IAWP LEGISLATIVE INFORMATION May 2006 Archives Home Page ***Weekly Update*** From Legislative Committee Chair: Todd Kolden, Aberdeen Central Office Week of May 8, 2006 HEARING ON PRESIDENT'S FY 2007 BUDGET PROPOSALS RELATED TO UNEMPLOYMENT INSURANCE • On Thursday, May 04, 2006, the House Committee on Ways and Means' Subcommittee on Human Resources held a hearing on Unemployment Insurance (UI) proposals included in the President's FY 2007 budget. The lead witness was Deputy Assistant Secretary Mason Bishop of the U.S. Department of Labor Employment and Training Administration. Ted Halley, President-Elect of NASWA and Executive Director of the South Carolina Employment Security Commission testified for NASWA on a panel that also had witnesses from the Government Accountability Office (GAO), the American Federation of State, County and Municipal Employees, the American Institute for Full Employment, the Institute for International Economics, and the Heritage Foundation. • Deputy Assistant Secretary Bishop testified on the following Administration proposals: o Allow states to use a percentage of all recovered improper payments for benefit payment control activities; o Allow states to use a percentage of certain tax payments for tax integrity activities; o Require states to impose at least a 15 percent penalty on fraudulent improper payments; o Allow states to permit collection agencies to retain a percentage of fraudulent improper payments and delinquent employer taxes recovered; o Prohibit states from non-charging employers when improper payments occur because of employer fault; o Require employers to report "start work date" to the state directory of new hires; o Authorize the U.S. Department of the Treasury to intercept federal income tax refunds for certain UI purposes; o Permit states to request waivers of certain federal requirements; o Appropriate $40 million for FY 2007 to expand certain improper payment reduction efforts of states; o Appropriate $10 million for FY 2007 to prevent and detect fraudulent UI claims filed using personal information stolen from unsuspecting workers; and, o Appropriate $30 million for FY 2007 to expand reemployment and eligibility assessments of UI claimants. • Congressman McCrery (R-LA) asked Mr. Bishop about the intent of the Administration's proposal to extend the Federal Unemployment Tax Act (FUTA) 0.2 percent surtax another 5 years beyond 2007. Mr. McCrery wondered if the system needed the additional funds. Mr. Bishop said the funds were needed to cover current activities, but also to cover future costs of benefit extensions and possible reform after states had demonstrated new approaches under the proposed waiver authority. • Congressman McDermott (D-WA) was concerned about a possible cut in workforce investment services under the Administration's Career Advancement Accounts (CAA) proposal. This proposal would not only replace much of the existing Workforce Investment Act (WIA) system with training vouchers, but also would cut annual appropriations for workforce services by over 20 percent. Mr. McDermott wondered how the system could expand training under such a proposal and yet not also cut reemployment services. Mr. Bishop said the system was "bureaucratic" and full of "inefficiencies" that would be eliminated under the proposal, allowing expansion of training with no loss of services, while saving over a billion dollars. Mr. Bishop added he had seen these inefficiencies throughout the system where Employment Service (ES) offices and One-Stop Career Centers were located in separate offices or were co-located, but not working together. Later, Sigurd Nilsen of the Government Accountability Office (GAO) noted much of the funds Mr. Bishop said were spent on bureaucratic and inefficient administration were spent on reemployment services for UI claimants and other workers. Mr. Nilsen added those receiving employment services represented the bulk of workers benefiting from the system. • NASWA President-Elect Ted Halley testified in support of many of the Administration's UI budget proposals. His testimony was based on past NASWA positions and strong input from an Unemployment Insurance Committee workgroup that had worked closely with the Employment and Training Administration to develop possible NASWA positions on the proposals. The UI Committee had hoped to review the workgroups recommendations before NASWA adopted positions on the proposals, but the timing of the hearing did not permit this step. Instead, NASWA President JoAnn Hammill and Mr. Halley consulted with the Legislative Committee and decided to present testimony from NASWA based on input from the UI Committee workgroup and other sources. • Mr. Halley said NASWA supports initiatives by the federal government to improve administrative efficiency, integrity and overall performance of the federal-state UI system. However, grants to states for administration of UI programs are inadequate. NASWA believes proposals to improve the UI system will not have the desired positive effect on performance without sufficient federal funding. • Mr. Halley said with substantial balances in the federal accounts of the UI trust fund, NASWA believes there are sufficient funds available to support state UI operations without extending the Federal Unemployment Tax Act 0.2 percent surtax for five years beyond 2007 as proposed by the Administration. • He also said in support of Administration proposals: o NASWA supports the proposal to allow states to use five percent of all recovered improper payments for benefit payment control activities and to allow states to use five percent of certain tax payments for tax integrity activities; Although NASWA is concerned about using five percent of these UI collections for administrative activities instead of the payment of benefits, it supports this proposal as long as the funds are restricted to benefit payment control and activities to combat employer tax evasion and fraud; o NASWA supports the proposal to require states to impose at least a 15 percent penalty on fraudulent improper payments with the modification that the penalty be at least 25 percent; o NASWA supports the proposal to allow states to permit collection agencies to retain a percentage of fraudulent improper payments and delinquent employer taxes recovered with the modification that all efficient means be used by the state before turning to a collection agency for assistance; o NASWA supports the proposal, with modifications, to prohibit states from non-charging employers when improper payments occur because of employer fault; the modification would be to treat employers no longer as "interested parties" if they respond inadequately or untimely to state requests for information on separations and to require charging these employers even if an appeal denies UI benefits to claimants; o NASWA supports the proposal to require employers to report "start work date" to the state directory of new hires; o NASWA supports the proposal to authorize the U.S. Department of the Treasury to intercept federal income tax refunds at the request of states for certain UI purposes; o NASWA supports the proposal to permit states to request waivers of certain federal requirements; o NASWA supports the proposal to appropriate $40 million for FY 2007 to expand certain improper payment reduction efforts of states; o NASWA supports the proposal to appropriate $10 million for FY 2007 to prevent and detect fraudulent UI claims filed using personal information stolen from unsuspecting workers; and, o NASWA supports the proposal to appropriate $30 million for FY 2007 to expand reemployment and eligibility assessments of UI claimants, but also supports restoration of FY 2006 cuts of $35 million from Reemployment Assistance and $57 million from the Employment Service grants to states. • Finally, Congressman Becerra (D-CA) asked Mr. Halley if the states had been consulted before the Administration announced its CAA proposal in the FY 2007 budget. Mr. Halley said he did not know about other states, but South Carolina was not consulted. SUPPLEMENTAL EMERGENCY SPENDING BILL PASSES SENATE • Yesterday, the Senate approved $109 billion in additional war and hurricane relief spending, breaking rank with the President, who has threatened to veto such spending. The measure now will go to conference with the House version, a bill which approved $92 billion. In addition to war and hurricane relief funding, the Senate bill includes funding for farm programs (offering compensation for losses incurred from natural disasters), the relocation of Mississippi's hurricane-damaged railroad, rebuilding a highway in Hawaii, protecting riverbanks in California, upgrading a hurricane center in Rhode Island, and compensating New England shell fishermen for their losses from red tide outbreak. House Majority Leader John A. Boehner (R-OH) said that the final bill will not spend "one dollar more than what the President asks for period." ETA PUBLISHES PY 2004 WIA PERFORMANCE MEASURES RANKINGS • On May 3, 2006 , the USDOL Employment and Training Administration (ETA) published tabular and map displays of the absolute ranking of state by state performance on the Workforce Investment Act (WIA performance measures for Program Year (PY) 2004. The rankings are based on actual performance, no progress against negotiated levels. The maps are color-coded in three different categories - Top Ten, Middle and Bottom Ten. • Almost all states achieved ranking within the top-ten states for at least one performance measure. Arkansas was listed in the top-ten for 15 of the 17 performance measures. Other states listed in the top-ten the most often were: Maryland (11 of 17), Nebraska (11 of 17), Michigan (10 of 17), Wyoming (8 of 17). • Arkansas also was listed in the-top most often for the Adult and Dislocated Worker programs. The District of Columbia was listed 7 times in the top-ten category for all of the seven Youth measures. Several states were listed in the top-ten for the Customer Satisfaction measures: Idaho, Kansas, Maryland, Michigan, Montana, Nebraska, and Nevada. 23 STATES ELIGIBLE FOR WIA INCENTIVE AWARDS • The Departments of Labor and Education have responsibility for the determining eligibility for incentive awards under the Workforce Investment Act (WIA). The Departments announced that 23 states are eligible to apply for WIA incentive awards. The 23 eligible states must submit their applications for incentive funding to the Department of Labor no later than June 12, 2006. The funds must be obligated by June 30, 2006; ETA is encouraging states to submit their applications as early as possible. The 23 states eligible to apply for the incentive grants are: Arizona ($709,618), Colorado ($680,253), Connecticut ($673,907), Delaware ($646,569), Georgia ($762,930), Illinois ($941,250), Indiana ($717,986), Iowa ($665,157), Kentucky ($716,581), Maryland ($711,961), Massachusetts ($712,003), Michigan ($817,852), Minnesota ($699,205), Nebraska ($651,792), Nevada ($661,574), North Dakota ($644,150), Oklahoma ($688,143), Oregon ($714,422), Pennsylvania ($853,980), South Carolina (709,298), Tennessee ($740,699), West Virginia ($685,054) and Wisconsin ($713,988). UNEMPLOYMENT RATE UNCHANGED IN APRIL • The Bureau of Labor Statistics reported today the April 2006 unemployment rate was unchanged at 4.7 percent. The number of unemployed persons was essentially unchanged in April, as well as total employment and the employment-to-population ratio. The labor force participation rate was 66.1 percent. Since April 2005, the labor force participation rate has remained in a narrow range between 66.0 percent and 66.2 percent. • In April, nonfarm employment increased by 138,000. The largest absolute employment increases were in service providing sectors--financial services, insurance and health care. • Mining had a substantial percentage increase in employment. The increase was concentrated within support activities related to oil and gas mining, such as exploration, reflecting a response to rising fuel costs. • Of the 900,000 persons, age 16 and over, who had been evacuated from where they were living in August 2005 because of the effects of Hurricane Katrina, 62.5 percent were in the labor force and their unemployment rate was 14.9 percent. The unemployment rate was 5.3 percent for individuals in this group currently living in their pre-Katrina homes. The unemployment rate was 26.5 percent for those not living in their former homes. Week of May 22, 2006 HOUSE PASSES BUDGET RESOLUTION FOR $2.8 TRILLION FOR FY 2007 • The House of Representatives passed its fiscal year 2007 Budget Resolution (H Con Res 376) to be passed in the early morning hours on Thursday, May 18, after leaders promised moderates they would find an additional $3.1 billion for labor, health and human services (HHS), and education programs. The additional $3.1 billion would have to be covered by savings elsewhere in the budget. The passage of the resolution clears the way for the House to move forward with the annual appropriations bills starting on Thursday, May 18. • The House now can proceed under the spending restrictions of its own blueprint. The Senate spending resolution (S Con Res 83), adopted on March 16, assumes $16 billion in additional spending beyond the House plan. The Senate budget also includes language that would expedite subsequent legislation to open Alaska's National Wildlife Refuge to oil exploration. • On Friday, May 19, the Majority in Congress announced it has begun talking about the prospect of reaching a conference agreement on the fiscal year 2007 budget resolution despite the significant differences. The House already has begun moving its 2007 appropriations bills using its resolution as a guide. HOUSE COMMITTEE APPROVES BILL TO REVISE LAW ON SERVICES FOR SENIOR CITIZENS • The House Education and the Workforce Committee approved legislation to rewrite the law governing programs that provide a wide range of social services to needy senior citizens. By voice vote, the panel sent to the House an amended version of the bill (HR 5293) that would update the 1965 Older Americans Act, which was last reauthorized in 2000 and expired in 2005. The program funds Meals on Wheels, transportation, referrals to home care, health, legal aid and other social services for seniors. • The committee approved the following amendments before it reported H.R. 5293: Recognize the need for older Americans to have access to mental health screening, and, if necessary, referrals for treatment; Recognize older Americans with disabilities might need access to assistive technologies, and would include "hours of community service employment-based training" as a core indicator of performance under the Senior Community Service Employment Program; Support benefit enrollment and outreach to seniors, and to encourage meal providers to disseminate information to homebound seniors about how to get flu shots in their communities; Authorize the Administration on Aging to carry out activities to prevent, detect and treat elder abuse, as well as collect data on and research elder justice issues; and Exclude the following from the calculation of eligibility for assistance: veterans' benefits, unemployment insurance, Social Security disability insurance and 25 percent of Social Security income. Week of May 30, 2006 HOUSE PANEL EXPECTED TO CONSIDER FY 2007 SPENDING BILL FOR WORKFORCE SYSTEM ON JUNE 7 • The House Labor, Health and Human Services and Education Appropriations Subcommittee is scheduled to meet on June 7 to consider the spending bill that funds the nation's workforce system. Funded by the bill are the Workforce Investment Act (WIA), Unemployment Insurance (UI), Veterans' Employment and Training Services (VETS) and Labor Market Information (LMI) programs. Consideration of the spending bill by the House Subcommittee represents the first step toward approval by Congress of fiscal year (FY) 2007 spending for the workforce system. The 2007 federal fiscal year begins on October 1, 2007, though many workforce system programs funded by the bill operate on a program year and would not receive funding under the bill until July 1, 2008. Last year Congress approved a spending bill that cut workforce system spending as a whole by approximately 7 percent. The Administration's FY 2007 Budget proposes a further reduction to workforce system spending of 21 percent. • It is unclear if the House will follow the Administration's budget request on spending for workforce programs. Chairman of the House Labor, HHS and Education Appropriations Subcommittee, Ralph Regula (R-OH) this week endorsed the services provided through the nation's one-stops while meeting with a workforce system advocate. But Chairman Regula did not disclose how much his spending bill, now very likely developed in draft form, would appropriate for WIA and other workforce programs. Approval of the bill over past fiscal years was delivered on party-line votes as disagreements occurred largely over spending for education and health programs. This year is unlikely to be any different, as appropriators in the Majority party work to restrain growth to federal government spending while balancing the requests of stakeholders concerned their programs have been funded insufficiently. Chairman Regula noted during a hearing in March that his Subcommittee would have to make difficult decisions on spending and could easily and usefully spend twice the amount available to his panel. UNABLE TO APPROVE A BUDGET CONGRESS SHIFTS FOCUS TO APPROVAL OF APPROPRIATION BILLS • Members of the House and Senate this week conceded agreement on a concurrent budget resolution is likely out of reach and began moving forward on setting budgetary caps through alternative means. Two impediments to a conference agreement between the two chambers are available time and a $16 billion difference in the amount authorized for domestic spending. The months of June and July are typically reserved for consideration of appropriation bills in advance of the month-long August Congressional recess. Congress is on a one-week recess for the Memorial Day Holiday leaving little time for lengthy negotiations over a Budget when it reconvenes on June 6. Lengthy negotiations would likely be necessary given the large spending gap for domestic programs, which many Members in both chambers believe to be irreconcilable. • What all this means to the workforce system and states is the focus should turn entirely to the appropriations process. As reported in the article above, the House Labor, HHS and Education Appropriations Subcommittee will consider its spending bill on June 7. Subcommittee Chairman Ralph Regula (R-OH) will be working with a budget cap totaling $873 billion, agreed to by the House the week of May 15. Even though this cap is identical to the one requested in the Administration's FY 2007 Budget, it does not translate automatically to workforce program cuts because leaders of the House Majority party agreed to increase spending for labor, health and education programs by diverting $3.1 billion from as yet unidentified sources. The additional $3.1 billion translates approximately to a 3 percent increase from the FY 2006 cap. The decision of where to spend the diverted $3.1 billion rests with Members of the House Appropriations Committee. Week of May 15, 2006 IMPASSE OVER BUDGET IN HOUSE HINGES ON LABOR, HHS AND EDUCATION SPENDING LIMITS • A coalition of about 15 House Majority moderates continue for a second week their objection to proposed domestic spending limits in the House budget resolution (H. Con. Res. 376). Approval by the House and Senate of a budget resolution should pass before moving appropriations bills because it establishes spending caps. House moderates are withholding support for the House budget resolution unless the Majority leadership agrees to increase by approximately $7 billion the cap on spending for the Labor, Health and Human Services (HHS) and Education budget functions. This increase would align the House resolution with the Senate's budget resolution (S. Con. Res. 83) approved in March. But fiscal conservatives are expressing equal insistence they will not go along with such an increase, citing concerns by core voters that federal spending is excessive. • The Majority leadership already offered to increase the spending cap for Labor, HHS and Education programs by a total of $4 billion. This increase above the Administration's FY 2007 Budget request would allow appropriators to level-fund these programs at their FY 2006 levels. But, according to Representative Mike Castle (R-DE), moderates want to increase spending for certain programs, noting their biggest concerns are funding for medical research, university research, the American Competitiveness Initiative and Community Development Block Grants. Notably absent from this list is funding for workforce programs, highlighting the importance for states to communicate to Congress (see article below) the importance of appropriating necessary funds for the system. House Majority Leader John Boehner (R-OH) said he believes negotiations with the coalition of moderates is going well and envisions a compromise near the $4 billion cap increase as a likely outcome. The House has two weeks in session before recessing for Memorial Day. STATES' LETTERS TO CONGRESSIONAL APPROPRIATORS OVER NEXT TWO WEEKS WOULD BE WELL-TIMED • Soon after the impasse in the House over the budget resolution is resolved, possibly as early as next week, House appropriators are expected to move quickly to approve the thirteen spending bills. Consideration of the spending bill that funds workforce programs, the FY 2007 Labor, HHS and Education spending bill is expected to begin in early June. Members of the House Labor, HHS and Education Appropriations Subcommittee responsible for crafting the bill that funds workforce programs are carefully monitoring progress on the budget resolution to assess how much spending they have at their discretion. Once the House approves its budget, the House Labor, HHS and Education Appropriations Subcommittee will determine where to direct funding, making it important for states to communicate their priorities with their Congressional delegations. HOUSE VETERANS SUBCOMMITTEE APPROVES BILL THAT WOULD MODIFY DVOP AND LVER PROGRAMS • The House Veterans Affairs Subcommittee on Economic Opportunity this week unanimously approved H.R. 3082, the Veterans Small Business and Employment Promotion Act of 2006. In her opening statement, Representative Stephanie Herseth (D-SD), the Subcommittee's Ranking Member, thanked the staff of the U.S. Department of Labor (USDOL) Veterans' Employment and Training Service (VETS), U.S. Department of Veterans Affairs, and NASWA on their assistance providing technical expertise and developing the legislation. NASWA worked with Subcommittee and VETS staff over the past two months to amend the Subcommittee's legislative discussion draft. The legislation as approved yesterday by the Subcommittee would amend the Disabled Veteran Outreach (DVOP) and the Local Veteran Employment Representative (LVER) programs. • Title II of H.R. 3082 would make the following changes to the DVOP and LVER programs: o Require VETS to establish guidelines for professional qualifications for DVOPs and LVERs; o Clarify that part-time employment of DVOPs/LVERs is half-time employment; o Require States to develop a licensing and certification program within two years after date of enactment for veterans as a condition to receive a grant; o Require all DVOPs/LVERs hired by a State be trained by the National Veterans Training Institute within three years of appointment; o Modify requirements for VETS annual report to include additional and more specific data concerning veterans' employment; o Authorize a five-year demonstration project to allow the Assistant Secretary of Labor for VETS to enter into contracts with non-governmental entities to carry out placement services in high-employment areas using unobligated funds and required GAO study such demonstration projects; o Modify the incentive award program to recognize high performing employment service offices in addition to high performing employees; and o Require USDOL to prescribe regulations with regards to priority of service established under the Jobs for Veterans Act, P.L. 107-288, no later than one year after the date of enactment. USDOL SENDS DRAFT UI INTEGRITY BILL TO HOUSE • U.S. Secretary of Labor Elaine Chao transmitted to the House of Representatives recently drafted legislation that would institute proposals included in the Administration's FY 2007 Budget request aimed at improving the integrity of the Unemployment Insurance (UI) program. The draft bill entitled the "Unemployment Compensation Program Integrity Act of 2006" would not extend the Federal Unemployment Tax Act (FUTA) 0.2 percent surtax as proposed in the Administration's FY 2007 Budget. The FUTA surtax extension will be included in a future draft legislative proposal. Release of the Administration's draft legislation runs concurrent to a hearing held last week by the House Committee on Ways and Means' Subcommittee on Human Resources when both the USDOL and NASWA witnesses testified on the UI components of the Administration's FY 2007 Budget. The draft legislative proposal includes provisions that would: o Permit states to use a portion of recovered funds for the for the reduction of fraud and errors and detection of nonpayment of required contributions; o Enlist debt collection agencies in the recovery of overpayments and delinquent employer UI taxes; o Impose a penalty for UI fraud; o Charge employers when their actions lead to overpayments; o Collect delinquent UI overpayments, uncollected employer contributions, and associated penalties and interest through garnishment of tax refunds; o Include the date individuals start work in the information reported to the National Directory of New Hires to facilitate identification of fraudulent UI claims; o Provide states the opportunity to request waivers of certain federal requirements in order to carry out demonstration projects to accelerate the reemployment of UI claimants; and o Permit more flexible use of state funds in the state's clearing account prior to transfer to the UI Trust Fund and other provisions. • According to the cover letter from Secretary Chao used to send the proposal to the House, the draft legislation would save the federal government approximately $1.7 billion over 5 years and approximately $3.8 billion over 10 years. The letter indicates the bill would produce indirect savings in the form of further reductions in improper UI payments and would lower state unemployment taxes. Tax savings are estimated at $2.2 billion over 10 years. BILL TO EXTEND WOTC AND WtWTC PROGRAM EXPECTED SOON • Legislation that would renew and extend the Work Opportunity Tax Credit (WOTC) and Welfare-to-Work Tax Credit (WtWTC) programs is expected to be introduced and considered soon by Congress. In a near miss, language to extend the WOTC and WtWTC tax credits was removed late in negotiations from a tax cut package (H.R. 4297) approved this week by Congress. But Majority Party members have said a second "trailer" bill will be introduced and considered before the Memorial Day recess, a two-week work period. The tax credit programs expired on December 31, 2005. Since their expiration, the U.S. Department of Labor (USDOL) issued Training and Employment Guidance Letter (TEGL) 14-05 to cover the administrative period of January 1, 2006 through September 30, 2006. Additional guidance will be issued by the Employment and Training Administration (ETA) if Congress fails to reauthorize the tax credits by September 30,2006.