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Hearing on the Implementation of 2012 Unemployment Insurance Reforms

April 16, 2013

Hearing on the Implementation of 2012 Unemployment Insurance Reforms










April 16, 2013


Printed for the use of the Committee on Ways and Means


DAVE CAMP, Michigan,Chairman

PAUL RYAN, Wisconsin
DEVIN NUNES, California
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia
DIANE BLACK, Tennessee
TOM REED, New York
MIKE KELLY, Pennsylvania

RICHARD E. NEAL, Massachusetts
JOHN B. LARSON, Connecticut
RON KIND, Wisconsin

JENNIFER M. SAFAVIAN, Staff Director and General Counsel
JANICE MAYS, Minority Chief Counsel


DAVID G. REICHERT, Washington ,Chairman

MIKE KELLY, Pennsylvania
TOM REED, New York







Advisory of April 16, 2013 announcing the hearing


Bill Starks
Director, Unemployment Insurance Division, Utah Department of Workforce Services

The Honorable Tommy Williams
Texas State Senator, District 4

Rich Hobbie
Executive Director, National Association of State Workforce Agencies

Larry Kidd
Principal/CEO of Reliable Staffing Services and RSS Professional, LLC

Judy Conti
Federal Advocacy Coordinator, National Employment Law Project


Hearing on the Implementation of 2012 Unemployment Insurance Reforms

Tuesday, April 16, 2013
U.S. House of Representatives, 
Committee on Ways and Means, 
Washington, D.C. 


 The subcommittee met, pursuant to call, at 2:25 p.m., in Room 1100, Longworth House Office Building, Hon. Dave Reichert [chairman of the subcommittee] presiding.

[The advisory of the hearing follows:]


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 Honorable 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/CEO 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.


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. 

Last, 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 statement of Mr. Starks follows:]

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


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 1990s.  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 statement of Mr. Williams follows:]

Chairman Reichert.  Mr. Hobbie, you are recognized.


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 statement of Mr. Hobbie follows:]

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.


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 CEO 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 statement of Mr. Kidd follows:]

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


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 statement of Ms. Conti follows:]

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 playing field 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. 

Secondly, 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.  Secondly, 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 businesspeople 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 passed.

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 truck drivers 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 secondly, 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.]