[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
``UNEMPLOYMENT INSURANCE: AN OVERVIEW OF THE CHALLENGES AND STRENGTHS
OF TODAY'S SYSTEM''
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HUMAN RESOURCES
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 7, 2016
__________
SERIAL NO. 114-HR11
__________
Printed for the use of the Committee on Ways and Means
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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
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
ROBERT J. DOLD, Illinois
TOM RICE, South Carolina
David Stewart, Staff Director
Nick Gwyn, Minority Chief of Staff
______
SUBCOMMITTEE ON HUMAN RESOURCES
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
DAVID G. REICHERT, Washington
C O N T E N T S
__________
Page
Advisory of September 7, 2016 announcing the hearing............. 2
WITNESSES
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
MEMBER QUESTIONS FOR THE RECORD
Rep. Joseph Crowley.............................................. 71
MEMBER SUBMISSIONS FOR THE RECORD
Rep. Vern Buchanan 1............................................. 101
Rep. Vern Buchanan 2............................................. 117
PUBLIC SUBMISSIONS FOR THE RECORD
Center for Fiscal Equity......................................... 121
``UNEMPLOYMENT INSURANCE: AN OVERVIEW OF THE CHALLENGES AND STRENGTHS
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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
strategies.
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
discussion.
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
intensify.
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
permitted.
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
issues.
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.
STATEMENT OF CISSY PROCTOR, EXECUTIVE DIRECTOR, FLORIDA
DEPARTMENT OF ECONOMIC OPPORTUNITY
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
Journal.
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
grow.
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
find.
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:]
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Chairman BUCHANAN. Mr. Carpenter, please proceed with your
testimony.
STATEMENT OF WALTER CARPENTER, MAI, CRE, PRESIDENT, PINEL &
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
unemployed.
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
today.
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BUCHANAN. Ms. Conti, please proceed with your
testimony.
STATEMENT OF JUDITH M. CONTI, FEDERAL ADVOCACY COORDINATOR,
NATIONAL EMPLOYMENT LAW PROJECT
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
recessions.
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:]
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Chairman BUCHANAN. Ms. Beebe, please proceed with your
testimony.
STATEMENT OF MICHELLE BEEBE, DIRECTOR, UNEMPLOYMENT INSURANCE,
UTAH DEPARTMENT OF WORKFORCE SERVICES
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
performance.
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
benefits.
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
today.
Chairman BUCHANAN. Thank you, Ms. Beebe.
[The prepared statement of Ms. Beebe follows:]
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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
interviewing.
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
Government.
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
Florida.
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
income.
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
extravagant.
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
communities.
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
administration.
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
net.
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
system.
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
want.
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
important.
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
Government?
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
duplicative.
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
pathways.
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
adjourned.
[Whereupon, at 11:18 a.m., the subcommittee was adjourned.]
Member Questions For The Record
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