In approving the 1954 appropriation, the Congress provided a base amount of $186,205,000 to finance the workload accomplished at a cost of $197,104,247 in 1953, when the average annual State salary rate was about $125 less than was allocated to the States in 1954. During the year, salary rates have continued to increase.

In addition, insured unemployment was higher in the first half of fiscal year 1954 than it was in the first half of fiscal year 1953. All of this points up the considerable adjustment which the State agencies have had to make in the first half of 1954. This request does not provide for an increase in the quality of operations provided for in the 1954 allocation to the States, which in itself was well below that of 1953.

During the closing months of calendar year 1953, the economy entered a period of adjustment, with some declines in employment, and an increase in layoffs. These adjustments are still occurring. As a result, State-insured unemployment is now about double that of the same period last year.

It is assumed that the adjustments in defense, and in consumer durables and soft goods production will continue during the rest of the fiscal year. The normal seasonal rise in employment is expected to be accompanied by a seasonal decline in insured unemployment, but volumes are expected to continue well above those of recent years. It is also assumed that the adjustment process will taper off and will be largely completed by the middle of fiscal year 1955.

During the January-June period, total unemployment is expected to average 2.6 million. Insured unemployment is expected to follow seasonal patterns and decline from 2,119,923 during the week ending February 6 to an average of 1,820,000.

Such an average would be below the 2 million averaged in the comparable periods of 1949 and 1950. An average of 1,820,000 in insured unemployment would be at a rate of 5 percent of base-period covered employment. Because covered employment has risen about 4.8 million since 1950, the rate of insured unemployment assumed for the January-June period is well below the 6.4 percent rate of 1950.

Changes in the volume of insured unemployment indicate the changes in many of the workload items of the employment-security program. An average weekly volume of insured unemployment of 1,820,000 indicates that 47.3 million weeks of unemployment will be claimed in the January to June 1954 period. In the July-December 1953 period, 25.6 million weeks were claimed, so that the fiscal year total is now estimated at 72.9 million. This compares with the 48.6 million weeks originally allocated to the States for 1954. From January 3 through the week ending February 13, a total of 12,253,400 weeks were claimed.

STATE SALARY INGREASES

The 1954 appropriation language did not contain the provision by which in recent years, increases in average State salaries above those used in the original allocation to the States could be financed from the contingency fund.

The average salary rate used in making the 1954 allocations was $3,688. After making those allocations, there were no funds in either the base or contingency funds which could be used for increases in salary rates.

However, employment-security-salary rates do not move independently of those of other State employees. It is now estimated that the average for the year will be $3,777, an increase of $89 per employee. This would mean that in addition to other adjustments, the States would be required to absorb about $3.9 million more. this request, we have provided for the salary rate expected to prevail in the States from April 1 to June 30. It provides for absorption of these increases in the first 9 months of 1954.

USE OF CONTINGENCY FUND

The appropriated contingency fund was $6 million. In preparing this request, $4 million of that amount was applied to the cost of the increased workloads anticipated. This will leave a $2 million contingency fund, against which the States currently have a claim for $935,000 for the cost of changes in State laws. The balance of about $1 million will be available for other State law changes or workloads in excess of those currently estimated.

In closing, I would like to read to the committee a resolution of the Federal Advisory Council which has been concerned with the effects of financing all employment security operations. The resolution reads as follows:

That the Council urge the Secretary to take whatever steps may seem necessary and helpful to assure adequate funds for the functioning both of the Federal bureau and the State agencies in the line of securing additional appropriations from Congress, especially in the form of a substantial contingency fund.

That, Mr. Chairman, is the statement, and we will be glad to answer questions.

DELAY IN PRESENTING JUSTIFICATIONS TO THE COMMITTEE

Mr. BUSBY. The committee is a little concerned over the fact that it took so long for the justification to get up here. I believe the supplemental request was signed last Tuesday, over a week ago today; and in accordance with my request, the clerk of our subcommittee telephoned the Department the first thing Thursday morning to have the justifications brought up as soon as possible. The committee didn't receive them until 11:40 a. m. this morning.

Is there any particular reason why it took that long to get the justification up here?

Mr. GOODWIN. Well, after we got the markup, I understood that that came to us sometime Thursday, and I think it was the latter part of the day on Thursday. We had two appropriations to prepare the material for, the two that are before you today. Now, we had received word that the unemployment compensation for veterans was scheduled for a hearing on Monday, Washington's Birthday, and we gave that precedence in preparing the material.

We then started immediately on the other material as soon as that was out of the way. We were unable to start on it, of course, until we had received the material from the Bureau of the Budget. We did work over the weekend on it. We worked over the weekend on it, Mr. Chairman, and we gave precedence to the unemployment compensation for veterans material.

Mr. BUSBEY. The Bureau of the Budget's letter to the President is dated February 16. That was a week ago yesterday.

Mr. GOODWIN. I haven't actually checked the receipt dates, Mr. Chairman, but I had understood we didn't get it until Thursday.

Mr. BUSBEY. I want to assure you, the same as any other Department, that it is the desire of this committee to cooperate as far as possible in every circumstance, but frankly, I think we were entitled to the justifications sooner than that, especially when a request for fast action was made as far back as last Thursday morning. I didn't ask our clerk to call down there to ask for these justifications with the idea that we would be stalled and put off. I expected them up here. Mr. GOODWIN. I would request the opportunity to look into that further, but I do know the staff worked on it over the weekend and it was not a question of the staff not applying themselves. I don't know why they didn't get up sooner than they did, in detail, other than what I have told you.

Mr. BUSBEY. I can't emphasize too much that when a request comes down from the committee, in the future, we expect a little better cooperation and effort to meet that request than has been displayed in this particular instance. What I said to our clerk, Mr. Moyer, when I learned they were not up here late this morning, probably wouldn't look too good in print.

BUREAU OF BUDGET PROCEDURES IN HANDLING SUPPLEMENTALS

Did the Bureau of the Budget advise you that they were sending up this supplemental request, or how did you happen to know about it, and when did you know about it?

Mr. HUDSON. I can answer that, Mr. Busbey. The first information we had that this was up on the Hill was the call I had from Mr. Moyer. The Bureau of the Budget sent this up without notifying the Department. We knew they had changed the amounts, but then we had to go back to the Bureau of the Budget and find out where they changed them and why before we could start to provide our justification.

Mr. BUSBEY. Is it customary for the Bureau of the Budget to notify the Department or not?

Mr. HUDSON. Ninety-nine times out of 100, on supplementals, we find out about it from the Appropriations Committee. On regular bills, we find out in advance.

Mr. BUSBEY. As far as I am concerned I think the Bureau of the Budget should certainly be criticized for not notifying you at the time they send a request to the Congress, especially in an emergency of this nature, when the supplemental bill had to be acted upon by the committee in a short period. As I mentioned before, we felt that part of this request was of such an emergent nature that we put funds in the bill without even having a hearing.

If we had the justification up here, we might have been able to have held hearings on both items and included them in the second supplemental bill before it went over to the Senate.

DETAIL ON BUREAU OF THE BUDGET MARKUP

Mr. GOODWIN. How do we get the detail on the Bureau of the Budget markup?

Mr. HUDSON. Mr. Moyer called me Wednesday about it; we called the Bureau of the Budget and got the details from the Bureau of the

Budget sometime Thursday. The Bureau started to work on it probably late Thursday and Friday. Friday we had the call about the appearance in the Senate, Monday. Part of the delay took place this morning. I sent the material up here to Mr. Moyer at 9:30 this morning by messenger. Somehow or other, he got it over in the Senate and it was delayed over there until we put a tracer on it and found it and got it over here at half past 11 or 12.

BREAKDOWN OF REQUEST

Mr. BUSBEY. How much of this request is for increases in the number of unemployment compensation claims to be filed this year? Is it the $10 million for net cost of increase in benefit claims, shown on page 5, less the $1,281,000 for going back to weekly claims taking, plus $748,500 for the veterans unemployment compensation program? Mr. GOODWIN. There are some of the other costs that are the direct result of increases in the workload, Mr. Chairman.

For instance, the increase in retirement contributions grows out of the fact that additional personnel is put on to take care of the increased load and that automatically increases the retirement contribution amount.

The same thing is true on the postage reimbursement; $13,227,500 of it is due to the workload increases. Now, that does include the $1,281,300 estimated as the additional cost in going to weekly benefits, rather than biweekly. That is the only item in there that is not exclusively an item of workload increase.

$1,272,500 is for the salary increase. That allows for the anticipated rise in the salary rate.

Mr. BUSBEY. At this point in the record, without objection, we will include pages 8, 9, and 10 of the justification and the cost ascertainment table on page 13.

(The pages referred to follow:)

WORKLOADS

Average volume of insured unemployment

The level of total unemployment for the second half of fiscal year 1954 is assumed to average 2.6 million which is above the 1.6 million average in the second half of fiscal year 1953, but substantially below the 3.9 million unemployed in the last half of fiscal year 1950 and the 3.2 million in the same period of fiscal year 1949 when the economy was also in a period of employment adjustments.

The proportion of this unemployment that will be insured will be exceptionally high because most of the layoffs are occurring in covered industry. Although 75.4 percent of total unemployment in the second quarter was insured unemployment, and 82.7 percent in January, it was assumed that as the fiscal year continued, the rate would begin to decline and would average about 70 percent for the last 6 months.

The application of a 70 percent ratio to total unemployment of 2,600,000 results in an estimated average weekly volume of insured unemployment of 1,820,000 during the last half of fiscal year 1954.

Volume of weeks claimed

Multiplying average weekly insured unemployment by 26 gives a 6 months' total of 47,320,000 weeks of unemployment claimed.

Initial daims

The total number of initial claims was estimated by developing a ratio of weeks elaimed to initial claims. This ratio was based upon past experience and an estimate of the influence the economic assumptions would have during the second half of fiscal year 1954. It is assumed that unemployment will rise somewhat

more than seasonally during January-June 1954, as a result of short-term layoffs occasioned by the adjustment of production schedules to new demand-price situations. As unemployment rises in the second half of the fiscal year, it is assumed that the duration of unemployment will also increase.

The application of the estimated duration of 5.8 weeks to the assumed volume of weeks claims for January-June 1954, results in an estimate of 8,158,621 initial claims. This was rounded to 8,200,000. The breakdown of this total into intrastate and interstate claims was based upon experience, and interstate claims were estimated at 5 percent of the total of 410,000. This was rounded to 400,000. During the past 5 fiscal years, the ratio has ranged from 4.2 to 5.6 percent. Intrastate claims were the difference-7,800,000.

Continued claims

The computation of the number of continued claims estimated for the second half of fiscal year 1954 is complicated by the expectation that States will return to weekly reporting on April 1.

The elements of the calculation are as follows:

1. On a weekly reporting basis, experience shows that about 95 continued claims are taken for every 100 weeks claimed.

2. On a biweekly basis State experience indicates 60 continued claims are taken for every 100 weeks claimed.

3. The number of weeks claimed is usually higher in the January-March quarter than in the April-June quarter. In fiscal year 1953, 54 percent of the weeks taken in the last half of the year were taken in January-March. In fiscal year 1950, during the inventory adjustment, the January-March proportion was 57 percent of the second half total.

4. It was assumed that the second half of fiscal year 1954 would more closely resemble that of fiscal year 1950 than that of last year, and that 57 percent of the weeks claimed would fall in the January-March quarter when the States would be paid for biweekly reporting only. On this basis, 26,972,400 weeks would be claimed in January-March, and 20,347,600 in April-June.

5. Applying the 60 ratio to 26,972,400 gives 16,183,440 continued claims for the January-March period (a biweekly reporting period). This was rounded to 16,200,000.

6. Applying the 95 ratio to the 20,347,600 weeks claimed gives 19,330,220 continued claims, on a weekly reporting basis, for the April-June quarter. This was rounded to 19,300,000.

7. The sum of the two quarters' estimates is the 6-month estimate of 35,500,000 continued claims.

The division between interstate and intrastate claims for each quarter was based on past experience which indicates that interstate continued claims are 5 percent of total continued claims. This percentage was applied and the figures rounded.

Other benefit claim workloads

The following workloads have been estimated on the basis of past relationship to the basic claim loads:

It is estimated that the number of new applications for work taken in the second half of fiscal year 1954 will rise seasonally and will total 4,550,000.

It

In the first 6 months of fiscal year 1954 new applications totaled 3,948,818. was assumed that the second half of fiscal year 1954 would, like fiscal year 1953, account for 53.5 percent of the year's workload. On this basis, the applications taken in the first 6 months indicate a second half load of 4,550,000.