J60 SUPPLEMENTAL FEDERAL SECURITY AGENCY APPROPRIATION BILL, FISCAL YEAR 1949 MONDAY, MAY 10, 1948 UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, D. C. The subcommittee met at 10:30 a. m., pursuant to call, Senator Knowland (chairman of the subcommittee), presiding. Present: Senators Knowland (chairman of the subcommittee), Young, Dworshak, McKellar, and Thomas of Oklahoma. Senator KNOWLAND. The committee will come to order. DEPARTMENT OF LABOR LETTER FROM ACTING SECRETARY OF LABOR DAVID A. MORSE REQUESTING RESTORATION At this point in the record there will be inserted a letter from the Acting Secretary of Labor to the chairman of the subcommittee in charge of the Labor-Federal Security appropriation bill, dated May 6, 1948, with an accompanying attachment. (The letter and attachment are as follows:) The Honorable WILLIAM F. KNOWLAND, DEPARTMENT OF LABOR, Labor-Federal Security Appropriation Bill United States Senate, Washington, D. C. DEAR SENATOR KNOWLAND: In response to your letter of April 27, 1948, regarding the supplemental Federal Security Agency appropriation bill for 1949, I appreciate very much the opportunity which you are giving me to appeal the House of Representatives action in excluding from this bill, by means of substantive legislative language in an appropriation bill, funds for the Department of Labor to operate the United States Employment Service. In addition, because of the lack of clarity of the House report as to the monetary reductions contemplated in the House bill, I should like very much to have an opportunity for a full and complete hearing on the budget request as we initially presented it to the House Subcommittee on Appropriations. The attachment sets forth in brief form the basis for our appeal and we will submit to you very shortly the required number of copies of the Department's request for funds for Employment Service activities for 1949. Yours very truly, DAVID MORSE, Acting Secretary of Labor. 1 M601640 1 Includes comparative transfers from Contingent, travel, printing and binding, and the farm placement supplemental of $200,000 for 1949 and $40,800 for 1948. (No provisions made in the bill for this item in the Department.) Insert on page 2, line 1: "UNITED STATES EMPLOYMENT SERVICE "Salaries and expenses: For expenses necessary for the general administration of the United States Employment Service, including a Director at not to exceed $10,000 per annum and other personal services in the District of Columbia, of which $2,265,000 shall be for carrying into effect the provisions of title IV (except section 602) of the Servicemen's Readjustment Act of 1944. (29 U. S. C. 49-491; 38 U. S. C. 695-695a, 695c-695f; Executive Order 9617; Reorganization Plan No. 3 of 1946, 3C. F. R., 1946. Supp. 901; Act of April 28, 1947, Public Law 40)," $5,270,000. The effect of this action would be to retain in the Department of Labor the United States Employment Service which the House is attempting by substantive Language in an appropriation bill to transfer to the Federal Security Agency and to reinstate the amount contained in the President's budget request for this agency. The Department's reasons for requesting full restoration of funds and activities is discussed below: Basis for retention of USES in Department of Labor A While the record will show there was general agreement that the Employment Service and unemployment-compensation activities shoud be operated under the jurisdiction of one Federal agency, the record will also show that the most recent proposed consolidation of the two activities was not approved by Congress basically because Congress deemed it more advisable to await the Hoover Commission's recommendation on the reorganization of the Federal Government. transfer of the Employment Service activities would seriously disrupt the operations of both the Federal and State employment-service functions. Inherent in any consolidation are delays and time-consuming problems that must be met. In this case the drastic appropriation cuts will make it necessary to revamp programs and functions and will entail a much greater length of time than is customarily necessary to achieve a consolidated operation. The country cannot at this time afford any disruption in the services and facilities in the only agency authorized by law to handle the mobilization of manpower for national security and national economy programs and in the vital farmlabor-recruitment program. The prospects of international and national commitments involving a stepped-up national-security program and more intensive recruitment of manpower to meet the demands of greater production and steppedup farm acreage for the security and civilian economy programs make it essential that there be no disruption of present organization facilities or reduction in currently available appropriations. The relationship and efficient operation of the United States Employment Service program with the work of other bureaus of the Department are of major significance in programing an over-all utilization of our manpower resources. These bureaus include the Women's Bureau, the Bureau of Apprenticeship, the Bureau of Labor Statistics, the Bureau of Labor Standards, and the Wage and Hour Division. Congress has by legislation placed activities in those units of the Department that have a prominent part to play in the efficient operation of an effective employment service. There is also important and active relationship of the United States Employment Service to the International Labor Organization in which the Department of Labor is largely responsible for this country's participation. 1949 estimate__. GRANTS TO STATES FOR PUBLIC EMPLOYMENT OFFICES $72, 000, 000 | 1948 act--- $64, 842, 400 (No provision made in the bill for this item in the Department.) Insert immediately following appropriation language for United States Employment Service: "GRANTS TO STATES FOR PUBLIC EMPLOYMENT OFFICES "Grants to States for Public Employment Offices, United States Employment Service, Department of Labor "For grants to the several States (including Alaska and Hawaii), in accordance with the provisions of the Act of June 6, 1933, as amended (29 U. S. C. 49-49 [1] 1), and for carrying into effect section 602 of the Servicemen's Readjustment Act of 1944, including, upon the request of any State, the payment of rental for space made available to such State in lieu of grants for such purpose, $72,000,000, of which not to exceed $757,000 shall be available to the United States Employment Service for necessary expenses in connection with the operation of employment office facilities and services in the District of Columbia and for use in carrying into effect section 602 of the Servicemen's Readjustment Act in Puerto Rico: Provided, That no State shall be required to make any appropriation as provided in section 5 (a) of said Act of June 6, 1933, prior to July 1, [1949] 1950: Provided further, That notwithstanding the provisions of section 5 (a) and section 6 of the Act of June 6, 1933, the Secretary of Labor shall from time to time certify to the Secretary of the Treasury for payment to each State found to be in compliance with the requirements of the Act of June 6, 1933, such amounts as he determines to be necessary for the proper and efficient administration of its public employment offices. "In carrying out the provisions of said Act of June 6, 1933, the Secretary shall assure that each State agency operates under such methods of administration relating to the establishment and maintenance of personnel standards on a merit basis as are found by the Secretary to be necessary to carry out the purposes of said Act; such methods and the methods required pursuant to section 303 (a) (1) of the Social Security Act, as amended, shall be promulgated jointly by the Secretary and the Federal Security Administrator and both such methods shall be administered in a manner which assures consistency in their application. "Whenever funds are paid to the same State agency under this heading and title III of the Social Security Act, as amended, (1) such State agency may, if it so elects, submit to the Secretary and the Federal Security Administrator a joint budget covering both the functions for which grants are made under this heading and the [functons] functions for which grants are made under such title III; in such a case, the Secretary of Labor shall, if the State agency so elects, certify to the Federal Security Agency the amounts to be paid to the State under this hearing and upon receipt of such certification, the Federal Security Agency shall certify such amounts to the Secretary of the Treasury, in addition to the amount, if any, payable by said Agency under the provisions of section 302 (a) of the Social Security Act, as amended. Any additional amounts so certified by the Federal Security Agency shall be paid to the State by the Secretary of the Treasury out of the appropriation herein made available; and (2) the State agency may commingle such funds and account therefor by such acounting, statistical, sampling, or other methods as may be found by the Secretary of Labor and the Federal Security Administrator, respectively, to afford reasonable assurance that the funds paid to the State agency under this heading and the funds paid to the State agency under title III of the Social Security Act, as amended, are expended for the respective purposes of this heading and of such title III. (39 U. S. C. 695b; 42 U. S. C. 502-503; Executive Order 9617; Act of Apr. 28, 1947, Public Law 40.) "Appropriated 1948, 1 $64,842,400. Estimate 1949, $72,000,000." The House in its report transfers United States Employment Service activities to the Federal Security Administration. In addition to House report indicates a 20-percent reduction in the grants appropriation for operations of State employment service offices on the basis that 1 Includes $7,460,000 appropriated in the Supplemental Appropriation Act, 1948. (a) The States promised in 1946 cheaper operations of the public employment offices upon return of these offices to State administration, and (b) Local office staff could be sharply curtailed in periods of high employment. The reasons for not disrupting employment service operations which will occur in the event of the proopsed transfer have already been pointed out. With respect to the monetary cut the following points are pertinent: (a) The request for $72,000,000 was based on estimates of needs as prepared by the States and on thorough review by the Department of Labor and the Bureau of the Budget. Curtailment can be effected only by reducing essential services. The additional costs arise not from staff expansion in the States (on the contrary there has been a steady contraction in staff since VJ-day) but in rising costs, due to State salary increases, increased office space costs, and the addition of farmplacement program. (b) Periods of full employment do not make the employment service job easier, nor do they become prima facie evidence that employment service activities should drop in volume. The tighter the labor market becomes the tougher the placement job because of the difficulty and time-consuming efforts to find people and because of increasing employer demands. Today we are experiencing high labor turn-over which throws greater work loads on employment offices. The States must meet the manpower mobilization requirements of the European recovery program and expansion in military production. Also, it is confronted with the problem of finding manpower for the handling of 9,000,000 more acres of agricultural production than were harvested last year. These responsibilities cannot be met by curtailment of local office staff. The appropriation for 1948 is $64,842,400 plus the pending supplemental request of $2,560,000 or $67,402,400. The increase requested to $72,000,000 for 1949 is not for additional staff (as a matter of fact 582 fewer positions are provided for). $3,700,000 is for increase in State salary rates (which does not cover increases in State compensation plans subsequent to September 1, 1947, which amount to approximately $4,000,000); $2,190,000 for expansion of farm-placement program to a full year, and $2,500,000 for increased costs other than for salaries-such as travel, office rental rates, repairs to offices, equipment, etc. One other vital point should be made and that concerns the need for a contingency fund to meet emergency conditions. Every year critical situations arise which cannot possibly be foreseen and provided for in advance. For example, factory shut-downs for retooling, or for lack of material, or because of strikes always result in sudden and sometimes protracted and substantial increases in the flow of traffic into the local offices to file claims for unemployment benefits. Advance estimates of local office staff requirements cannot take these emergencies into account. When such situations occur State administrators are compelled to borrow people from employment service activities to handle the claim load because they have no funds to hire additional people on a temporary basis. The result is that because of the reduced number of employment service staff, job orders remain unfilled so that in many instances people being paid benefits cannot be placed in job openings. Another example occurs where States give their employees salary increases. No provision is made in the Federal budget for this because again it cannot be anticipated. The increase has to be paid but it can only be done on the basis of curtailing operations. During the House hearings this problem was fully recognized and discussed and apparently concurred in by the chairman of the House subcommittee handling the bill as is borne out by his remarks on pages 214 and 215 of the House hearings. In the event that the requested restoration of funds is granted it will be necessary that authority be contained in the supplemental bill to extend to the items in this title the same general provisions applicable to other Department of Labor items as contained in sections 102, 103, 104, 105, and 106 of H. R. 5728 as passed by the House and amended by the Senate. Line 16 through line 23: Section 201 of the proposed House bill H. R. 6355 proposes to rescind $22,000 of funds recommended for appropriation for 1949 to the Office of the Secretary and $28,550 for the Office of the Solicitor. This rescission according to the House report is due to the proposed transfer of the United States Employment Service to the Federal Security Agency. The amounts involved are used to service the Employment Service in the Department and should be retained if the House proposal is not approved. Senator KNOWLAND. The first witness on H. R. 6355, which is the supplemental Federal Security Agency appropriation bill for the fiscal year 1949, will be Mr. David A. Morse, Under Secretary of Labor. Mr. Morse, you may proceed. UNITED STATES EMPLOYMENT SERVICE STATEMENTS OF DAVID A. MORSE, UNDER SECRETARY OF LABOR; ROBERT C. GOODWIN, DIRECTOR, UNITED STATES EMPLOYMENT SERVICE; EDWARD L. KEENAN, DEPUTY DIRECTOR, UNITED STATES EMPLOYMENT SERVICE; KENDRICK E. BROWN, ACTING ASSISTANT DIRECTOR FOR BUSINESS MANAGEMENT, UNITED STATES EMPLOYMENT SERVICE; AND JAMES E. DODSON, BUDGET OFFICER, DEPARTMENT OF LABOR GENERAL STATEMENT Mr. MORSE. Mr. Chairman, the Secretary is ill, and I am appearing today in his stead. Mr. Chairman and members of the committee, I am grateful for the opportunity to appear before you today and express my views on H. R. 6355, making supplemental appropriations for the Federal Security Agency for the fiscal year ending June 30, 1949. I should like to point out to the committee, by way of background, that the regular 1949 budget request for the United States Employment Service has not been before this comittee for consideration until today because of the action of the House Subcommittee on Appropriations in defering action from the regular appropriation bill, H. R. 5728 until after action should have been taken on Reorganization Plan No. 1 of 1948, which was defeated by the Congress. I may also say there has been no real hearing before Congress up to this time on this budget request for the USES in the Department of Labor. Early in the House hearings on this bill, the chairman of the House Subcommittee announced that the hearings would be conducted on the basis of a consolidated United States Employment Service unemployment compensation operation in the Federal Security Agency. EFFECT OF THE HOUSE ACTION From the standpoint of the public employment service system, and especially the Federal functions of that system, the appropriation bill you have before you is a very complicated one. It would, among other things: 1. Transfer the United States Employment Service from the Department of Labor and combine its functions with those of the unemployment compensation program in a newly created Bureau of Employment Security in the Federal Security Agency. 2. Combine in a single budget the funds for the State administration of both the Employment Service and unemployment compensation programs; reduce the combined estimated funds for this purpose by $22,650,000. 3. Cut $1,100,000, or approximately 30 percent from the estimate for the Federal functions of the United States Employment Service and unemployment compensation programs, exclusive of the Federal |