[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]



                         REFORMING UNEMPLOYMENT
                     INSURANCE TO SUPPORT AMERICAN
                         WORKERS AND BUSINESSES

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON WORK AND WELFARE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION
                               __________

                              JUNE 4, 2024
                               __________

                          Serial No. 118-WW08
                               __________

         Printed for the use of the Committee on Ways and Means






              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





                                 ______

                   U.S. GOVERNMENT PUBLISHING OFFICE

57-013                     WASHINGTON : 2024
























                      COMMITTEE ON WAYS AND MEANS

                    JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida               RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska               LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania             MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona            JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois               EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio                  BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas               DANNY DAVIS, Illinois
DREW FERGUSON, Georgia               LINDA SANCHEZ, California
RON ESTES, Kansas                    TERRI SEWELL, Alabama
LLOYD SMUCKER, Pennsylvania          SUZAN DelBENE, Washington
KEVIN HERN, Oklahoma                 JUDY CHU, California
CAROL MILLER, West Virginia          GWEN MOORE, Wisconsin
GREG MURPHY, North Carolina          DAN KILDEE, Michigan
DAVID KUSTOFF, Tennessee             DON BEYER, Virginia
BRIAN FITZPATRICK, Pennsylvania      DWIGHT EVANS, Pennsylvania
GREG STEUBE, Florida                 BRAD SCHNEIDER, Illinois
CLAUDIA TENNEY, New York             JIMMY PANETTA, California
MICHELLE FISCHBACH, Minnesota        JIMMY GOMEZ, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio

                       Mark Roman, Staff Director
                 Brandon Casey, Minority Chief Counsel

                                 ------                                

                    SUBCOMMITTEE ON WORK AND WELFARE

                    DARIN LaHOOD, Illinois, Chairman
BRAD WENSTRUP, Ohio                  DANNY DAVIS, Illinois
MIKE CAREY, Ohio                     JUDY CHU, California
BLAKE MOORE, Utah                    GWEN MOORE, Wisconsin
MICHELLE STEEL, California           DWIGHT EVANS, Pennsylvania
LLOYD SMUCKER, Pennsylvania          JIMMY GOMEZ, California
ADRIAN SMITH, Nebraska
CLAUDIA TENNEY, New York

























                         C  O  N  T  E  N  T  S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Darin LaHood, Illinois, Chairman............................     1
Hon. Danny Davis, Illinois, Ranking Member.......................     2
Advisory of June 4, 2024 announcing the hearing..................     V

                               WITNESSES

J.T. Taylor, Senior Director of Fraud, ID.me.....................     4
Beth Townsend, Executive Director, Iowa Workforce Development....    19
Chris Stricklin, President, Dunn University......................    31
Will Raderman, Employment Policy Analyst, Niskanen Center........    36
Jennifer Phillips, Program Lead, Georgetown University, Beeck 
  Center for Social Impact + Innovation..........................    47

                    MEMBER QUESTIONS FOR THE RECORD

Member Questions for the Record and Responses from Will Raderman, 
  Employment Policy Analyst, Niskanen Center.....................    92
Member Questions for the Record and Responses from Jennifer 
  Phillips, Program Lead, Georgetown University, Beeck Center for 
  Social Impact + Innovation.....................................    97

                   PUBLIC SUBMISSIONS FOR THE RECORD

Public Submissions...............................................   113

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                  REFORMING UNEMPLOYMENT INSURANCE TO
                     SUPPORT AMERICAN WORKERS AND
                              BUSINESSES

                              ----------                              

                         TUESDAY, JUNE 4, 2024

                              House of Representatives,
                          Subcommittee on Work and Welfare,
                                   Committee on Ways and Means,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:59 p.m. in 
Room 2020, Rayburn House Office Building, Hon. Darin LaHood 
[chairman of the subcommittee] presiding.
    Chairman LaHOOD. Well, good afternoon, everybody. I want to 
welcome everybody to our Subcommittee on Work and Welfare for 
our hearing today on reforming unemployment insurance to 
support American workers and businesses.
    And I am grateful for the witnesses for your time and the 
effort you took to be here today, and for our conversation and 
dialogue that we will have for this hearing. I especially want 
to thank the committee members that are here today for this 
important subject.
    My name is Darin LaHood, and I represent Illinois's 16th 
district, covering much of the central and northern part of 
Illinois.
    For the purposes of today's hearing we want to learn how 
Congress can help rebuild and restore confidence in the 
unemployment insurance program after the turmoil of identity 
theft, fraud, and claim delays during the pandemic.
    GAO has estimated that between $100 and $135 billion was 
lost from COVID-era UI programs to fraudsters and criminals, 
foreign and domestic, deploying sophisticated schemes to divert 
benefits from unemployed workers. My home state of Illinois 
lost approximately $3.2 billion to fraud. This is outright 
theft of valuable taxpayer dollars that were not delivered to 
workers who needed them the most.
    And while COVID programs have since expired, this data 
exposes a number of program weaknesses that need to be 
addressed. In February 2023 the Ways and Means Committee held a 
hearing with witnesses from the Department of Labor, Inspector 
General's Office, GAO, and the Pandemic Response Accountability 
Committee. These oversight agencies testified to problems with 
outdated state systems and weak online security that made the 
UI program particularly vulnerable to fraud.
    Last year this committee passed the Protecting Taxpayers 
and Victims of Unemployment Fraud Act, which includes steps to 
strengthen program integrity, recover lost funds, and prevent 
future fraud. The House has since passed this legislation on a 
bipartisan basis.
    We know fraudsters are still attacking UI and other Federal 
benefit programs, and we need to build on these efforts moving 
forward. This hearing will investigate three main areas of 
reform.
    Number one, supporting state program integrity improvements 
and technology modernization, which are vital to this process. 
We will explore ways to prevent fraud by verifying identity of 
UI recipients and moving away from the ``pay and chase'' model 
of benefit delivery.
    Second, we must focus on reemployment. The purpose of UI is 
to provide a bridge between jobs. However, many workers end up 
exhausting their benefits and remain out of the labor force. 
According to the Department of Labor, 38 percent of UI 
claimants exhausted their benefits in the first quarter of 
2024. We know the longer a worker remains out of the labor 
force, the harder it is to return to work. That is why I have 
co-led, along with Ranking Member Danny Davis, to my left, the 
BRIDGE for Workers Act, to strengthen the Reemployment Services 
to Eligibility Assessments program. Our bill would offer more 
flexibility to states to provide job skills training, resume 
preparation, and career exploration to connect unemployed 
workers to in-demand jobs more quickly. We passed this bill 
unanimously out of committee last November, and I look forward 
to its consideration on the House floor very soon.
    Third, to improve program administration, we will examine 
the administrative funding model for state UI programs which 
collects but does not distribute adequate resources to states. 
The Federal Unemployment Tax, pronounced FUTA, provides a 
dedicated revenue stream to support state administration of the 
UI program. However, these dollars are not ending up in state 
agency hands to enact needed system improvements.
    In fiscal year 2022 states received approximately $3.7 
billion less in administrative funding than employers 
collectively paid in FUTA taxes due to problems with how 
dollars flow through the Unemployment Trust Fund. This process 
also creates disparities in how funding is allocated across the 
country. As part of making the UI program more resilient, 
reforms are needed to improve this financing mechanism so 
states are able to invest in long-term solutions.
    Lastly, I would like to recognize my colleagues 
Representative Carey, Representative Steel, and Representative 
Tenney for their recent introduction of legislation to 
modernize UI and support workers and small businesses. These 
bills are important building blocks for us to work on reforming 
this critical program for American workers.
    Again, I am grateful for the witnesses before us today. I 
want to thank you for being here today, and we look forward to 
your testimony.
    Chairman LaHOOD. With that, I am pleased to now recognize 
the gentleman from Illinois, our ranking member, Mr. Davis.
    Mr. DAVIS. Thank you, Mr. Chair. And before I begin my 
statement, I want to thank you for the hearing and thank the 
witnesses for coming.
    But I want to convey all of our best wishes to our 
colleague, Dwight Evans, who could not join in person today. I 
know Dwight is probably watching this hearing and formulating 
questions, and we all look forward to having him back with us 
in person very soon.
    Unemployment insurance is an earned benefit to assist 
workers who lost their jobs through no fault of their own, 
helping workers pay the rent and put food on the table while 
stabilizing our local and national economies. During the 
pandemic, 22 million, or about one in four, American workers 
received unemployment benefits. Unemployment benefits kept five 
million people out of poverty and helped prevent the long, deep 
recession predicted by economists. The Biden American Rescue 
Plan's extended unemployment benefits and other investments 
resulted in record-breaking job growth and the longest stretch 
of low unemployment since the 1960s.
    However, the pandemic highlighted that much work remains to 
make the unemployment insurance program fair and effective. 
Millions of workers spent hours or days trying to access and 
complete the unemployment benefit application, and many never 
succeeded. People of color, younger workers, and lower-paid 
workers were disproportionately less likely to know they could 
even apply.
    The Government Accountability Office also notified us about 
a deeply troubling and unacceptable problem among workers who 
applied for benefits: White workers were more likely to receive 
benefits than Black workers.
    Unfortunately, problems with equitable access to 
unemployment benefits preceded the pandemic, with many states 
making it difficult or near impossible for workers to claim 
earned unemployment benefits when they needed them. States 
often justified the roadblocks as fraud prevention, but the 
stark reality was that workers who were our friends and 
neighbors were locked out of benefits they earned.
    The good news is that both red and blue states are now hard 
at work removing some of these barriers to unemployment 
benefits. Ways and Means Democrats worked closely with the 
Biden Administration to provide the American Rescue Plan 
resources so that the states could take immediate action to 
ensure that workers receive their benefits fairly and on time, 
while preventing fraud.
    The Department of Labor has funded 160 grants in 46 states 
to ensure basic fairness to people of all ages and races in our 
unemployment system. I am very proud of the good work in my 
home state of Illinois, as well as around the country, and I 
look forward to hearing about these efforts from Jennifer 
Phillips today. The success of the equity grant shows how much 
states can do with adequate resources.
    But we should not confuse the effects of funding shortfalls 
with the appropriate funding consequences states currently 
experience when they fail to pay benefits to unemployed 
workers. The ARPA equity grants were an important first step to 
make sure that all workers received their earned benefits, and 
these grants are an investment that should continue.
    In addition, there are larger structural issues to address, 
starting with giving the Department of Labor the data and tools 
it needs to protect workers.
    Mr. DAVIS. Thank you, Mr. Chairman, and I yield back.
    Chairman LaHOOD. Thank you, Mr. Davis, for your opening 
statement there.
    We will now go to introduction of the witnesses and have 
their five-minute presentation. I will start with introductions 
from left to right.
    J.T. Taylor is the senior director of fraud at ID.me from 
McLean, Virginia.
    Next we will have Beth Townsend as executive director of 
the Iowa Workforce Development in Des Moines, Iowa.
    Next we will have Chris Stricklin, who is the president of 
Dunn University in Birmingham, Alabama.
    We have Will Raderman, who is an employment policy analyst 
at the Niskanen Center in Washington, D.C.
    We have Jennifer Phillips, who is the program lead at 
Georgetown University's Beeck Center for Social Impact and 
Innovation in Washington, D.C.
    Welcome to you all.
    Mr. Taylor, I will start with you. You are recognized for 
five minutes.

      STATEMENT OF J.T. TAYLOR, SENIOR DIRECTOR OF FRAUD,
                             ID.ME

    Mr. TAYLOR. Thank you, Chairman. Chair LaHood, Ranking 
Member Davis, and distinguished committee members, thank you 
for the opportunity to testify today on reforming unemployment 
insurance to support American workers and businesses.
    My name is J.T. Taylor, and I currently serve as the senior 
director of fraud at ID.me. Drawing from over two decades of 
public service in the United States Secret Service, the U.S. 
intelligence community, and the U.S. military, I bring a 
comprehensive perspective on digital fraud and cyber threats.
    ID.me is a leading digital identity verification platform, 
independently certified against NIST 863.3. We support over 129 
million digital wallets, and help dozens of Federal and state 
agencies enhance security and streamline identity verification 
processes.
    The COVID-19 pandemic presented unprecedented economic 
challenges requiring a swift response. In March 2020 the CARES 
Act was signed into law designed to deliver emergency 
assistance to individuals and businesses affected by the 
pandemic. However, lacking identity verification controls, this 
rapid action opened the door to widespread fraud.
    The GAO reported improper payments totaling $247 billion in 
2022, with estimates of pandemic-related UI fraud ranging from 
100 billion to 135 billion. ID.me estimates this figure closer 
to be 400 billion based upon our data and insights from 27 
states that we supported during that tumultuous time period. 
This discrepancy highlights the persistent challenges in 
accurately quantifying and combating fraud due to the 
technological limitations and fraud reporting deficiencies 
across the state networks.
    Overall, 27 states partnered with ID.me for digital 
identity verification at the height of the pandemic, 
implementing IAL2 controls in their respective programs, 
effectively curbing fraudulent activities and expediting claim 
processing for legitimate applicants. As a result of our NIST 
IAL2 solution, we have been credited by seven states for 
helping to avert a staggering $273 billion in potential fraud 
loss.
    We were brought in, in part, because legacy methods of 
identity verification that have traditionally supported public 
benefit programs are no longer up to the task of both stopping 
fraud and ensuring that the communities who need the programs 
the most are able to access them seamlessly. The combination of 
stolen personal information and generative AI enables 
fraudsters to hyper-scale their fraudulent attempts. 
Biometrics, including facial verification and liveness 
detection, are essential in combating these threats.
    ID.me's responsible use of biometrics, guided by principles 
of fairness, transparency, and choice through the multiple 
verification pathways ensures that identity verification 
processes are both secure and inclusive. However, the 
increasing sophistication of deep fakes from domestic 
fraudsters to nation-state-affiliated cyber criminals makes 
securing these inclusive verification pathways much more 
difficult.
    The Department of Homeland Security has acknowledged the 
clear and present danger posed by synthetic content, which 
threatens various domains, including national security and the 
financial sector. Biometrics are increasingly proving to be an 
effective countermeasure to deep fakes and digital injection 
attacks, and ID.me believes that biometrics will need to play 
an even bigger role in the protection of benefits in the 
future.
    Now is the right time to discuss how responsible use of 
biometrics, continuous human oversight, and threat research and 
monitoring will enable the government to maintain its edge in 
the fight against digital fraud. Congress should work with the 
executive branch to avoid any form of blanket bans or 
restrictions on their use, and advance guidelines for 
responsible deployment of biometrics.
    The integrity of our national services and benefit programs 
hinges significantly on the robustness of our identity 
verification processes. My recommendations on strengthening 
these mechanisms are as follows: number one, adherence to NIST 
guidance on identity verification; number two, opt for NIST 
Identity Assurance level 2; and number three, establish 
uniformity in data retention and the statute of limitations for 
prosecutorial support.
    Additionally, legislative efforts like Protecting Taxpayers 
and Victims of Unemployment Fraud Act should be commended and 
advanced as soon as possible. The longer we wait to act, the 
harder it will be to recover what stolen dollars we can 
mitigate and the newest evolutions of fraud we are starting to 
see.
    Key provisions like extending the statute of limitations 
for criminal charges and civil actions for prosecuting fraud 
from five to ten years, and incentivizing states by allowing 
them to retain a percentage of the recovered overpayments of 
unemployment benefits and reinvesting these dollars into 
program integrity and fraud prevention are crucial. By allowing 
recovered funds to be utilized to modernize state systems for 
verifying identity and income, states can further enhance their 
fraud prevention measures, ensuring UI claims are cross-
verified against the National Directory of New Hires and the 
State Information Data Exchange System.
    It is also important, however, to underscore that states 
have been--effectively demonstrated, when given choice, they 
can efficiently leverage the competitive identity verification 
marketplace developed around the NIST I02 guidelines. Just as 
Congress added the identity verification requirement under 
section 242 of the Continued Assistance Act to improve 
integrity of the Pandemic Unemployment Assistance Program, 
Congress should also consider further steps to add identity 
verification to traditional UI and subsequent UI programs.
    Recovery and resilience extend beyond strict measures. They 
require fostering competitive innovation where technology can 
thrive to recover stolen funds and prevent future losses. This 
effort must include continuous dialogue and cooperation between 
private sector and government entities.
    As we tackle these challenges and work to ensure solvency 
and crucial public benefit programs like UI, we owe it to the 
American taxpayer to implement forward-thinking strategies and 
robust infrastructures that ensure accessibility, security, and 
privacy.
    Thank you again for the opportunity to discuss these 
crucial issues.
    [The statement of Mr. Taylor follows:]
    
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    Chairman LaHOOD. Thank you, Mr. Taylor, and thanks for your 
prior service to the country. We will next move to Ms. 
Townsend.
    You are recognized for five minutes.

        STATEMENT OF BETH TOWNSEND, EXECUTIVE DIRECTOR,
                 IOWA WORKFORCE DEVELOPMENT

    Ms. TOWNSEND. Thank you, Chairman LaHood and Ranking Member 
Davis and other members of the committee for the opportunity to 
speak to you today about Iowa's Reemployment Case Management 
program and our efforts to help Iowans find reemployment at the 
earliest possible moment.
    I am Beth Townsend and, as the director of Iowa Workforce 
Development since 2015, I am here to talk about the value in 
providing intensive, one-on-one support and innovative 
resources as soon as someone files for unemployment.
    Iowa has seen significant and consistent value in 
overhauling our approach to helping Iowans find jobs. Iowa 
Workforce Development is the centerpiece of workforce 
information programing and solutions in Iowa. We are the agency 
responsible for administering the unemployment insurance 
program, implementing all Federal workforce services programs, 
including 15 American job centers located throughout the state.
    Iowa, like every state, depends on our employers to move 
our economy forward. But real, long-term growth requires a 
workforce that is stable as well as sufficient. We want people 
to feel fulfilled where they work, which helps decrease the 
churn in the labor force that has been so common since the 
pandemic. That is why Iowa Workforce Development focuses on 
helping its customers find rewarding careers, rather than jobs. 
This is the path that benefits our entire state the most, when 
both workers and employers grow together.
    Nothing is a better illustration of Iowa's innovative 
efforts to grow and develop its workforce than the Reemployment 
Case Management program, also known as RCM, which was created 
in 2021 in response to the workforce shortage caused by the 
pandemic. Our path to creating the Reemployment Case Management 
program began in 2020, when the COVID-19 pandemic created 
unprecedented joblessness and overwhelmed unemployment systems 
throughout the nation.
    One step Governor Reynolds took in an effort to get more 
Iowans back into the workforce and ease the challenge employers 
were facing in June of 2021 was to end Iowa's participation in 
Federal unemployment programs early. Her actions removed the 
disincentive that the generous pandemic benefits had created 
for some Iowans to continue to sit on the sidelines.
    Additionally, in October 2021, Governor Reynolds announced 
a shift in the mission of Iowa Workforce Development. Our 
agency's new and overriding policy priority would be to get 
those jobless Iowans to the other side of the unemployment as 
quickly as possible. This unemployment--or this simple yet 
profound change revolved around returning unemployment to its 
original purposes: serving as a short-term bridge between 
careers, rather than as a means of long-term support.
    It is important to understand that the RCM was not created 
to eliminate or lessen unemployment benefits. Instead, our goal 
was to reduce the need for benefits by helping the unemployed 
find work quickly.
    Our Reemployment Case Management program is built on two 
things: strengthening the incentives that encourage the 
unemployed to aggressively search for work, and providing more 
assistance earlier in the process to increase the odds of their 
success. To do this we decided to implement a modified and 
supplementary version of the Federal RESEA program.
    As you know, RESEA programs have been part of unemployment 
in the United States for more than a decade. Iowa has operated 
a version of RESEA since 2015, but under the terms of the 
federally-funded program which require waiting until claimants 
receive unemployment benefit payments and are notified about 
RESEA, career planners were not meeting with unemployment 
claimants at the earliest until roughly the fifth week after an 
initial claim was filed.
    Given the increased demand for workers created by COVID-19, 
as well as workers' increased need for job search assistance, 
we deemed that delay to be too long. Instead, RCM was created 
to be a new, state-funded program that would supplement the 
Federal version, meeting with unemployment claimants from the 
week after their initial claims were filed.
    Unemployment claimants in Iowa now are contacted about RCM 
during the first week after they file for benefits. Career 
planners schedule one-on-one appointments and immediately 
assign claimants to several virtual workshops on topics of how 
to navigate the computer system for reporting work search, how 
to build a successful resume, and how to interview for a job. 
Career planners continue to have regular one-on-one employments 
with claimants to review job search results and assign 
reemployment activities.
    Once the claimant becomes eligible for RESEA, the program 
takes over the one-on-one appointments and monitoring. The 
claimant continues to receive these services until he or she is 
reemployed. If anyone exhausts 50 percent of their eligible 
benefit weeks, we shift him or her to more intensive services.
    Because of the RCM program, we have seen a reduction of 30 
percent--of over 30 percent in the amount of duration of 
unemployment benefits, and we have saved approximately $250 
million in unemployment benefits in the last two years, paid 
out, which results in a reduction in unemployment taxes to our 
employers. Through this program we have been very successful in 
helping Iowans get back to work faster and helping Iowa 
employers find the workforce that they need. Thank you.
    [The statement of Ms. Townsend follows:]
    
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    Chairman LaHOOD. Thank you, Ms. Townsend. I also want to 
thank you for your prior service in the Air Force.
    With that we will next recognize President Stricklin for 
five minutes.

        STATEMENT OF CHRIS STRICKLIN, PRESIDENT, DUNN
                          UNIVERSITY

    Mr. STRICKLIN. Good afternoon, Chairman LaHood, Ranking 
Member Davis, and distinguished members of the subcommittee. On 
behalf of the Alabama Workforce Council, I am Chris Stricklin, 
a retired Air Force colonel with an encore career in the 
construction industry at Dunn Companies in Birmingham, Alabama.
    Thank you for the opportunity to speak on our belief the 
answer to reducing the number of people on unemployment 
insurance, as well as increasing labor force participation and 
getting people back to work, lies in revolutionizing our 
workforce, both removing obstacles to entry and improving the 
opportunity to earn a livable wage while on a career 
progression pathway. This requires teamwork and an all-hands-
on-deck approach with business, government, and education 
leaders to create multiple pathways for individuals to receive 
the education or skills needed to be successful and remain 
employed.
    Our team of industry partners, the State of Alabama, the 
Department of Labor, and our workforce councils simultaneously 
focus on training those searching for employment for the first 
time, upskilling those yearning for advancement, and retraining 
those on unemployment. To be successful we must ask ourselves, 
what leads people to need unemployment compensation?
    Our group of leaders began efforts with the belief that 
workforce issues in UI could not be solved by merely putting a 
hammer in someone's hand. Instead, we must capture their hearts 
and their minds, and inspire motivation in both our industries 
and in their futures. This is not a labor crisis; it is an 
issue of finding one's personal identity and purpose.
    Our efforts initially targeted areas with some of the 
highest unemployment and least skilled population. The training 
model delivered awareness of job options in different 
specialties so one could find what interested them, then reduce 
barriers to entry. Training is provided at reduced cost, 
designed to be accomplished quickly, and focused on one simple 
task: train the first two weeks on the job. This delivers a 
measure by which to guide course development while delivering 
to industry partners an individual who understand safety and 
basic operation. This translates to employers with a reduction 
in on-the-job training, improved safety outcomes, and increased 
retention.
    Through our efforts we enabled unskilled, under-skilled, 
and unemployed individuals the ability to obtain skill 
certifications which follows for their entire career. We are 
now reaching a previously untapped or underserved pool of 
motivated individuals and enabling their career pathways, not 
merely jobs.
    Our model of certification is hybrid, in which an 
individual takes theory portion of the class online, on demand, 
and on their schedule, then transitions to an in-person lab for 
the last part of the hands-on. Through this effort, over 3,000 
Alabamians have earned credentials to date, and the training 
has extended to other industries including food and beverage, 
hotel operations, meat cutter, and mental health worker.
    Along the same motivation, courses have been conducted in 
our prisons to reduce recidivism and build a positive future 
for parolees, specifically developing a commercial driver's 
license program which has graduated 78 parolee students to 
date.
    Our next innovation is occurring this month at Dovetail 
Landing, with a focus on veterans reentering the workforce 
after their military service with the Reverse Boot Camp.
    Alabama has developed a comprehensive approach to 
decreasing the need for unemployment compensation while 
increasing the labor force participation and post-secondary 
attainment rates by concurrently developing new modalities of 
training that integrate supportive services, work-based 
learning, enhanced career navigation, and short cycle training 
programs to allow individuals facing benefits cliffs to persist 
in training and the workforce. By unbundling and modernizing 
degrees, Alabama is providing multiple points of entry and exit 
for Alabamians to enter training and the subsequent workforce.
    What I am most excited about with regard to reducing 
unemployment is Governor Kay Ivey's December 23 launch of the 
Alabama Talent Triad as the nation's first full-scale talent 
marketplace to connect education and training providers, 
students and job seekers, and employers based on a direct 
skills match. In March this year Alabama State Workforce 
Development Board adopted a policy to require the Alabama 
Talent Triad to be used for the Workforce Innovation and 
Opportunity Act training program intake process.
    Where this best impacts our conversation today will be a 
policy to be adopted shortly, which would enable unemployment 
insurance claimants to apply for all available and suitable 
employment using the triad. This will allow the state to 
instantly verify work search requirements. Rather than the 
traditional three applications per week, Alabamians will now be 
able to apply for all jobs, potentially hundreds, with the 
click of one button, and this will be a required first step of 
signing up for unemployment.
    In closing, we are a state working together for a better 
tomorrow for our individuals, our companies, our industries, 
our communities, our state, and our nation. Together this will 
revolutionize our social dialogue and develop career routes 
with progression pathways, especially for those who may have 
fallen behind.
    Thank you for the opportunity to sit before you today and 
explain why we truly believe Alabama is number one in the 
nation for workforce innovation.
    [The statement of Mr. Stricklin follows:]
    
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    Chairman LaHOOD. Thank you, President Stricklin, for that, 
and we are grateful for your service.
    Mr. STRICKLIN. Thank you.
    Chairman LaHOOD. We will next recognize Mr. Raderman for 
five minutes.
    You are now recognized.

     STATEMENT OF WILL RADERMAN, EMPLOYMENT POLICY
                ANALYST, NISKANEN CENTER

    Mr. RADERMAN. Chairman LaHood, Ranking Member Davis, and 
members of the committee, thank you for inviting me here today 
and for holding a hearing on how to better administer 
unemployment benefits.
    My name is Will Raderman, and I am an employment analyst at 
the Niskanen Center, a non-partisan think tank founded in 2015. 
We have been privileged to support this committee's work, most 
recently with the Tax Relief for American Families and Workers 
Act. Our central economic philosophy is that strong free 
markets and robust social policies together provide the 
foundation for a free and fair society.
    Unfortunately, programs meant to complement our dynamic 
economy and keep families stable following job loss are falling 
short. This includes recurring performance issues with the 
state unemployment insurance systems. My testimony will touch 
on three related points.
    One is that Federal funding sent to state UI agencies for 
administration has been eroded by inflation and fluctuates year 
to year, making it difficult to develop strategic, long-term 
investments.
    Two, substantial amounts of tax revenue raised specifically 
for program administration is not ending up in state agency 
accounts to fund upgrades.
    And three, Congress should reform the financing process so 
that state agencies have the resources needed to maintain 
program integrity.
    Early on in the COVID pandemic, it became clear that UI 
agencies were not equipped to handle the surge of claims. 
Although the agencies received an influx of additional funding 
to help manage the situation, years worth of necessary 
improvements could not be implemented overnight. Many 
legitimate applicants were forced to wait months before 
receiving their benefits, while criminals stole up to $135 
billion, according to GAO estimates.
    The magnitude of the fraud was unprecedented. However, the 
administrative shortcomings were not. Past emergencies like 
Hurricane Katrina exposed many of the same system gaps that 
were exploited at a far more costly scale during COVID. Similar 
types of malfunctions will repeat themselves without changes to 
the administrative financing process so that state agencies can 
steadily invest in program modernization. One-off funds are not 
a substitute.
    Each year Congress provides state agencies with the base 
allocation to fund program administration, which they must try 
to plan around, but those allocations are not reliable. Since 
2007 the value of the base allocation sent out to states has 
declined by $900 million when adjusting for inflation, a 27 
percent decline. Every agency is worse off as a result.
    State space funding is also volatile. Less funding is 
released during stronger economic years, when fewer claims are 
projected. The result is that UI agencies get fewer resources 
when they have the most opportunity to focus on system updates.
    To make matters worse, the approved funding is divided up 
differently each year through a distributional resource 
justification model. This formula causes states' allocations to 
fluctuate over time, and tends to shortchange agencies 
struggling the most to process benefit claims. In particular, 
this formula contributes to significant regional disparities 
that hurt central and southern states. Their agencies can 
receive half as many dollars per working-age resident as the 
best-funded ones.
    Part of the problem is that we are leaving hundreds of 
millions of dollars of revenue already raised annually for the 
purpose of UI administration on the sideline. Eighty percent of 
the funding raised through the Federal unemployment tax is kept 
in a Federal account to fund program administration, while 20 
percent is automatically directed to an emergency benefits 
account. Yet agencies are not given full access to the 80 
percent of funds intended for program administration, due to 
congressional appropriations and complex trust fund rules.
    The spare revenue could be used by state UI agencies to 
improve their systems, but it is rarely made available for that 
purpose. Instead, a strict account law frequently causes unused 
funds in the administrative account to be diverted to the 
emergency benefits account, including more than $4.5 billion in 
the five years leading up to the pandemic. A better use of 
those funds would have been to allow UI agencies to upgrade 
their institutional capacity.
    To counter these issues, we advise Congress to pursue 
reforms to establish a stronger connection between what is 
raised for program administration and what goes back to the UI 
agencies, and to ensure that agencies receive steadier, 
inflation-adjusted allocations over time.
    In conclusion, administrative financing fixes are necessary 
to maximize agency performance and integrity.
    Chairman LaHood, Ranking Member Davis, and members of the 
committee, thank you again for the opportunity to testify 
today. I look forward to hearing your questions.
    [The statement of Mr. Raderman follows:]
    
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    Chairman LaHOOD. Thank you, Mr. Raderman. We will now 
recognize our last witness, Ms. Phillips.
    You are recognized for five minutes.

     STATEMENT  OF  JENNIFER  PHILLIPS,  PROGRAM   LEAD,
      GEORGETOWN UNIVERSITY, BEECK CENTER FOR SOCIAL IM-
      PACT

    Ms. PHILLIPS. Thank you, Chairman LaHood, Ranking Member 
Davis, and distinguished members of the subcommittee, for the 
opportunity to testify today. It is my honor to share insights 
about how state unemployment insurance agencies are helping 
historically disenfranchized workers access UI benefits, and 
how simplifying and improving access for all workers actually 
boosts UI system integrity.
    I work for the Beeck Center for Social Impact + Innovation 
at Georgetown University, and we focus on best-in-class digital 
service delivery solutions to ensure access to public benefits. 
And previously I proudly worked for the Illinois Department of 
Employment Security as the assistant deputy director for 
service delivery.
    Unemployment insurance is an economic first responder 
program. It safeguards eligible workers from financial crises 
when they lose a job, and it helps stabilize the economy. 
Eligible workers can and should expect it will work for them 
when they need it. And Michigan's mission statement really says 
it all: UI should be fast, fair, and fraud free.
    Pandemic claim volume, combined with years of declining 
investment in state technology, brutally exposed foundational 
cracks in aging systems, and millions of eligible American 
workers struggled to obtain UI benefits. Research shows that 
many were historically disenfranchized workers who were less 
educated, younger, and from racial and ethnic groups.
    Equitable access means that any eligible worker should be 
able to effectively and efficiently obtain and--apply and 
obtain for benefits that they are entitled to without facing 
undue burdens or barriers. McKinsey Research finds that when a 
person's experience utilizing state services meets or exceeds 
expectations, it can boost trust in government, improve morale 
among civil servants, and lower government agency costs.
    U.S. DoL has awarded nearly $800 million for ARPA UI 
modernization to help achieve three congressionally-mandated, 
mutually reinforcing goals of preventing and detecting fraud, 
increasing benefit timeliness, and expanding equitable access 
to UI. These innovation-focused grants offer an unprecedented 
opportunity to modernize UI. And as a former state UI 
administrator, I thank you, and I want you to know that UI 
leaders across the country are hard at work meeting those 
goals.
    State innovation will shine a light on what works and what 
does not. That plus U.S. DoL's recent Building Resiliency 
recommendations will create a roadmap for the reforms that are 
most needed. In my written testimony I outline ten UI access 
challenges and corresponding solutions that U.S. DoL and states 
are working on, and I will highlight five now.
    [Slide]
    Ms. PHILLIPS. In Illinois we created an acronym for the 
first three: PLATE, Plain Language, Accessibility, and 
Translation for Equity. PLATE encourages thinking about 
claimant diversity, like for someone who reads at a fifth grade 
level, or is blind, or is deaf, or whose first language is not 
English. States like New Jersey--and that is up on the screen--
took complicated UI correspondence and made it easy to 
understand, with actionable steps for claimants. They also 
created a how-to toolkit to share with other states like 
Illinois.
    Fourth, it is critically important to develop technology 
solutions that build in iterative feedback loops via user 
research. We need to build, test, improve, launch in phases, 
and keep improving. Illinois plans to update its UI application 
and online claimant portal. To better understand user pain 
points, Illinois partnered with U.S. DoL to analyze over 
270,000 claimant survey responses. We conducted live claim 
filing observational research, and we analyzed data about where 
people abandon in the application process. States are improving 
their ability to conduct this type of customer experience and 
usability research, ensuring that new technology works for 
unemployed workers, especially those historically marginalized.
    Lastly, another key challenge is website navigation and how 
to apply for UI. States like Michigan, working with human-
centered non-profit Civilla, have created a step-by-step 
claimant roadmap on their website. They offer weekly claim-
filing help sessions, and launched a Community Connect program 
with regional liaisons to help when needed. State outreach 
efforts that increase human interaction also help confirm that 
claimants are legitimate filers.
    States have pivoted from the crush of the pandemic to now 
pioneering and implementing innovative solutions that increase 
equitable access to UI. My written testimony has more than 25 
examples of that state ingenuity that improve access and can 
also drive down non-fraud improper payments. To keep this 
momentum, states need flexibility and continued funding. They 
need ways to accelerate the work by collaborating. And 
organizations like the Beeck Center and others, supported by 
private philanthropy, help convene, connect, and catalyze this 
change.
    States need champions. States need Congress to champion 
additional technology modernization and customer experience 
improvements to restore faith that when an eligible American 
worker loses their job, UI will work for them fast, fair, and 
fraud-free.
    It was an honor to testify to the committee today, and I 
welcome your questions. Thank you.
    [The statement of Ms. Phillips follows:]
    
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    Chairman LaHOOD. Thank you, Ms. Phillips, and that 
concludes our formal testimony today. We will now move to the 
question-and-answer period, and I will recognize myself for 
questions.
    [Chart]
    Chairman LaHOOD. Mr. Raderman, I am going to start with 
you. For years, states have said there is inadequate 
administrative funding available for making needed improvements 
to their UI technology and benefit systems. As the chart behind 
me shows--and I think is up on the monitoring screens here--
outside economic downturns such as the Great Recession of 2008 
and COVID-19, states routinely receive less than half of 
Federal tax revenues paid by employers to administer the UI 
program. In fact, prior to the pandemic, when the economy was 
strong, states received about 40 percent of what employers paid 
in.
    It is clear that substantial amounts of tax revenue raised 
specifically for UI administration is not ending up in the 
state agency hands to enact needed system improvements. So, Mr. 
Raderman, can you explain some of the challenges this 
administrative financing mechanism creates, and what can be 
done to improve it?
    Mr. RADERMAN. Thank you for the question, Chairman LaHood.
    So the current financing mechanism is causing states to 
manage their programs with bare bones resources and with little 
to no guaranteed funding each year to actually focus on system 
improvements. The result of that is a lot of the problems that 
you see during COVID we are seeing in past crises like 
Hurricane Katrina, as well, because the financing system is not 
in a good place to actually let states proactively address 
those problems over time.
    In order to actually improve the system there needs to be a 
stronger connection between what is being raised for program 
administration and what is being returned to states each year.
    Chairman LaHOOD. And what is your recommendation on 
improving that connection from a public policy standpoint?
    Mr. RADERMAN. There is going to be kind of two points in 
time that I think--or two points of access that need to be 
changed. One is the actual appropriations. It needs to be that 
all of the dollars being raised are being approved. But there 
is also the issue that some of the Federal accounts that manage 
the dollars end up diverting funds away from program 
administration when that balance for the administrative account 
exceeds a pretty low value.
    So making sure those funds are actually going back to 
states is crucial, as well.
    Chairman LaHOOD. And what you just mentioned there, is it 
your recommendation that it be codified into law?
    Mr. RADERMAN. Currently, there is a statutory provision 
that is diverting funds away from the administrative account. 
And our view at the Niskanen Center is to change that so those 
funds stay for program administration.
    Chairman LaHOOD. Thank you for that. I am going to turn 
next to Ms. Townsend.
    In your testimony you state that unemployment claimants in 
the State of Iowa are contacted about the state's reemployment 
case management program when they first file for benefits so 
claimants can quickly begin developing skills to successfully 
navigate a pathway back into the labor force.
    As I referenced in my opening, our BRIDGE for Workers Act, 
which gives states additional flexibility to provide 
reemployment support to any individual receiving benefits as 
long as the state believes these services would help them 
return to work more quickly.
    Ms. Townsend, can you talk more about the return on 
investment that reemployment services provide, and how that 
relates to rebuilding our labor force, particularly looking at 
the success you have had in Iowa?
    Ms. TOWNSEND. Thank you for that question.
    So since the inception of the program we have spent 
approximately $4 million on our Reemployment Case Management, 
and that pays for 18 caseworkers and a manager. It also pays 
for some computer upgrades so that we were able to better track 
individual efforts in terms of their work search activities, 
and also manage their cases better.
    Of the $4 million, we anticipate that by the end of 2024 we 
will have saved $400 million in unemployment benefits. So it is 
about a 1-to-100 return so far. Just to give you an idea, in 
2019, the year before the pandemic, Iowa paid out roughly $388 
million in unemployment benefits. Once the Reemployment Case 
Management system went into effect, we paid $253 million in 
2022 and $260 million in 2023, and we expect to--or anticipate 
paying a similar amount.
    But one of the things that I would also point out is the 
value that individuals receive in getting that one-on-one 
assistance. I receive daily success stories from individuals 
who, when they lose their job, they are frustrated, they are 
hopeless, they are anxious, and they are not sure where they 
are going to go. And having that person in their corner to say, 
you can do this, you can do more. Let's apply for that job that 
maybe you didn't think you had the experience for, and let's 
get your resume and interview skills up to par to get those.
    So we are helping Iowans get jobs that are beyond what they 
expected to get. They are getting really good-paying jobs, and 
they are getting those careers that, like I talked about in my 
opening statement, they are going to stay with, and they are 
going to continue to benefit the employer that they have come 
to in their next act.
    Chairman LaHOOD. Thank you for that. And, Ms. Townsend, 
have you found that other states have tried to model or look at 
your program as a success in what they do?
    Ms. TOWNSEND. We have received inquiries from other states 
about how we are doing it. I think it is probably a funding 
issue. We are--Governor Reynolds gave us ARP dollars to fund 
the program, and that is what we have been--we will use until 
2026, at which point we will ask the legislature for funding if 
we don't have any additional Federal funding.
    Chairman LaHOOD. Thank you for that.
    Mr. Taylor, I will turn to you now. An April report from 
the GAO analyzed data from 2018 to 2022 that showed the federal 
government's losses were an estimated $233 to $521 billion 
annually to fraud, a substantial portion from the unemployment 
insurance program. I think you referenced that in your 
statement.
    Mr. Taylor, can you describe the current trends your 
company has noticed in relation to UI fraud, and what can be 
done to strengthen program integrity for the unemployment 
program?
    Mr. TAYLOR. Thank you, Chair LaHood. I would offer that--
when ID.me was initially retained by the 27 states in my 
opening testimony, what we found was an outdated system, a 
legacy system built around what is known as knowledge-based 
answers, things like looking at a credit report to see what 
type of car you drove whenever you were in college or high 
school. This was an outdated policy.
    Whenever we went into those 27 states, fraud rates went 
down, accessibility went up. Today the threats that we are 
facing to specifically unemployment are--have risen to a 
critical infrastructure level, primarily driven by nation-state 
involvement, where they are attacking a number of states. This 
includes the country of China, it also includes the country of 
Nigeria, predominantly.
    So fraud has evolved. Yet the controls that we have put in 
place have not evolved at the vast majority of states and 
institutions. ID.me has seen great gains specifically around 
the IAL2. But even today, we enhance the IAL2 NIST policy by 
adding in the machine learning aspects. What we have found is 
that you have to fight AI with AI.
    And the stolen identities are already out there. Now there 
is a hyperscaling that is taking place within these criminal 
networks. As an agent on the front lines of this back in 2020, 
you would get a phone call and it would be maybe a person that 
suffered one instance of identity theft. Whenever I came to 
work at ID.me, we verify 60,000 to 70,000 identities per day. 
We have a receptacle, we have an email box where you can email 
in to our team and see if you are under threat of identity 
theft. And the scale that we see today is a direct result of 
this hyperscaling of fraud controls.
    So what I am seeing today is that not only are the outdated 
aspects of identity verification need to be replaced by at 
least IAL2, but at the same time fraud is evolving quicker than 
our policies, and we need to account for that.
    Chairman LaHOOD. Thank you for that, Mr. Taylor. Those 
conclude my questions.
    I will next turn to Ranking Member Davis for your 
questions.
    Mr. DAVIS. Thank you, Mr. Chairman, and thank you to all of 
our witnesses.
    Ms. Phillips, thank you for testifying today and for the 
important work you did on behalf of Illinois workers.
    One of the things we fought to do in the American Rescue 
Plan was invest in equity, and specifically in race equity in 
the unemployment program. What are some of the long-term 
benefits for children and communities when workers who are 
historically left out are able to access their earned benefits?
    Ms. PHILLIPS. Thank you, Ranking Member Davis, for that 
question. I have four points to answer that question.
    One, financial stability is incredibly important. Losing a 
job is stressful, it has devastating consequences. Sixty-four 
percent of Americans live paycheck to paycheck right now. If 
you cannot find a job immediately or get UI benefits that you--
assuming you may be eligible, families may not be able to pay 
bills, rent, and other expenses. My written testimony offers 
citations on numerous research studies that show how financial 
stability is a gateway for better child outcomes, emotional and 
educational success for both parents and children, and 
reattachment to the labor market.
    Financial instability can be a disrupting force, like 
having to move to a different school district because you don't 
have enough money to pay rent. And parents--research is very 
clear on parents' unemployment that can also have long-term 
effects on children's lifelong earnings.
    The third point is that there is well-documented and well-
researched evidence that shows the mental health and the stress 
impacts that unemployed people face. I cite research in the 
testimony about that hardship, about anxiety and depression 
that unemployed workers face that also affects children.
    And finally, the fourth point is that local economies lose 
when they--they lose when eligible workers can't get UI, when 
people have less income and those dollars are not circulating 
into those local economies.
    The research also is very clear, and there is numerous 
studies cited in my testimony about how unemployment has 
extreme disparities for people of color, namely African 
American and Hispanic families.
    Mr. DAVIS. Thank you. Can you tell us more about why 
ensuring equitable access makes unemployment insurance more 
effective as a tool for preventing recession or making economic 
downturns shorter and less bad?
    Ms. PHILLIPS. I also cite research in my testimony that 
shows the return on investment for the unemployment insurance 
program is $1.2 to every dollar spent. There is evidence in my 
testimony that cites a Harvard research project that shows the 
importance of UI as an economic stabilizer, demonstrating that 
states that have more generous unemployment insurance benefits 
actually significantly lessen the volatility of local economic 
fluctuations. Having workers have financial stability is good 
for local economies, and the lack of UI access that happens 
during financial economic downturns when people cannot access 
UI and cannot get reemployed right away sets communities of 
color back economically.
    Mr. DAVIS. Ms. Phillips, can you tell us more about what 
data we collect currently to measure fairness in the UI system, 
and what additional data we might need to hold states fully 
accountable?
    Ms. PHILLIPS. Thank you for that question.
    Currently, I will cite two examples of where there is data 
collected that has really robust demographic information.
    Right now the U.S. DoL requires states to report on 
recipiency rates. That has strong demographic information. But 
I will say that any new reform that can allow for greater 
disaggregation of data will help states--will help Congress 
hold states accountable. One example that I cite in my 
testimony is the ETA 227 report. That is the overpayment report 
that states report on--to U.S. DoL quarterly. Within that 
report there is a section on non-fraud improper payments.
    In my testimony I cite that just in last--in 2023 in 
Illinois, the percentage of non-fraud improper payments was 
actually higher than the fraud improper payments. And we have 
no demographic disaggregated data to show, like, what is 
happening with those non-fraud improper payments. They are 
this--they are--they can be claimant error, state agency error, 
employer error. But we don't know anything about anything 
deeper than that.
    And then finally, I would just like to say, like, in terms 
of recommendations for what states could collect in the future, 
Illinois is using its equity grant to look at likelihood to 
file. One of the equitable access to UI issues is not just what 
happens when someone actually has applied and is on the journey 
to reemployment, but we know virtually nothing about people who 
don't make it to the front door who are potentially eligible.
    One of the things that Illinois is doing with the equity--
the ARPA equity grant is looking at when employers file a WARN 
notice, and figuring out if we can find out why people choose 
to apply or not apply to UI.
    And finally, states could be collecting customer experience 
data. They could be collecting survey information like we did 
in Illinois that asks claimants about their levels of trust, 
satisfaction, timeliness, and ease with the application 
process.
    Mr. DAVIS. Thank you----
    Ms. PHILLIPS. Thank you.
    Mr. DAVIS [continuing]. Mr. Chairman, for your indulgence, 
and I yield back.
    Chairman LaHOOD. Thank you, Mr. Davis. We will now 
recognize Mr. Carey of Ohio.
    Mr. CAREY. First I want to thank the chairman for having 
the hearing, and I want to join the ranking member in wishing 
our colleague, Mr. Evans--we can't wait to have you back up 
here with us.
    I also want to thank the witnesses for being here to 
discuss these much-needed reforms to unemployment insurance 
program--or UI from now on.
    Today, alongside my colleague, Representative Greg Landsman 
from Cincinnati, I am proud to introduce the New Opportunities 
for Business Ownership and Self-Sufficiency, or as we call it, 
NO BOSS Act. This legislation intends to support individuals 
pursuing small business ownership by improving the currently 
under-utilized Self-Employment Assistance Program within the UI 
program. Our legislation aims to make state participation less 
burdensome and to encourage greater engagement in the SEAP 
program.
    [Chart]
    Mr. CAREY. Mr. Chairman, currently the Federal Unemployment 
Tax, or FUTA, tax is paid versus revenue received by states 
whose fraud UI administration is unequal across the states. You 
can see from the chart behind me.
    The disparity is most pronounced in the Midwest, where I 
come from, in Ohio, the south, southwest, according to your own 
calculations. In Fiscal Year 2022, according to the Department 
of Labor, FUTA receipts versus amounts returned data, Ohio 
employers paid an estimated $229 million in FUTA taxes, and 
Ohio received $105 million in administrative grants from DoL, 
which is--if you do the math, it is only about 46 percent of 
the taxes paid.
    So as you can see, Ohio kind of is getting the short end of 
the stick here on the UA administration funding versus taxes 
paid by its employers. Funding that could be used to 
potentially administrate programs like the Self-Employment 
Assistance Program, or SEAP, which my bill, the NO BOSS Act, 
gives states more flexibility to administer.
    Can you explain a little bit why this disparity is so 
pronounced in these areas?
    Mr. RADERMAN. Thank you for the question, Representative.
    So the way that the dollars for program administration get 
distributed, it is through a resource justification model, 
the--kind of the main points of emphasis in terms of how it 
gets divided up between the states, it includes both program 
efficiency and processing, the various basic workload, and then 
how accessible the program is. So is there going to be a higher 
workload in the state?
    And so the states that--or the agencies that are having the 
most issues with either efficiency or accessibility, they end 
up getting penalized the most when it comes time to actually 
distributing the dollars. And a better approach would make--
would be to make sure that all the states were getting a much 
more stable amount, making sure that it was based more on the 
working population that was overseen, rather than the claims 
levels itself.
    Mr. CAREY. Okay, thank you. This committee has done 
important work to address fraud and overpayments of the UI 
benefits, including the House-passed Protecting Taxpayers and 
Victims of Unemployment Fraud Act, which was mentioned earlier 
today.
    States like Ohio are making investments in fraud recovery 
and prevention efforts. And as they continue to recover these 
fraudulent payments, we should be working to incentivize their 
investments in these efforts. So back to you, sir. What 
thoughts do you have on policy recommendations that would 
incentivize states to pursue fraud recovery work?
    Mr. RADERMAN. Thank you for the question, Representative.
    A number of the proposals that have been put forward do 
include incentives that provide states a percentage of the 
funds that are reclaimed. I know that there has been proposals 
to allow the OIG to pursue fraud for a longer period of time, 
making sure that that fraud--those fraud dollars end up going 
back to the States. It makes sense to us.
    But I think making sure that the state agencies have more 
robust funding moving forward so all the dollars that are being 
raised specifically for administration, ensuring that they go 
back to the states and that some of the losses due to inflation 
over the past several decades get undone, those are both 
important measures to put them in a better financial position.
    Mr. CAREY. Again, I want to thank the witnesses, and I want 
to thank the chairman and the ranking member for having this 
hearing. And with that I yield back.
    Chairman LaHOOD. Thank you, Mr. Carey. I will now recognize 
Mrs. Steel.
    Mrs. STEEL. Thank you, Mr. Chairman LaHood, for holding 
this hearing. And thank you, all the witnesses for coming out.
    Recently, Chairman Smith and I sent a letter to Acting 
Secretary Su asking for all details of any attempt of her to 
forgive or write off fraudulent unemployment insurance payments 
issued by California or any other state. I would love to submit 
this letter for the record, Mr. Chairman.
    [Pause.]
    Chairman LaHOOD. Yes, I am sorry, yes. [Laughter.]
    So ordered.
    [The information follows:]
    
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    Mrs. STEEL. We are still awaiting a response from the 
Department, and I want to submit another record of recent L.A. 
Times article titled, ``Job Growth in California Falls Back, 
Unemployment Rate Remains Highest in the Country.''
    Chairman LaHOOD. Without objection.
    [The information follows:]
    
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    Mrs. STEEL. Thank you.
    Inflation, record high cost, and heavy state regulations 
are killing small businesses across the state.
    Before I ask Mr. Taylor for the questions, and I want to 
ask Ms. Phillips that--you just mentioned while you are 
speaking that non-fraud proper overpayment is more than 
fraudulent payments?
    Ms. PHILLIPS. Thank you, Representative Steel. So, yes, the 
U.S. Department of Labor requires all states on a quarterly 
basis to file the ETA 227 report, it is the improper 
overpayment report. And I am going to just make sure I have the 
exact number here.
    So in 2023, 62 percent of Illinois's total overpayments 
were considered non-fraud, improper payments. And of that 62 
percent of non-fraud, improper payments, 57 percent were 
attributable to a claimant error made somewhere along the 
process.
    Mrs. STEEL. So it was Illinois, but not for the national 
average.
    Ms. PHILLIPS. Yes, I have not done----
    Mrs. STEEL. Yes, because we had this hearing with Acting 
Secretary Su regarding this, and she said that fraudulent 
payments by the law that you cannot really forgive because she 
wanted to forgive this loan that fraudulent payments went out 
in California. Out of $135 billion, $30 billion happened in 
California. It is over 22 percent. So that is actually under 
her watch, because she was labor secretary in California. She 
was the one who created it. Now she wants to forgive that. That 
is taxpayers' money, and it should not go to that. So that is 
why I was asking.
    I asked the same questions that she couldn't give me any 
numbers for. So she was hiding something or, you know, you gave 
me some numbers because she said she doesn't know the numbers 
nationally, that during the COVID that this UI went out--the 
payments went out, and then how much was overpayment or how 
much was fraudulent payments.
    Ms. PHILLIPS. And Representative Steel, I should amend my 
comment that the data, the ETA 227 data, is regular UI. It does 
not include the CARES Act program.
    Mrs. STEEL. So it has nothing to do with the CARES Act, 
so----
    Ms. PHILLIPS. Doesn't have the CARES Act.
    Mrs. STEEL. So thank you.
    Ms. PHILLIPS. Yes.
    Mrs. STEEL. Thank you very much for clearing that up.
    According to the Pandemic Response Accountability 
Committee, California estimated it sent $800 million in 
pandemic unemployment benefits to the 45,000 prisoners. 
Improper payments to prisoners, scammers, and international 
gangs are part of the reason California has a Federal 
unemployment insurance loan balance to the Federal Government 
of $18.3 billion. If it is not going to be paid, then guess 
what happens? Employers have to pay a much higher rate.
    Some estimates show California Employment Development 
Department distributed approximately 30 billion, as I just 
mentioned, during the pandemic. So, Mr. Taylor, in your 
opinion, why was California the epicenter for UI fraud during 
the pandemic?
    Mr. TAYLOR. Thank you, Representative Steel. Let me offer 
that prior to implementing ID.me, and right around October 
2020, California was experiencing a landslide of fraud at the 
time. Coming out of the governor's office and post the ID.me 
integration, whenever we implemented the IAL2 controls in 
there, reporting out of the governor's office put it right at 
$125 billion in fraud savings that ID.me saved the State of 
California. Subsequently, California has moved away from the 
IAL2 standard, and now you are starting to see those fraud 
rates that you are alluding to.
    As far as the why, it is going back to an old data broker 
model that I referenced in my testimony, where you are asking 
for PII that is quite literally available for cents on the 
dollar on the dark web.
    Mrs. STEEL. Thank you very much, because I want to make 
very clear about that, because when Julie Su was Labor 
Secretary, she actually mentioned that, you know what, they are 
not up to date with how they are going to make proper payments.
    I have a few more questions, but I am going to submit in 
writing because--since my time is over.
    Mrs. STEEL. I yield back.
    Chairman LaHOOD. Thank you, Mrs. Steel. I will now 
recognize Ms. Chu of California.
    Ms. CHU. Ms. Phillips, the Niskanen Center--and indeed, 
some on this dais--assert that the formula that allocates the 
appropriations among states unfairly shortchanges certain 
states because the state employers pay more Federal UI taxes 
than they receive in Federal administrative payments. But the 
reason that certain central and southeastern states receive 
smaller allocations is that they erect barriers to receiving UI 
benefits, they pay UI benefits to fewer workers, and therefore 
have a smaller claims processing and payment workload. Is that 
correct?
    Ms. PHILLIPS. So that is--I worked for Illinois Department 
of Employment Security, and probably am not the right person to 
ask on other states. But lower benefits would result in a lower 
FUTA.
    I do want to say, Representative Chu, that one of the 
things that Mr. Raderman's testimony is spot on is that when 
states have fewer resources, when they need to make the 
improvements the most, that is a problem, right? State capacity 
during the pandemic was at its lowest point, and the funding 
goes up when it is raining the hardest, but the funding goes 
down when states need to really ramp up and improve both 
technological and process improvements.
    Ms. CHU. Well, one thing is clear. There has not been full 
funding on helping the states deal with the UI workload, and 
this problem has been going on consistently. In fact, the only 
time they really had those funds was when the American Rescue 
Plan modernization funding came in, which you testified about 
with regard to its positive benefit.
    Now, the Biden Administration has consistently proposed to 
increase annual funding and to fully fund the state UI workload 
to ensure that workers have access to the earned UI benefits 
while simultaneously helping states prevent fraud and errors. 
However, Republicans routinely appropriate less than what is 
needed to fund the state workload.
    Can you talk about how consistent increased Federal funding 
for UI administration would enable the state workforce agency 
directors to increase support for staffing and technology, and 
perhaps even having things like equity grants?
    Ms. PHILLIPS. Thank you for that question.
    In my testimony I celebrate the ARPA UI modernization 
funding. Congress originally appropriated $2 billion. And last 
year, as a result of the Fiscal Responsibility Act, that was 
reduced to $1 billion. As a state administrator at that time, 
we were planning for that funding. We were working on proposals 
at that time, and it was a setback, capacity-wise, for us not--
to know that we were not going to have as many resources for 
improving technology, improving processes, improving 
reemployment efforts, as well.
    Ms. CHU. Well, we know that these funds that Congress 
provided through the American Rescue Plan have indeed made 
significant strides to help states improve their UI systems by 
detecting and preventing fraud, promoting equitable access, and 
ensuring the timely payment of benefits since the pandemic. In 
fact, because California received these funds, you know, 
through ARPA, it was able to actually deal with the fraudulent 
things that took place, was able to streamline its identity 
verification and fraud reporting system, expand language 
access, and also eliminate the backlog of unprocessed claims.
    So, Ms. Phillips, would these type of improvements have 
been possible without the American Rescue Plan funding that 
Democrats provided?
    And how should the lessons learned from these achievements 
inform any further reform of the UI system?
    Ms. PHILLIPS. Thank you, Representative. I am going to 
start backwards with the lessons.
    Organizations like the Beeck Center and others are trying 
to help connect states with one another. In my testimony U.S. 
DoL also has been documenting the ingenuity that states are 
working on not only on equitable access to UI, but also on 
timeliness of benefits, and detection of fraud, and preventing 
fraud.
    I would argue that one of the best ways to prevent and 
detect fraud is by--I know this might sound strange coming from 
someone working on digital benefits, but making sure that the 
digital benefit access is also paired with in-person options, 
as is required by law, is an important fraud prevention 
mechanism.
    Your question about whether this would happen--whether all 
of this innovation would have happened or would be happening if 
the ARPA funding was not there, I would argue probably not, for 
many of the reasons that Mr. Raderman was talking about, that 
the resource justification model makes it difficult to have 
extra resources to be able to work on modernization efforts.
    Ms. CHU. Thank you. I yield back.
    Chairman LaHOOD. Thank you. Now I recognize Mr. Moore of 
Utah.
    Mr. MOORE of Utah. Thank you, Chairman LaHood, for holding 
this important hearing.
    I would look back to when I first ran for this seat. It was 
just three-and-a-half years ago, and unemployment insurance 
was, you know, just becoming a thing with--as we were trying to 
navigate the pandemic and, you know, seeing the workforce go 
through a stress point. And it was that moment that, to me, was 
like we are not going to be able to solve these things at the 
Federal level. And it continually got worse.
    And the thing that was the most frustrating to a lot of my 
constituents, particularly small business owners, was not being 
able to hire people, or not being able to get some of their 
folks back to work. That is an un-American concept. It is un-
American. I get the pandemic was a tricky thing to navigate, 
and that different states handled it different ways, but we 
can't ever get to that point again. We can't ever get to that 
point again where it was easier to stay home and engage in this 
type of program than it was to go back to work.
    And, you know, we didn't--I look back on it, and we made 
mistakes as a country, as a Federal Government, trying to do 
too much and creating unintended consequences. And I think the 
data will bear that out over the history of time. We saw an 
enormous amount of inflation right after the ARPA, or the 
American Rescue Plan, was passed. We cannot have so much money 
chasing too few goods, especially when there was a stress on 
supply chain and things like that.
    And that, I think, is leading to my main point and one 
question simply that I have for Ms. Townsend. Like Iowa, Utah 
is a state that has been on the forefront of creating high-
performance service delivery models for the unemployed and 
those lacking the job skills required to fully participate in 
the workforce. And so my point here, ultimately, is what are we 
doing at the state level to make sure these programs are 
actually run well?
    And where do we get the outcomes? We are just not going to 
get the outcomes from the Federal Government. The nation is too 
big, the population is too high, and we do not have the purview 
and the ability to properly target where the work needs to be 
done.
    The Utah Department of Workforce Services, Utah's 
integrated model for workforce and social assistance, 
simplified the application process for individuals seeking 
assistance such as unemployment insurance, and provides a case 
manager who identifies suitable services based on an 
individual's needs. Can you speak to the effectiveness of 
individuals receiving unemployment benefits having case 
managers in shortening their duration on unemployment insurance 
and finding meaningful employment?
    Ms. TOWNSEND. Absolutely. Thank you for the question, 
Representative Moore.
    So what we have found in Iowa is that when individuals, 
like I said before, come into the American job centers or 
contact Iowa Workforce Development after they have filed a 
claim for unemployment benefits, and we assign a single 
individual to help walk them through the process, most of them 
have not looked for a job for a period of time. Many of them 
have not looked for a new job for decades. And so--and as 
anyone who has been paying attention knows, the way to find a 
job now is not the way it was even five years ago, even pre-
pandemic.
    So having someone available to help them navigate the new 
system of basically virtual and all-digital application 
process, having someone available to look through your resume--
because, for instance, in Iowa we have more jobs than we have 
unemployed, and I know it is the same in Utah. If you are 
applying for jobs and you are not getting a response, then the 
problem is probably in your resume. It is probably in the way 
that you are going about your job search.
    And so one of the things that we can do with the 
reemployment case management is look at what jobs are you 
applying for? Are they the right jobs for your skills and your 
experience? What other jobs should you be applying for? And is 
there something in your resume that we need to fix or improve?
    And so, when they get that one-on-one assistance, it helps 
direct them not only to the better jobs that they may not have 
otherwise realized they were eligible for, but also gives them 
that support and the hope that I can get this job. And they do. 
And we see--every day we are seeing stories about people who 
are getting jobs that pay them way more than they were making 
before they became unemployed.
    Mr. MOORE of Utah. Absolutely, thank you. And I think the 
irony that--I can even, you know, admit it myself that I am 
saying that having a case manager involved, some people would 
claim that is more bureaucracy, right? What I am saying is, if 
we don't have that special attention to do this at the most 
basic level, where we are actually helping the individuals, we 
are going to continue, like Mr. Taylor was highlighting, the 
just an enormous amount of fraud that slips through the system 
unless you give it that special attention.
    And that is why I want to be able to communicate and help 
spread throughout the country that states that do this well, 
they need to be replicated, and we don't need to just continue 
to throw more money at the problem. You need to put the right 
type of resources at the ground level to help these individuals 
get out of this mess, and that should be an incredibly 
bipartisan approach. And if you look beyond the rhetoric, that 
is what this Work and Welfare Committee is trying to do, is 
find the help that they need, and lift people out of these 
horrible situations that they get put in.
    Ms. Townsend and to the rest of the witnesses, I appreciate 
your perspective, and I yield back.
    Chairman LaHOOD. Thank you, Mr. Moore. We will recognize 
Ms. Tenney of New York.
    Ms. TENNEY. Thank you, Mr. Chairman, and thank you to the 
witnesses. This is a really important issue.
    I am a small employer up in upstate New York. And, you 
know, there has been serious systemic problems with 
unemployment insurance in this program, and particularly in the 
State of New York. There have been over 11 billion fraudulent 
unemployment payments since 2020. Yet despite this figure, New 
York has only recovered a small fraction of that.
    New York is one of only two states, along with California, 
that remains delinquent on its loans borrowed from the Federal 
Unemployment Trust Fund and the COVID-19--and that was from the 
COVID-19 pandemic. The failure of Albany--and it is run by the 
Democrats right now, it is one-party rule all across the 
board--to repay the debts will force employers to bear the 
burden of these increased Federal unemployment taxes. And this 
debt remains, and it has been a tremendous burden. It has 
forced businesses to close in upstate New York. It is really 
heartbreaking.
    And I just think it is worthy of note that last year, in 
our meeting on February of--I believe it was 2023--we had the 
inspector general here to discuss this unemployment at our last 
Ways and Means full committee hearing. And I asked the 
inspector general about New York, and he specifically said, 
``We tasked the governor of New York''--at the time it was 
Governor Cuomo--``in 2011 to change the systems in place, the 
computer systems, the technology, or you are going to have a 
real serious problem with fraud.'' And we ended up with that. 
And guess who is paying the price? Our beleaguered employers in 
upstate New York.
    And so, because of this fiscal mismanagement and these 
real-world consequences, they are hiking this Federal 
unemployment tax that really particularly hits the smaller 
businesses, a lot of restaurants, a lot of businesses forced to 
close, and also those who are unable to find people to replace 
them.
    That is why I am happy to join with Michelle Steel of 
California. We introduced legislation to protect employers in 
our respective states, New York and California. The small 
businesses in New York, and also California, should not be 
punished because of their state government's incompetence. And 
it really is, it is a huge concern because we do have programs 
to help people temporarily move into unemployment in their 
attempt to get a new job.
    So I appreciate all the ideas and the tasks that you have 
here.
    And I first wanted to just say thank you to Colonel 
Stricklin for your innovation in reading your testimony and 
hearing your testimony today on what you have done on trying to 
get people back into the workforce, particularly veterans, and 
I appreciate that. My son just became a major yesterday in the 
Marine Corps, so it was kind of fun to pin his little oak leaf 
cluster on him yesterday.
    And so--but I know that so many people that--we have so 
many incredible people that serve in our military who can 
convert those skills into, you know, into the private sector 
when they go into their new careers, and so I thought maybe 
what you might explain to us in enhancing what you talked 
about, how you actually got people back to work, how this 
detrimental effect of our workforce shortage--how did you get 
businesses to deal with initiatives to get people back into the 
workforce in light of some of the issues we have today, where 
people almost have more incentives to stay home than they do to 
go to work? How do you inspire people to get out, go to work, 
take care of their families, pay taxes that we need for some of 
our services? How did you do that? And I would love to hear 
about it, especially with your unique background as a military 
member.
    Mr. STRICKLIN. Thank you for the opportunity to respond to 
that, and it is something that we are very passionate about.
    And when we started this five years ago in our group, we 
were not happy with the progress being made. And so we met and 
said we are going to make a difference. And this all started on 
a cocktail napkin among competitors in industry, among our 
training aspects of the Alabama Community College system and 
among our government. And we sat down and said, ``How do we get 
people inspired to a new tomorrow? We need to find something 
they are passionate about, and we need to reduce the barriers 
to entry.''
    So when we started these courses, it started with a skid 
steer and a pile of rocks, a pile of aggregates, and we had 
people come in to learn this single piece of equipment. And 
everybody agreed that we are going to work together to make a 
difference. And then, down the road, when we are finished with 
this, we are going to compete over hiring them to get them back 
into our workforce. Because if we don't have a better 
workforce, there is nothing to compete with down the road.
    And these individuals--if I could tell one quick story--so 
as we did the first pilot group, somebody went through and he 
thought he was going to earn a new job. And in three classes 
down the road I happened to be there, and he came up and hugged 
my neck, and he said, ``I want to thank you and the committee 
for what you are doing because I thought I was getting a new 
job, but this didn't change my pay, it changed my family and my 
kids' futures, because you changed our level of income so that 
now I can offer more to my kids and offer more for their 
future.'' And that is how we inspire a new tomorrow to them. We 
all want good. We all love this nation.
    Ms. TENNEY. So your company invests in getting new people 
during that transition period, where they are training and 
getting them off unemployment and getting into your business. 
Is that----
    Mr. STRICKLIN. Yes, ma'am. And originally, we didn't know--
it was funded by a grant. We didn't know if we were going to 
get it. And the partners in industry went to our training 
aspect. And we said, ``If we don't get the grant, we will write 
a check to cover the first year of training.''
    Now, mind you, none of us wanted to, but we were willing 
to. And luckily, the grant came through. And when I mentioned 
in my testimony we have trained over 3,000 Alabamians, none of 
those 3,000 Alabamians have paid a cent for their training. It 
has all been through grants that we have enabled them to a new 
tomorrow.
    Ms. TENNEY. Well, thank you so much. My time has expired. 
But thank you to everyone. I appreciate your insight.
    Chairman LaHOOD. Thank you. I recognize Ms. Moore of 
Wisconsin.
    Ms. MOORE of Wisconsin. Thank you so much, Mr. Chairman.
    And thank you, Mr. Ranking Member. I think this is an 
extremely important discussion, and I want to get a few things 
straight before I move on.
    I think, Ms. Phillips, you were talking about the non-
fraudulent improper payments that were made. Did you say that 
we have not disaggregated what percentage of the overpayments 
were fraudulent versus non-fraudulent, accidental?
    Ms. PHILLIPS. So we--thank you, Representative Moore, for 
that question. The ETA 227 has no demographic information.
    Ms. MOORE of Wisconsin. Demographic.
    Ms. PHILLIPS. There is no disaggregated demographic 
information. It is broken down by what type of improper--non-
fraud, improper error code a state reports on that quarterly 
report, and the----
    Ms. MOORE of Wisconsin. But we do know which ones were----
    Ms. PHILLIPS. We know whether----
    Ms. MOORE of Wisconsin [continuing]. Which ones were 
fraudulent----
    Ms. PHILLIPS. Yes.
    Ms. MOORE of Wisconsin [continuing]. Versus improper 
payment.
    Ms. PHILLIPS. Non----
    Ms. MOORE of Wisconsin. And what percentage is that? That 
wasn't clear to me.
    Ms. PHILLIPS. So I only have--anyone could look at the 
information, state by state or nationally. But I can only speak 
right now to Illinois's numbers. And in 2023, as I mentioned 
just a minute ago--I just want to make sure I am completely 
accurate here--that 62 percent of Illinois's total improper 
payments--total overpayments were considered non-fraud improper 
payments.
    Ms. MOORE of Wisconsin. Mr. Taylor, would you agree with 
that? I probably should have asked you that. What percentage of 
these payments were improper and other part fraudulent?
    Mr. TAYLOR. It depends on the state, Representative Moore. 
There was a wide variety of disparity when it comes to what we 
call first-party and third-party fraud, third-party fraud being 
the stolen identity----
    Ms. MOORE of Wisconsin. Yes, yes.
    Mr. TAYLOR [continuing]. First-party improper.
    Ms. MOORE of Wisconsin. Well, the reason that I have just 
burnt up so much of my time on this, Mr. LaHood, is because I 
just think our committee was focusing on this as if the 
majority of these payments were fraudulent.
    And, I mean, thank God we made these payments because I 
think it was Ms. Phillips that said 64 percent of folks live 
paycheck to paycheck, and we know what people were doing four 
years ago. I mean, they were maxing out their credit cards, 
hoarding toilet paper. And so, we want to just be clear that it 
was important. I mean, all of you would agree that, despite the 
fraud, which is terrible, that we saved people's lives, 
literally, by providing this benefit.
    Ms. Townsend, your reemployment work strategies. I mean, I 
am very impressed with your ability to get people back to work. 
It is a model that everybody has to look at. But I am wondering 
if what we used to say, that you bite your hand to spite your 
face or whatever--haven't we found that states that did a 
remarkable job of avoiding inflationary problems over the years 
reduced staffing, and then found themselves in this situation 
where we had an emergency and they just didn't have the 
staffing in place as a punishment, almost, for their doing so 
well in getting people unemployed?
    So, I am wondering if any of you feel that the formula 
maybe punishes states that do a good job. Maybe I will ask you 
that, Ms. Phillips, and also--yes, go on.
    Ms. PHILLIPS. Well, I think I would go back to Mr. 
Raderman's comments earlier that the way the resource 
justification model works is that when there is a low demand 
for unemployment benefits, that is also a low administrative 
amount of money that states have, and so you can't fix the roof 
during that time. So that is one point.
    But I also want to comment on the workforce aspect because, 
as a former fellow UI administrator, states across the country 
are working on the RESEA program, and most administrators 
believe that the UI program is a temporary--it is a trampoline. 
But the people that are eligible to apply for UI are workers, 
and they want to get back to work. And most state agencies are 
working on----
    Ms. MOORE of Wisconsin. Can I----
    Ms. PHILLIPS [continuing]. That employment piece----
    Ms. MOORE of Wisconsin. Can I ask something very quick 
before I get cut off?
    Ms. PHILLIPS. Mm-hmm.
    Ms. MOORE of Wisconsin. Do we see instances where there are 
barriers to applying to unemployment?
    I mean, like the state has taken the position that we don't 
want to provide this benefit, and so many more people who are 
eligible and need it don't get it, and that also lowers the 
numbers and sort of masks the need?
    Ms. PHILLIPS. Representative Moore, I can really only speak 
from my experience in Illinois that there was--there is no 
preventing people from applying. But I think we know, 
especially through the pandemic, the challenges that any UI 
claimant faces in applying, and the administrative burdens that 
they face on online applications, on certification processes, 
on other documentation that they need to provide.
    I know I am over time, but one of the things that I cannot 
unsee is I observed these live claim filing observations, and I 
watched people from five different regions in Illinois apply, 
including an older woman, a 76-year-old woman from downstate 
Illinois near Carbondale, who was struggling mightily. She came 
into the office because she couldn't apply online. It wasn't 
working for her. There were many different blockades that I 
won't go into, but there are improvements that can be made to 
the actual application process.
    Ms. MOORE of Wisconsin. Thank you so much, Mr. Chairman, 
for your indulgence.
    Chairman LaHOOD. Thank you, Ms. Moore. I recognize Mr. 
Smucker of Pennsylvania.
    Mr. SMUCKER. Thank you, Mr. Chairman, for convening this 
hearing. I would like to talk a little bit about the state's 
management of their own unemployment funds.
    And as a former business owner, I think most business 
owners, you know, we value unemployment. We know that when you 
go through rough times, it is a safety net for employees that 
they are no longer able to provide work for. Even most business 
owners, at least in our case, I think we understood the need 
for a rating system--I was in Pennsylvania a rating system 
based on your own experience so that businesses who are laying 
off more workers are paying more.
    But what did get frustrating was when states mismanaged 
their own funds and, as a result, businesses in Pennsylvania, 
for instance, had much higher rates and it was harder to 
compete.
    And I am concerned right now, you know--during the pandemic 
we, of course, know that states' unemployment budgets were 
strained. There was a huge surge in claims. We have been 
talking about that this entire hearing. The federal government 
provided loans to states to help them bridge the gap and, of 
course, expected that to last while the pandemic lasts, and 
until individuals returned to work, and then expected, I think, 
to begin paying back those loans.
    So it is--there are some states, like California, New York 
that have yet to pay the federal government for those loans 
from four years ago. And in fact, they not only have been 
accumulating that debt, but also now paying high interest. So 
in California $650 million already paid in interest, and 
another $550 million in interest due to the federal government 
by September 30. That really, I think, is going to matter to 
small businesses in those states who probably will end up 
having to bail out the states as a result of the bad policies 
by the governors and the administrations in those states. And 
it should maybe be even concerning to us, because eventually 
all taxpayers, if states can't pay that back, may need to bail 
them out even further.
    And so I was proud to have cosponsored Representative Steel 
and Representative Tenney's legislation to ensure that small 
businesses will not have their credits against the FUTA, the 
Federal tax rate, reduced and will not see a dramatic increase. 
And I hope that today's hearing will call attention to best 
practices that states can utilize, can take advantage of during 
strong economic times to prevent these kind of future system 
strains and collapses in the future.
    So Mr. Raderman, what actions can Congress take to ensure 
that states who receive Federal loans for their UI programs 
repay those loans in a timely manner, with hopefully minimal to 
zero impact on small businesses?
    Mr. RADERMAN. Thank you for the question, Representative.
    In terms of the state loans that were taken out, the way 
the programs are currently structured, it does fall to the 
states to fund the benefits. Our view is that the taxable wage 
base that is used to actually finance the state level 
benefits--I can't speak to every state, but I know for 
California and New York in particular, those wage bases have 
not been adjusted for inflation over time, and so it has become 
especially difficult to actually fund the benefits when 
downturns do occur, and that kind of results in that large 
amount of debt.
    So the preference is to make sure that that wage base is 
indexed moving forward, or raised and indexed, and you can 
actually lower the rates overall so that businesses will have a 
bit more stable tax rates moving forward.
    Mr. SMUCKER. With the budget hole that we are in now in 
those particular states, do you agree it will eventually 
probably impact the small businesses there? And how do you 
think it will do that?
    Mr. RADERMAN. I agree, they are going to be facing higher 
rates at the moment. And I think it is important to address the 
financing issues now----
    Mr. SMUCKER. I think it----
    Mr. RADERMAN [continuing]. So that there is not a problem 
moving forward.
    Mr. SMUCKER. I think there is a lot of concern there. I 
appreciate you responding to that.
    Mr. Stricklin, your testimony was really impressive. It 
sounds like the program that you have in Alabama is very 
impressive. I was really just interested in one aspect of it, 
and I am out of time. But you talked--I have seen a lot of 
employee workforce education and training programs, and 
apprenticeship programs, and so on. Your goal is to train the 
first two weeks on the job. I have never really seen that 
exactly, and I found that really interesting. Really 
fascinating, actually. I would love to have you expand a little 
bit on that.
    Mr. STRICKLIN. Yes, sir. Thanks for the opportunity to 
expand on that.
    And when we sat down in the beginning, and you look at this 
problem--and it is so big you never know where to start, right? 
How do we climb a mountain? We have got to take the first step. 
And when we looked at this we said we have to have something 
manageable and measurable so that we know how to develop the 
training courses.
    And we said, as owners of businesses, as small businesses, 
what do I want most from an employee when they show up? And we 
really boiled it back to I would love for somebody to walk in 
on day one of their third week, they know how to put on their 
safety equipment, they know where to go in the office, they 
know basic operation of the equipment. Then we can train them 
the specifics of what to do. And that is where that came from, 
is let's just train the first two weeks. That way they are 
showing up on day one of week three, and they are ready to run. 
Like, your company or my company or any company wants to train 
them in the specifics of what we do there and what our 
competitive advantage is.
    Running a piece of equipment is running a piece of 
equipment. Operating a piece of equipment is----
    Mr. SMUCKER. It is a really interesting concept, and I am 
out of time.
    Mr. STRICKLIN. Thank you, sir.
    Mr. SMUCKER. Thank you, Mr. Chairman, yes.
    Chairman LaHOOD. Thank you, Mr. Smucker.
    Well, that concludes our question-and-answer period. I know 
it went by quickly.
    Let me just say in closing here how grateful we are for 
your generous testimony here today. As I think we all learned 
from this hearing, this is a complex subject. There are many 
nuances here that need to be worked out. And we have to figure 
out ways to rebuild and restore confidence in this system 
moving forward. And so this was a great learning process for 
the members here. It was great for me and everybody else here. 
So we appreciate your ideas, your proposals, your successes 
that you have had. And we look forward to staying in touch with 
you as we put together further public policy initiatives to 
address these problems and serve the people that we need to 
serve.
    So with that, please be advised that members have two weeks 
to submit written questions to be answered later in writing. 
Those questions and your answers will be part of the formal 
record.
    With that, we are grateful again for you being here today, 
and the committee stands adjourned.
    [Whereupon, at 3:33 p.m., the subcommittee was adjourned.]









      

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