserve to receive reemployment 
assistance benefits are getting them, but it is also vital to 
protect Florida's unemployment trust fund.
    So how is Florida's reemployment assistance program 
prepared for the future? We know that recessions come and go, 
and there is no doubt that another national recession will hit. 
The only question is when. So continuing to research innovative 
ways to help our programs run effectively and efficiently will 
take us through another recession and be able to continue to 
serve claimants while connecting them with employment 
opportunities in a local community.
    We know barriers to employment still exist, and we are 
working with our partners across the State on innovative ways 
to eliminate those barriers.
    Thank you.
    Chairman BUCHANAN. Thank you, Ms. Proctor.
    [The prepared statement of Ms. Proctor follows:]


    Chairman BUCHANAN. Mr. Carpenter, please proceed with your 

                        CARPENTER, INC.

    Mr. CARPENTER. Chairman Buchanan, Ranking Member Doggett, 
and the Members of the Subcommittee on Human Resources, thank 
you for the opportunity to testify today.
    I am Walter Carpenter, president of Pinel & Carpenter in 
Orlando, Florida. I graduated from the University of Florida in 
1975, and in the early 1980s, I was afforded the opportunity to 
become a partner in my firm. Pinel & Carpenter is a real estate 
valuation and consulting firm primarily providing professional 
services throughout the State of Florida.
    Both as an employer and an employee, I am humbled by the 
fact that many of my fellow workers have been employed with the 
firm for over 20 years, spanning my 41 years with the company. 
I look upon these workers and their families as an extension of 
our work family, recognizing they depend upon the 
decisionmaking and success of the company.
    As a small-business owner, the day-to-day challenges of 
successfully growing a business, meeting customer demands, 
managing employees, and monitoring Federal and State laws and 
regulations sometimes seems overwhelming. As an employer, I 
would like to speak to you today regarding three areas of the 
unemployment system I believe directly impact small businesses.
    First, the unemployment tax rate and the rate base, which 
depends upon the amount to be paid by employers, can have a 
direct impact on future hiring decisions. Depending upon the 
type of business and the claims experience of the employer, the 
tax rate can dramatically vary and during significant rate 
increases can actually have a negative impact on employment 
within a State.
    Secondly, as small-business men and women, we understand 
the importance of the unemployment system being primarily a 
State responsibility with successful solutions creatively 
solved at a more local level. As there are many differences 
from region to region and State to State, one size does not fit 
all, and an overall Federal solution may actually have 
unintended adverse consequences in many States.
    Finally, as an employer, I specifically understand the very 
important issue of the integrity in the employer-funded 
unemployment insurance system. During the downturn of the 
Florida economy, employers and employees recognized the value 
of the system that provided a short-term partial wage 
replacement for individuals who found themselves temporarily 
    As previously mentioned, the bottom line and cost tax rate 
paid by employers is closely monitored and watched in the State 
of Florida. Although the professional service company like mine 
may have comparatively low rates, I interact on a regular basis 
with other employers in the manufacturing and construction 
fields which have immediately felt the significant rate 
increase of the trust funds as they become depleted. Yet, as an 
employer, we can partner with our State government in 
formulating solutions which balance a rate increase with job 
growth by increasing funding through other State programs to 
encourage companies to relocate to Florida or for existing 
companies to expand.
    Throughout the 2010, 2011, and 2012 legislative session in 
Florida, employers worked with the State to effect increases in 
the trust fund to adequately pay unemployment claims. The 
cumulative effect of these cooperative efforts allowed the 
borrowed money from the Federal Government to be paid back and 
the interest paid off in 2 years. The trust fund in Florida has 
rebounded to a once again healthy status and the employers are 
paying relatively low rates, which started in 2014 and continue 
    In most States, the majority of job growth is generated by 
small businesses at the local level. Unemployment claims are 
paid out to individuals at the local level, and the revenue is 
generated to pay the claims through private employers within 
the State. The unemployment insurance program is appropriately 
designed to place the primary responsibility for the 
unemployment insurance system at the State level with the 
ability to borrow funds from the Federal Government on a 
temporary basis when State trust funds experience shortfalls.
    To effectively promote job growth and funding for new 
companies to relocate to Florida and for existing businesses to 
expand, the State considers what may be an appropriate maximum 
number of weeks in Florida for payment of unemployment 
compensation. Again, the State of Florida, working with the 
business community, has found that a sliding scale of benefits 
works well in our State. I do not believe a Federal one-size-
fits-all approach when it comes to the trust fund is a proper 
to way to achieve creative solutions.
    Finally, as an employer who has contributed to the trust 
fund for some 40 years, I believe the integrity of the 
unemployment system is critical. Of utmost importance is the 
adoption of clear, straightforward administrative standards 
requiring that State law requires that individuals be able to 
work, available to work, and actively seeking work.
    As an employer, I believe continued improvement should be 
made in the methods used by State unemployment insurance 
agencies. The unemployment system is intended to be an 
insurance temporary payment program and is not a public 
assistance system. Again, I see this as a public-private 
partnership with the businesses providing the revenue to 
support the trust funds and each individual State maintaining 
the integrity of their State systems.
    Chairman Buchanan, Ranking Member Doggett, and the other 
Members of the Subcommittee, thank you for the opportunity to 
present my views to you. I appreciate your service, your time, 
and your consideration.
    Chairman BUCHANAN. Thank you, Mr. Carpenter.
    [The prepared statement of Mr. Carpenter follows:]


    Chairman BUCHANAN. Ms. Conti, please proceed with your 


    Ms. CONTI. Thank you. Good morning, Chairman Buchanan, 
Ranking Member Doggett, and Members of the Subcommittee. I 
appreciate the invitation to testify today.
    Since it was established over 80 years ago, the UI system 
has been one of the mainstays of our Nation's social insurance 
system, and there is no better example of the importance of the 
UI system than the role it played in the Great Recession. In 
2009 alone, UI kept an estimated 5 million people out of 
poverty and saved more than 2 million jobs. Over the course of 
the recession, it closed the GDP gap by nearly 20 percent.
    Unfortunately, as Ranking Member Doggett has noted, too 
many States have taken actions that have weakened the UI system 
since the end of the recession. And as a result, today UI 
recipiency is at historic lows and State trust funds are still 
largely unprepared for the next recession, which though not 
imminent is certainly inevitable.
    Today, I would like to focus on three key areas: State 
trust fund financing and solvency, program integrity, and 
reemployment services.
    Over the past three decades, rather than forward funding 
trust funds during good economic times, a majority of States 
have managed their programs with more of a pay-as-you-go 
approach, which left them woefully unprepared for the last 
recession. Thus, during the Great Recession, States had to 
borrow more than $141 billion dollars from the Federal 
Government to pay their UI claims. And then the States had to 
repay these loans, which was done with a mandatory tax on 
businesses, which they had to pay long before the recovery had 
really taken hold and they were able to pay those funds as 
easily as they could have during good economic times.
    Though virtually all States have paid back their loans, the 
programs as a group are still unprepared for the next 
recession. Only 18 States have sufficient reserves to get 
through 1 year of typical recession claims and none of the 13 
largest States in terms of UI meet that standard.
    Equally worrisome, because so many States have chosen to 
repay the debt by slashing benefits, we are not ready for the 
next recession in terms of the cushion that workers may need 
transitioning between jobs.
    But there is time to correct these problems, and the 
Federal solution is simple. We recommend that Congress 
gradually raise the UI taxable wage base over the next 6 years 
to $59,000, which is half of the Social Security taxable wage 
base, and we recommend that it be tied to the Social Security 
wage base after it. States and the Federal Government can then 
adjust tax rates in order to make sure that they are fair and 
sufficient to fund for the next recession.
    And I realize that the concept of raising taxes is anathema 
to some, but it is important to keep them in perspective. 
Currently, they represent only 0.6 percent of overall hourly 
compensation costs, a mere 21 cents per worker per hour, and it 
is a small price to pay during good economic times for the 
income support and economic stimulus that they provide during 
    With respect to program integrity, we need to be sure that 
we approach this in a balanced manner, not just talking about 
claimant fraud. In 2015, for example, just 2.9 percent of total 
payments represented claimant fraud. And, of course, as Ms. 
Proctor described, there is a larger fraudulent scheme that the 
States need to be adequately financed to deal with as well.
    A virtually equal percentage of overpayments, 2.7 percent 
in 2015, were found to be due to agency error, and my written 
testimony details the levels of employer fault for overpayments 
as well.
    One of the single biggest barriers to better program 
integrity is the persistent underfunding of UI agencies. Their 
funding has remained flat since 1995, and it is at its lowest 
rate since 1986. They need to be better resourced to zealously 
pursue program integrity.
    They also need to be better resourced, as other witnesses 
here today agree, to better invest in high-quality and targeted 
reemployment services. There is ample evidence of their value 
to workers, employers, and State trust funds, which are held in 
trust by the Federal Government. Yet, in spite of that fact, in 
spite of the fact that the U.S. workforce grew by 36 percent 
between the years of 1985 and 2015, funding for reemployment 
services has shrunk by 61 percent over the same period of time.
    In order to correct this underfunding and ultimately save 
the UI trust fund's money from shortened durations of 
unemployment, we recommend that Congress appropriate sufficient 
funds for the agencies to run vibrant reemployment services 
programs through their employment service. We also recommend 
that Congress make a one-time appropriation to help States 
update their UI technology, which will help them better 
administer every aspect of their program.
    Alternatively, Congress could consider funding 2 years of 
enhanced reemployment services through the Federal Unemployment 
Account, require that States put the funds they save in those 
UI payments into a type of escrow account, and then reinvest 
that once the 2-year period is over.
    I appreciate the opportunity to testify today, and I am 
happy to answer any questions that you may have. Thank you.
    Chairman BUCHANAN. Thank you, Ms. Conti.
    [The prepared statement of Ms. Conti follows:]

    Chairman BUCHANAN. Ms. Beebe, please proceed with your 


    Ms. BEEBE. Chairman Buchanan, Ranking Member Doggett, and 
Members of the Subcommittee, good morning and thank you for the 
opportunity to be here. My name is Michelle Beebe and I serve 
as the unemployment insurance director for the Utah Department 
of Workforce Services.
    To provide some background on Utah, the average individual 
in Utah qualifies for 22 weeks of benefits at $375 per week and 
stops filing after 12.3 weeks. Our duration and exhaustion 
rates are among the 10 lowest in the country, even with our 
relatively high wage replacement rate. Our State unemployment 
trust fund was one of only 15 to retain solvency during the 
most recent recession, and we are currently ranked as the fifth 
healthiest in the Nation.
    The recently enacted Workforce Innovation and Opportunity 
Act has three primary points of impact on UI: Reemployment 
services, providing meaningful assistance when filing a claim 
for benefits, and using employer wage records to evaluate 
    Utah uses a triage approach in facilitating reemployment 
that leverages technology. Individuals filing a new claim are 
required to complete our online work registration and 
assessment. This includes participating in our State labor 
exchange, identifying their level of need, and utilizing online 
workshops. Individuals completing this process show a 26 
percent increase in higher rates compared to individuals who 
fail to complete the process.
    A certain portion of individuals will find work regardless 
of our intervention. The key is to identify who would best be 
served by an investment in mediated services. This is addressed 
with a worker profiling model, which evaluates education and 
previous work history to identify the probability of exhausting 
    Utah began participating in the original REA program in 
2010, and we migrated to the new RESEA program in 2015. This 
extended the program statewide, and it focused Utah's mediated 
outreach on efforts that were for individuals that were 
recently separated from military service and those identified 
in the probability model.
    Over a period of 5 years, individuals participating in the 
REA program have drawn $10.9 million less in State unemployment 
benefits controlled through the control group. When we account 
for administrative costs, Utah generated an estimated $5.8 
million net positive return to the State trust fund as a result 
of the REA program.
    To provide assistance for those filing new claims, instead 
of in-person support at 31 one-stop centers across our State, 
we centralized our claims center, and we now operate with only 
25 staff. This phone and online customer service delivery model 
includes an online chat feature and a help desk where staff in 
the one-stop centers can reach a claims taker in less than a 
minute. By leveraging technology, the hours of coverage and the 
convenience of access is increased significantly. This is one 
example of a State using its resources effectively to 
accomplish the program mission.
    Congress designed the UI program as a Federal-State 
partnership. This ensures that the voice of local employers, 
who fundamentally support the payments of unemployment benefits 
through our State trust fund, is heard. Administration of the 
program is based on workload projections and historical 
operational costs for funding; however, the amount requested by 
States is consistently decreased in the final base allocation 
and has not been adjusted to include inflationary increases. 
This underfunding has shifted the purpose of the model to 
essentially having States compete with each other for ever-
diminishing pieces of the same pie. States are left with 
limited means to pursue innovation.
    The demonstration projects that were created with the 
Middle Class Tax Relief and Job Creation Act is one example of 
proposed alternative funding that showed an imbalance in that 
partnership. This allowed for 10 States to pursue projects to 
improve the effectiveness of reemploying individuals using 
State trust fund dollars. Unfortunately, the overly 
prescriptive nature of the legislation and the subsequent 
interpretation by the Department of Labor made pursuit of such 
an opportunity unrealistic and in the end no States applied.
    Administrative funding is limited and States need 
flexibility in order to achieve sustainability and to pursue 
invasion. States should be held accountable by their employer 
base--and by extension of Federal Government--to spend 
responsibly and with demonstrable impact. We exist to protect 
workers during periods of involuntary unemployment and to 
protect employers by preserving the skills of the local 
workforce. This can be facilitated with flexibility in the use 
of funding and by realigning the balance of the Federal-State 
partnership to recognize the value of State innovation.
    Thank you to the committee for engaging in this discussion 
    Chairman BUCHANAN. Thank you, Ms. Beebe.
    [The prepared statement of Ms. Beebe follows:]

    Chairman BUCHANAN. I want to thank all of our witnesses for 
great testimony today. And I will begin with the questioning.
    Mr. Carpenter, you are a small-business guy. I am. I know I 
talk to a lot of different business people, and over the years 
some have told me if they paid $30,000 or $40,000 salary, when 
they add all the add-ons to it, FICA and all the other costs, 
UI costs, everything else, it used to be 20 percent, now it is 
close to 40, 42 percent. So when they hire someone for 50, it 
ends up being really 70 compared to an independent contractor 
or something else.
    So I guess I want to get your thoughts with the rising cost 
of insurance. I know you represent small business across the 
State as well and as a small business person. Ms. Conti had 
suggested raising the cost of unemployment insurance to small 
businesses, what impact would that have on your business and 
business in general in Florida?
    Mr. CARPENTER. Thank you, Chairman.
    I think any type of an increase in a cost center for a 
small business has an adverse impact. It requires an immediate 
increase in revenue, which is not always obtainable for a small 
business. And it is usually the cumulative effect of what 
people believe to be small incremental tax increases taken on a 
small business in totality is what has caused the problem. 
Oftentimes small integral increases in and to themselves don't 
look big, but to a small business, multiple ones do.
    Chairman BUCHANAN. Ms. Proctor, I am so impressed with what 
has taken place with the current administration in Florida. I 
know we have gone from 11 percent unemployment down to 4 or 5. 
And I know the governor and yourself have restructured a lot of 
it in terms of economic opportunity and UI and all these other 
agencies you merged together. Maybe you can take a minute and 
just explain to us, and maybe it would help other States as 
well, what Florida has done, because it is very impressive what 
has happened over the last couple of years.
    Ms. PROCTOR. Yes, sir. Thank you, Chairman.
    Over the last couple of years, since Governor Scott took 
office, the focus really has been on getting every Floridian 
back to work. We know that every job is important, and we know 
that if we support the private sector industry in our State and 
make sure that taxes are low and regulation is low, then there 
is going to be more job creation. Businesses are going to come 
where they are welcome, and if the taxes are too high, then 
businesses won't feel welcome, just like individuals go where 
they feel welcome and loved.
    And so we know that and we see that all across the State. 
If we reduce the regulation and a business is able to open its 
doors sooner, then they are able to make that revenue sooner, 
they are able to hire more people sooner, and the economic 
impact of that is always felt at a local level.
    So it is very important that we focus not only on the job 
creation in the private sector, but make sure we support that 
with an environment that shows that businesses are very welcome 
in Florida and that Florida is open for business.
    Chairman BUCHANAN. And your thoughts just quickly on if we 
raise the UI fees that go to, companies have to pay small 
businesses in Florida, what impact would that have?
    Ms. PROCTOR. So we have focused on cutting taxes, not 
raising taxes in the State of Florida. We know that every tax 
is money out of a business owner's pocket, and we would rather 
them use that money to hire more people or give more benefits 
or use the money as they see fit. So we know that, as was just 
testified to, every tax increment adds on top of each other not 
only at the State level if we add taxes on top of other taxes, 
but there is also local regulation that has to be taken into 
account and a business owner will feel all of those. So we are 
focused on cutting taxes rather than raising them.
    Chairman BUCHANAN. Thank you.
    And I now would like to recognize the distinguished 
gentleman, Mr. Davis.
    Mr. DAVIS. Thank you very much, Mr. Chairman.
    And I thank all the witnesses for being here with us.
    Ms. Conti, let me ask, I am concerned about the 
unemployment safety net. Certain groups of Americans continue 
to struggle. For example, the unemployment rate for African 
Americans is 8.1 percent, much higher than the average. 
Further, 2 million Americans remain long-term unemployed, with 
African Americans, Asian Americans, and older Americans 
remaining jobless the longest.
    In Illinois, 40.3 percent of the unemployed were jobless 
for 27 weeks or more, much higher than the average 27 percent 
nationally. Chicago's local rate of employment is below the 
national average and other large urban cities.
    These high rates or long-term employment, plus the large 
number of disconnected workers, together with the lower-income 
jobs appearing after the recession, the lack of State trust 
fund solvency, and the tenuous economic health of certain 
States, suggest that any economic volatility in the global 
market could harm millions of Americans.
    What reforms do you think are needed to help these hardest-
hit Americans now and to help the unemployed if global economic 
volatility increases in the next few years?
    Ms. CONTI. Thank you for your question, Congressman Davis.
    I think there are two tools that we have at our disposal. 
The first is more vibrant reemployment services, starting with, 
as Ms. Beebe spoke about, the worker profiling system. Utah 
uses it is to great effect, so they can meet a worker on that 
first week of unemployment and predict who is the most likely 
to exhaust benefits without getting a job and provide them with 
the intensive services they need to either find a job in that 
period of time or to move them into the publicly available 
training that is available through the Workforce Investment 
Opportunity Act.
    Unfortunately, far too many States don't use the worker 
profiling system that Congress enacted in 1996, I believe it 
was, and the reasons are twofold. One is many don't have the 
money to do it because there aren't adequate appropriations for 
UI administrations. Some States, Utah probably being one of 
them, use some State money to help with this as well.
    But beyond that, I have also heard a number of State 
administrators express concern that if they use the profiling 
system too much and disproportionately, it is people of color, 
for example, or women who are turning up as the ones that are 
most likely to exhaust benefits, they are worried about some 
sort of discrimination lawsuit. When I have spoken with folks 
at DOL, they don't have any concerns like this.
    So I think it would be time for all of us, and this 
committee could help to facilitate that, to facilitate a 
discussion and perhaps a guidance of the best usage of worker 
profiling so that States can feel comfortable using it to the 
degree of success that Utah has.
    The other thing I would bring up, especially since you 
speak about disconnected workers, just recently, this summer, 
along with the Center on American Progress and the Georgetown 
Center for Poverty and Inequality, we released a fairly 
substantial large report about the ways we believe that the UI 
system should be overhauled in order to make it as vibrant as 
possible and protect workers, employers, the trust funds, and 
have that role in the economy we think that it should.
    And one thing we recommended was the institution of 
something called a job seekers allowance. It would be a means-
tested, modest 13-week benefit that people who are disconnected 
from work, people who have not earned enough money or been 
sufficiently attached to the workforce to qualify for UI, new 
entrants to the workforce, a small amount of money they can use 
to defray costs like transportation, resumes, wardrobe in order 
to be able to interview, child care if necessary for 
    And we think that this is something, and once you bring 
somebody into the system and give them this help and then get 
them connected with reemployment services, as well, or 
employment services, perhaps, in the first instance, when they 
have that extra cushion, when they have that connection to the 
workforce system and the employment service, we think that is 
going to be something that would be great at getting people who 
have either given up looking for work or disconnected people or 
folks who haven't had a chance to get into the workforce system 
yet that opportunity.
    Mr. DAVIS. Thank you very much. And I would certainly agree 
that the Georgetown proposal, as well as some of the 
interesting things that the State of Utah is doing, would be 
very helpful. I have looked at this for a long time. So thank 
you very much for your testimony.
    And I yield back, Mr. Chairman.
    Chairman BUCHANAN. Thank you, Mr. Davis.
    I now recognize Mr. Rice.
    Mr. RICE. Thank you, Mr. Chairman.
    I am so pleased to hear about the successes in Florida and 
Utah in particular and glad that the Federal Government has 
allowed States the level of flexibility they have, although I 
hear you, Ms. Beebe, that perhaps we need to allow States more 
flexibility for innovation so that we can continue to solve 
this problem.
    I think the best way to solve the problem is to have a 
better labor market. You know, we have got over 90 million 
people out of the workforce permanently, not looking for a job, 
because they could basically gave up, a large percentage of 
them. So the best way to help with reemployment is to create a 
tighter labor market where people don't struggle, have such a 
difficult time to find job. And the way we do that under the 
purview of this committee is tax reform and other things to 
make this country more competitive, in my opinion.
    But working with the economy that we have now, and the 
successes that you, Ms. Proctor, and you, Ms. Beebe, have seen 
in your various States, one thing I am curious about is, is 
there a State association or mechanism for the States to 
regularly get together and compare notes on successful programs 
and how these innovations can be shared with other States?
    Ms. Proctor.
    Ms. PROCTOR. Thank you, Congressman.
    Absolutely. And one of the things we like to do is we like 
to make sure we talk to other States. And we work regularly 
will Utah and with NASWA and make sure that our successes are 
heard not only in our State, but also in other States, because 
all of the States across the Nation are going to have different 
ideas, and we don't always know what will work in one State. If 
it may work in Florida, it may not work in other States. But if 
it does work in Florida, there is a chance it will work in 
other States.
    And so we want to make sure we share that information as 
broadly as possible. We also want to make sure that we have a 
strong economy, because if we don't have a strong economy and, 
as you were saying, a strong labor force and job market, then 
we are in a difficult situation. So the stronger our economy, 
the better these innovative ideas will work.
    Mr. RICE. And we certainly need a reasonable sinking fund 
to take care of the next recession. We will never completely do 
away with business cycles. But as you say, lower taxes yield a 
stronger economy and less need for unemployment insurance. So 
there is a balance in there somewhere.
    Ms. Beebe, can you tell me about any history that you have 
had with looking at other States and adopting any things that 
they have innovated or other States looking at your programs 
and maybe picking up some of your ideas?
    Ms. BEEBE. Yeah, absolutely. And I think the beauty of 
bringing States together is that you find what may have worked 
in Florida, while it may not have a direct translation to our 
State, there are pieces that are translatable to our economy 
and we can make it work for our local solution.
    Recently, the Department of Labor and the National 
Association of State Workforce Agencies called together 
representatives from both State unemployment programs and State 
workforce programs to talk about work search. We realize that 
this notion of checking off a certain number of contacts each 
week is not necessarily how people meaningfully find work. 
There are things like networking, there is how to use the 
Internet effectively. And so by getting together a group of 
different views within the same room and to talk through how 
can we reenvision work search so that it is more effective and 
also fits the requirements for the unemployment program.
    Mr. RICE. I am so impressed with the testimony you have 
given about the use of technology both for bringing people back 
in the workforce and screening people and then with the, I 
guess you call it, centralization of your unemployment ops 
where your experts are all in one area, you can use the chat 
feature that you were talking about. So often you hear about 
technology putting workers out of work. You are using 
technology to put people back to work. That is a fascinating 
thing. So thank you for your service.
    I yield.
    Chairman BUCHANAN. Thank you, Mr. Rice.
    Mrs. Noem.
    Mrs. NOEM. Thank you, Mr. Chairman.
    And, Mr. Carpenter, in your testimony you talked about how 
one size doesn't fit all. And I think in some of the 
questioning that we have already had today, the different 
programs that were talked about were not one size fits all. In 
fact, there are 53 different programs across the country based 
on what each State has chosen to do and offer. But for you as a 
business owner, tell me why it is important that you don't have 
the same programs that another State may have.
    For me, I am from South Dakota and a small business owner, 
and I don't know if the same program would work for South 
Dakota that would work in New York or California or Florida or 
Illinois. So tell us today why it is important as a business 
owner to have flexibility and have a program that may not be 
nationwide or federalized.
    But also, I want you to talk about Ms. Conti in some of her 
testimony talked about raising the threshold and potentially 
raising the amount of money that goes into these unemployment 
funds and what that would do to you and your business when that 
goes into place.
    Mr. CARPENTER. Thank you.
    Florida has different types of businesses than other 
States. So I think what may adversely impact another State with 
regard to employment may not have the same effect in Florida. 
So I think the greatest to overcome unemployment is to 
concentrate on employment and to provide job growth, and I 
think that is what Florida has done.
    So also, I think the innovation that you get with small 
business working with their State governments on how to adjust 
the unemployment system in their State, that creates a variety 
of those, that some will work in some States not in others. But 
that provides a large number of those through shared ideas to 
be shared rather than a top-down effect from the Federal 
    Mrs. NOEM. Do you have a specific provision or something 
that you feel like was implemented in Florida that made a big 
difference for you as a business owner?
    Mr. CARPENTER. Well, I think the biggest impact in Florida 
over the last 8 to 10 years has been the State working with 
small businesses on what is important with regard to job growth 
and the interaction of the State agencies with the university 
and the community colleges and working with small business so 
that the jobs and the skill set that small businesses need are 
actually introduced at the community college and the college 
levels to help the employment in the State.
    And I certainly don't think that an increase in the wage 
level on unemployment is necessary. I mean, Florida lived 
through a tremendous recession, and its unemployment funds are 
back up to the level already that it was prerecession, maybe 
even a little bit above that. And that has been obtained within 
a short period of time and was still done at the level that we 
have been at. So as a small business, I don't think, at least 
in Florida, that is certainly not necessary.
    Mrs. NOEM. Ms. Proctor, how many weeks is your 
unemployment, your UI available? What is your program and the 
average benefit per week?
    Ms. PROCTOR. So right now we are at 12 weeks and it is 
specifically tied in statute to the unemployment rate. So as 
the unemployment rate drops and more jobs are available in our 
economy, there are fewer weeks available to get the supplement 
that is provided by the reemployment assistance program in 
    Mrs. NOEM. Do you know what the average weekly benefit is?
    Ms. PROCTOR. The average weekly benefit, you can get a 
maximum of $275, and most folks get a little bit less than 
that. And usually people stay on about 11 weeks is what we are 
seeing right now.
    Mrs. NOEM. Okay. All right. Great.
    Ms. Beebe, was there other--I know I don't have much time--
but was there something specific or another State that was 
doing something that caused you to look at your program and 
make a change? Because you are outstanding, your cooperation 
with other States. Is there something in particular that helps 
you get new ideas to implement or to try in Utah?
    Ms. BEEBE. I would like to be bring up the example of the 
State workforce development board as part of the Workforce 
Innovation and Opportunity Act. Utah is one of, I believe, 10 
States that is considered a single State designee, so the 
workforce board covers our entire state workforce development.
    Mrs. NOEM. How is that funded?
    Ms. BEEBE. It is funded through WIOA dollars, employment 
services dollars. It has a variety of funding.
    And with the workforce development board, I was recently 
having a conversation with a group of employers about how to 
set up an ideal one-stop center. And it was interesting, we had 
an employer who has nine employees, they are located in a rural 
town called Price, Utah, and we have an employer who has 3,500 
employees in an urban center, 1,200 of which are engineers, and 
the distinction of what these employers need for success.
    A hospital in Price, they found that they can find 
qualified candidates to come and get experience with their 
residency, but they will oftentimes leave once they have that 
2-year period to put on their resume. And so in order to 
effectively recruit people for that location, they need to find 
people that have family ties to the location. And so this 
rural-urban unique situation is very, very important to have in 
the conversation.
    Mrs. NOEM. Yeah. Great. I am out of time. Sorry. Thank you.
    Ms. BEEBE. Thank you.
    Chairman BUCHANAN. Thank you, Mrs. Noem.
    Mr. Crowley.
    Mr. CROWLEY. Thank you, Mr. Chairman. Thank you for this 
hearing today.
    I think it is important that we have an understanding of 
the role that unemployment insurance plays throughout our 
country. It is there to help people through a tough time when 
they have lost their job through no fault of their own usually. 
No one looks forward to unemployment insurance, in fact, when 
they are fired for no fault of their own. No one looks forward 
to unemployment insurance. I don't have a constituent who says, 
``I can't wait to be on unemployment insurance.'' Unemployment 
insurance typically replaces a third or less of a worker's 
    What it does do is help people make ends meet between jobs 
so they don't lose their home or have their children have to go 
hungry. And yet, we have seen States cut back unemployment 
benefits during some very difficult times for Americans. And 
there have been proposals to make it worse, not better.
    Primarily, my colleagues on the other side of the aisle 
fought us every step of the way when we tried to keep 
unemployment benefits going to the 3.6 million Americans who 
had not yet found work during the largest recession in our 
Nation's history since the Great Depression. It seems corporate 
tax cuts are always on the table. When it comes to helping 
working families, they deemed unemployment insurance to be too 
    Ms. Conti, I would like to hear more about what you are 
seeing in the unemployment system and what we really should be 
doing. What are some of the reasons that people looking for new 
jobs, why is it they need income, not just job placement 
services? Does cutting off or blocking unemployment insurance 
benefits make it easier or harder to look for a job?
    Ms. CONTI. Most of the studies that you see show that it 
makes it harder to look for a job. Unemployment assistance is 
something that keeps people connected to the workforce and 
keeps them engaging and looking for the jobs. It provides 
people with the money they need to travel to job interviews, 
whether it is local, just using gas or public transportation, 
or perhaps crossing State lines or going to different cities. 
It takes care of child care for people when they are looking 
for jobs, wardrobes, all of the tools that we need for looking 
for jobs.
    Mr. CROWLEY. And by the way, Ms. Conti, it doesn't pay for 
it. It helps.
    Ms. CONTI. Exactly.
    Mr. CROWLEY. Child care alone, unemployment insurance is 
not going to cover the cost for child care alone.
    Ms. CONTI. Right. The costs are astronomic. But if somebody 
loses so much of their income and there is no replacement and 
they have a young child that they can't keep in daycare, for 
example, or can't put in some sort of affordable and safe care 
while they are interviewing for a job, we hear all sorts of 
horror stories that there are low-income single mothers, for 
example, who have had to leave their children unattended to go 
look for jobs and then all of a sudden they are in the child 
welfare system.
    So there is a drastic cause-and-effect problem here and we 
need to be looking at it as a whole.
    Mr. CROWLEY. Holistically.
    Ms. CONTI. There are studies that talk about how when there 
are children in families that are suffering unemployment they 
have less educational achievement, that they really suffer as a 
result of it.
    So unemployment is a real human waste. It is a human 
tragedy. Adults want to support their families. They generally 
want to work for a living. It can have a dramatic effect on an 
entire family unit and, in times of recession, on entire 
    So when we see States responding to solvency issues by 
slashing benefits so badly that we don't believe they are going 
to be ready for the next recession and aren't going to be able 
to provide adequate resources in times of heightened 
unemployment, it really troubles us for what we are going to 
see in the future.
    Mr. CROWLEY. It is remarkable, I think, in terms of where 
we have come in the last 8 years, and forgetting that this was 
the worst recession since Herbert Hoover's Presidency and the 
Great Depression that really started in the Bush 
administration, was left in the lap of the present 
    But nine States currently offer less than 26 weeks' 
unemployment benefits. When was the last time so many States 
gave workers so little opportunity to earn enough unemployment 
protection for themselves and for their families? Do you have 
an idea?
    Ms. CONTI. Not since before the Federal/State unemployment 
insurance system was founded.
    Mr. CROWLEY. And when was that?
    Ms. CONTI. It is over 81 years old.
    Mr. CROWLEY. Eighty-one years. So not since it has been 
founded has less been given to unemployed workers in this 
country who are looking for work. Is that correct?
    Ms. CONTI. Correct. And right now we have recipiency rates 
in the Nation of about 26 to 28 percent, whereas before the 
recession it was at 36 percent. There are a few States where 
recipiency is as low as 1 in 10 unemployed workers in the 
State, and that is not what we believe is an adequate safety 
    Mr. CROWLEY. I have additional questions, but my time is 
running out, unfortunately, so I will have them in writing for 
you. And if you can respond in writing, we would appreciate it.
    Ms. CONTI. I will be happy to do so. Thank you.
    Mr. CROWLEY. Thank you, Mr. Chairman.
    Chairman BUCHANAN. Thank you, Mr. Crowley.
    I now recognize Mr. Smith.
    Mr. SMITH. Thank you, Chairman Buchanan. I want to thank 
the witnesses for being here.
    One thing we should all agree on is reducing fraud in 
unemployment insurance. When people defraud the system, the 
people who legitimately need our help don't get access to the 
resources that are needed.
    As I traveled through Missouri during last month, I was 
completely shocked to read that a man from New Madrid County in 
southeast Missouri in our congressional district was convicted 
of a variety of fraud charges. Among other convictions, his 
actions resulted in more than $60,000 worth of fraudulent 
unemployment insurance benefits to some of his employees.
    Sure, I am pleased the authorities tracked him down and 
ended his scheme, but concerned how many more people in 
Missouri and throughout our country are out to defraud the 
    Ms. Proctor, in your testimony you talked about identity 
theft and fraud in the UI program in particular. Given your 
experiences, can you discuss the ways in which Florida has 
become better at identifying this illegal activity?
    Ms. PROCTOR. Yes, sir. Thank you very much.
    So what we found was that there was, back in 2014, 
something else going on in the system. It wasn't just the 
traditional one-off where somebody may say that they are 
eligible for benefits and then we find out later that they are 
not, the cut of the pay and chase that the chairman was 
speaking of.
    What we found is that people were stealing identities from 
you name it. I mean, you hear about information being stolen 
from all types of systems all over the world and then being 
sold. And they were using those fake identities to come into 
the system and get benefits. And they can do that in Florida; 
they can do that all across the country.
    For instance, someone could come in and say they are me. 
They could come in and say they are Cissy Proctor and that they 
have lost their job through no fault of their own. And they 
probably know more information about myself than I do. You can 
buy the IP address, for instance, that I may file, may use to 
go on my online banking system. And they can buy anything they 
    And so we found that that was very prevalent in our system, 
and we built an in-house system to fight the fraud. And so we 
have what is called, we call it our FIRRE system, that on the 
front end looks for patterns to see if the person who is coming 
in, for instance, and saying they are Cissy Proctor is not.
    For example, you may be able to file a claim in a very, 
very short period of time that a person would not be able to do 
it in, or there are a lot of other examples that we use to find 
this fraudulent activity. And then we keep it out of our system 
so that they are not given more information or access to the 
money or access to the system.
    And then what we have started to do is we have provided, 
people who we think their identity has been stolen, we have 
started sending them letters to let them know, because like my 
testimony earlier, unlike the IRS system, you may never file 
for reemployment benefits in Florida, so you may never know 
that your identity has been stolen.
    So we want to let these people know proactively, to give 
them the resources that they need. And so it has been a 
proactive approach on our end to make sure that we keep this 
identity theft out of our system.
    Mr. SMITH. What were some of the initial challenges 
whenever adopting that system?
    Ms. PROCTOR. We built it ourselves. And so it was the 
creation of a system in-house that looked at identity theft in 
a different way. It wasn't looking at just blocking anybody 
from getting into the system, but we had to make sure that we 
were only blocking the folks that weren't real. We don't want 
to block somebody who is coming in the system legitimately to 
get the benefits that they are due. We want to only block the 
people who are coming in who have stolen identities, are coming 
in to steal money out of the Unemployment Trust Fund.
    So that was the biggest challenge that we had. And what we 
have implemented now on the back end is, if somebody has 
difficulty, if they have difficulty authenticating who they 
are, or we have a question about whether or not somebody is 
using a false identity--for instance, you can buy a PDF of a 
driver's license with your picture on it--and if someone was 
using something that we questioned, we now have an in-person 
verification option for people. We will call them in and they 
will come into one of our career centers. So not only can they 
authenticate who they are, but then they also can get the help 
that they need to get reemployed in Florida.
    Mr. SMITH. So what advice would you give the folks back 
home in Missouri, to adopt a system similar to Florida, or is 
there any other advice that you would give?
    Ms. PROCTOR. We work with States all across the country, 
and we are happy to, if there are folks in Missouri that would 
like to talk to our team, we can run them through a demo of our 
FIRRE system, show them what we found, show them what our 
technology does. And we have also for other States, we have 
actually run some claims through our system to show them what 
levels of fraud they may or may not have in their system.
    Mr. SMITH. Thank you, Mr. Chairman.
    Chairman BUCHANAN. Thank you, Mr. Smith.
    Mr. Dold, you are recognized.
    Mr. DOLD. Thank you, Mr. Chairman.
    And I certainly want to thank our witnesses for taking your 
time to come and help us with what we believe is obviously an 
issue throughout the country, and we want to make sure that 
those that find themselves out of work have an opportunity not 
only to get back on their feet but find employment again.
    And ultimately, as we look at the unemployment rate that 
the country nationwide says it is 4.9 percent, we all know that 
that number is significantly higher than 4.9 percent. At least 
back in Illinois, we know that there are a number of folks that 
have stopped looking for work. And I think that ultimately we 
want to find more people back into the workforce.
    Time and time again, Mr. Carpenter, I interact as a small-
business owner with other small-business owners. Let's say I 
have jobs available. I am having a hard time finding people to 
actually come take the jobs. And obviously the role that we 
want to see is, how can we get those that are dealing with our 
unemployment insurance to be able to marry up with employers.
    So, Ms. Beebe and Ms. Proctor, you obviously in your roles 
are working with your States. How are you engaging with small-
business employers that are looking for work? And we recognize 
that a one-size-fits-all doesn't work, but can you tell us real 
quickly how you are working with small businesses to get people 
back to work with local businesses?
    Ms. PROCTOR. Yes, sir. In Florida, we know that more than 
65 percent of the businesses in Florida have fewer than five 
employees. So the small businesses are really the backbone of 
our community. And so what we want to make sure is that there 
is an environment within which they can do what they need to 
do, which is run their own businesses.
    What is interesting and really great about the Florida 
Department of Economic Opportunity is on one side we have the 
Reemployment Assistance Program, where we are trying to help 
those who lose their job through no fault of their own get back 
to work. So we have a whole system and network of career 
centers and State colleges and universities and private 
industry and charities that are working very hard in Florida to 
get people back to work.
    And on the other end we work with the business community, 
because we have the economic development programs for our 
State. And so we work with the chambers across the State, not 
only the Florida chamber but also local chambers, to make sure 
that we understand what the business needs are in our State and 
we can marry up the business needs with those needs of folks 
who are looking for a job and may need extra training.
    We also recognize in the middle is the communities. We want 
healthy communities. We want to make sure that the 
infrastructure is available in those communities to support the 
businesses and support a strong economic climate so that 
everybody who wants a job can get back to work.
    Mr. DOLD. Great.
    Ms. Beebe, do you want to talk just a little bit about what 
you are doing in Utah?
    Ms. BEEBE. Absolutely. So we have some formal and informal 
means. In terms of formal engagement with the business 
community, we find that that occurs through the State Workforce 
Development Board, where more than 50 percent of the 
representatives are from businesses across the State.
    We also have an Employment Advisory Council. So any time we 
are looking at potential policy changes, we take it in front of 
our group, which has five public, five employer, and five 
employee representatives, to make sure we are not developing 
government policy in a bubble.
    In terms of the informal means, we have workforce 
development specialists that are located around the State of 
Utah whose sole job is to engage the employer community in 
making that match between job seeker and employer. Finding a 
job in tech industry Utah County is going to be a very 
different experience from finding a job in the oil and gas 
industry in Duchesne County, and that local approach is 
    Mr. DOLD. You also talked a little bit about triaging folks 
as they are coming in and using technology to be able to do 
that. Obviously, the opportunity that everybody is going to be 
doing the same thing, therefore, taking less staff time, 
actually freeing up staff time to be able to focus on those 
that might have more specific needs.
    Can you talk about how important it is to have the 
flexibility to be able to do things differently in Utah than 
perhaps a one-size-fits-all mentality coming from the Federal 
    Ms. BEEBE. Absolutely. And so by having that flexibility to 
identify what works best for Utah, we can use our resources 
where it is appropriate. I know that some States have selected 
to have an unemployment representative in each of the one-stop 
centers. And as individuals file for claims, they are meeting 
with them one-on-one.
    By having the flexibility to use our resources, the claims 
process is standardized. We can do that centralized. The RESEA 
program is not standardized; it is an individualized approach. 
It requires an individualized communication. And so by 
identifying what those needs are, we are able to have that 
tailored approach.
    Mr. DOLD. Well, I certainly appreciate that.
    And, Mr. Carpenter, can you talk just a little bit as a 
small-business owner how you have helped leverage or have 
leveraged what Ms. Proctor and her organization are doing?
    Mr. CARPENTER. Absolutely. I think the engagement of the 
State with the small businesses on what their actual needs are 
from an unemployment standpoint is utmost important. And it 
changes. I mean, it is not something that is stagnant. So that 
is an ongoing conversation with the State of what skill sets 
are needed in small businesses in our particular State as 
compared to potentially a different State, like Connecticut.
    Mr. DOLD. Thank you, sir.
    Mr. Chairman, my time has expired. I yield back.
    Chairman BUCHANAN. Thank you, Mr. Dold.
    The gentleman from New York, Mr. Reed.
    Mr. REED. Thank you, Mr. Chairman.
    And thank you to our witnesses.
    The questioning will go to Ms. Proctor and Ms. Beebee, 
because I believe you have implemented something I am very 
interested in exploring a little closer.
    The Theory of Constraints, as indicated in your written 
testimony, Ms. Proctor, can you articulate that a little bit 
more in detail? What are you looking for in there to make the 
programs more efficient, less duplicative in their efforts, and 
what are you seeing as the common barriers that you are 
identifying through the Theory of Constraints and solving with 
that practice?
    Ms. PROCTOR. Thank you so much for the question. We have 
worked very closely with Utah, who has implemented the Theory 
of Constraints across the State. And what we know is that we 
want to make sure that we provide reemployment assistance to 
claimants who are eligible in a timely manner. And how do you 
do that with a system that seems to eat up more workers and 
more IT and more money without really making a big difference 
and making sure that the people who are eligible receive that 
money timely?
    And so we went to Utah and have implemented the Theory of 
Constraints to make sure that what we have is a streamlined 
process. We make sure that the process runs without looking to 
new IT, without looking to additional money or staff time until 
we have streamlined the process as much as possible, and then 
we identify the IT needs that may help that process just take 
it one more step. And then if we need additional resources or 
additional dollars, we know that we have basically found in 
every nook and cranny every available resource in the agency 
that we can.
    I mean, one of the examples that we have really focused on 
with the team out of Utah and the Theory of Constraints is our 
first payment timeliness. We know that if we can pay claimants 
timely that it is an extremely important measure, and we 
haven't been able to hit it in a long time. And just last week, 
we hit the measure and actually exceeded it.
    And I think the focus on making sure that we have a 
streamlined system, a process that works, when something goes 
wrong in the system or we have, for instance, a hurricane like 
we just had where you may have disruption, we need to be able 
to manage that, and being able to manage that with a 
streamlined process makes much more sense than if it is 
    Mr. REED. So let me get to more of the frontline input, 
because obviously a lot of times sometimes folks in D.C. focus 
on their point of view from here. I am really looking for input 
from people on the front line.
    So, Ms. Beebe, when you are talking about looking at 
streamlining these programs within your agency, do you look 
outside of your agency? How do we deploy the Theory of 
Constraints, not just within the agency yourself, either 
economic development or workforce I believe is your agency, how 
do you deploy that beyond? Because if you are cutting checks to 
a claimant, are you using one central office in the Florida 
government in order to do that or are you doing that within 
your department and another department is doing it on another 
program, et cetera, et cetera, et cetera? That is duplicative, 
in my opinion.
    So how do you do that? Explain that to me. And what are you 
uncovering as you identify these points of constraints?
    Ms. BEEBE. Thank you for the question. And as Ms. Proctor 
said, it is not always about getting more money. I think that 
the fundamental aspect is engaging staff.
    Mr. REED. Within your agency or outside of your agency?
    Ms. BEEBE. Within agency to begin with.
    Mr. REED. How do you go beyond your agency walls? How do 
you get into those other silos? So that is one thing I have 
uncovered in looking at some initiatives we have taken. We have 
silos in government that don't know and don't communicate with 
each other. How do we break those barriers down so we are using 
the resources most effectively that are deployed in each agency 
for the purposes that other agencies may be able to tap into?
    Ms. BEEBE. I think that comes under strong leadership. One 
way that we have been able to engage outside of those silos is 
to address the issue of worker misclassification. We have found 
that our Utah Department of Workforce Services is often looking 
at it from an unemployment insurance perspective; our Utah 
Labor Commission is looking at it from a workers compensation 
perspective; and our Department of Commerce is looking at it 
from a business license perspective.
    By having a coordinated council that meets on a regular 
basis that has these open lines of communication, we are able 
to share tips and leads, we are able to share best practices, 
and we are able to collaborate on our communication streams so 
that we are not addressing it in a one-off.
    Mr. REED. And what has been your experience once you have 
done that? Has that been a positive experience or have there 
been negative experiences you can share, both positive and 
negative experiences, with us as policymakers?
    Ms. BEEBE. It has been very positive for us and we have 
seen incredible gains.
    Mr. REED. And why has it been positive? What has allowed it 
to be positive?
    Ms. BEEBE. The sharing of ideas and the sharing of tips and 
leads. Information disclosure is so important when it is done 
in a controlled manner in respect to the confidentiality of the 
data that we are sharing.
    Mr. REED. Okay. And what have been negatives? I have got 5 
seconds. Any negative experiences?
    Ms. BEEBE. Negative experience, I think it is the 
challenges of working with larger groups, and those are 
overcome with strong leadership and open communication 
    Mr. REED. I appreciate that input.
    With that, I yield back. My time has expired.
    Chairman BUCHANAN. Thank you, Mr. Reed.
    I would just like to thank all of our witnesses.
    And I know my personal experiences, seeing the 
administration in Florida, the focus has been on jobs and 
creating jobs. You can't create jobs unless you have successful 
small businesses. And I think that is one of the reasons that 
we have had so much success the last four or five years in 
Florida, because we talked earlier, it is about the culture 
that has been created. Focus on small business, it will get you 
the jobs and keep full employment, which is the goal.
    But thanks for your thoughts and ideas today.
    Please be advised that members will have 2 weeks to submit 
written questions to be answered later in writing. Those 
questions and your answers will be made part of the formal 
hearing record.
    Chairman BUCHANAN. With that, the subcommittee stands 
    [Whereupon, at 11:18 a.m., the subcommittee was adjourned.]

                    Member Questions For The Record