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





 
         IMPLEMENTATION OF 2012 UNEMPLOYMENT INSURANCE REFORMS

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 16, 2013

                               __________

                           Serial No 113-HR03

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
         
         
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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

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

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                    SUBCOMMITTEE ON HUMAN RESOURCES

                DAVID G. REICHERT, Washington, Chairman

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




                            C O N T E N T S

                               __________

                                                                   Page

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

                               WITNESSES

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


         IMPLEMENTATION OF 2012 UNEMPLOYMENT INSURANCE REFORMS

                              ----------                              


                        TUESDAY, APRIL 16, 2013

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

HEARING ADVISORY

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

1100 Longworth House Office Building at 2:00 PM
Washington, April 9, 2013
    Congressman Dave Reichert (R-WA), Chairman of the Subcommittee on 
Human Resources of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing reviewing the implementation 
of reforms to the unemployment insurance system contained in Public Law 
112-96, The Middle Class Tax Relief and Job Creation Act of 2012. The 
hearing will take place at 2:00 P.M. on Tuesday, April 16, 2013, in 
room 1100 of the Longworth House Office Building.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include public and private sector experts on 
unemployment benefits and policies designed to promote reemployment. 
However, any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    In March 2013 (the most recent official data), the U.S. 
unemployment rate was 7.6 percent, with 11.7 million individuals 
unemployed, of whom 4.6 million were long-term unemployed--defined as 
unemployed for 27 weeks or longer. As of the week ending March 16, 
2013, approximately 5.2 million individuals were collecting State or 
Federal unemployment benefits.
      
    The Federal-State Unemployment Insurance (UI) program, created by 
the Social Security Act 1935, assists unemployed individuals by 
offering weekly unemployment benefit checks while they search for work. 
In order to be eligible for benefits, jobless workers must have a 
history of attachment to the workforce and must be able and available 
for work.
      
    As a result of a series of laws enacted since 2008 to provide 
Federal extended benefits on a temporary basis, the maximum number of 
weeks of total unemployment benefits payable per person grew by late 
2009 to a record 99 weeks, including up to 73 weeks of federally-funded 
benefits. Today, long-term unemployed individuals in most States are 
eligible for a maximum of 63 weeks of total benefits. From July 2008 
through December 2012, a total of $208 billion was spent on Federal 
extended unemployment benefits, with most of that cost supported by 
general revenues.
      
    On February 22, 2012, the President signed P.L. 112-96, The Middle 
Class Tax Relief and Job Creation Act. This legislation extended and 
reformed the Federal Emergency Unemployment Compensation (EUC) program 
for the remainder of 2012, which was subsequently extended through 
December 2013. This legislation also included landmark reforms to the 
permanent unemployment program, such as creating new job search 
requirements for Federal benefits, permitting States to have new 
flexibility to seek ``waivers'' to promote pro-work reforms, allowing 
States to screen and test certain UI applicants for illegal drugs, 
requiring ``reemployment eligibility assessments'' (REAs) for the long-
term unemployed, and requiring States to recover more prior 
overpayments of UI benefits. The initial implementation of these 2012 
reforms was previously explored during a Human Resources Subcommittee 
hearing in April 2012.
      
    In announcing the hearing, Chairman Reichert said, ``Fourteen 
months ago, Republicans and Democrats in the House and the Senate 
agreed on commonsense reforms to the unemployment insurance system 
designed to help more Americans return to work sooner. The President 
signed those policies into law, but the administration has since been 
selective in implementing some policies and has created barriers to 
successfully helping states take action on other policies. This hearing 
will help us evaluate how the administration has implemented the 2012 
reforms and determine what we can do to help more Americans collect 
paychecks instead of unemployment checks.
      

FOCUS OF THE HEARING:

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

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

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

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

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

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

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

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

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

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

    Mr. HOBBIE. Good afternoon, Chairman Reichert and Ranking 
Member Doggett and Members of the Subcommittee. I am Rich 
Hobbie, executive director of the National Association of State 
Workforce Agencies, known as NASWA. Our organization was 
founded in 1937, and since 1973 it has been a private nonprofit 
corporation financed by annual dues from Member States and 
other revenue. On behalf of NASWA, I am pleased to comment on 
implementation of the Middle Class Tax Relief and Job Creation 
Act of 2012.
    First, State workforce agencies have done an extraordinary 
job reacting to unprecedented challenges of the great 
recession, processing record numbers of claims and programming 
numerous law changes. The unemployment insurance system has 
paid claimants nearly a half trillion dollars from 2008 to 
2012. But chronic Federal underfunding of UI program 
administration has left States with legacy computer systems 
averaging 25 years old. Upgrading a typical State UI benefit 
and tax system has been estimated to cost between $45 million 
and $100 million.
    NASWA urges Congress to enact the NASWA UI administrative 
financing reform proposal that guarantees States at least 50 
percent of the Federal Unemployment Tax Act revenue for 
administrative purposes.
    Second, States applaud Congress for funding reemployment 
services and reemployment eligibility assessments, known as RES 
and REA. States have moved aggressively to meet with over 9 
million emergency unemployment compensation or EUC claimants 
since the enactment of the Job Creation Act to comply with the 
in-person eligibility assessment requirement. States reported 
several startup problems, a short time period to plan and 
implement the program, the need for extensive cross training of 
staff, initially high claimant no show rates, and a lack of 
meeting space. However, most of these issues have been 
resolved.
    Based in part on this experience, NASWA strongly supports a 
permanent REA/RES program to assist jobless workers return to 
work. Recent evaluations demonstrate these programs increase 
employment and reduce unemployment insurance duration and are 
cost effective.
    NASWA recommends the Federal Government create a capped 
mandatory spending grant to States for REA and RES to ensure 
steady and sustainable funding. We know this might be hard in 
the current budget environment, but this would be a positive 
reform for workers, employers, and the government.
    Three, sequestration, which began on March 1st, applies to 
some mandatory programs. The EUC sequestration amount 
represents a significant portion of nondefense spending 
reductions, perhaps as much as 10 percent. But what seemed to 
be a simple percentage change of benefit amounts is complex for 
many States. A recent NASWA survey asked when States could 
implement sequestration of EUC. A third of States said they 
could implement quickly, but many States said that changes 
could not be implemented timely or with minimal cost. There 
still are as many as 10 States that do not know how they will 
make the changes.
    Four, on the nonreduction rule applied to weekly benefit 
amounts, NASWA recommends elimination. States should have the 
flexibility to determine unemployment benefit amounts.
    Five, NASWA does not have a position on drug testing, but 
State administrative funds are already constrained and funding 
might have to come from other UI administrative activities or 
other sources.
    Six, on the demonstration projects, USDOL guidance seems to 
be a mirror of Federal law. Federal law and guidance do raise 
concerns for States, however. States would have to shift scarce 
administrative resources to plan, build, manage, evaluate, and 
regularly report on the approved projects. Projects could not 
result in any increased cost to the State UI trust fund, and 
calculating a wage subsidy based on different weekly benefit 
amounts for each claimant also could be a challenge for States 
and employers.
    Seven, before the Act, 22 States had short-time 
compensation programs. Since then, three additional States have 
implemented the program.
    Eight, on self-employment assistance, NASWA partnered with 
the USDOL for a national webinar to promote SEA programs. 
Fourteen States participated in that webinar, but only four 
States have active programs as of now.
    Nine, on data exchange standardization, NASWA agrees that 
data in various publicly funded programs could be collected, 
stored, and exchanged more efficiently.
    NASWA and its Members are currently engaged in two 
successful standardized data exchange systems, the State 
Information Data Exchange System between employers and States 
and the Interstate Connection Network among States.
    Mr. Chairman, thank you for the opportunity to testify. I 
look forward to answering questions.
    Chairman REICHERT. And thank you.
    [The prepared statement of Mr. Hobbie follows:]
    
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    Chairman REICHERT. And now the chair will recognize Mr. 
Renacci to introduce our next witness.
    Mr. RENACCI. Thank you, Mr. Chairman.
    Today I have the privilege of welcoming a fellow Buckeye to 
the Committee.
    Welcome, Larry, and thank you for being here.
    Mr. Kidd has a unique perspective. Not only is he a 
business owner himself, but Larry's business is putting Ohioans 
back to work and helping employers locate talent. Larry was 
recently appointed by Governor Kasich to the board of JobsOhio, 
a nonprofit corporation that helps create jobs in Ohio. He has 
firsthand knowledge about the difficulties facing the 
unemployed, as well as the difficulties employers face during 
periods of long-term unemployment.
    Larry, I appreciate you taking the time away from your 
business to give us your perspective. I hope we hear from you 
and the other witnesses about how we can help make State 
unemployment programs more efficient and effective for job 
seekers, job creators, and the taxpayer.
    I yield back.
    Chairman REICHERT. Thank you, Mr. Renacci.
    Chairman REICHERT. Mr. Kidd, please continue with the 
testimony. You have 5 minutes.

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

    Mr. KIDD. Good afternoon, Chairman Reichert, Ranking Member 
Doggett, and other Members of the subcommittee. Thank you for 
the opportunity to testify before the Ways and Means 
Subcommittee on Human Resources. I am honored to be able to 
speak to you today. Again, my name is Larry Kidd, president and 
chief executive officer of Reliable Staffing Services of 
Jackson, Ohio. I graduated from Miami University in 1986 and 
earned an MBA from National University in 1989.
    From 1986 to 2003, I worked in various positions with three 
large corporations. During that period of time, I was promoted 
from an entry level employee to a director of a department. In 
2003, I left my director's position and became a partner in a 
small business, a third-party warehousing company. In 2 years, 
I was able to increase the business by two times. Consistently 
our team faced struggles in finding the right people for the 
right positions. I engaged the services of temporary staffing 
firms but found staffing firms could not meet our employment 
needs either.
    Having experienced the importance of finding and keeping 
key employees, my management staff and I formed a temporary 
staffing service, Reliable Staffing Services, or RSS. Our role 
was to recruit, screen, interview, hire, and place employees in 
client workplaces. As stated in our client agreements, RSS was 
the employer of record. This means that RSS was responsible for 
the FUTA, SUTA, worker's compensation, and all other employee 
costs.
    Our company's goal was to service our employment needs, but 
also to creatively supply a market that was underserved. As a 
former user of the temporary staffing service, my team was very 
familiar with the importance of finding the right people. In a 
short period of time, Reliable Staffing Service became one of 
the leading staffing suppliers in the region. In 2010, when the 
local economy experienced a downward shift, our clients' 
customer orders were abruptly cut back. This resulted in 
layoffs of our employees. Our team worked diligently and soon 
we were able to secure additional clients that needed our 
workers. We tried to call back many of the laid-off workers, 
but found that they were happy receiving unemployment benefits 
and chose not to accept our offers for employment.
    We contacted the unemployment offices to explain our 
dilemma and were told by the unemployment staff that they were 
just simply too many claims to process and they couldn't follow 
up on all the employees. This attitude made it very challenging 
to get former employees back to work.
    There were several reasons employees chose not to return to 
work. Number one was they claimed it was too far to drive; 
number two, they claimed that they were making too much money 
on unemployment to return to work; number three, they were 
uncertain of the length of the assignment; number four, they 
admittedly could not pass a drug test; or number five, they 
could not afford to take a pay cut.
    As a small business owner, I found regulation, cost of 
compliance, and taxes to be extraordinary. Often I found my 
biggest hindrance to my company's growth was not competition or 
the economy but burdensome government policy. In my staffing 
company, our cost structure is the cost of wages, cost of 
burden, plus our margin. We charge our clients based on these 
three items. If the cost of unemployment insurance increases, 
our company may or may not be able to pass these costs along to 
our client. If we cannot pass the cost along to the client, we 
must absorb the cost in our margins or simply lose the 
customer. This situation occurs more often than one may 
realize.
    Unemployment benefits should be short term and truly for 
the needy. Those unwilling to search for work or do not want to 
return to the workforce should not be eligible for unemployment 
benefits. Recipients of illegal drugs should be evaluated for 
treatment because they are likely unemployable.
    Unemployment should not be up to 99 weeks. Other programs 
should be implemented to keep recipients in the right frame of 
mind. Programs such as Ohio's Learn to Earn or on-the-job 
training programs are much better for the employee, the 
employer, and society. These programs help keep employees fresh 
and motivated.
    I have the utmost respect for the small business owner. In 
some ways the small business owner is our country's most at-
risk employee. They carry the burden of growing a business, 
managing employees, properly applying government regulation, 
meeting customer demands, and creating that next best idea. 
Many times there is little or no return on investment for the 
small business owner. When increases in taxes, unemployment 
burden, or other governmental demands occur, the small business 
person must scramble to find a way to make it work.
    Please consider the impact increases have in unemployment 
burdens or other taxes have on them, the small business owner. 
Some reports State that 50 percent all employees work for the 
small business. If the risk does not equal the reward, small 
business people will not continue to take the risk with their 
new ventures.
    Chairman Reichert, Ranking Member Doggett and other Members 
of the Subcommittee, thank you for your time and allowing me to 
present my views today.
    Chairman REICHERT. Thank you for your testimony.
    [The prepared statement of Mr. Kidd follows:]
    
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    Chairman REICHERT. Ms. Conti, you are recognized for 5 
minutes.

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

    Ms. CONTI. Thank you, sir. Chairman Reichert, Ranking 
Member Doggett and Members of the Subcommittee, thank you for 
the opportunity to testify here today. My name is Judy Conti, 
and I am the Federal advocacy coordinator at the National 
Employment Law Project. We are a nonprofit organization that 
advocates on behalf of low income and unemployed workers.
    I would like to briefly summarize the four main points in 
my written testimony.
    First, nearly 4 years after the end of the great recession, 
4.6 million people have been out of work for 27 weeks or 
longer, and the average duration of unemployment stands at 
nearly 9 months. The Middle Class Tax Relief and Job Creation 
Act scaled back the Federally funded UI programs in a manner 
that resulted in a 43 percent reduction in benefits during a 
time in which nobody would argue that we have seen anything 
close to a 43 percent improvement in the jobs picture. And 
currently the average EUC payment is a mere $294 per week, 
which is hardly sufficient to cover even housing costs in most 
States for a family.
    But that, too, will face reduction as the sequester sets 
in. States that have already implemented the sequester have 
reduced benefits by an average of $31 per week, but the longer 
States take to implement the cuts, the steeper they will be 
from workers who are often barely scraping by.
    Simultaneous with the sequester, many States are making 
unprecedented reductions to State UI programs, further 
weakening the safety net at a time when too many families and 
communities still need it desperately. These cuts are 
counterproductive and cruel at a time when so many are still 
struggling so badly to get a foothold back on the economic 
ladder.
    Second, Congress carefully defined appropriate 
circumstances in which States could enact legislation requiring 
UI claimants to pass a drug test as a condition of eligibility 
for UI. And the Department of Labor, though it hasn't issued 
regulations, as I understand it, has been diligently advising 
States that have pending drug testing laws to make sure that 
their proposals are in conformity with Federal law, as Texas' 
is.
    It is worth noting, however, that drug testing UI 
applicants is a solution in search of a problem. As detailed in 
Mr. Hobbie's written testimony, drug testing is extremely 
costly, and in the few States that have enacted some sort of 
testing scheme for recipients of public benefits, in every 
instance the rate at which applicants tested positive was truly 
negligible. Workers aren't unable to find work because of drug 
use on some widespread basis, but rather because there is still 
only about one open job for every three unemployed workers. 
This is a waste of taxpayer money and an insidious stereotype 
of the unemployed that Congress sought to narrowly circumscribe 
and with good cause.
    The bill also authorized up to 10 States to experiment with 
reemployment programs that for the first time would apply UI 
trust fund accounts to wages and wage subsidies designed to 
return the long-term unemployed to jobs. Congress crafted this 
provision to protect the integrity of UI funding--that is the 
money that employers pay in, in the form of taxes--and to 
ensure that workers are guaranteed their fundamental rights 
under Federal, labor and employment laws.
    Though no State has sought such a waiver pursuant to the UI 
program letter released by the Department of Labor, we are 
confident that once States can demonstrate that programs will 
not compromise their UI trust funds, many of which are still in 
trouble, and will have the desired effect of finding workers 
good and permanent jobs, they will seek the waivers and the 
Department of Labor will grant them in appropriate 
circumstances.
    Third, as has been discussed, one silver lining of the 
great recession is that it sparked renewed interest in work 
sharing programs, a form of UI that gives employers the option 
of reducing employers' hours instead of firing people. The 
February 2012 legislation provided $500 million in incentive 
funding to enact and amend work sharing, and DOL has produced 
clear and timely guidance for States.
    In the current and coming legislative sessions, NELP will 
continue to work to raise the profile of this win-win option 
for workers and employers, and we hope to see many more States 
take it up next year.
    Finally, like our colleagues at Utah and in NASWA, NELP 
believes that many workers need more and more rigorous 
reemployment services at the onset of periods of unemployment, 
not just when they have reach the 27th week of unemployment. We 
recently published a paper on this issue called ``Getting Real: 
Time to Reinvest in the Public Employment Service,'' and we 
propose that Congress appropriate an additional $1.6 billion in 
annual funding for the Employment Service to serve workers and 
employers alike, and though this costs money, the savings seen 
in increased income taxes, reductions in UI, and the salary 
that workers will start receiving more than pays for itself.
    We live in troubling economic times, and if we are serious 
about an economic recovery that works for all Americans, we 
can't be penny-wise and pound foolish when it comes to 
supporting our Nation's unemployed workers.
    Thank you again for inviting me to testify, and I welcome 
questions from Members of the Subcommittee.
    Chairman REICHERT. Thank you.
    [The prepared statement of Ms. Conti follows:]
    
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    Chairman REICHERT. And thank you all for your testimony, 
and thank you also now as we move into the question phase for 
your patience as we ask you a few questions. So my first 
question is for--actually all my questions will be directed to 
Mr. Starks and Mr. Hobbie.
    Mr. Starks, your State, as we heard in your testimony, has 
a very aggressive approach to work research and early 
engagement of UI recipients. Can you walk us through how Utah 
helps people search for work and how that differs from other 
States? And what does everyone have to do, what do you have to 
do to offer help and assistance for people who are sincerely 
trying to find work but are having trouble quickly working 
their way through the maze of trying to find the right job that 
fits them?
    Mr. STARKS. In Utah, our work search standard was to do two 
work search contacts per week. We doubled that a couple of 
years ago. Claimants were able to file over the telephone or 
over the Internet for their weekly claims. In August of this 
year, we made Internet the only option, and that way we could 
document their four work searches.
    We felt it was reasonable for the claimants to do four. On 
average, that would only take a couple of hours per week. 
Internet is kind of the future for job applications, and we 
require them to register for work, too, as a condition for 
unemployment. So asking them to take another step doing online 
filing we didn't think, was unreasonable.
    One of the problems that we have had associated with that 
is verifying those work searches, too. It is one thing to, you 
know, require a claimant to document those work searches and it 
is another thing to verify those. It is often not a record that 
employers are required to document. And so when we are trying 
to verify those work searches, it can prove difficult 
sometimes.
    Chairman REICHERT. Well, how cost effective is this 
approach, compared to what you did in the past and maybe what 
some States are even still doing today?
    Mr. STARKS. You know, I don't have any numbers as far as 
the work search requirements. I can tell you that we think it 
is good public policy in that it helps screen out the claimants 
that don't want to engage in active reemployment activities. If 
they are serious about getting back to work, requiring four 
work searches we don't feel is unreasonable. However, we think 
that it should be left to the State to determine that.
    Chairman REICHERT. So what would be your advice to the rest 
of the country? Any lessons learned that you want to share 
today?
    Mr. STARKS. Asking claimants to do work search activities, 
I think it goes back to our whole program at Workforce 
Services, and that is getting jobs should be your full-time 
job, and everything that we are trying to do in Utah is around 
jobs. So, my recommendation is, is to engage the claimants 
early and often and you will see some positive results.
    Chairman REICHERT. Mr. Hobbie, do you have any response to 
those questions?
    Mr. HOBBIE. Yes, Mr. Chairman. There was a four-State study 
of reemployment services and reemployment eligibility 
assessments recently produced by IMPAQ International, and 
particularly promising there were the results in Nevada where 
provision of these services led to a reduction in 3 weeks of 
duration on unemployment insurance, at an average cost of about 
$300 per week. That is a gross savings of $900, and at a cost 
probably approaching $200 to no more that be $300. So there is 
an indication that the net savings there probably was at least 
$600 per claimant helping them go back to work sooner than they 
would otherwise and at jobs comparable to what they would have 
found if they had waited those 3 weeks.
    So the evidence we see indicates that these programs are 
effective at lowering unemployment, increasing employment, and 
they are highly cost effective. And they help employers, too, 
in the sense employers are finding workers that they are 
looking for sooner than they would otherwise.
    Chairman REICHERT. Thank you.
    Mr. Doggett, you are recognized.
    Mr. DOGGETT. Thank you very much.
    Senator Williams, on your proposal that is likely soon to 
become law in Texas, do you believe that it provides a model 
that other States could follow and that the Department of Labor 
should consider as it sets its guidelines?
    Mr. WILLIAMS. I do believe that, and I think that the 
sooner they set their guidelines, the more likely it will be 
that other States follow suit. We have a number of programs 
that have been successful that we are going back and trying to 
bring them into compliance with DOL requirements. So I think it 
would be very helpful for them to go ahead and get that 
guidance out there.
    Mr. DOGGETT. And you focused your requirement in accordance 
with the statute so that you were focused only on individuals 
that have been terminated because of unlawful use of a 
controlled substance and individuals for whom there is not 
suitable work in an occupation that does not regularly require 
a drug test.
    Mr. WILLIAMS. Well, I think what we focused on is that it 
would be an occupation that would require drug testing as a 
routine part of--as a condition of employment, and then we have 
directed the Workforce Commission to develop a set of screening 
questions that would help identify those people who need to be 
tested. So it is not limited only to people who were terminated 
for that reason. There could be other reasons that might show 
up in that screening assessment and it is yet to be drafted or 
implemented.
    Mr. DOGGETT. You also mentioned the denial by the 
Department of Labor of a Texas waiver application, and it is 
true that Texas was the early bird trying to secure the grant. 
In fact, they were so early, I believe they were within about 
48 hours of the signing of the law that Governor Perry sent a 
letter up, and back in March, shortly after that, last year, 
Secretary Oates replied that she regretted denying the 
application but that the guidance, so that all States would be 
on a level playingfield for applying, had not been completed 
and expressed the hope that Texas would resubmit its 
application and welcome States' ideas for demonstration 
projects. I believe that Texas has not resubmitted its 
application since receiving that letter.
    I would also want to note with reference to the effect of 
these cuts on our job training programs that Texas is projected 
to lose approximately $38 million in job training programs 
during this year under sequestration, and if it stays in effect 
it will be about $500 million over the course of sequestration 
over the next decade, which seems to me to be a real setback to 
trying to get folks to work.
    I want to ask Ms. Conti, with reference to your comments 
that an investment in these programs, in these reemployment 
services generates about $3.40 in lower government spending and 
higher revenue from more employment, if you could elaborate on 
specific programs and services that have proven successful in 
getting people reemployed.
    Ms. CONTI. Absolutely. Thank you for if question. In our 
paper ``Getting Real,'' we detailed four different things that 
for a relatively speaking modest of investment, $1.6 billion, 
we believe could really help return a lot of people to work. 
Expand job placement services, including increasing job 
listings on the public exchange and improved matching 
technology, basically having job counselors do what Mr. Kidd 
does, help set people, unemployed workers up with employers in 
the area that have open jobs and they have skills to fill those 
jobs. We believe that that could help an additional 700,000 job 
seekers, for example, for less than $500 million.
    We recommend that you interview an additional 1.5 million 
unemployment insurance applicants after they file the initial 
claim to create a job search plan. You know, we are in 
different times now. There are many people that have had either 
the same job for their whole work life or they have easily 
transitioned from one job to another, but we are in different 
economic times now, not just because people are applying for 
jobs more using technology as opposed to resumes or networking, 
but also because we just don't have a robust economy. And if 
people are looking for a job now like they were 5 or 6 years 
ago they are not likely to be successful. So we know that there 
are plenty of people out there that have good marketable skills 
to compete but don't know how to market themselves.
    There is a Worker Profiling and Reemployment Service that 
we recommend allocating an additional $540 million for, and 
this again is something that gets workers early and determines 
who are those that are likely to become the long-term 
unemployed and from the beginning gives them more intense 
services, including training where necessary.
    And finally, provide pretraining counseling for an 
additional 1 million people for about $540 million. This would 
be to help people pick the right training programs so that they 
get skills that are marketable in their local economies instead 
of studying for a certification that may not help them.
    Mr. DOGGETT. Thank you.
    Thank you, Mr. Chairman.
    Chairman REICHERT. Mr. Young.
    Mr. YOUNG. Thank you, Mr. Chairman.
    Thank you to all of our panelists for being here today. I 
really appreciate your testimony.
    Under the 2012 unemployment insurance reform, States are 
now required to establish job search requirements for everyone 
collecting State and Federal unemployment insurance benefits, 
from the first through the last week of benefits. Currently, in 
my home State of Indiana, our State legislators are working in 
a bipartisan way to implement a law that would be consistent 
with these new requirements. This would effectively require all 
Hoosiers to visit the same Work-One Centers that they would 
have to visit to receive Federal benefits, and extends it to 
State unemployment insurance benefits.
    With only the Federal unemployment insurance job search 
requirements already implemented, we have seen in the State of 
Indiana around a 70 percent statewide compliance rate with the 
job search requirements.
    My question to Mr. Starks and Mr. Hobbie is this: What 
additional efforts might our State adopt, might you recommend 
to them or might we, at the Federal level, in our conversations 
with State legislators indicate to them would be helpful in 
increasing this compliance rate? And can you conceive of 
incentives at the Federal level that might assist in increasing 
that compliance rate?
    And I know, Mr. Starks, you have already spoken to the 
important role that verification in the job search plays. 
Perhaps there are other things that come to mind.
    Mr. STARKS. Again, as far as work search goes, I don't know 
how much more I can add than I indicated earlier. We think it 
is reasonable for States to require that. However, we are a 
strong advocate also of State rights, and I think what is maybe 
good for Utah may necessarily not be good for another State. It 
works for Utah. It has created some unintended consequences 
that create some workload for us. If somebody doesn't complete 
their work search, then we have to send out a denial letter, 
then they have an opportunity to come and complete those work 
searches. But, you know, we still think it is good public 
policy. We are not going to not do it because it is going to 
create some work for ourselves.
    Mr. YOUNG. By way of follow-up, there is, of course, an 
incentive as a matter of good public policy to get more people 
to work and improving their own circumstances. It grows your 
own economy. It could save you, at the State level, a certain 
amount of money. Are there any additional incentives that you 
currently receive for a higher compliance rate with the work 
search requirements from the Feds?
    Mr. STARKS. No.
    Mr. YOUNG. Mr. Hobbie.
    Mr. HOBBIE. Thank you, Mr. Young.
    Mr. YOUNG. Yes, sir.
    Mr. HOBBIE. I have several ideas with respect to the 
additional efforts. One is NASWA, in partnership with all 
States, and in partnership with DirectEmployers Association, an 
association of over 600 major corporations, operates the 
National Labor Exchange, which is a job bank that is available 
nationally and in each State. It contains over 1 million job 
openings on any given day and they are updated every day. So I 
would urge all States to take advantage of the National Labor 
Exchange and work with employers who are not entering jobs into 
the State job bank to enter their jobs in there so that they 
become immediately available to workers seeking jobs in their 
States.
    Second, the work search amendments in the Job Creation Act, 
I think, could serve as a model for the regular State programs, 
too. And of course I respect what Mr. Starks said about States 
designing their own programs, but greater emphasis on looking 
for work, expecting claimants to seek work, and then providing 
some assistance through reemployment and eligibility 
assessments and reemployment services funded by the Federal 
Government. We do need additional funding to provide these 
additional services, but if we did, I think it would be far 
more cost effective. And then I would just like to add, in 
terms of incentives, the act also provided for demonstration 
projects, which we can get into later.
    Mr. YOUNG. Yes, sir.
    Mr. HOBBIE. I think there are some incentives that could be 
built into the current law that would improve the possibilities 
for those demonstrations at the State level, and I could get 
into detail on that later.
    Mr. YOUNG. Absolutely. And I would like to go on record as 
supporting the flexibility that I know is so important at the 
State level as well.
    I yield back. Thank you so much.
    Chairman REICHERT. Thank you, Mr. Young.
    Mr. Renacci, you are recognized for 5 minutes.
    Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the 
witnesses for being here.
    Last Congress I introduced the EMPLOY Act, a bill that 
would have allowed participating employers to receive a subsidy 
from the State for the wages paid to an individual eligible for 
unemployment compensation. This concept of my bill is similar 
to the one in the 2012 UI reforms included in the Middle Class 
Tax Relief and Job Creation Act. This act allowed States to 
apply for waivers in order to use unemployment funds to pay for 
reemployment programs.
    In April 2012, the Department of Labor issued 24 pages of 
burdensome application requirements. To the best of my 
knowledge, Texas has been the only State to apply for a waiver. 
This is concerning, as many States have been working diligently 
to expedite the reemployment of individuals receiving 
unemployment benefits.
    Mr. Hobbie, you have experience with regards to 
reemployment services and the impact these waivers would have 
on States. What changes could be made to improve the UI policy?
    Mr. KIDD. In our written testimony we indicate two changes 
that we think would be helpful that my association supports. 
One is to add a provision for reemployment bonuses for UI 
claimants to provide incentives for the individuals to go back 
to work sooner than they otherwise would with a bonus. And 
there have been evaluations of that approach that indicate that 
would be cost effective. Second, of course, I also mentioned 
additional Federal funding would be helpful.
    Third, the way the Job Creation Act is drafted, it embeds 
training with the wage subsidy in that particular paragraph. 
And what I would suggest there is you separate out the training 
and have two provisions. One would be for wage subsidies only 
and the other would be for wage subsidies with the training for 
a kind of on-the-job training program so that States could also 
run just a straight, simple wage subsidy program in addition to 
the on-the-job training program.
    And then also I think there is a problem with paying the 
subsidies off of the weekly benefit amount. Each individual has 
a different weekly benefit amount. That can be hard for States 
to administer. I would suggest following something similar to 
what Utah has done, or Texas, with just a flat amount that 
would be provided for a subsidy to an employer to employ an 
individual for a certain amount of time and then maybe an 
additional subsidy if that employee is retained an additional 
amount of time beyond that.
    And then, finally, I would also suggest the subcommittee 
take a look at Sections 1115 and 1110 of the Social Security 
Act, which provides permanent demonstration authority for other 
programs in your jurisdictions, such as Supplemental Security 
Income. There may be some provisions in there that you could 
use to set up a permanent demonstration authority for 
unemployment insurance, too, which is excluded from those 
provisions.
    Mr. RENACCI. Thank you. I am going to come to Mr. Williams 
before I do that.
    Mr. Kidd, earlier, in regards to drug testing, one of the 
witnesses testified that the number of individuals who test 
positive were negligible. In your business, do you do drug 
testing?
    Mr. KIDD. We do do drug testing.
    Mr. RENACCI. What is the percentage of people who test 
positive?
    Mr. KIDD. Between 15 and 20 percent.
    Mr. RENACCI. Would you consider that negligible?
    Mr. KIDD. I would not consider that negligible. And 80 of 
our clients require drug testing.
    Mr. RENACCI. And the biggest concern, of course, with 
someone who tests positive, is if they go out into the 
workforce and are working and they injure somebody, that is a 
problem not only for you, but for the business.
    Mr. KIDD. It absolutely is a problem. Many people forget 
that many of our employment clients are factory workers. And if 
you were to send somebody that is on an opiate or cocaine or 
something like that, and they are on a production line, it is 
very possible they could cut their hand off or drive a forklift 
into somebody and hurt somebody else, or even kill somebody. We 
are not going to take that risk, and neither will our client.
    Mr. RENACCI. Thank you. Thank you, Mr. Kidd.
    Senator Williams, it is clear that the waiver process has 
really been a deterrent for most States. I know Texas appears 
to be the only State that has applied. Ohio is not applying 
because of the waiver process and its complexities. As the only 
State that applied, do you believe it is time for the 
Department of Labor to go back to the drawing board and make 
the waiver application process more attractive to the States? 
And please explain what the waiver process has been like for 
your State of Texas.
    Mr. WILLIAMS. Well, I don't know that I can speak directly 
to the waiver process. I know it has been a lengthy thing. And 
it is my impression that once the DOL issued their guidelines 
that more of the States seemed to become discouraged about 
that.
    One thing I would encourage, though, is more flexibility. 
And I say that because what we have done with our job search 
requirements, for example, is that we allow our local workforce 
boards to set the number of job interviews that an applicant 
has to have on a monthly basis. And, you know, we have found 
that that has worked better, to allow them to set those. And 
our average is approaching five now. And so it has worked 
really well, and people are out looking for a job. I think it 
would work a lot better if they would just allow the States a 
lot more flexibility and allow us to move forward and, you 
know, get those impediments out of the way, is the key.
    Mr. RENACCI. Thank you, Senator.
    I yield back.
    Chairman REICHERT. Thank you.
    Mr. Davis, you are recognized.
    Mr. DAVIS. Thank you very much, Mr. Chairman. And I want to 
thank the witnesses for appearing.
    Ms. Conti, let me ask you, even with the most successful 
reemployment programs in place, do you agree that the most 
important factor in people returning to work is a strong 
economy that creates jobs for the unemployed? Do you believe 
that past threats of default on our Nation's debt, as well as 
the implementation of the sequester, has negatively affected 
our economic recovery and thereby hurt the ability of the 
unemployed to find work?
    Ms. CONTI. Absolutely, Congressman. Look, we all know that 
these demonstration projects, reemployment services, these are 
all things that can help around the margins, and we should do 
them because all of the workers that are unemployed in this 
country deserve every effort we can muster. But there is no 
replacement for a robust economy and one that works for 
everybody, where employers are creating jobs, where governments 
are making appropriate investments, not threatening default, 
not enacting or allowing to happen a sequester that was put 
into place in the first instance because it was so odious that 
nobody thought it would ever actually happen.
    So we find ourselves in interesting political times. We 
obviously have concerns about our debt and deficit that we 
can't ignore. But the biggest debt and deficit we have right 
now is the jobs deficit and the deficit that workers are 
feeling in terms of their ability to provide for themselves and 
their families. And there is nothing that is going to do any 
better for unemployed workers than a robust economy and one 
where we are making appropriate investments in public service 
employees, in infrastructure in this country, and making sure 
that we have our fiscal house in order.
    Mr. DAVIS. Thank you very much.
    Mr. Kidd, I noticed in your testimony you suggest that some 
Americans aren't going back to work because they were making 
too much money with unemployment benefits to return to work. Is 
there any indication of what ``some'' really means? Is that a 
lot of people? Or is that maybe two or three? Or half a dozen? 
I mean, it seems to me that the average weekly unemployment 
benefit is $300, and that only reaches about 70 percent of the 
poverty level for a family of four. So I am trying to 
understand how much is the many.
    Mr. KIDD. I appreciate the question. I cannot give you a 
percentage, but I can tell you that we are working in an area 
that at one time had an unemployment, one of the counties we 
serve, of over 17 percent unemployment. It was significant. 
There was a large plant closure. And I would argue that if we 
had an employee that was willing, flexible, and willing to work 
for the amount of money that our client offers, we could employ 
about anybody. We have over 90,000 open positions in Ohio, with 
an unemployment rate of about 7 percent.
    So there are jobs out there available. And even in our 
small community we could get them jobs if they applied and they 
were willing to be flexible with that. As a percentage, I don't 
know. I know it is less now than it was when we had 99 weeks on 
unemployment. They were very free to tell us that there is no 
way we are going to go back to work when we receive this 
unemployment benefit. First off, they were concerned how long 
the assignment lasts. At that time, gas prices were very 
expensive, and quite frankly some of them just didn't want to 
go back to work, so they chose not to accept our offers.
    Mr. DAVIS. I find that to be a very interesting 
observation. And I guess maybe what works in some economies or 
some locations. I can tell you that $300 wouldn't influence 
many people in the communities where I live to not take a job 
if they could actually find one. So chances are there are 
differences based upon cost of living and what takes place. 
Certainly would not happen in the community where I live.
    Ms. Conti, let me ask you, is it fair to say that the last 
year or so there has been a dramatic reduction in assistance to 
the unemployed? Last year, the duration of Federal UI benefits 
was significantly scaled back. And this year the sequester has 
cut the amount of the weekly Federal unemployment benefit. 
Also, you mentioned that each eight States have cut back on 
basic unemployment benefits, reducing them below 6 months for 
the first time in over 50 years. Do you think that these 
dramatic reductions in unemployment benefits are reflective of 
an equal improvement in the labor market?
    Chairman REICHERT. Ms. Conti, if you could answer briefly, 
please. The gentleman's time has expired.
    Ms. CONTI. Sure.
    Absolutely not. We all know that we are still struggling 
with unemployment that is far too high. We understand that our 
unemployment numbers are coming down not just because we are 
creating jobs, but also because too many people are leaving the 
workforce. They are discouraged. So we have not seen the kind 
of improvements that justify the kind of cuts that we have see 
in unemployment.
    Mr. DAVIS. Thank you very much.
    And thank you, Mr. Chairman.
    Chairman REICHERT. Thank you, Mr. Davis.
    Mr. Kelly, you are recognized.
    Mr. KELLY. Thank you, Chairman.
    And I thank all of you to being here.
    Actually, coming from the private sector--and, Mr. Kidd, I 
can appreciate what you are saying--it is very difficult to 
hire people today. You know, I worry the reason people are not 
employed is because some of them are unemployable. When I am 
back in Pennsylvania, in District 3, and I am going to these 
different places and talking to employers, and I say, what is 
the number one thing, because I see a sign up there that says 
now hiring, why are you not able to hire? And inevitably they 
come back to saying, the people who are applying can't pass a 
drug test.
    Now, I want you all to understand this. This is from being 
in the real world. When I talk to my insurance carrier, they 
suggest under loss control you should drug test people, but be 
very careful when you do that because alcoholism and drug 
addiction are considered diseases, and it could be 
discriminatory, what you are doing. So when you talk to people, 
Mr. Kidd, because you talk to them, and I got tell you, there 
are a lot of people right now willing, looking for people to 
employ. They can't do it because these people are unemployable.
    Now, is that what you are seeing? I mean, this isn't a 
myth. This is what actually happens on the ground when you are 
out talking to people, looking for folks to fill jobs, and 
understanding that there is a tremendous liability on that 
person who hires somebody and brings them in if something 
happens. Mr. Renacci talked about a safety issue. You brought 
somebody in and you knew of their condition, instead allowed 
them to go on the floor, and they are somehow involved in an 
accident, you are liable for that.
    Mr. KIDD. I absolutely agree with you. We do see a real 
issue with the whole drug situation. As part of the JobsOhio 
board of directors, I had a small roundtable of business people 
in our local community, and we had two employers that were 
1,200 and 1,500 each, two of the largest employers in the 
community. And we asked them, what is the biggest problem that 
you face? I thought it might be worker's compensation or even 
unemployment, but it wasn't. It was drugs. We can't get people 
to work. And we can't keep them once they are here because they 
will continue to fail a drug test.
    It is a big risk for employers to put somebody knowingly on 
drugs in a factory or any other kind of setting. And, you know, 
it is a dangerous situation. And it is not something that an 
employer is willing to take that risk. It just simply isn't.
    If I may make one quick statement about the drug situation. 
Jackson County is the largest prescription opiate problem in 
the whole State of Ohio. Jackson County is only a county of 
30,000 people. We have 131 per capita prescriptions per person 
a year, which is extraordinary. So I developed a drug task 
force to help solve this problem. And we continued, as you pull 
the onion back, you see more and more and more of it. And it is 
a huge problem for employers.
    Mr. KELLY. Let me ask, Mr. Hobbie and Senator Williams, 
now, in 2012, we did the unemployment insurance reforms. It is 
14 months later. You are still waiting for the regs. A lot of 
the States have gone out of session right now. So 14 months for 
the Federal Government. Nobody is alarmed by that because 
that's kind of the way these folks work. How do you proceed 
when you don't have the regs in place? How in the world do you 
begin to build a model when you don't know what the regs are 
going to be? And is this what you have experienced in the past.
    Mr. WILLIAMS. Well, it is a problem for us in Texas. We 
have a legislature that is in session for about 4\1/2\ months 
every other year. And so when the Federal Government takes so 
long to issue guidance, it makes it very difficult for us to 
make any adjustments to things so that we can comply with 
Federal law. So it is a huge impediment.
    Mr. KELLY. Okay.
    Mr. Hobbie.
    Mr. HOBBIE. I agree. And this happens repeatedly where 
there is an expectation that States implement a new law 
quickly, but there is a lag between the time the law goes into 
effect and States are expected to implement and the regulations 
come forth. The recent amendments to trade adjustment 
assistance were a good example of that. So States would very 
much like to have the regulations sooner, but they often don't 
get them. So they do what they can and they cope when the 
regulations finally come out.
    Mr. KELLY. And I would like to see the direction of the 
conversation go to talk about the benefits of being employed as 
to worrying about unemployment benefits. There is something 
wrong. We have the model upside down. And Mr. Davis hit on it. 
Until we have a dynamic and robust economy, we are not going to 
get people back to work. We can have this conversation and 
continue to have this conversation, but until you get some 
certainty for the job creators to look into the future and say, 
oh, you know what, I am going to make that move now, I am going 
to hire these folks, I am going to bring them in, I am going to 
train, I am going to pay them, and I am going to look to a 
brighter future.
    But that is the problem. I am so tired of hearing about 
unemployment benefits and not about the benefits of being fully 
employed. That is the key and that is what we should be 
concentrating on. Thank you all for being here.
    Thank you, Mr. Chairman.
    Chairman REICHERT. Thank you.
    Mr. Griffin.
    Mr. GRIFFIN. Thank you, Mr. Chairman.
    Thank you all for being here today.
    In my home State of Arkansas, the issue of drug testing for 
unemployment benefits has been a hot one in the State 
Legislature. And I want to ask you, Senator Williams, not in 
your testimony, but on your Web site you talked about, I think 
the term you used was drug testing as a reemployment strategy. 
Does that sound familiar? Basically, it is something that helps 
prepare people, the drug testing does, it prepares them for 
employment.
    I would ask if you could comment and elaborate on that and 
any other benefits that you are finding to drug testing for 
unemployment benefits.
    Mr. WILLIAMS. Well, in Texas we have long required that 
someone be ready and willing to go back to work and that they 
actively be seeking employment in order to be able to receive 
unemployment benefits in Texas. And so this has been a standard 
that we have held our applicants to for many, many years.
    I would say that if you are abusing illegal drugs or if you 
are abusing prescription drugs--and I would point out that that 
is a huge problem all over the country--you are not ready and 
able to go back to work, so you are not employable. And it is 
important for those people and for their families and really 
for the future of our country that we identify those folks and 
that they get in a program where they can get straightened out.
    The largest refinery in the Western Hemisphere was recently 
built in my senate district, in Port Arthur, Texas. And when I 
visited there 4 years ago, when that plant was under 
construction, I heard over and over again, we want to hire 
local folks but we can't find people that can pass the drug 
test. And we have that all over the State. We have a booming 
economy, and the biggest problem we hear, to hire truckdrivers 
in the State of Texas, is to find people who can pass the drug 
test. And so I would submit to you that it is a big problem, 
and this is something that we need a national policy to address 
this.
    Mr. GRIFFIN. I want to echo my friend, Mr. Kelly. I spoke 
with a major, major employer in my district. And I have central 
Arkansas, Little Rock and surrounding counties. And this 
particular employer is an industrial employer. And they told 
me, actually in a public hearing at the Clinton School, we had 
a jobs conference a couple years ago, and they said openly 
there that routinely they try to hire people, but those people 
fail the drug test. And this is an industrial context, so they 
can't take the risk of having people operate dangerous--
potentially dangerous machinery, et cetera, when they can't 
pass a drug test. And so, that is a real problem in my 
district, I can tell you that.
    Let me ask you quickly, separate from the drug testing, 
pursuant to the act that we have been discussing here today, 
States can apply for waivers to design programs, pay people for 
working or training, et cetera. Now, my understanding from this 
hearing is that no State has yet applied. Do you know if Texas 
plans to apply, if there is some innovative program that they 
plan to seek approval for?
    Mr. WILLIAMS. Well, as I mentioned in my previous 
testimony, we do have a program that is our Back to Work 
program that has been successful, and we are trying to bring 
that in compliance with DOL guidelines in lieu of regulations 
being issued. But our State has long resisted, for instance, 
people who are self-employed. If they choose to go and start 
their own business, we don't feel like it is appropriate for 
those folks to be able to collect unemployment benefits from 
their former employer while they are trying to start their own 
business. So I would say that, beyond our Back to Work program 
and the Shared Work program, there is very little beyond that 
that we are involved in right now.
    Mr. GRIFFIN. Got you.
    Mr. Kidd, real quickly, the law specifically mentions one 
category open for testing people who need to pass a drug test 
to get a particular job, or to perform that job. In your 
experience, what share of employers require drug tests for that 
job, for a particular job?
    Mr. KIDD. I can think of very few jobs that shouldn't 
require it. Eighty percent of all our clients require it.
    Mr. GRIFFIN. Eighty percent, okay.
    Mr. KIDD. Eighty percent of ours do. And I would argue that 
the others should be doing it, too. And, quite frankly, we test 
them anyway because we want to make sure that they are going to 
be clean. First, it is a reflection on us. But second, we 
cannot afford the cost of the worker's compensation case if 
somebody gets hurt or somebody else dies. We just can't afford 
to do that, and we couldn't live with that with our conscience.
    Mr. GRIFFIN. Thank you.
    And thank you, Mr. Chairman.
    Chairman REICHERT. Thank you.
    Mr. Reed.
    Mr. REED. Thank you, Mr. Chairman. And not to belabor a 
point, but I did want to reference, Ms. Conti, in your 
testimony--and I am not asking you a question--you have come to 
the conclusion that drug use in the workplace is a negligible 
number. And, obviously, you have heard testimony from your 
colleagues or peers on this panel who disagree with you. I can 
also tell you that as co-chair of the Manufacturing Caucus, we 
have had people testify before us as employers repeatedly say 
it is a significant issue, not a negligible issue.
    And when I look at the citations within your testimony, 
where you refer to the support of your ``negligible'' 
conclusion, you reference a welfare test for welfare 
recipients. We are talking about unemployment. Welfare and 
unemployment are completely different programs. So to use that 
as the basis for your conclusion that it is negligible I think 
is misleading. I don't take and give much weight to it, to be 
perfectly honest with you, because they are two different 
issues.
    Also, you cite a Huffington Post article that I note was 
written on June 6, 2012, just a few months after the law 
passed. So to come to a conclusion that somehow this reform is 
not producing in regards to unemployment and the issue of drug 
use in the workplace in a short 2- to 3-month window, to come 
to a conclusion that a negligible drug issue is the reality of 
the situation, I question that conclusion.
    Ms. CONTI. May I respond, sir?
    Mr. REED. It is my time. I appreciate it. But to make such 
a bold conclusion I find very troublesome. Because, you know 
what? I care about the people who are on unemployment. And if 
someone has a drug problem, I look at drug addiction as a 
medical condition, an illness, a mental health-related issue in 
certain circumstances. What we are talking about is trying to 
empower people to get back to work. That is what has made 
America great, is that work ethic, that pride.
    And so a lot of times I think we on this side of the aisle, 
people try to portray us as somehow trying to target people on 
unemployment. That is the farthest thing from the truth, ladies 
and gentlemen. We are talking about empowering people to 
overcome an obstacle that we believe is a significant problem 
and that many employers who have testified before me and other 
Members of this panel have indicated is a significant panel. 
And that is what we are talking about, is how can you in the 
unemployment program identify areas where those issues of drug 
use and abuse are there and make sure those employers and those 
employees get the help so that the people can get back to work.
    The question I wanted to focus on to the panel is on the 
physically requiring to show up reforms that were in the 
reemployment eligibility assessment policies back in the 2012 
reforms. And coming from a rural district of western New York, 
I see the benefits of using technology, allowing people to 
access the program that way because of transportation issues 
and things like that.
    But one thing I am also concerned about, I harken back to 
some memories I have when I was a law guardian, when I first 
started out my law practice, and I was assigned to represent 
kids. And I remember vividly an 8-year-old young man in the 
western portion of my home county, Steuben County in western 
New York. And we were sitting in his living room, and I am 
trying to have a conversation with him, just, you know, who are 
you, you know, I am who I am, and that type of thing. And I 
said, what do you want to be when you get older? And the 
response from an 8-year-old young man was, what are you talking 
about? I mean, it was the sum and substance, what are you 
talking about? We live here, check comes in the mail, and that 
is what we do.
    Now, I was expecting astronaut, firefighter, police 
officer. And then it struck me, as I sat in that living room 
with that 8-year-old young man, I said, why would I expect when 
that 8-year old man becomes 20, 21, that he has learned about 
adults working.
    And so when I look at that in-person requirement, it 
resonates with me that maybe what we are trying to do is to 
send a message to the people in the home so somehow we can 
break the cycle of dependency that we are seeing in America.
    And so, you know, I am running out of time, and I will get 
off my bully pulpit. But I am very interested in knowing how 
you deal--Mr. Starks, you are from Utah--how you deal with 
those rural issues and those competing issues that I just 
articulated there? How does it work? And has anyone studied or 
looked at the impact on the children in the households in 
regards to the life lessons that are being taught by not having 
that in-person requirement?
    Mr. STARK. The staff-assisted requirement that is included 
in the provision for the EUC REAs, even though we are a fairly 
rural state, about 80 percent of our population is within 50 
miles of Salt Lake City, and over 90 percent of our EUC 
claimants were actually within 50 miles of an employment 
center. So in Utah we covered the vast majority. We sent REA 
requirements to every claimant, every EUC claimant. However, if 
they did call up and indicate that they were more than 50 miles 
away, we would issue them a waiver for that REA. But they were 
few and far between.
    So it really didn't become too much of an issue in Utah. 
However, we support technology wherever it can be, you know, 
substituted. We typically find excellent results with 
technology, too.
    Mr. REED. Appreciate it. Time has expired. Thank you very 
much.
    Yield back, Mr. Chairman.
    Chairman REICHERT. Thank you.
    I would like to welcome the gentlelady from Tennessee, who 
is a fellow Member of the Ways and Means Committee, Ms. Black.
    Ms. Black, thanks for joining us today. Do you have a 
question for the panel?
    Mrs. BLACK. Yes, I do. Thank you so much, Mr. Reichert, for 
allowing me to be here with you today. I want to go just a 
little bit different direction, but still tying in with the 
conversation that has been had so far.
    According to the President's budget, which was released 
last week, in the last 5 years, counting both the State and the 
Federal unemployment benefits, the UI system has paid out 
almost $550 billion in benefits. That is an annual average of 
more than $100 billion in benefits through the system that 
previously paid out only about $35 billion in those same 
benefits. This I think is not only having a negative impact on 
some recipients, as we have heard today, but also on the system 
that administers these benefits.
    I want to go to my own home State of Tennessee. A recent 
audit that just occurred in the last couple weeks in 
Tennessee's unemployment insurance program revealed that the 
Department of Labor and Workforce in my home State had provided 
about $73 million in unemployment benefits to ineligible 
claimants over the last 3 years. And the audit went on to say 
that these overpayments had, and I quote, ``increased 
significantly over the past 3 years,'' close quote.
    Now, Congress has tried to address these issues. And in 
2011 we enacted bipartisan reforms to impose a 15 percent 
penalty for fraud cases. And then in 2012 we came back and we 
passed further reform so that States would recover more 
overpayments by reducing the current benefit checks. But, 
clearly, there is still more work that needs to be done here.
    I want you to begin answering this question for me, Mr. 
Hobbie, and then, Mr. Starks, if you will follow up. Now that 
benefit recipient is coming down and the receipts are coming, 
are States shifting workers away from getting benefits out the 
door and back to program integrity? And are error rates 
improving as a result? Mr. Hobbie, would you address that?
    Mr. HOBBIE. Yes. Thank you, Ms. Black.
    The system is still overwhelmed. Now, initial claims have 
come down. But because we have a continuing long-term 
unemployment problem, continued claims remain very high. So the 
workload in States is still high, but it is coming down. Some 
of the increases in overpayments in the system were due to the 
great recession. But, of course, that started the end of 2007 
and was ended in the summer of 2009. And you point out that the 
overpayments in Tennessee increased in the last 3 years.
    Mrs. BLACK. Last 3 years.
    Mr. HOBBIE. So that is a bit puzzling, that pattern there. 
I don't have enough knowledge about Tennessee to know what is 
going on there.
    I can say that as the claimant workload goes down, we do 
expect, and what has happened before, is States do shift 
workers back away from processing claims timely to some of the 
integrity activities.
    I should also note that the system used to estimate 
overpayments, called the Benefit Accuracy Measurement System, 
has some problems with it. And we at NASWA in individual States 
are working with the U.S. Department of Labor to try to improve 
that system. It wasn't originally designed to estimate 
overpayments. The sample sizes are somewhat small. It is not 
focused so much on overpayments. And as a result, the estimates 
are somewhat inaccurate, the confidence interval around them is 
really quite wide.
    So we are trying to work with the Department of Labor to 
improve that methodology, improve the accuracy, the estimates. 
Originally, when that so-called BAM System, B-A-M System was 
designed, it was designed as a system more to help States 
improve the integrity of their programs by providing them 
management information to improve their programs rather than 
calculating overpayment rates. But it subsequently has been 
used for the publishing of overpayment rates which, frankly, 
can't be compared from one State to the other, they can only be 
looked at within a State. But the overpayment rates have been 
high; they are coming down, to some extent. And we are trying 
to make some progress on it.
    Mrs. BLACK. If we would give the rest of the time to Mr. 
Starks.
    Mr. STARKS. Thank you. I would echo what Mr. Hobbie 
indicated. It is really difficult to compare one State against 
the other. For instance, if one State is more stringent on work 
search requirements, they are going to have, usually, a higher 
improper payment rate.
    I think with unemployment settling down, talking to my 
fellow directors, there is a much bigger effort on integrity. I 
think over 20 States now have implemented a treasury offset 
program where they are now intercepting Federal income tax 
refunds for overpayments. We have the SIDES initiative. In 
Utah, we are actually piloting two projects right now where we 
are actually looking at incarceration records for the prisons 
and county jails. We are also working with a large vendor that 
has data on about a third of the payrolls.
    Mrs. BLACK. I think my time has expired.
    But thank you again, Mr. Chairman, for allowing me to ask 
my question.
    Chairman REICHERT. Thank you.
    I would also like to welcome the gentleman from Texas, who 
is the chairman of the Health Subcommittee on the Ways and 
Means Committee.
    Mr. Brady, do you have a question?
    Mr. BRADY. Yes. Chairman Reichert, thanks very much for 
letting me join you today. And I want to applaud the leadership 
of Senator Williams, my state senator, for his leadership not 
only in chairing the Senate Finance Committee in Texas, but 
leadership on finding innovative ways to get people back to 
work.
    Today there are literally tens of millions of Americans who 
can't find a full-time job. There are millions more who have 
simply given up looking for work altogether. Yet we have jobs 
going unfilled in energy, in building trades, in 
transportation, simply because the applicants cannot pass a 
drug test. Last year at this time, Republicans, Democrats, and 
the White House came together and agreed it was time to find 
some solutions to get people job-ready, those who are on 
unemployment today. And we, together, in a bipartisan way, 
created a process where States could raise their hand and show 
us in demonstration projects and pilot programs exactly how we 
connect those who don't have a job with good-paying jobs that 
are available today. Yet here we are, more than a year later, 
no waivers have been granted because no applications have been 
submitted under a round that has created a very burdensome, 
very complex process that, in fact, won't work.
    So my question to Senator Williams and then to Mr. Hobbie 
is, if we can convince the Department of Labor to do their job, 
to follow the law as written, and the intent, to go back to the 
drawing board, coming up with the process that encourages 
States to step forward, Senator Williams, in your view, for 
Texas, which has already been recognized has having innovative 
programs to connecting local people to local jobs, if 
Department of Labor can get it right, is Texas still willing to 
raise their hand and implement a pilot program to help show us 
the way?
    Mr. WILLIAMS. Yes, sir, we are. And I would point out that 
when we rolled out this Back to Work program, our Lieutenant 
Governor traveled to 18 cities around the State promoting our 
Back to Work program. And so this is something that all of us 
in the legislature, from our leadership to the Membership, take 
very seriously. And removing those impediments and hurdles that 
we have would make a big difference in what we were able to do.
    I would also point out that I think there are some 
technical changes that need to be made. I think one thing that 
hasn't been touched on here about your program integrity is the 
sample size that you are using to test unemployment benefits 
for overpayment is set by the Department of Labor at 480. Now, 
what does that mean? In Rhode Island, they sample 480 people; 
in South Dakota, who doesn't have as many people as live in my 
senate district, they sample 480 people; and, in Texas, with 25 
million people, they sample 480 people.
    And so there are others, Mr. Temple and others, who could 
go into a lot of the details about what the Labor Department 
considers best practices that are also just a way to scratch 
the list off and check the box and say, we don't have 
overpayments by looking the other way. And so I think there is 
not only a need for waivers, but there is a need for the 
Department to recognize that States are the best ones to 
implement these programs and to give us the flexibility to 
monitor them and make sure that they are working appropriately.
    Mr. BRADY. Senator, thank you very much.
    Mr. Hobbie, we are sort of given the impression up here 
that States weren't interested in stepping forward to help us 
solve this problem, connect these workers with jobs, and that 
today, you know, a year later, States generally aren't all that 
interested. Do you think that is the case? Or do you think 
States need the right application process so that they can 
indicate their interest? Is the interest still there?
    Mr. HOBBIE. Mr. Brady, yes, the interest is there. States 
generally would like more flexibility from the Federal 
Government in implementing these demonstration programs, not 
only from the Department of Labor, but also under the law. And 
earlier I mentioned some changes that could be made, I think, 
to the current law which would make it more flexible for States 
such as Texas to operate the kind of demonstration programs 
they have had in the past.
    So, in general, I would say our Members are interested. 
They want more flexibility. But they also recognize the Federal 
Government wants accountability. With respect to 
accountability, the law requires sophisticated evaluation of 
the demonstration programs. It would be very helpful if the 
Federal Government would provide funding for those evaluations 
rather than having it come out of the Unemployment Trust Fund 
or from state administrative costs.
    Mr. BRADY. Well, I appreciate all the witnesses.
    Again, Chairman, you are holding this hearing because we 
want those who are unemployed to be job-ready on day one. And 
key to that is the growing number of jobs that require drug 
screening and drug testing, good-paying jobs. So thank you for 
continuing to shine a light on this problem.
    Chairman REICHERT. Thank you for joining us today, Mr. 
Brady.
    Well, thanks to all of you for your testimony. Your 
information is very helpful. Sometimes these hearings seem so 
sterile and formal, and you probably walk away and wonder if it 
was worth it. You can see there was a lot of interest here 
today, a lot of questions asked. We want to get this right. And 
what is worth it is getting, as everyone here has said, on both 
sides, getting people back to work. I mean, that really is what 
we all are here for.
    And accountability, Senator, you mentioned that, the 
Federal Government has an issue with performance measures, 
accountability, and, you know, on a program that spends 
billions of dollars every year, there are a lot of complicated 
processes involved in this issue. But that doesn't mean we 
should not proceed forward and find solutions to the problems 
that we are all facing and try to get people back to work.
    I will just mention this rather quickly. There are a lot of 
us on this Committee, on the Full Committee and some of us here 
today, who have had experience working with local government. 
Having been a part of the local government, my job was the 
sheriff in Seattle. And in dealing at local level, you know 
what is best for your community, you know what works in your 
community. And that has been a common theme today. I think that 
the Federal Government needs to understand even more so than 
some of us do that the Federal Government would be best letting 
you have that flexibility administering programs. Yes, with 
accountability and responsibility, but the ability to 
administer those programs tailored to your community so you can 
help the people that you know best get back to work and support 
their families.
    So, again, I appreciate all of your hard work. Continue to 
do that. And we will look to you for answers. And hopefully we 
can find solutions.
    If Members have additional questions for the witnesses, 
they will submit them to you in writing. And we would 
appreciate receiving your responses for the record within 2 
weeks.
    Chairman REICHERT. Thank you. This Committee stands 
adjourned.
    [Whereupon, at 4:03 p.m., the subcommittee was adjourned.]