TABLE OF CONTENTS *

OPENING STATEMENT OF CHAIRMAN HOWARD P. "BUCK" MCKEON, SUBCOMMITTEE ON POSTSECONDARY EDUCATION, TRAINING AND LIFE-LONG LEARNING, COMMITTEE ON EDUCATION AND THE WORKFORCE, U.S. HOUSE OF REPRESENTATIVES, WASHINGTON, DC *

OPENING STATEMENT OF RANKING MEMBER MATTHEW MARTINEZ, SUBCOMMITTEE ON POSTSECONDARY EDUCATION, TRAINING AND LIFE-LONG LEARNING, COMMITTEE ON EDUCATION AND THE WORKFORCE, U.S. HOUSE OF REPRESENTATIVES, WASHINGTON, DC *

STATEMENT OF MR. RAYMOND L. BRAMUCCI, ASSISTANT SECRETARY, EMPLOYMENT AND TRAINING ADMINISTRATION, U.S. DEPARTMENT OF LABOR, WASHINGTON, DC *

STATEMENT OF MR. ALVIN C. COLLINS, DIRECTOR, OFFICE OF FAMILY ASSISTANCE ADMINISTRATION FOR CHILDREN AND FAMILIES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC *

STATEMENT OF MS. CYNTHIA M. FAGNONI, DIRECTOR, EDUCATION, WORKFORCE AND INCOME SECURITY ISSUES, UNITED STATES GENERAL ACCOUNTING OFFICE, WASHINGTON, DC *

STATEMENT OF MR. ROBERT RECTOR, SENIOR POLICY ANALYST, WELFARE AND FAMILY ISSUES, THE HERITAGE FOUNDATION, WASHINGTON, D.C. *

STATEMENT OF MR. ROBERT BERNHARD, MANAGER, HUMAN RESOURCES DEPARTMENT, KEY PLASTICS, YORK, PENNSYLVANIA *

STATEMENT OF MR. JASON TURNER, COMMISSIONER, NEW YORK CITY HUMAN RESOURCE ADMINISTRATION, NEW YORK, NEW YORK *

STATEMENT OF MR. DAVID BUTLER, VICE PRESIDENT, MANPOWER DEMONSTRATION RESEARCH CORPORATION, NEW YORK, NEW YORK *

STATEMENT OF MR. WENDELL PRIMUS, DIRECTOR OF INCOME SECURITY, THE CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON, D.C. *

STATEMENT OF MR. RODNEY CARROLL, CHIEF OPERATING OFFICER, WELFARE-TO-WORK PARTNERSHIP, OPERATIONS DIVISION, MANAGER, UPS, WASHINGTON, D.C. *

The Subcommittee met, pursuant to call, at 10:05 a.m., in Room 2175, Rayburn House Office Building, Hon. Howard P. "Buck" McKeon [chairman of the Subcommittee] Presiding.

Present: Representatives McKeon, Goodling, Petri, Ballenger, Barrett, Castle, Deal, Ehlers, Isakson, Martinez, Owens, Andrews, Roemer and Kind.

Staff Present: Robert Borden, Professional Staff Member; Becky Campoverde, Professional Staff Member; Linda Castleman, Office Manager; Mary Clagett, Professional Staff Member; Victor Klatt, Education Policy Coordinator; D'Arcy Philps, Professional Staff Member; Michael Reynard, Media Assistant; Jo-Marie St. Martin, General Counsel; Kevin Talley, Staff Director; Shane Wright, Legislative Assistant; Dan Lara, Press Secretary; Gail Weiss, Minority Staff Director; Cedric R. Hendricks, Minority Deputy Counsel; June Harris, Minority Education Coordinator; Mary Ellen Ardouny, Minority Legislative Associate/Education; Peter Rutledge, Minority Senior Legislative Associate/Labor; Maria Cuprill, Minority Legislative Associate/Labor; Marjan Ghafourpour, Minority Staff Assistant/Labor; and Michele Varnhagen, Minority Labor Coordinator.

Chairman McKeon. Good morning. I apologize for being late. I would like to welcome you to today's hearing on welfare reform, a reform that by almost all measures has proved to be a success far exceeding most, if not all, expectations.

Three years ago this committee played an important role in helping craft the work requirements included as part of the Personal Responsibility and Work Opportunity Act, commonly known as welfare reform. Thanks to the efforts of the Chairman and other Members of the Ccommittee, including Representative Talent and Senator Hutchinson, who at the time served in the House and on this Committee; we pushed for provisions which ensured States would be accountable for moving a substantial number of recipients toward work and self-sufficiency. As part of this focus on work, we also pushed for provisions requiring individuals receiving welfare benefits to participate in meaningful work activities, moving away from the traditional stand-alone education and training programs, which were found to be rarely successful under the old welfare system.

Today we will have the opportunity to hear from expert witnesses on the impact these requirements have had on the overall success of welfare, and in particular the impact upon individuals receiving welfare.

The efforts of our committee along with the Ways and Means Committee to assist welfare recipients move toward self-sufficiency continued as we played an active role in crafting the new welfare-to-work program established as part of the 1997 budget agreement. I along with the Chairman and other Members were particularly concerned that if these funds were going to be provided, they should be strongly coordinated with other Federal employment and job programs. In the end I believe we were successful in doing so.

As the welfare-to-work program nears completion, we will hear from several witnesses today on what impact this program has had in moving welfare recipients, especially those with the greatest needs, into employment. We will also have the opportunity to examine the extent to which this program has prodded coordination between welfare and work force programs.

In addition, I anticipate learning more on why a significant amount of funds from this program along with the funds under the Temporary Assistance For Needy Families program have gone unspent by States and localities.

I will leave it to our witnesses to provide specific details on the successes of welfare reform, but I find much of the news very encouraging. The facts are clear. The number of families relying on public assistance has fallen tremendously. Income among those leaving welfare has increased. Employment rates among single-parent mothers has increased, while poverty rates have fallen. These are all indeed reasons to be encouraged by welfare reform.

Some may point out that not all is rosy for those on welfare, and they are right, as we will hear today. There is a small segment of the welfare population that has not fared better under welfare reform. It is important for us to take a closer look at this population and determine why this group seems to be falling behind and what steps can and should be taken to address the needs of this population. Yet I take exception to those who try to claim that because welfare hasn't raised every family out of poverty, that it is a failure. I would only point out that the former program to assist those in poverty had over 30 years to attempt to reach this goal, yet by all accounts it failed miserably.

I believe we have turned the corner on welfare and on the broader issue of poverty in this Nation. It is my belief that if we continue to reshape programs so they are based on the fundamentals of personal responsibility, work, charitable organizations, local communities and accountability, we will continue to make strong headway in making the lives of all Americans even better.

I want to thank each of our witnesses for being here this morning, and I look forward to your testimony.

[The statement of Mr. McKeon follows:]

OPENING STATEMENT OF CHAIRMAN HOWARD P. "BUCK" MCKEON, SUBCOMMITTEE ON POSTSECONDARY EDUCATION, TRAINING AND LIFE-LONG LEARNING, COMMITTEE ON EDUCATION AND THE WORKFORCE, U.S. HOUSE OF REPRESENTATIVES, WASHINGTON, DC – SEE APPENDIX A

Chairman McKeon. I now recognize Representative Martinez for his remarks.

Mr. Martinez. Thank you, Mr. Chairman. I would join the Chairman in thanking all of you for taking time out of your busy schedules to testify before this Subcommittee this morning. I would also like to thank Chairman McKeon for assembling what I consider a widely representative panel. I recognize several members of the administration. I understand we are going to hear from several policy analysts and researchers with a wide variety of experience and expertise from all sides of the ideological spectrum and from two program participants, an employee and an employer.

One of the many positive aspects of working with Mr. McKeon is that his hearings are always geared toward unbiased information-gathering rather than furthering a political position. And I particularly appreciate this opportunity to do some unbiased information-gathering on welfare reform unlike many Federal programs that develop and change over time, in the beginning it was very radical and highly controversial when it passed 3 years ago. And I readily admit as a firm believer that it is the responsibility of the advantaged to help those that are less advantaged.

I am skeptical about a number of aspects about the welfare reform effort, particularly the Personal Responsibility and Work Opportunity Reconciliation Act. However, it would seem that in conjunction with a number of supportive measures, including the new tax credit for businesses that hire welfare recipients, an increased minimum wage that went along with the bill, and of course a booming economy, welfare reform by all measures has seemed to be highly successful for most of the participants.

I would admonish the Chairman and all others that when they think of these programs, they think of the people holistically; not those that are a success and or those that had failed. But the welfare system as it was not a particularly good system, but I wouldn't say it failed everybody. There were a lot of people that benefited by it. What we have to keep in mind is not the myths that are perpetrated to the Congress here, but the realities. Most of the people that went on welfare were not long-term welfare recipients before. They were people that had lost their jobs because of downsizing, because of plant closures and a lot of other reasons that needed that assistance temporarily.

There has always been that element that have been considered long-term welfare recipients. Years ago Ted Kennedy -- and I guess it was an idea before its time -- tried to add to the Job Training Partnership Act a component that would serve the very hard to serve long-term welfare recipient. Now today that is becoming a part of the philosophy of welfare reform is that indeed those are those kinds of people that need that extra assistance, and it is more costly to assist those. That is why the President asked for those $3 billion and why the President is asking again for some more money to continue the program.

The program as it has been so far -- that particular part of the program has been successful, and we ought to give it more time and more money to determine that if the economy takes a downswing, and you eliminate the part of the welfare success because of the booming economy, then you are going to need to continue that program in those hard times to make sure that those people that are hard too serve are served. Number one.

Number two, there are places in the country, and I can take you, every one of you, to any of those particular places, in fact I was in one of those places just this past weekend, where the reason that people are getting assistance is because there are no jobs, absolutely no jobs. And I will tell you the one place that is very glaring is the Native American reservations. Those reservations, the unemployment rates in many places exceed 30, 40, 50 percent. And there are just simply no jobs in those places.

Now those people come to a point in time when they have no more assistance, and they are not eligible for assistance because the 24 months or 18 months has run out on them, but what are they going to do since we have not provided the opportunity for them to have employment. So I think we have to look at all of those aspects of it as we look at whether or not the program is a success or failure, or where it is really helping or where it is not.

I am interested to hear from you who are immersed in the welfare reform on a daily basis, and I believe you can tell us how it is working and in particular the role that the welfare-to-work program has played in the success that we are now patting ourselves on the back for.

So with that I yield back the balance of my time.

Chairman McKeon. Thank you, Mr. Martinez.

Chairman McKeon. We are happy to have the Chairman of the full committee Mr. Goodling with us here today and turn some time over to him for comments.

Mr. Goodling. Well, I just want to indicate that when Mr. Bramucci -- after he visited my district, I told the press it was the best thing that happened in Washington in a long time, his arrival down here. And Mr. Collins' boss has helped me dramatically to get everybody to think in terms of quality when we talk about Head Start instead of quantity, and I appreciate that.

The fact that the two of you are sitting so closely together, I hope that means that in our Work Force Investment Act the idea of coordination will not just be words, but become reality, because that will determine whether it is going to be effective or whether it isn't going to be effective at all. Thank you, Mr. Chairman.

Chairman McKeon. Thank you. And we will hear now from our first panel. The first witness, Mr. Raymond Bramucci, is the Assistant Secretary for the Employment Training Administration with the U.S. Department of Labor here in Washington. And Mr. Al Collins is the Director of the Office of Family Assistance Administration for children of families with the U.S. Department of Health and Human Services in Washington. And I am glad to see your sitting close together. I thought it was just because that is where the mikes were. Let's hear first from Mr. Bramucci.

Mr. Bramucci. Good morning, Mr. Chairman. My old friend Chairman Goodling, my real old friend Rob Andrews and Major Owens, we go back a long ways, and it is good to be here. Because I know there are a lot of questions, I am going to make a few brief remarks and expect my written testimony be entered into the record.

I have been traveling the country watching this system develop out there in the hinterlands and every corner of east and west, south and north, but I can tell you while spending levels in the welfare-to-work are not at the level we would like all over the country, welfare-to-work is working. People are moving to work across this country uniformly. And we are experiencing a fundamental change in the national mindset about welfare.

First, welfare recipients want to work and are taking advantage of the opportunity to go to work in numbers we have never seen in the 60-year history of welfare as we knew it. Secondly, more and more employers are hiring welfare recipients and finding them to be valuable additions to their work force. Yet getting people to their initial job may be the easiest part of our challenge. The hardest part is ahead of us. Helping to sustain people in work in the face of daunting obstacles, helping to move people up from an entry-level job to a job that is truly self-sustaining, that is the hard part. That is what we are involved with now with the Department of Labor's welfare-to-work program.

A quick hit will not get this job done. That is why we need Congress to pass the bipartisan plan to extend welfare-to-work in the outyears.

Thanks. I look forward to working with all of you on this program and look forward to your questions.

[The information follows:]

STATEMENT OF MR. RAYMOND L. BRAMUCCI, ASSISTANT SECRETARY, EMPLOYMENT AND TRAINING ADMINISTRATION, U.S. DEPARTMENT OF LABOR, WASHINGTON, DC – SEE APPENDIX B

Chairman McKeon. Thank you very much. Mr. Collins.

Mr. Collins. Mr. Chairman, members of the Subcommittee, good morning. I am Alvin Collins. I am the Director of the Office of Family Assistance in the Department of Health and Human Services. I want to thank the Subcommittee this morning for the opportunity to be before you and also thank the Subcommittee for its leadership and support for work and training.

The Department of Health and Human Services is supportive to reauthorization of the welfare-to-work program. As you know, as indicated by the previous speakers, on October 22nd, 1996, President Clinton did sign the bipartisan welfare reform legislation that is drastically changing the Nation's welfare system. The focus of the new program, which we call TANF, or the Temporary Assistance to Needy Families program, is on work and responsibility and on providing States with the flexibility to be innovative in addressing those unique issues and needs for its own State and its own program.

Let me just also add, Mr. Chairman, that before assuming this position late last year, I had the unique challenge and opportunity to lead the welfare reform efforts in the State of Maryland as the State Department of Human Resources secretary. From that position and many other activities before this, and finally joining Secretary Shalala and many others as well as the other partners in Federal agencies, I have had the opportunity to see the TANF program move forward in a progressive way.

In essence, much progress has been made. Clearly the strategy of requiring work and responsibility and rewarding families who have gone to work has begun to pay off. In 1998, all 50 States met the law's overall work requirements, and we have nearly four times more people working today than we did in 1992. So the legislation did set forth important new requirements about work. In fact, there are new requirements in 1999 that States have to ensure that 35 percent of their overall caseload and 90 percent of their two-parent families are engaged in work activities. So employment rates are very encouraging.

Welfare recipients have increasingly gone to work. In fact, we know we have an increase of at least 23 percent versus 77 percent in 1992 and just 13 percent in 1997, again indications that the program is working.

More recent information about earnings is very encouraging, so we know the welfare reform is having a positive effect on the earnings of some of our recipients. So keeping the emphasis on work and moving the families towards self-sufficiency and moving people into the work force, we have seen the caseloads decline. We have had great success.

We ask you that you continue to move forward. The President has indicated in his most recent budget a significant increase for child care. We know that we must also continue our support for transportation, our housing assistance vouchers and other activities to make sure that our families are successful.

I have written testimony that has been filed, and I would be glad to answer any questions.

Chairman McKeon. Thank you very much, and your full statements will be put in the record.

[The statement of Mr. Collins follows:]

STATEMENT OF MR. ALVIN C. COLLINS, DIRECTOR, OFFICE OF FAMILY ASSISTANCE ADMINISTRATION FOR CHILDREN AND FAMILIES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC – SEE APPENDIX C

Chairman McKeon. We have several Members here that will be having questions, so I will hold mine until the end. Mr. Martinez.

Mr. Martinez. I will hold mine until the end.

Chairman McKeon. We would hear first from Mr. Castle.

Mr. Castle. Thank you, Mr. Chairman. And thank you, gentlemen. I am pleased to hear your reports. They confirm pretty much what those of us who worked in welfare reform for many years have believed, that these kinds of programs would work. While you made brief statements, I would actually like to make you questions from the statements you made.

One thing you said, Mr. Bramucci, that I would like a little further explanation is on the spending levels are not what you would want all over the country. I wasn't exactly sure what you meant. I assume that is the welfare-to-work spending levels that are being spent by the States. I assume that means not all the States are implementing that aspect of the welfare reform programs as completely as we would want it. Am I accurate about that? Could you just expand on that a little bit?

Mr. Bramucci. First of all, I will respond to your question, but I would like permission from the Chairman to ask somebody who helps me a great deal. I need a lot of help. Ray Uhalde, who has kept this program going inside the House while I am outside, I would like to ask permission to have him at the table. Mr. Chairman?

Chairman McKeon. If there is no objection, that would be fine with me.

Mr. Castle. I could probably use some help, too, but that is all right.

Mr. Bramucci. What I tried to indicate in my brief remarks was that it is isn't across the board in 50 States and the territories on how States are utilizing the various pools of money that they have. Some States are utilizing TANF monies more readily; other States are using the welfare-to-work formula money that we have made available, so that in some places you see very vigorous performance, a lot of activity, a lot of it based, by the way, Congressman, on when they got the money. We see that States who got the money earliest in terms of the formula money are spending down greater and have greater participation. All this has to do with timing and a lot of complicated rules and two major sources of monies that are available to States. And so we don't see a pattern across the board that you would say is very uniform. That is what I was referring to.

Mr. Castle. Okay. My next question is a little bit different. I guess it is to both of you or either of you. And I agree with you, I have always felt -- and I was an involved in welfare reform early on, but always felt that welfare recipients really do want to work. There was a misunderstanding out there by a lot of us, not everybody obviously, but a heck of a lot. A substantial majority did. But there are some limitations, as we know. A lot were concerned about if I work and get a minimum wage, and I have to give up Medicaid, for example, what will I do about my children or food stamps or other government benefits? Now that we have been into the system for a couple of years, what, if anything, are you hearing about what welfare recipients are concerned about when they take on a job in terms of things that we may have to look at in terms of perhaps step-down or other things that we have to do with respect to keeping some benefits in place to make sure that we are always encouraging work?

I have always felt that we had to make work more valuable than welfare. If you don't, you have got a problem. You have got a fundamental problem. People are going to dance around it whether they want to work or not. Anything you could tell me about that would be helpful.

Mr. Bramucci. I think we are actually reconstructing the safety net based on work. What we have got to do is provide the support services to keep people into work and to give them the background and the training they need as they move up the ladder so they can support themselves. We can't just hit them with a request or a requirement and then walk away. We have got hugely dependent people who have kids and health needs, so we have got to construct a system of providing, for instance, substantial medical care. We have got to make sure we don't abandon them on that count. They are worried about that.

Secondly, they are worried about child care. If you have got two kids, and you are struggling to find a way to be in compliance with the law, not lose the ball of wax, you got to find somewhere to put those children where they can get quality care. I would say that is a factor.

Third, we have got to add value to those people so they have something in their portfolio that will permit them to get enough money in their pay to support themselves. So it is support at home; maybe transportation would get in there big-time also. But as we are now situated with the funds we have available and the flexibility, if we can put together the kind of partnerships that we need on the ground level, between Al and us and Transportation and HUD and all the other people that bring resources to bear, we can get this job done.

Mr. Castle. So you are working in that direction. You think you have, generally speaking, the resources to go in that direction?

Mr. Bramucci. At this point.

Mr. Castle. But you do believe that is correct, Mr. Collins?

Mr. Collins. Congressman, let me just add I certainly agree with the points that Ray has made. In my travels across the country even before and certainly now as part of the administration, what I consistently hear are families are worried about child care, they are worried about transportation, and they are worried about housing. I think with the wisdom of this Subcommittee and the administration, we have gone in great directions as to make these things possible. If you look in the President's budget for this coming year, we talked about adding additional money for child care, certainly additional money for transportation and housing assistance and what have you.

But I think fundamentally we have to figure out how to make work pay, and States are coming up with the earned income tax credit programs and other things that we have done at the Federal levels.

Mr. Castle. I am sure we would like to help you with those kind of programs.

Let me ask you one other question. Just one final question, the yellow light is on. We all know, I don't know what the amounts are and I am not going to ask you that, but there are unexpended funds in both the welfare-to-work program in the State levels and the TANF programs. Has the administration taken a position with respect to that in terms of the States should be returning some of these funds eventually, or they should be left with the States, or have you not really faced that issue at this point?

Mr. Collins. Let me just add, Congressman, the administration is real clear those monies should be left in the hands of States. In fact, half, approximately 50 percent, of the money that appears to be unspent is, in fact, obligated by States, and States will be drawing that money down to pay for certain activities. But we do maintain fundamentally that agreement with the States, and States have plans to use those resources.

Mr. Castle. Thank you very much, gentlemen. I appreciate all you are doing. I yield back the balance of my time.

Chairman McKeon. Thank you. Mr. Andrews.

Mr. Andrews. Thank you, Mr. Chairman. First let me commend you, Mr. Chairman, for reasserting the rightful jurisdiction of this committee and Subcommittee over this issue. Welfare-to-work, it is true, deals with the TANF program which is under the Ways and Means Committee, but the solution to the welfare-to-work program deals with job training and employment recruitment, and that is well within our jurisdiction, and I enthusiastically support your efforts to make sure we are a part of that process.

I want welcome Mr. Collins and especially welcome Secretary Bramucci, who I have known for nearly 20 years. I am not at all surprised that anything he is involved with would be a great success given his great personal integrity and record of public service. And on behalf of the people of New Jersey, we appreciate all you have already done for us, and we are not surprised with your success here. It is great to see you, Ray.

I did want to ask a question that Governor Castle related to just a few minutes ago, which is the question of the unspent funds. In my area, in southern New Jersey, there were 16,000 families on what used to be called AFDC. There are now about 7,000 families on TANF.

I think the hard part is just beginning, to echo what Secretary Bramucci said. It is great that people have moved from welfare-to-work. And I think it is a -- first of all, a credit to those individuals and then to all those who helped them get there, but there are two looming problems that I think run the risk of causing a social cataclysm in many areas of America in the next 3 to 4 years.

Problem number one is a lot of people that have moved from welfare-to-work have a real ceiling as to how high they can go, and that ceiling is a function of their lack of skills, their lack of access to child care, to health care, to transportation. It is one thing to be working; it is quite another thing to be supporting a family and making enough money to support a family and move up the economic ladder.

And I think for us to just declare victory on behalf of those families that have already moved from welfare-to-work would be a tragic mistake, because many of them are not necessarily going to move ahead for circumstances that have nothing to do with their own efforts or attitudes, but have everything to do with the system that they find themselves in.

The second problem is in the case of my area, the 7,000 families that have not moved from welfare-to-work, I have met this year with nearly 300 employers in my area. Easily two-thirds of them have said that their number one problem is finding people to hire, which is a nice problem indeed, given a comparison to what we had 6 or 7 years ago. But there is a real disconnect here, isn't there, that there are 7,000 people out there that are still on the rolls, and there are hundreds of employers looking to hire people. It is obvious that the 7,000 people who are still on the rolls have very serious impediments to making the jump, and I don't think that the present law affords them the tools to make the jump.

That is why I am very much in support of the proposal that you have brought here today. I think it would be a breach of trust to take any part of that $3 billion that was promised by this Congress when we approved the 1996 law, to take any part of that and divert it to other purposes. We made a promise, and that is that people in the welfare system around the country would use their best efforts to become employed, and we would use $3 billion to help them make that transition.

The job is far from done, and for us to even think about removing any of that money from the States or from the discretionary Federal programs would be a serious mistake.

The question that I have for either of you two gentlemen is, how many dollars have yet to be obligated, and what kinds of changes in the rules do you think we should authorize here to make it easier to draw down those dollars so the very real needs of those who have yet to be placed and those who have been placed but have hit that ceiling that I talked about could be served? How much is out there, and what should we do to make it available?

Mr. Bramucci. Well, let me respond specifically after I give you an overview of your observations. I think abandonment right now, we have got to redouble our efforts, because the people we are dealing with are hugely at risk. They have a long period of dependency, and they need help. But we have flexibility. We can use those funds that we have available throughout the country to help them get training and education they need.

As to the unspent funds, I am going to turn that to Ray Uhalde, my trusted help.

Mr. Uhalde. Mr. Andrews, we have obligated over $1 billion to States, who in turn send 85 percent of that money down to local work force boards. And approximately 15 percent or so of that money currently has been actually spent. The issue with the expenditures on the money is first the eligibility provisions in welfare-to-work, which have been overly prescriptive. For an example, it is targeted on those on the roles longest, 30 months or more or within 12 months of the time limit. In addition, they have to meet two or three other barriers. They have to not only have a high school diploma or GED, but also have low reading and math skills or have poor work history and some other provisions. It wants all those filters. We are actually missing people who have poor basic skills and can't read their diplomas. So the President's reauthorization would simplify the eligibility, target it on long-term welfare who also are either disabled or homeless or some other simple provisions, also the noncustodial fathers.

Mr. Andrews. My time is up. I want to say to the Chairman and my other colleagues I am certainly eager to take the recommendations that these gentlemen have made in their written testimony and work with both sides to produce a good piece of legislation that would let this money be used for those who most need it. I thank the Chairman for this time.

Chairman McKeon. Thank you. Mr. Isakson.

Mr. Isakson. Thank you, Mr. Chairman.

Secretary Bramucci, I wanted to --in reading through your printed testimony, and I realize there might have been a lot of contributors to that, there is a sentence in there which if anyone that is with you or yourself could elaborate on for a second, I would appreciate it. It is in the section that refers to noncustodial parents, which generally is the father of children on welfare benefits, and it says, and I quote, "We now have for the first time the beginnings of an understanding of how to serve a highly disadvantaged population." that is in that section. I want to know if that statement relates to noncustodial parents, and if it does, what are the beginnings of those understandings? Because my guess is all of that is a subset of the overall group we are trying to serve that may be a big problem area.

Mr. Bramucci. Yes, sir. That is a challenge. And I can relate to you last week in Oakland, California, being at a program where the welfare-to-work program there was deconstructing a series of hangars or depots that were constructed during World War II. And in that gang of people, that work crew, about 45 percent of them were men. And I talked to them about what was keeping them from coming up through the system and presenting themselves for the services we had available in the programs we had. And just today I got a summary of that meeting. I would be happy to send you a copy of that as to the complications arising out of child support, out of past histories of violations.

For instance, most of the people coming through this program, once they completed it and were about to enter the work force, have to have a driver's license. Well, they didn't have a driver's license, but they did have a lot of citations for driving without a license. So we went back to the PIC, that particular program, and got the kind of attention with an automobile company that trained people to get licenses, that made cars available for licenses. We had the grantee negotiating with the local prosecutor to begin mitigating some of the past citations.

It is a complicated issue, but we think we are learning. We are learning that the way to get at them is with community-based organizations that have connections with families that work closely with public housing authorities. We have been trying to find ways of cooperating with HUD. We are making some progress, and we are determined to move on.

Mr. Isakson. My second question on that area, is there a problem in these noncustodial parents, fathers, actually getting into work because of legal obligations they have to the children prohibit them from wanting to participate in a government program that would actually help them to get into work such as some type of child support or some type of past history not of a criminal nature?

Mr. Bramucci. Indeed.

Mr. Isakson. My last question -- I agree with Mr. Andrews completely on training so that those we have gotten into the work force can build to the future so they remain employable in less good economic times. But assuming for a second that we have a protraction of our current prosperity, which all of us hope -- I sense in reading this and hearing your comment about extension in the outyears that our biggest challenge now is to make the unemployable employable who qualify in this category; is that correct?

Mr. Bramucci. That is absolutely correct.

Mr. Isakson. Thank you, Mr. Chairman.

Chairman McKeon. Thank you. Mr. Roemer.

Mr. Roemer. Thank you, Mr. Chairman. I appreciate the opportunity to listen to and learn from the distinguished gentlemen on our panel today. I want to compliment you for bringing together such a talented panel that can help us make decisions and, as Mr. Andrews said, reclaim our jurisdiction of this very important matter that has been handed over to the Ways and Means Committee by the Parliamentarian, which I think many of us would acknowledge was a mistake.

I would start off with a question that relates to what we talk a lot about in this committee, and that is flexibility, whether it be education flexibility, the flexibility of States to be able to make certain decisions. I think both of you have testified that the original rules stipulated by our legislation, which I was an early advocate of and strong supporter of, that these might be too strict, that these may not afford the flexibility and the discretion of our States and our Governors to interpret these and apply these to people most in need back in our States.

I have heard from my Governor numerous occasions that they would recommend some changes to this law. I think both of you have mentioned the three characteristics that have been enumerated here in the law; one, the lack of a high school diploma or GED, and specifically it says, and possess low math or reading skills. Should we change that? Is your recommendation to "or low reading and math skills." .

Secondly, require substance abuse treatment prior to employment and/or they have a poor work history.

Now, what specifically would you suggest as changes to those three requirements? Is it a simple change in the end, or is there -- is it a one requirement versus two out of the three? Is it allowing the States to make some of those decisions? How would you recommend a change in that for our States?

Mr. Bramucci. As completely as possible.

We view those on the ground as artificial barriers. These, by definition, people who are left, that 60 percent are at-risk people. They need help. And frequently they are willing to work and willing to be involved, and we are creating barriers that are unnecessary. We have had meetings with our colleagues around the country to find out what these barriers are, and these are real barriers. In terms of the hand-off of welfare people to our competitive grants as well as the efforts in the States to use the formula money, they just don't make sense because we are categorizing people as kind of gifted, and really they need help, and we can help them. And we have the flexibility, and we are beginning to build the partnerships and the alliances on the ground level to get this done. We are not there yet, but we are getting there. We are working closer together. We are having more coordination of programs that are ending up helping people get into supportive work.

Mr. Roemer. Mr. Collins, would you advocate elimination of all three requirements and allow the State to try to get the remaining people off of welfare? We have had astounding success. In Indiana we have had about 50 percent of the people off welfare that were on in 1994. Now we have people that instead of removing somebody that didn't have a GED and they were in the 11th grade and they dropped out because of family reasons, now we are running into people that have a learning disability and they dropped out in the sixth grade. And we need more resources and more flexibility. They may have a substance abuse problem. How do we address that, and how do we rewrite this law?

Mr. Collins. Congressman, that is a great question. I would recommend that we support the recommendations as were indicated by Ray, that we make the modifications that are stipulated there. We have flexibility to build on in the Temporary Assistance to Needy Families legislation, and I think the final regulations that were signed by the President in April of this year clarifies and moves forward the final regulations of that flexibility. We would like to see the same kind of flexibility given to States in the modifications as is recommended there.

Mr. Roemer. Does the Cardin bill or the Akaka bill accomplish both of those? Is there a change that you would make from the administration bill, incorporate it into either one of those bills?

Mr. Uhalde. Mr. Roemer, the Cardin bill and the Akaka bill both capture all of the changes to streamline that eligibility and also add a provision to ensure that children aging out of foster care be eligible because those youngsters at 18 and to about 24 are really at risk of becoming a new generation. We ought to get them immediately.

Mr. Roemer. I really appreciate your helpful testimony. I would hope that we would respect our States' rights and allow them to be flexible to use this remaining money that we have to help the poorest of the poor and to help continuing the very successful effort that we have started in welfare reform. And I salute all three of you for your hard work and your successful work in achieving these objectives.

Thank you, Mr. Chairman.

Chairman McKeon. Thank you. Mr. Deal.

Mr. Deal. Thank you, Mr. Chairman. Thanks to the panel members for being here.

1996, when we passed welfare reform, we also passed an another reform measure in this country that I think had some corollary relationships to welfare reform. That is the Immigration Reform Act. It was designed in part to try to keep certain immigrants into this country from going onto the welfare rolls in part by requiring sponsorships.

I am being told by my local family and children services that they are not allowed to ask the questions as to the status whether or not they are immigrant, or if they are, whether or not they have sponsorship. I realize this is not within the main context of your testimony today, but I would like to ask if you cannot answer it today, if you would inquire and tell me if this is a prohibition from the Federal level or a prohibition from my State level, because I think it is a tremendous impediment to what we thought we were doing by putting some teeth into sponsorship to say that if you are going to bring someone here, part of your sponsorship says you will not allow them to be a public charge, and that if they are, then the sponsor can be held liable in part for that cost.

So if that is an issue that you could inquire into as to why is that not being able to be allowed to work, and why is the inquiry not being allowed to be made at the local level, I would appreciate that, unless have you a response.

Mr. Bramucci. I haven't heard that issue raised in my travels at all, but we will address it and get you a prompt answer.

Mr. Collins. Same here, Congressman. We will look into that.

Mr. Deal. Thank you.

Let me ask you this, because I think your testimony is very helpful, and I think you have acknowledged that establishing relationships and crossing boundaries and working with a very complex issue of getting people out of welfare and back to work is certainly one that needs to be done. I would like to ask you if you have seen some really innovative programs that States are putting in place to go one step further back, and that is before they ever drop out of school, to try to move into the middle schools and the high schools in a preventive fashion. I am aware of some programs that are in place in my State, I am not certain if they are allowed to use any of these funding sources to implement them and to expand them. Because I am one that believes that we can do the prevention before they ever get to that spot of actually entering the welfare rolls, that is a very important component of it.

Have you seen some innovative programs, and, if you have, do we need to expand the flexibility of using some of these funds to promote those programs?

Mr. Bramucci. Well, we have seen a number of very innovative programs. I want to give you an example of one I saw a couple of days ago in San Francisco. Remember, besides the welfare-to-work money, we also have school-to-work money that is out there helping make these links. But I will give you an example of how innovative we can become.

There is a program in San Francisco that I saw called YUMA where kids are intercepted, kids who are at risk at school who are about to drop out. There is some kind of a connection between a school board and the local PIC and this community-based organization. What they have done is to purchase two franchises from Ben and Jerry's Ice Cream, and they give these kids counseling and supplementary education, but also put them to work for 10, 12, 20 hours a week in these Ben and Jerry's stores. They have also negotiated an agreement with the San Francisco Giants, yes, and the Oakland Raiders to sell ice cream and coffee at the stadiums.

Now, that is innovative. That is supportive. That is taking kids at risk. That is using public funds in a way that I think that you all wanted us to, that with flexibility and being supportive of kids who are going down the tubes.

Mr. Collins. Congressman, I may add the program that Ray just described is a good example of how the TANF funds and the welfare-to-work funds can be merged and create some real innovative activities. I have seen a community group funded in the State of Mississippi that talked about prevention activities in a certain neighborhood. We can't use the TANF founds for the general education, but certainly those funds, either Federal or State, can be used to fund such things, before- and after-school programs and pregnancy prevention programs and what have you. So the possibilities are virtually unlimited.

Mr. Deal. Thank you, Mr. Chairman.

Chairman McKeon. Mr. Bramucci, just to clarify that, did you indicate that they use the funds to buy the franchises?

Mr. Bramucci. This is a community-based organization that gets support from the PIC and the welfare-to-work establishment. It is not supported by public funds. It gets money through corporate contributions. Yes, they did purchase a franchise in cooperation with the California Small Business Council, but that in no way -- no way anything that we supported them with was involved in that transaction. This is in support of services for kids, period. The operation was put into place, the kids that enter employment and earn money based on the proceeds of that store.

This is entrepreneurship. It is also school counseling, it is social counseling, and I think it is terrific. They are coming in, by the way, on Thursday. There is a celebration here, in the Capitol, a national organization called PEPnet is celebrating success stories around the country, and that one is coming in here to be given a prize.

We are watching that carefully, Mr. Chairman, and there is no problem with fund mixtures.

Chairman McKeon. Okay. At the start you said that they were creative and they had bought the franchise, and at the end of your statement you said this was a good use of funds. I didn't understand.

Mr. Bramucci. Reasonable question, sir.

Chairman McKeon. Mr. Owens.

Mr. Owens. Thank you, Mr. Chairman.

I am pleased to see my old friend Ray Bramucci. When friends move away to New Jersey, we think they are lost forever, so I am glad Mr. Andrews is taking good care of you.

Let me focus on the world's largest welfare-to-work program. New York City has 20,000 people in the Work Experience Program, they call it, who are employed in city departments; 10,000 of them work in nonprofit and other agencies. Those who are employed in the city departments certainly don't get the same wages as city workers would get. They don't get any fringe benefits. They don't even get the same equipment when they are working. If you divide their welfare grant by the number of hours they work, they would get minimum wage.

Now, I don't know how many other places across the country have similar programs, but my first question is do you define this as a legitimate welfare-to-work program?

Mr. Bramucci. Well, we see welfare-to-work work experience as qualifying for minimum wage, and we do not envision nor have any tolerance for replacing of other workers with welfare recipients. We are aware that there is a lawsuit in New York City filed by AFSCME on behalf of members who are filing claims that they were aggrieved, but this is not a common practice around the country. I don't know of a movement or a trend that I could address. I say I am aware that in New York City there is this controversy, but it is not -- our program isn't designed to get involved in that kind of controversy.

Mr. Owens. The lawsuit is a recent development. The unions have tolerated this arrangement for a long time. The program has been in existence for quite a while.

My next question is have you evaluated that program at all, or are you evaluating similar programs?

Mr. Bramucci. Congressman, as I understand it, the funds for this program that you described, this placing of people in public employment, is being financed with TANF money. Our welfare-to-work money is not being drawn down in New York to pay for this.

Mr. Owens. So they are not spending the money for welfare-to-work?

Mr. Bramucci. They have been spending TANF money in New York more than welfare-to-work money.

Mr. Owens. In this program, out of 20,000 workers, only 11 have been hired permanently by the city to work in the city departments. This is at a time when we have great prosperity all over the country and also in New York City. And there is no impetus, no push, no drive to get large numbers of workers into the private sector. It is so easy to fund them into this WEP program, and it seems to me that the department ought to have some kind of position on the failure to move in accordance with the law, the provisions that are made in the law.

Mr. Bramucci. Well, our role so far -- remember, this legislation enables the States to have great discretion on what they choose to spend money on and how and what funds they choose to spend. But besides the formula money, Congressman Owens, we have made investments in the city of New York, for instance in the Consortium For Worker Education in Manhattan, which is currently -- and the Bronx, which is currently taking welfare recipients from public housing, training them to be -- well, first of all, selecting them, screening them, and then training them and then licensing them to be caregivers as satellite employees of existing child care facilities. We put a computer in their public housing apartment, and after we have trained them to be caregivers and they are licensed by the State, we send children there.

Now, that is getting to where the rubber hits the road, not connected to the State, not connected to the city, but part of our ongoing investment in community-based organizations and street-level operations. There are some positive results going on there where we have more discretion as to how money is spent.

Mr. Owens. That is a consortium for employment?

Mr. Bramucci. Consortium for Worker Education. I would love to walk over there one day and meet you and bring you around and show you stuff.

Mr. Owens. I would love to do that. In fact, on my agenda is to contact the Secretary to find out more about that.

Specifically my last question relates to a program to train truck drivers, the CDL. We heard there was great demand. We started some classes. We thought we had about 25 people to come in and get training on how to pass the written test. One hundred people showed up, and consistently they came back. We took them through the whole process. They passed the written test. Now they need to get the hands-on training with the trailer trucks. That costs about $3,500 to $4,000 in New York. Some of these people, 20 percent were women, surprised us that showed up and wanted to be on this job. Some are on welfare.

Is there anything that prohibits spending over a short period of time $3,500 to $4,000 to train somebody to finish that process, reasonable requirements for the CDL license?

Mr. Bramucci. I don't think there is anything technically --I mean--

Mr. Owens. Assume they are on welfare.

Mr. Bramucci. Remember, we have a work first requirement that we are obliged to agree to; however, we have been urging the greatest flexibility in getting people into work that is self-sustaining. Now, how you draw the line and how neat you can make this, I think that there is plenty of room in the Work Force Investment Act as well as the Welfare-to-work Act to get this job done.

I would like to talk with you a little bit about that as to how we can use our good offices to help to you get that done.

Mr. Owens. I look forward to that. Thank you very much.

Chairman McKeon. Thank you. Chairman Goodling? Mr. Petri.

Mr. Petri. Mr. Chairman, I want to commend you for having this hearing on this very important subject. And I do think that since we have, as the witnesses have indicated and others, achieved some measure of success in the welfare-to-work and welfare reform area, this is not a time to rest, but a time to move forward. And people are willing now, because they have seen some success, to take a few risks and to maybe try some more experiments, and people in different States are doing different things that we can learn from. And with a tight labor market, it is much easier to do this because you are not necessarily -- you are filling unmet needs instead of displacing existing workers, and that is very important as well.

In that connection I noticed in your testimony that you quote the GAO report saying, "Many of the remaining recipients have multiple barriers to participation in work activities such as mental health and substance abuse problems and domestic violence," which is all clear, but they don't point out one of the biggest barriers, which I think, Mr. Collins, you referred to, and that is to help families make work pay.

The fact of the matter is we have a multitude of programs with phase-outs, and I have constituents coming to me all the time who move from welfare-to-work who are saying, what am I going to do? My boss needs me to work overtime, and if I work overtime, I am going to lose medical aid for my kids or I am no longer going to be eligible for rent subsides. And, in fact, between 10,000 and about 24,000 -- a woman working with two kids, if she goes from 10,000 to 24,000, ends up with less take-home than an increase.

So we need to work real hard to make it worthwhile for people to get a raise and to get ahead and between in that lower to moderate income range, rather than having to hope that someday, once they get over 25,000, then they will really start making it, which is true. But in the meanwhile people in the best of intentions have created dozens of uncoordinated programs in many different departments out here in Washington under the jurisdiction of no single committee, and no one is really coordinating it. So I guess all I can do is say we should be aware of that and plead with the administration and my colleagues to be open to creating intercommittee and interagency task forces to try to really get a handle on that so work does pay.

If people could perceive they are getting ahead by working harder, maybe they will stop -- if they are going to work some overtime, they are not going to have time for drugs and some of these other things. So a carrot may solve many of these other problems indirectly. Could you comment on that? Is this a true perception?

And my second question -- I may as well ask it because we don't have much time -- is that there has been this mentality that somehow people had to move from no job to a good high-paying, well-paying job overnight, and the real world doesn't work that way. And so are people open to using manpower and various other employment agencies, coordinated with training, to place people in temporary jobs, getting to work just even a few hours, then they fail, get counseling as to why, and try again, and just keep on working at it instead of making it an all-or-nothing experience that a lot of people are just not really going to be able to succeed at? Those are my two questions.

Mr. Collins. Thank you, Congressman. I would be glad to comment on the latter question. Let me just say within the Temporary Assistance and Needy Family program, there is sufficient family flexibilities for States to come up with whatever options or kinds of program designs they would like to, including the one that you just talked about.

Now, I would also remind you that from my own experience as well as the other States across the country, States were worried about participation rates early on. So some of their strategies tend to be a little more narrowly defined than they possibly will be in the future simply because they had to know they had to make Federal requirements for participation rates. But those essentially are no longer an issue, but they still have to be there. A lot of the States are meeting those participation rates, especially in this overall family category.

Regarding what the other kinds of cliff effects that you talked about, there are a couple of things. First of all, the President has been real clear working along with Congress there needs to be better coordination between Federal agencies and State agencies and what have you. And as an example of what is going on between DOL and HHS, we are certainly well on the way of doing some of that to sort of recognize those kinds of issues and barriers that you just talked about. So we are collaborating better there.

The President along with the Congress has also worked on minimum wage. The President has recommended that we increase the minimum wage further so that people will be able to be make more money and work at making work pay.

The other issue, of course, is States using their strategies along with us to do such things as their earned income tax credit, which would allow people to bring more money home, keep those monies so their work would, in fact, become more reliable so people would be able to work those extra hours and take those extra jobs.

We also have to make sure that it supports the families in terms of housing assistance, child care and other things. Their needs are there, and we are well on the way to recognizing those needs, and, working along with you, we will fund them.

Mr. Bramucci. I would like to add one issue. I think this is an important issue of spend-down and how people have taken advantage and held back a little because they didn't know what to anticipate. The Urban Institute just did a report for us which indicated that as many people became participants in the welfare-to-work program in the quarter April to June of this year as had entered the program all of last year. So we are beginning to build up a head of steam.

I can tell you, Congressman, all of the sensitivities you have about supporting families and keeping people together and being realistic, we are sensitive to that. We are working together to maximize the support mechanism that I talked about earlier of making the new safety net. That is what it is. It is being realistic about what keeps people from being reliable workers that can go up the chain. Central to that is making lifelong learning available. And we have in the Work Force Investment Act, which this Ccommittee had so much to do with, Chairman McKeon, I know that you were a big player in that along with the Chairman of the Committee. That is part of the mechanism to make sure that those services get done out of our one-stop centers. It is not done yet, but we are developing it and working at it. I think we are making progress.

Chairman McKeon. Very good. Mr. Kind.

Mr. Kind. Thank you, Mr. Chairman. Mr. Chairman, I, too, want to just echo what Mr. Andrews said earlier about your willingness and Mr. Goodling who just left willingness to reassert our jurisdiction on this important issue. I appreciate the testimony from the witnesses today. It has been very enlightening. Hopefully as we move forward with reauthorization, we are going to be able to pick up some bipartisan support about the recognition for the need for reauthorization.

I was kind of hoping I would be called before my good friend from Wisconsin Mr. Petri was called so I would have a chance to toot Wisconsin's horn on welfare-to-work and the success that we have realized back in the State: Over an 80 percent reduction in welfare rolls. I think we are leading the Nation in that category. But as we are discovering, as everyone is, in the success of the program across the country, it is the remaining 20 percent now in the State that are really the high risk, the ones that pose the greatest challenge.

I am just wondering, we have all the money in the programs for work-related activities and support services and that, but I am wondering if we are missing a witness at the table here today, a representative from the Department of Education, and whether or not if we are truly going to add value to these individuals and make them as marketable as possible in today's very competitive job climate, and if we do have a downturn economically, whether they are going to be marketable to other employers in order to sell themselves and to advance themselves in career-offering opportunities. I just generally ask the question whether or not given that there is a prohibition on the use of funds for general education purposes, perhaps postsecondary remedial programs, if that is an area that also needs to be looked at right now and allowing greater flexibility back at the local level to get some of these individuals into those type of programs, and whether or not the individuals we are talking about would even be in a position to take advantage of remedial programs if there are a sufficient number of them with their high school diploma or equivalency degree or GED, and just how much work needs to be done in order to bring them back to that level where we would like to see them.

Mr. Bramucci. Under existing law, if you combine this with work, this can be done. I think that the opportunity we really have, not ruling that out, not minimizing that, the educational area, is our connection with employers. If people have minimal skills, and employers are stepping up to the table and buying -- and actually I have seen interviews in public housing with employers eager to hire people and to make flex rules and to be understanding about all the limitations that people who have been marginal in their lives bring to the table. If we can spark the kind of coalitions that we are envisioning in the Work Force Investment Act through our one-stops and bring our business community into this equation, we have an almost unlimited ability to address people's training needs, but it has got to be addressed in the real world of work, in relevant work.

We haven't even scratched the surface yet, Congressman, in putting together the resources we need. We have had separate operations all over the country. What we are trying to do is talk to each other. You can see we speak the same language. We have talked to each other a great deal because we see that we cannot succeed independently, nor can workers. Workers have to have auspices and the local community, the local WEPs that we are putting into place and the local one-stops are the best answer to that issue.

Mr. Kind. Mr. Collins, anything to add?

Mr. Collins. I would certainly support that. I think, as Ray indicated, one of the keys is making sure that the TANF agencies are an active partner and an active relationship in the one-stop operations and also active players in the Work Force Investment Act activities, as we certainly are. As you indicated, Congressman, that TANF moneys can't be used for general education; however, there are ways in which the educational community can partner and can look at using those resources in certain creative ways. So within the flexibility under the TANF stature, certainly we can get those partners and make sure that the welfare TANF recipients are certainly part of the strategies that communities design.

Mr. Kind. Because I think one of the concerns a lot of us are feeling is given this relative period of economic good times in the country, you have the success in welfare-to-work going into entry-level positions, but where do they go from there? Are these truly self-sufficient positions? Are there opportunities for career advancement and higher opportunity to earn a higher income and provide for the families? If there is a downturn or an economic slowdown in this country, are these the first jobs that are going to get cut, and then we are back in the same situation we were 6, 7, 8 years ago or so? What is your perspective?

Mr. Bramucci. The best protection against that is a portfolio of training. I was in Dallas just a couple of days ago with the Dallas Housing Authority. There we have HUD referring people to a welfare-to-work formula grantee that was getting people ready for work. Now, in that room were initiates and graduates. There were four companies that were interviewing people. Each of those companies, and one I remember was Parkland Hospital, and then there was Marriott hotel chain, each of them had a career path. Each of them had a career path.

We are not just buying and accepting dead-end jobs. We are encouraging employers to be sensitive, to say, look, if you work hard, here is what you can do with your life. We are not just looking for you to lift the rock and throw it down, but we want to make an investment in you. That is the hopeful thing.

I can't predict what is going to happen if the economy goes down. It will put a premium on people's skills more so than now, but what we can do while we have this opportunity is arm people with as much training, education and experience as possible by encouraging employers to give people upward mobility and to be understanding that that is what gives people incentives to get to work instead of sitting in their house, by making work more valuable.

So it is complicated, but we are on the same page. We are pushing this, and we are not doing this in a mean-spirited way. We are doing this with a feeling that these are Americans that can produce, and they can; not every single one of them, but the vast majority are able to do something with the right attention and the right training and education and programs to support them.

Mr. Kind. I think one of the more encouraging aspects of the program has been the response from the private sector and employers who recognize the mutual interest that exists there. In my district we have got 3M and UPS who have really stepped up and they have brought on additional hires. These could be very promising jobs for it. I think we need to continue reaching out to businesses in the private sector and keeping their involvement where it should be.

Thank you, Mr. Chairman.

Mr. Collins. Mr. Chairman, may I just add? I know time is up. Please pardon me. I want to note also the unique role here for community colleges. Two Sundays ago, Ray and I together were in San Francisco at a community college conference talking about the role of welfare-to-work funds as well as the Temporary Assistance for Needy Family funds. They are really coming on board with strategies that you alluded to.

Chairman McKeon. I am glad you mentioned that. I just visited over the break a company that I have visited now several times, the first time in 1992 when I was running for Congress, and they were a young company that had at that time about 40 or 50 employees. They were doing about $10 million a year. Now they have, I think, about 450 employees, and they will do over $50 million this year.

The reason I went and visited them is I had received a call from them about a year ago. They needed some help working with the city to come up with some extra money to start a training program. They worked with the community college and with the city so they had education, they had local government, and they had their business connection. They set up a school right in their facility. They take their own employees or other people in the community, and now other employers have joined with them. Now they have expanded it quite a bit. I was there last year when they were putting in the computers because they are training people to do a new kind of programming that helps them in running their machinery. When people graduate, it takes them about a year to get through this program. They take their employees, they start school at 6:00 in the morning, then they go to work at 9:00, and so it is a long day for them. They have to make a real commitment to it, but when they finish, they will be making from $50,000 to $100,000, and then they have trouble keeping them because they have other companies that are trying to come and take them away from them.

It is a great effort where you have a local community college, local civic government and business pulling together. They have expanded this to now they have a full-time teacher in there from the community college working, teaching other kinds of classes now. It is a great program.

There are exciting things happening around the country. You have related several of them here today. I visited another program that takes people from no experience at all, they have to start them from the very basics, and commit them to be there every morning at 9 o'clock for a week. That is hard for some of those people to do that. They can wake up maybe once, maybe twice, but they don't understand that they have to be there every day because they have problems that come up, which we all do, but we have to learn how to handle and deal with those problems.

But they had a person there that had gone through that program, a single mother with two children, that gave kind of a heart-wrenching story of when she was on welfare and not able to provide for her children. And now she is able to buy them shoes and the things that they need, and she says she will never go back on welfare again. She was giving an inspiring message to other single mothers that were just starting the program.

They work with them very, very basic, being there on time and trying to build encouragement with them of what they can do. And then they put them in an office, and they have to sit there and call for an appointment to go out and have a job interview. Very basic stuff to start with, but once they take that level, then they maybe go to a level like I had talked about earlier to step up. We need all levels to be covered.

Mr. Bramucci, you talked earlier about complicated rules, and then you talked about flexibility. If there are complicated rules that we need to get rid of, is that in the legislation, or is that in the regulation?

Mr. Bramucci. The complicated rules came originally from -- the questions came from the corner. For instance, to oversimplify, the negative factor of a high school diploma. Now, we know with social promotions in our country that a high school diploma does not prove that you are literate or whatever, yet that is a restriction. So that is a snag in the line of handing over people who need our help. We need to clear the decks there so we can get at this population and we don't have people kind of saying, well, we are not sure that they are eligible, and we don't want to get a disallowable, we don't want to have to pay money back. We need those people in our system. That is what we need. We need the decks cleared, and we need some more time to make a lasting commitment to get people into the work force honestly so that they are self-sustaining. If you clear the deck for us, I think we are developing enough expertise and enough coordination of government units to make this happen. And we do have flexibility in the sense that the money is there; that once the person is declared eligible, we have flexibility. So that the rules keep people sufficient in numbers from entering the door. That is what I am saying. That is what has puzzled you a little.

Chairman McKeon. It also is puzzling when we say we want people that are high school graduates who are illiterate. We are trying to improve our schools so that anybody that is a high school graduate can read. That is something I think that we need to deal with. I think that there are some things that we can do to clean that up. We did the same thing with the higher ed. We talked to people, we said we know as we go through and do this reauthorization, we will make some mistakes. We need to come back and clean it up. It seems like now we are hearing that we have done some good things, but there are some things that were overlooked or some things that maybe inadvertently we caused some other problems. If we can come back and clear that up, that is what we would like to do.

Thank you. Mr. Martinez.

Mr. Martinez. Thank you, Mr. Chairman.

Sometimes it is really hard for all of us up here to keep focused on what we are trying to achieve and how we are trying to achieve that and what the real facts are concerning that group of people that we are trying to help. We talk about welfare reform and how successful it has been. I think it was Mr. Kind who said in his State of Wisconsin there has been a 50 percent reduction in the welfare rolls, but there is still a remaining 20 percent that are difficult to serve.

I would venture to say that that has been a reality of welfare even before all of the reforms, because people that went on welfare, the bigger percentage of them, we saw data -- and I am going to ask later about how much data you have on this particular subject -- we saw even before this went into effect that there were a lot of people in places like where U.S. Steel closed outside Youngstown, Ohio, and there was a whole community devastated because almost all the people in that community actually worked at U.S. Steel. Now they had no jobs. What were they going to do? They went on welfare, but all of them were working people that had worked 17, 18 years and didn't want to be on welfare; welfare couldn't support the life-style they had become accustomed to because they were working.

I met one individual who said, I used to be the single sole breadwinner here in his family of five, me, my wife and three children. Now all of my three children who I had intended to send to college are working just to make sufficient money to keep the house we have and the cars we have that we need to get us back to and from work; five where one was working before. In that situation, they all went right back to work as soon as they could find jobs. They didn't ask for assistance for too long.

The myth has always been that people on welfare, all of them are long-term welfare recipients. That has not been true. The biggest majority of people that have gone on welfare have gone on as the bill now describes in TANF. Temporary assistance is what they required. I am wondering if in this whole success story of welfare reform and all these things that it has brought to us, that if anybody has kept statistics -- this is my question -- on how many of that 50 percent that Mr. Kind talked about were not long-term welfare recipients or hard-to-serve welfare recipients. Does anybody have a statistic on that?

Mr. Collins. Congressman, let me just add that I think your question is certainly right on point. We are very concerned about the exact same features and points that you made. There are various independent studies tracking people who were on welfare who have left welfare. I am sure you have seen some of those. In the Department we have funded a series of studies, leaver studies as we call them, that are within specific States themselves, also one or two national studies that we are doing, also studying them more. The Office of the Attorney General is also looking into these kinds of leavers and to make sure they were attracted and to find out exactly what you are talking about. We will be glad to furnish any of those studies to your office at any point in time. We are continuing to look at that.

We are very concerned, you are quite right, as those individuals leave welfare, we have to make sure first of all where they are going, what they are doing, and design the kind of strategies and support in those directions. We are also aware that the ones that you alluded to, the hard to serve as we call them, are the remaining ones on cash assistance. We have to be very diligent in designing programs along with States and being supportive to States to make sure those individuals have the kind of supports, both short- and long-term, that they need in order to remain independent because the majority of the individuals that are on welfare, as you indicated, do want to go to work.

We also have those individuals that are remaining that quite frankly have issues of substance abuse, are mentally ill, mental health, domestic violence and other things that we have who are requesting resources, and we continue to have resources to invest in them. But fundamentally we are very concerned about where they are going and what is happening to them and are following them with various studies.

Mr. Bramucci. Let me add this point, Congressman, that the welfare-to-work program being administered by the Department of Labor, however, has a 30-month -- one of the strong eligibility rules for coverage is at least 30 months on welfare. Now, you are talking to somebody who was on welfare. The family was on welfare because we lost everything right after the onset of the Depression. My father and mother took the family on welfare. We stayed on for about 4 months. I understand that. The population we are addressing now tends to be long-term.

One of the advantages that we have as we get down to the outyears -- one of the reasons it is so important to give us authority and extend this program, is when the clock stops ticking for some people, and their eligibility runs out, we will be able to pick them up with these funds, because when they become ineligible for TANF, if they are still at risk and they are still not with a job, they will still be eligible for our services. That remains one of the issues that give people hope. It is part of that safety net. They get off TANF, we can pick them up because we have the flexibility and the rules that enable us to make them eligible for our employment services and counseling and whatever. It is very important to keep this going so that we can deal with this population that is difficult to deal with.

Mr. Martinez. That is where I think we need to keep our focus. The percentage has always been there, the very difficult to serve, the long-term welfare recipient. Years ago, like I said earlier, Ted Kennedy and I entered into an amendment to the Job Training Partnership Act to serve these people. We weren't successful in that. We were successful in getting it in, but we had to receive 140 percent of additional revenues for JTPA before that would kick in. Of course that was not going to happen.

But the fact is that that percentage has always been there. Only until we did this welfare-to-work did we really start to address the real element that people were unhappy about, the people that were continually on welfare and were healthy and could go to work if they had some help and assistance. I want to make sure as we move forward with Ben Cardin's legislation that that is where we are focused.

I agree that the criteria, the one, two or three criteria you have to meet, especially the one about the high school_as Buck McKeon said earlier, we have a great, great-sized population of young people that graduated from high school that can't read. They just were socially promoted out. To me that was an absolutely ridiculous requirement in there. It still is. Before we are able to put a requirement like that in, we better make sure they graduate with the necessary skills out of high school. Thank you, Mr. Chairman.

Chairman McKeon. Thank you. Chairman Goodling.

Mr. Goodling. Just 2 seconds because we have, as the Secretary said, some people out there who are going to testify who are where the rubber meets the road. I don't want to miss them, but I did want to take this opportunity, since the Work Force Investment Act was mentioned so many times, to pay tribute to Mary Gardner Clagett and D'Arcy Philps because they were very, very key players in getting that whole act together when you think of all of the entities that they had to argue with and fight with and cajole and baby, ruffle their feathers sometimes and smooth them other times. I did want to pay tribute to them.

Chairman McKeon. Thank you.

Thank you, Mr. Bramucci, and, Mr. Collins, for being here today and for your testimony. We appreciate it. We will be working with you closely as we move forward on this.

We will ask the next panel now to join us. We have an excellent panel here. I will introduce six of you, and the Chairman will introduce the representative from his district.

Ms. Cynthia Fagnoni is the Director of Education, Work Force and Income Security Issues at the United States General Accounting Office here in Washington. Mr. Robert Rector is senior policy analyst covering welfare and family issues at the Heritage Foundation here in Washington. Mr. Jason Turner is the commissioner of the New York City Human Resource Administration in New York. Mr. David Butler is vice president of Manpower Demonstration Research Corporation, also in New York. Mr. Wendell Primus is the director of income security with the Center on Budget and Policy Priorities here in Washington, D.C. Mr. Rodney Carroll is the chief operating officer of the welfare-to-work partnership and operations division manager at UPS here in Washington. Mr. Chairman.

Mr. Goodling. I wanted to introduce Mr. Bernhard because he is one of those who is at where the rubber meets the road, as the human resource manager for a company in York, Key Plastics. I also want to introduce a potential representative from the 19th District in the future, not threatening to me, that is Robert's son, if he will stand. He is behind there. I don't have to worry. He has a few years.

Thank you, Mr. Chairman.

Chairman McKeon. Thank you. It is always interesting when you hear a Congressman introduce a future representative from his district. Ms. Fagnoni.

Ms. Fagnoni. Thank you, Mr. Chairman and members of the Subcommittee. Thank you for inviting me here today to introduce our work on welfare reform and its implications for the Nation's workforce development system. My testimony today focuses on what is known about the effectiveness of various approaches for moving welfare recipients into jobs, how States are implementing welfare reform, what studies tell us about the status of those leaving welfare, and what challenges are ahead as welfare reform continues to evolve. My testimony is based on a number of reports we have issued over the past few years and a report that is being issued today on welfare-to-work approaches.

Regarding the effectiveness of various welfare-to-work approaches, research conducted to date suggests that programs with an approach that combines job search assistance with some education and training tended to be more effective than either approach alone in increasing employment and earnings while reducing welfare payments. In addition, preliminary results from a more recent ongoing evaluation found that so far neither approach was clearly better than the other, although the rapid employment approach cost half as much as the education-based approach. Even with the most successful programs, effects were modest and did not usually lift families out of poverty.

In implementing welfare reform, States have begun changing their welfare systems to emphasize employment. Many States require clients to test the job market for a specified length of time before investing in what can be costly assessments or vocational training programs. In some instances applicants were expected to engage in job search activities as soon as they applied for assistance. Training focused more on job readiness skills than on acquiring new vocational skills. Employability skills such as getting to work regularly and on time and appropriately resolving interpersonal conflicts have often been taught by way of experience in the job market, such as trial jobs, unpaid work experience, community service jobs, or subsidized and unsubsidized employment. In contrast, vocational and basic skills training, including English as a second language and GED training, was generally reserved for those who needed it to get or keep a job or to advance in a career path.

To provide employment and training services to welfare clients, the work force development and welfare systems have operated largely as two separate systems. In a five-State study we did in 1998, we found that only Wisconsin had fully integrated its welfare and work force development systems into a single agency. Michigan used its work force development agency to establish employment and training policies for TANF clients. The other States we looked at, Arizona, Ohio and Massachusetts, used their welfare systems to establish employment and training policies for their TANF clients, deciding such things as the nature of employment assistance and the type of training to be made available to clients.

Nationwide, 17 States used one-stop career centers or other traditional work force development structures as the primary means to deliver employment and training services to welfare clients. By contrast, 14 States had established separate welfare-dedicated centers to serve their welfare clients. The remaining use some combination of the two. Some States, such as Arizona, were simultaneously developing one-stop career centers to serve their nonwelfare clients. In all cases, most employment and training services were funded through the Temporary Assistance for Needy Families program.

No clear-cut answer has emerged as to which service delivery approach has worked best in meeting the employment and training needs of welfare clients.

Turning now to what is known about families who have left the welfare rolls, information from seven State studies indicates that most of the adults in these families were employed at some time after leaving welfare, with employment rates ranging from 61 to 87 percent. However, these employment rates generally excluded families who returned to welfare, sometimes representing a substantial portion of the families who leave welfare.

Former recipients in these seven States had average quarterly earnings that generally ranged from just over $2,000 to nearly $4,000, or estimated to be from $9,500 to just over $15,000 annually. This estimated annual earned income is greater than the maximum amount of cash assistance and food stamps that a three-person family with no other income could have received in these States. However, if these earnings were the only source of income for families after they left welfare, many of them would remain below the poverty level. Much remains unknown about families' total household income, such as earnings from other sources such as child support payments, or about receipt of income supports such as Medicaid, food stamps, subsidized child care and the earned income credit.

As welfare reform and the work force development systems evolve to address today's issues, several challenges lie ahead. You have heard about some of them in earlier testimony. As States meet steadily rising work participation rates, they must require more of their welfare recipients to participate in work-related activities. Finding ways to involve the recipients who remain on the rolls in work activities was one of the most challenging and widespread implementation issues cited in many of the States we visited.

While TANF and welfare-to-work grant funds are available to provide a variety of services to the hardest to employ, little is known about how best to help these individuals move to economic self-sufficiency. Many of the adults in families leaving welfare who have become employed are employed in low-wage jobs. Some States and localities have undertaken efforts to help these former welfare recipients as well as other low-wage workers upgrade their skills to improve their job prospects.

This focus on serving clients engaged in work may require establishing some new service strategies, such as offering training in the evenings and on weekends, and providing for the child care needs of participants. It may also mean broadening the coverage of existing federally funded training programs through the work force development system to clearly embrace those already in the work force, such as through continued training after employment. In addition, with the passage of the Work Force Investment Act and the expansion of one-stop career centers, States and localities have an opportunity to reassess how services are coordinated and delivered. Providing Temporary Assistance for Needy Family services through these centers is a State and local option, and some States may call upon the centers to deliver at least some services to welfare clients. Many States are already doing so. As the Work Force Investment Act is implemented, it will be important to understand how one-stop career centers can be most effective in meeting the employment and training needs of all clients and how the Federal programs covered under the Work Force Investment Act can be structured to provide more efficient and effective programs.

Mr. Chairman, this concludes my formal remarks. I would be happy to answer any questions. Thank you.

[The statement of Ms. Fagnoni follows:]

STATEMENT OF MS. CYNTHIA M. FAGNONI, DIRECTOR, EDUCATION, WORKFORCE AND INCOME SECURITY ISSUES, UNITED STATES GENERAL ACCOUNTING OFFICE, WASHINGTON, DC – SEE APPENDIX D

Chairman McKeon. Thank you. Mr. Rector.

Mr. Rector. Thank you, Mr. Chairman.

In the last few years the AFDC/TANF caseload has dropped by close to 50 percent nationwide. There has been a large debate about why this has occurred. Is this largely a result of a robust economy or is it the result of welfare reform? That is the issue I would like to speak to today. As I speak, you might want to turn to chart number 1, which is in the back of my testimony, which might make some of the things I am saying more clear.

The first test in determining, well, was this welfare reform that caused dependency to go down, or was it an economic one is an historic test. In chart 1 I show the AFDC caseload from 1950 to the present. The black lines on the chart indicate periods of recessions, and the white periods are periods of economic boom.

One thing that you can see very clearly from this chart is that the recession or boom has very little effect on the actual size of the caseload. In a few cases, recessions seemed to have caused the caseload to go up slightly, but that is not even a consistent pattern. But more importantly, if you see on that chart, prior to the 1990s, there are eight prior periods of economic boom from 1950 to the present. In not one of those periods did the AFDC caseload substantially decline. However, in the ninth period, as you can clearly see at the end of the chart, all of a sudden the caseload drops about 50 percent. Never had this happened before in an economic boom, and I think that that is a pretty clear set of evidence that economic boom alone is not going to be efficacious in reducing caseload. What differentiates this last period with the huge decline in caseload which had never occurred before is the presence of welfare reform.

Now, a second way of testing what was the cause of the decline in dependence would be to compare the different States. If you look over the last 2 years or 3 years, there are huge differences, with some States having reduced their caseloads by as much as 80 percent and other States where caseloads have actually gone up. Now, if it were true that the economy was the principal factor in causing these caseloads to go down, then you would expect that the States that have had very substantial drops in caseload to have had the best and most robust and hottest economies. But, in fact, when you examine that, you find that there is no correlation whatsoever between the economic factors in the State, the robustness of the economy, such as the unemployment rate, change in unemployment, growth in other economic factors, no correlation whatsoever between those internal economic factors and the rate of the decline in the caseload. In fact, in my analysis, we found that the States that had the fastest declines in caseloads actually had slightly higher unemployment rates than those with less decline.

We then looked at another set of factors, those factors measuring workfare and welfare reform in the individual States. We found that those variables, particularly work force orientation, an immediate work requirement when the individual first applies for welfare, as well as the firmness and sincerity of the work requirement and a willingness to sanction those who would not comply with the work requirement were overwhelmingly the strongest factors in determining why caseload was going down in some States and not going down in others.

If you look at chart 3 in my testimony, what you see is that in the States that have what I would call rigorous work programs oriented on requiring individuals to work from as soon as they apply to get into welfare, the caseload during an 18-month period in those States dropped 50 percent. In the States that did not have that type of work system, the drop was only 14 percent, about a quarter of what you had in the strongest States.

Mr. Goodling. [Presiding.] Mr. Rector, would you stop just a second. In case you are wondering what is going on up here, there is a vote on. We are trying to keep everything going, but getting people to go and vote and get back.

Continue, Mr. Rector.

Mr. Rector. I would emphasize that some people characterize these rigorous work-oriented systems as simply` throwing people off the caseloads. That is not what is occurring. Very few exits from welfare are the results of people being sanctioned off. What is actually happening is a change in the work ethic.

We have heard a lot of discussion this afternoon so far about skills and motivation. I would emphasize that the crucial factor in terms of reducing welfare dependency, but more importantly in terms of reducing child poverty, is not so much the skill level of the mother as her work ethic and her motivation. That is what is being changed in these workfare systems. We have done research where we show that, for example, the motivation and work ethic is 5 to 10 times more important in terms of determining whether a child will be in poverty than the math and verbal skill level of the mother.

In conclusion, I would say that we all, in order to learn what welfare has done and can do, should look at the State of Wisconsin. It is represented in chart 5 in my testimony. In the State of Wisconsin, since reform began in that State, the caseload has dropped over 90 percent. There was no bottom of the barrel; they did not find substantial pools of unemployable people. This was a drop of 90 percent by an orientation on work first. Coincident with this drop, the child poverty rate in the State of Wisconsin appears to have been roughly cut in half, the largest decline in the country. This is a wonderful success, and it is a wonderful model for other States to follow in the future.

[The statement of Mr. Rector follows:]

STATEMENT OF MR. ROBERT RECTOR, SENIOR POLICY ANALYST, WELFARE AND FAMILY ISSUES, THE HERITAGE FOUNDATION, WASHINGTON, D.C. – SEE APPENDIX E

Mr. Goodling. This isn't working out very well. I am going to recess while I run and vote. Hopefully the Members will be back from voting shortly. We will stand in recess until Mr. McKeon gets back and bangs the gavel.

[recess.]

Chairman McKeon. [Presiding.] I apologize for having to leave, but we had a vote. We will begin again now with Mr. Bernhard.

Mr. Bernhard. Good morning. I would like to first thank the committee for inviting me to speak with you this morning. I represent Key Plastics, a local manufacturer in York, Pennsylvania. Key Plastics York Division has supported and works closely with the Pennsylvania Department of Public Welfare, specifically the Welfare Reform Initiative, since July of 1997.

Welfare reform in Pennsylvania began on March 3, 1997, and targeted those clients who received welfare benefits and may be fit for gainful employment. Pennsylvania Department of Public Welfare job developer Mike Fullerton contacted our company in July of 1997. As part of a business outreach initiative, Mike met with us and asked about our anticipated personnel needs. These discussions resulted in a joint agreement between Key Plastics, another local employer, USA Direct, and the York Transit Authority to initially provide transportation from the city proper. That agreement called for a trial period in which ridership levels were assessed for a possible permanent route that would also include the first and second shifts. Unfortunately, interest in the transit service was not sufficient to sustain an ongoing route.

Beginning in June of 1998, group employment interviews were held at the Department of Public Welfare offices in York and continue to this day; however, our hiring efforts have not been without challenges.

Several welfare recipients who were referred to us possessed low reading and writing skills. Others failed to respond to job offers, and some had language barriers. In addition, several clients faced other transportation and child care issues.

Several individuals who have been hired were terminated. These terminations were the result of poor attendance and attitude, difficulty performing work-related tasks, and child care problems. Despite terminations and our inability to hire unqualified candidates, the barriers to employment that we have experienced with welfare recipients are not unlike the hiring challenges presented by the general public.

We have found that many welfare recipients want and are able to work. However, the challenge is to work with them long enough to overcome some of the barriers that preclude them from being productive employees.

Part of our effort to enhance the skills of our work force is to offer training programs. Each associate who joins our organization receives federally mandated safety compliance training. Additionally, our company provides task-specific training and offers a generous associate education program, worth $5,000 per year, per employee for ongoing training in a variety of areas.

Various other State, Federal and community-based programs exist to improve one's suitability for jobs, but are viewed as underutilized.

While our company offers career advancement opportunities in addition to similar programs that are available at the local level, our experience has been that employees failed to take full advantage of these opportunities. Perhaps corporations and government need to do a better job of educating and motivating employees to more fully access these corporate and taxpayer investments. Key Plastics would welcome the opportunity to participate with committee initiatives in this regard in the future.

Summarily, welfare reform thus far has made significant inroads to providing incentives for both recipients and employers alike. We have fostered new partnerships with the York County Assistance Office and other agencies to attract potential employees. In order to obtain and keep a qualified work force, we have worked together to develop strategies that enable welfare clients to get to and from work.

Despite the many challenges we have experienced through our hiring efforts, we are committed to finding solutions. Key Plastics and other York-based companies have stepped up to the plate to be involved in this hiring effort. The statistics show that we are having an impact. It is my understanding in York County alone, over the past 2 years, the welfare caseload has declined by 1,129 families. Of the 900 families still remaining, 200 are employed in full- or part-time jobs and continue to receive a small welfare check.

Although welfare reform and job opportunities have enabled many welfare families to transition from welfare, our work isn't finished.

In closing, I would like to thank the committee for inviting me to Washington this morning to speak on this important topic. It is efforts like this that go a long way to evaluate, monitor and enhance programs designed to get through some of life's difficult challenges and periods. Thank you.

[The statement of Mr. Bernhard follows:]

STATEMENT OF MR. ROBERT BERNHARD, MANAGER, HUMAN RESOURCES DEPARTMENT, KEY PLASTICS, YORK, PENNSYLVANIA – SEE APPENDIX F

Chairman McKeon. Thank you. Commissioner Turner.

Mr. Turner. Thank you for this opportunity today to present some of the results we have experienced since the introduction of Mayor Giuliani's major welfare reforms, which we began 4 years ago, in 1995, and to describe some of the goals that the mayor has set for the future.

In July of last year, the mayor announced that by the dawn of the new century, all individuals receiving cash assistance would work in exchange for their benefits. There would be almost no exceptions to this expectation. Only family heads applying for or receiving SSI plus mothers with newborns under 3 months old would be exempted.

When the mayor took office in 1994, there were almost 1.1 million New Yorkers dependent on welfare. The caseload had grown from about 300,000 dependent individuals in the early 1960s to the high figure until recently. Since then, the reforms introduced by the mayor, along with the strong New York economy, have reduced the caseload 45 percent, or almost 500,000 individuals, a number which is larger than the entire population of Buffalo, New York's second largest city. In addition, the city's caseload has largely paralleled that of the more rural balance of the State, which is unusual.

The mayor's July announcement was made possible by the sweeping reforms introduced by Congress under PRWORA. The new expectation is to achieve almost universal work activity in what we call the full engagement model. In order to make this real, that is, not just a statement of intentions, increased program performance is essential. Beginning last year, this transformation of welfare offices into job centers began. This is much more than a name change. Job centers differ from welfare offices in that all applicants for benefits look for work while their application is being processed as a condition of receiving the very first check. And if they are unsuccessful at finding private work with our help, then they are immediately enrolled in New York City's Work Experience Program, or WEP. This eliminates any period in which an individual is not working in exchange for benefits. Therefore, it fundamentally changes the nature of assistance itself. Job centers now cover 65 percent of the city, with the balance expected to come on-line in January.

But I would like to talk about another less noted change which is essential to achieving full engagement in work activity. Not only must the content of the program change or the nature of the program services delivered, but also the performance of the delivery system has to be improved. Most urban work program delivery systems are inadequate to the task of providing work opportunities to people of all capabilities and then tracking their attendance and progress. Until this near complete limitation is lifted, welfare-to-work expectations will never come near planners' hopes.

To attack this problem, the Human Resource Administration adopted and adapted the New York City Police Department's management performance and precinct accountability process, which is called Compstat. The mayor made precinct commanders fully accountable for results within their zones, with regular meetings to assess performance. At the Human Resources Administration, this concept is called Jobstat, or the statistical compilation of work and welfare data by job center area. Twice a month, at least two job center directors make presentations to top management staff in what is called the situation room. On a large screen in front of the room, computer-generated data relevant to the geographic area which the job center is located is displayed, and a creative problem-solving session results in solutions and movement toward the mayor's goal of full engagement in work activity.

I would like to comment on something about the discussion going on at the moment relating to the TANF and welfare-to-work programs together. Given the large national caseload reductions, Congress is appropriately discussing whether it is possible to take savings from amounts appropriated for these two programs. Of the two programs, both of which are managed by the Human Resources Administration in New York City, TANF is by far the more valuable. As it relates to welfare-to-work, this committee is well aware, and we have had discussion this morning, of the difficulties inherent in cost allocating funds to various population subgroups as required under current welfare-to-work law.

But there is an even larger problem with the program, which does not exist so much for New York City, where both programs are operated out of the same agency as it does in almost every other major city. The problem is that the welfare agency manages contracts for the welfare-to-work vendors, the TANF welfare-to-work vendors, while another city agency typically runs the welfare-to-work contracts in most places. This creates a dual delivery system for welfare-to-work services.

The problem with this is several-fold. First, no one agency has the ability to manage the program as a system, for instance, using uniform performance payments to vendors to achieve work outcomes. Secondly, the separate welfare-to-work vendor system does not necessarily require the use of the same management information system as the welfare agency uses. Thus data on attendance, for instance, which is critical to assuring that participants are making progress in their activities, is late being entered in the welfare system's computers or is not as a practical matter available at all. And finally, the two work systems compete for referrals, each complaining that they don't have sufficient access to individuals in need of help. But the truth is that in most urban areas, there is a surplus of available traditional training slots operated by nonprofits. What is needed is a rationalization of this unwieldy landscape with strong vendors operating in a performance environment with income guaranteed only in the event of defined results. Thank you.

[The statement of Mr. Turner follows:]

STATEMENT OF MR. JASON TURNER, COMMISSIONER, NEW YORK CITY HUMAN RESOURCE ADMINISTRATION, NEW YORK, NEW YORK – SEE APPENDIX G

Chairman McKeon. Thank you. Mr. Butler.

Mr. Butler. Thank you for giving me the opportunity to speak to you this morning. It is fortuitous that I am sitting next to Commissioner Turner since I am going to talk about the other side of the country and results that are coming out of our evaluations in Los Angeles. Although I am a New Yorker, I will still feel fine talking about what is happening in LA.

Although that is the focus of my remarks, MDRC has been doing a lot of work in the area of welfare reform, time limits, et cetera, and I would be more than happy to address some of the things we have been learning from other studies during the question and answer period.

In Los Angeles, we are studying it really in two contexts. One is a project called the Urban Change study, which tracks the effects of TANF in four large cities, Los Angeles, Miami, Cleveland and Philadelphia. Last April we issued our first report on early implementation. In Los Angeles, we are also in the latest stage of an evaluation of the Jobs-First GAIN program, which is the welfare-to-work initiative which immediately preceded the passage of welfare reform in California and is very similar to it in many ways. The new program is called CalWORKs.

In June we issued a report on the first year impacts of Jobs-First GAIN. My remarks are going to focus primarily on Jobs-First GAIN, and I will talk a little about our observations from Urban Change project. They are very early, but I think perhaps useful for you. I am going to be making four main points. The first, no surprise, big cities like Los Angeles and New York are really the most critical test of the effectiveness of welfare reform. To pick up on an expression that has been thrown around somewhat this morning, it is where the rubber really does meet the road. That is where we have concentrated poverty, that is where we have the large caseloads, the unwieldy bureaucracies. That is where the economy has not had the same positive effect it has had in some other areas.

The second point I would make is the LA experience in shifting what was essentially an education first program to a work first program belies the conventional wisdom that very large bureaucracies cannot change or are overwhelmed by the requirement to change the culture. In fact, LA did that quite successfully, our studies indicate. At the same time, that program change also led to better outcomes for participants in the program in terms of increased employment and earnings. However, the broader and more ambitious goals of welfare reform pose challenges that have not yet been fully met, reaching out to a larger portion of the caseload, helping people sustain employment over the longer term. The experience to date indicates that work first is not enough to take you there, and I think in Los Angeles there is certainly recognition of that, and there is an attempt to expand the program into other areas.

In 1995, Los Angeles implemented Jobs-First GAIN, which represented a fundamental change in the philosophy and goals and practice, which in many ways anticipated work first in the TANF legislation. Originally the GAIN program in Los Angeles was very much an up-front basic education model. A large-scale evaluation that MDRC conducted of GAIN in LA and in five other counties found that in Los Angeles the program is very costly, but not very effective. It had been well implemented, it was not an implementation problem, but participants were neither completing education nor finding jobs. In contrast the GAIN program in neighboring Riverside had unprecedented earnings and employment gains for participants and very large reductions in welfare receipts. Riverside used a mixed approach that included job search and some basic education, but had a very strong emphasis on rapid employment as the program goal.

LA revamped their program along the lines of Riverside and adopted most of their features. That challenge was enormous in terms of reshaping and reorganizing the culture and management organization. However, within 2 years Jobs-First GAIN emerged as a very well-implemented work first program with a strong employment focus, strong job search assistance, aggressive job development and a relatively tough enforcement approach to encourage participation.

These changes were impressive, and they show that large bureaucracies can thoroughly transform their organizational culture, but have they translated into positive outcomes for participants? They have, but the story is mixed. After 1 year of follow-up, Jobs-First GAIN significantly increased employment compared to a control group by 11 percentage points, but a substantial percentage was still not working, 45 percent. There were reductions in welfare receipt, but welfare dollars were essentially replaced by earnings. Income remained basically the same. We will be continuing that analysis later and see how it bears out over a longer time period.

In the interim, Jobs-First GAIN had to be shifted to the new TANF legislation and become CalWORKs, and LA was in a good position to begin that change because it already was imbued with the work first self-sufficiency focus of CalWORKs. And so to that extent, this transition has been a smooth one. But there were some new changes that had to be put in place that were very difficult. CalWORKs expanded the scale of GAIN. It added time limits, work requirements, post-placement services, and set very high performance standards for program success, including achieving sustained full-time employment for families to get them permanently off of welfare.

How are we doing today? In terms of actually expanding the program, in program services, quite well. GAIN in LA did meet its first-year goal of enrolling all of the nonexempt participants in the program. Quite a lot of staff hiring, a lot of logistical changes, opening new offices was successful. They were also successful in increasing the availability of additional services to reach this harder-to-serve caseload that were exempted in the past. An array of assessment tools and program services to address substance abuse, mental health and domestic violence issues were all put in place.

It is too early to know whether those programs are going to make a difference. The utilization rates so far have not been particularly high, but you need to give it more time to see what happens. In terms of sustaining employment over the longer term, LA is implementing a number of services aimed at both job retention and wage progression, including case management, extended job development for former recipients, rapid reentry into the program for people who lose jobs, and skills for entry-level workers so they can move up, as well as access to postsecondary education for working families.

Now, again, the implementation story still is not complete. These are programs that are being put in place, but it looks as if the experience in LA is comparable to what we are seeing in other parts of the country, that it is a difficult challenge to develop programs that work for working families and don't conflict with work or family responsibilities and have a positive impact on long-term employment. To date we have not seen evidence of any models that have had that effect. Other cities in Urban Change are confronting similar problems, and we will be following them over the years. I am more than happy to talk about them in the question and answer period. Thank you.

[The statement of Mr. Butler follows:]

STATEMENT OF MR. DAVID BUTLER, VICE PRESIDENT, MANPOWER DEMONSTRATION RESEARCH CORPORATION, NEW YORK, NEW YORK – SEE APPENDIX H

Chairman McKeon. Thank you very much. Mr. Primus.

Mr. Primus. Mr. Chairman and Members of the Subcommittee, I very much appreciate your invitation to testify. I was asked to testify on the findings in a report released in mid-August by the Center on Budget and Policy Priorities.

Dramatic declines in the number of people receiving cash welfare benefits and food stamps have contributed to the conventional wisdom that the new welfare reforms are working very well. Caseload reduction by itself, however, is not an adequate measure of success. The ultimate criteria for measuring success also should include whether the well-being of children and families has improved.

There are four major findings in the report. The first finding is that the drop in AFDC and food stamp caseloads between 1995 and 1997 is much steeper than can be explained by increases in the earnings of poor households. In other words, caseloads declined more rapidly than economic need. From 1993 to 1995, caseloads declined less than poverty. But from 1995 to 1997, the number of people receiving AFDC/TANF fell by 22 percent, and the number of poor people and single-mother families declined only 5.4 percent. Similarly between 1995 and 1997, the number of people receiving food stamps fell 16.6 percent, while the number of poor people fell only 2.9 percent.

The second part of our findings deals with what has happened to the incomes of single-mother families. We use census data, and we employ the same methodology as the Congressional Budget Office in employing a comprehensive measure of income; in other words, we include food stamps, housing and school lunch. Figure 3 in the testimony tells the story. Between 1993 and 1995, the average earnings and income of single-mother families rose substantially. Increases were particularly large for the poorest or bottom 60 percent of people in these families. Between 1995 and 1997, by contrast, the poorest single-mother families experienced a significant decline in their average disposable incomes. Among the poorest 20 percent, average income fell $580 per family between 1995 and 1997, a decline of 6.7 percent. And about $460 of this income loss was due to declines in means-tested assistance.

The next group of families, about 2 million, are in each of these quintiles. These are families between 75 and 112 percent of poverty. They had earnings gains of $900 and EITC increases of $450, but those gains were completely offset by losses in means-tested assistance. So essentially between 1995 and 1997, their income stagnated, even though they had significant earnings gains. And for the very poorest 10 percent, about 800,000, 900,000 families, their income declined $810, a reduction of 14.3 percent, and about 75 percent of this was due to the declines in means-tested assistance.

The third finding is that certain parts of the safety net weakened significantly, particularly for poor children. Census data show that if means-tested benefits had been as effective in reducing child poverty in 1997 as in 1995, some 700,000 fewer children would have been poor in 1997. And the poverty gap for families with children, the aggregate amount by which incomes fall below poverty, actually increased between 1995 and 1997.

The fourth finding is that these declines in TANF have led to declines in food stamps and Medicaid even though many of these families remain eligible for assistance.

I want to say, Mr. Chairman, we are not saying that welfare reform has been a failure, but I don't think we can say it is an unqualified success at this time either. We have to, as the panel was saying, redouble our efforts. We have to examine more data.

I think these data are consistent with what we are finding from the State leaver studies. I think the conclusions are that they clearly support the administration's request for reauthorization of the welfare-to-work block grant as introduced by Congressman Cardin and others.

I think there are three important components that you need to change. You need to loosen those targeting requirements, I think you ought to add the requirement that all States serve noncustodial parents, and I think you have to integrate your work force component with child support and TANF. Many of these dads, when they pay child support, they face a 100 percent tax rate. I also think you should examine the analysis that Congressman Petri talked about, the fact that when mothers go from $10,000 to $24,000, they basically face 100 percent tax rates.

Finally, I think what this means is that you shouldn't reduce the TANF block grant, and, as you complete the appropriations process in September, that you not reduce title 20 or child care or housing assistance, and that you at least appropriate the levels that were in existence last year. Thank you.

[The statement of Mr. Primus follows:]

STATEMENT OF MR. WENDELL PRIMUS, DIRECTOR OF INCOME SECURITY, THE CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON, D.C. – SEE APPENDIX I

Chairman McKeon. Thank you. Mr. Carroll.

Mr. Carroll. Thank you. Good afternoon, Mr. Chairman and Members of the Subcommittee. Thank you for inviting me to participate on this panel. I am pleased to be here today to discuss the progress of welfare-to-work efforts nationwide.

My name is Rodney Carroll, I am the chief operating officer of The Welfare-to-work Partnership. I am on loan from United Parcel Service, where I was a division manager. I also may bring a unique perspective to today's discussion, having spent a portion of my childhood in Philadelphia on public assistance. When the Congress passed and the President signed landmark welfare reform bill in August of 1996, America was challenged to end welfare as we know it. It was clear then that in order to accomplish this ambitious goal the Nation's business community would have to take a leading role. That is why The Welfare-to-work Partnership was created: to energize the business community to hire and retain people off of public assistance without displacing existing workers. We have come a long way in just 2 years. At its launch in May of 1997 the Partnership began with five founding companies. They were United Airlines, Burger King, UPS, Sprint and Monsanto. Today, it has 12,000 business partners, all dedicated to hiring and retaining former welfare recipients. To date, those companies have hired an estimated 500,000 individuals from the welfare rolls.

So far, the results are outstanding. Research from our public opinion firm, Wirthlin Worldwide, reveals that 65 percent of businesses report that welfare-to-work hires have the same or higher retention rates than traditional entry level employees. Eighty-two percent report the former recipients they have hired have turned out to be good, productive employees. Nine in 10 businesses offer their new welfare hires training that could lead to a job promotion, and one-third of the employees have been promoted within a year, and 72 percent of the jobs being offered are full-time positions with full medical benefits.

There is much to be proud of since the signing of the landmark law. The rolls are down 40 percent, from over 12 million to less than 7.4 million people. And the evidence continues to mount that the large majority, about three-quarters, are moving off the rolls for the right reasons, they are finding jobs.

At the core of this quiet revolution is a strategy that emphasizes partnerships over partisanship and stresses the importance of work.

We no longer need to debate the effectiveness of welfare-to-work. We know it is working. We have seen it work in small towns and large cities. We have seen it in the retail industry and also in financial services, in high tech. We have seen it in Fortune 100 companies and small businesses.

It is time to shift the debate from is welfare reform working to how do we help those still on the rolls and how do we make sure that those who are now working can achieve lasting self-sufficiency? Businesses will continue to have new entry-level hiring needs that presents us with new challenges and new opportunities.

As the Nation moves forward, we must focus on partnerships with service providers. Social service organizations, often called service providers, can help businesses train, place, and retain welfare recipients. As we go deeper into the available pool of welfare recipients, we must continue to work closely with service providers to ensure they understand the businesses' needs and can offer the necessary training to deliver work-ready employees. One such successful model is the close partnership in New York City between the Salomon Smith Barney and Wildcat Services Corporation which offers a program that trains welfare recipients for jobs in the financial services industry.

Secondly, we must focus on increased retention rates. As I mentioned, companies are already reporting that former welfare recipients have good retention rates. In order to continue that trend while serving the bottom line, companies are offering promotional opportunities and career tracks to all employees, including former welfare recipients.

Next, we have to focus on child care. As you well know, many welfare recipients want to work, but they can't find affordable or reliable child care. Many times child care facilities are not open during nontraditional hours and only accommodate children from certain agencies. In other cases, the quality and cost of the care are barriers to success. We need to commit new energies and resources to surmount these challenges.

There are solutions. For example, in San Diego, California, Gale Walker used a Small Business Administration loan to help launch Children of the Rainbow, an innovative child care center that accommodates children from infants to age 14 and is open from 5 a.m. to 1 a.m., seven days a week.

Next, we need better access to jobs. We must also explore creative ways to expand and improve transportation and housing options for welfare recipients who are just starting in the work force and in too many cases employment opportunities are far from the residences of the perspective employees or inaccessible via public transportation.

While at UPS -- there is an air hub in Philadelphia -- one such scenario exists between Camden, New Jersey, where we had people that we wanted to hire. We needed to get them to Philadelphia. When I approached both transportation companies, Southeastern Transportation and New Jersey Transit, neither one really wanted to put on bus routes because they said, well, we can't put on buses because there are no riders. I continued to say there are no riders because there are no buses. And now the New Jersey Transit Authority has over five buses coming from Camden, New Jersey, and Philadelphia, and SPTA has over 60 buses coming 24 hours a day.

Educating business. We need to continue to educate businesses as well as social service groups and employees themselves that under the new welfare law former recipients whose wages are still low are eligible for a host of transitional supports. They include food stamps, Medicaid, child care subsides. The greatly expanded Earned Income Tax Credit offers low-wage workers another powerful economic boost, and all those who are eligible should be receiving it. Moreover, employers need to be aware that they can receive as much as $8,500 in Federal tax credits for hiring and retaining recipients.

Finally, reaching non-custodial fathers. Many non-custodial fathers are anxious to take responsibility for their children, but they often don't have the resources or the training to find jobs. As we move forward with welfare-to-work, it is important to help these dads understand that there are resources available to help them take responsibility for their children and enter into appropriate training programs. We need to help everyone understand that a parent who struggles to pay the bills with a paycheck is a more powerful example to a child than a parent who struggles to pay their bills with a welfare check.

I grew up on welfare, and there is no substitute for an example of a working parent. What we need to understand is that an adult moving from welfare-to-work breaks the cycle of dependency that will eventually benefit our children and grandchildren.

Let's be clear: There is still much work to be done. While it is true that some of our greatest fears associated with welfare reform have not come to pass, we should guard against complacency. We know the job isn't done. Not when over 2 million heads of households are still on the welfare rolls, not when millions of non-custodial dads live on the margins of life, unwilling or unable to support their families, not when many of those who are working are still far from escaping the ravages of poverty, not when the decline of welfare rolls in our cities lag behind the overall national decline.

We know that gaining a job is a critical first step to ending this dysfunctional welfare system that has lasted more than 60 years. But welfare-to-work is still a work in progress. As the State deadlines and time limits approach and people transition off the rolls, we must continue our efforts to energize our Nation around welfare-to-work.

In just 3 years our company has come a long way by creating a system that promotes lives of independence and self-sufficiency will take time. We cannot afford to be impatient. Just look at the last 60 years for the alternative.

Members of the Subcommittee I would be happy to address any questions that you may have. Thank you.

[The statement of Mr. Carroll follows:]

STATEMENT OF MR. RODNEY CARROLL, CHIEF OPERATING OFFICER, WELFARE-TO-WORK PARTNERSHIP, OPERATIONS DIVISION, MANAGER, UPS, WASHINGTON, D.C. – SEE APPENDIX J

Chairman McKeon. Thank you very much. Mr. Isakson.

Mr. Isakson. Thank you, Mr. Chairman.

I wanted to ask Mr. Primus, if I could, a question; and I probably should know this, but I don't. How long have food stamps, school lunches, low-income housing subsides and the Earned Income Tax Credit been used to consider eligibility? Has that always been the case?

Mr. Primus. I mean, it varies by program. I mean, the Earned Income Tax Credit is in the Tax Code and really only depends upon earnings and AGI. It doesn't take into account food stamps or housing. So each individual program considers what income to count separately. And by and large I think they make some sense.

But I think the real problem you have to focus on is the one Mr. Petri mentioned, and that is when mothers are earning 10 or 12,000 and they get a big pay raise. Then you get a phase-out of 21 percent in EITC, you pay FICA taxes of 7.65, food stamps is a 30 percent decline, sometimes States have a child care co-pay of 20 or 30 cents on a dollar of income, et cetera. You add all those up, and that mother is no better off at 20,000 than she was at 12.

Mr. Isakson. So that is the point I was getting at. I wanted to try and understand your analogy of a 100 percent tax rate. Your analogy was that, as the income goes up, the eligibility for benefits goes down and the amount of benefits lost equates to the amount of income gained. Am I correct in understanding?

Mr. Primus. You understand that very well, sir.

Mr. Isakson. I guess my question is -- and I want to put this in the right way, because I understand exactly what you are saying in terms of that possibly being a disincentive for improvement. The flip side of it is the incentive for improvement is as people do become employable, as their life styles do grow and prosper, they do move theoretically in hopes far beyond that point where they are paying taxes like all of the rest of America. So there is two sides to that story.

I mean, the way we have a progressive system of taxation in this country, we do so under the theory that those that do the best pay for those that have the least, in part at least in programs like this. So although I understand the analogy, if you remove that factor entirely you are going to continue to pay benefits at an ever-increasing rate of eligibility for people. I think your analogy here points out, if I read it correctly, that you would add 2,811,000 people if you took out the means-tested benefits. Am I correct?

Mr. Primus. I guess I don't quite understand that last point. You are right. There is a rule that says if you lower those tax rates you are going to give benefits higher up the income scale, but I do think some attention has to be given to this problem. I think you can make improvements in the Earned Income Tax Credit and other things to alleviate it.

Let me just add one other thing, because you asked a question about non-custodial parents. I think we have put a little too much emphasis on the female side. We have got to do more on the male side. And those dads that pay child support today, in many cases their contribution doesn't improve their children's income one iota. They essentially face a 100 percent tax rate on an activity that on a bipartisan basis you would all support -- low-income dads paying child support. But I think we also have to look at that tax rate.

Mr. Isakson. Well, I just -- that was going to be my last thing. I wanted to thank you for acknowledging that, because that is a significant problem. And I am very supportive of us getting those non-custodial -- a lot of people don't understand what welfare is and who is actually getting it and what it is causing. It often is that single mom, but that non-custodial dad, if we can make them productive, if we can have incentives, then they are going to have better income and better opportunity to meet obligations to help take care of those problems. But it becomes a disincentive when you do that off-set. I appreciate your acknowledgment of that.

Mr. Primus. If I could add one thing. That non-custodial dad is not eligible, in many cases, for the earning subsidy. And while I don't think you can make the EITC eligible, I think you want the dads to pay. I think we have got to figure out another way to encourage a good behavior on his part.

Mr. Isakson. Thank you.

Chairman McKeon. Mr. Owens.

Mr. Owens. Thank you, Mr. Chairman, for allowing me to speak out of turn, because I do have an important meeting to go to.

Mr. Primus, I basically agree with you on the basis of my anecdotal evidence and my contact with my poor constituency that this program is not an unqualified success, even a success at all, in my opinion. But I won't get into the details of that.

I want to clarify the statement made by my previous colleague who spoke, who said, as welfare recipients become prosperous they have to pay more taxes. Did you discover any who became prosperous? There was a study reported I think a few days ago about the gap, the income gap; and they talk about the fact that the middle class of America really makes between 50 and $40,000 a year. That is where the middle class is. So you are talking about people who even after they go to work they are very much still in poverty. Am I correct?

Mr. Primus. That is all correct. I mean, I think welfare reform has indeed helped some families to move from welfare-to-work. That indeed has helped individual families increase their earning. But when you look at the data in aggregate, we find that many, as a whole, they are not doing better because some families have left welfare and have no work, and sometimes when families have left welfare they don't get food stamps and Medicaid, even though they are still entitled to it. So at the bottom that is what is offsetting the earnings game.

Mr. Owens. Thank you very much on that point -- food stamps and Medicaid.

Mr. Turner, I would like to talk about the great reduction of welfare rolls in New York City. There is a court case now related to the WEP program, but previously there was a case and a Federal judge made a ruling in connection with the hostile interview techniques and the reception that people applying for welfare receive. Many who would have been eligible for food stamps were not told about it and not given food stamps, and many who would have remained eligible for Medicaid were not told.

Would you just tell us what the final court order directed the city to do in this situation?

Mr. Turner. Well, that is still under discussion at the moment.

The judge recently had said that Mayor Giuliani should open three more job centers and make progress towards our goal to having all job centers throughout the city. The court discussion that you are referring to is not related to TANF or AFDC benefits but rather the plaintiffs argued that when individuals came into the centers that there were examples of individuals who didn't get benefits that were food stamp benefits, immediate needs and emergency assistance. There is in all States, including New York City, an expectation that a certain proportion of individuals who applied for assistance will begin receiving assistance, and they argued that the proportion was too low in New York City. We disagree with their analysis, and the judge appears to be taking our point of view, although we are--

Mr. Owens. The judge did not issue an order for you to begin to behave in a different way in terms of your intake?

Mr. Turner. No. What the judge did was ask that the department come back to him with evidence that we had a process in place which assured to a reasonable degree that individuals who applied for food stamps received them.

Mr. Owens. Let me just cut you off there. I want to get my question in about the WEP program. Is it true that you have about 20,000 people who were moved into city departments doing work that city employees used to do? And of that number, only about 11 to 15 have been hired permanently? Are these figures not up to date that I have here?

Mr. Turner. There is many, many more than 11 to 15 individuals over the course of the WEP program.

Mr. Owens. Out of the 20,000, how many would you say have been hired permanently?

Mr. Turner. We have right now, looking at my figures, right now 31,000 people involved in the Work Experience Program at this point in time.

Mr. Owens. That is a combination of private and nonprofit agencies and the city. The city had about 21,000 and the nonprofit agencies about 10,000?

Mr. Turner. Well, the city has about 26,000 at the moment and nonprofits the rest.

Mr. Owens. Over the history of the program, how many people have been moved out of the city agencies into jobs, either permanent jobs in the city agencies or permanent jobs somewhere else?

Mr. Turner. First, let me describe what WEP does. It gives individuals an opportunity to contribute through work in exchange for their benefits and, by doing so, as a by-product, gives them the best training that they can have to success on a job which for individuals who have never held work before is actual work. We heard from the--

Mr. Owens. How long has the work program existed? What is the history in terms of moving people out?

Mr. Turner. We heard from the GAO it is the most important thing, according to the research, is to combine actual work with education, not substitute one with the other. So what we have done is insist that WEP be a part of every program. And here is getting to your question. We expect 35 hours a week worth of work activity, of which at least 20 hours of the 35 is actual work in WEP and the balance is other things like education, training and job search.

Mr. Owens. The program has existed for some time. My question is, how many people have moved from there to work?

Mr. Turner. We did a study that looked at the proportion of -- the reason not -- here's why I can't answer your question directly. When somebody leaves welfare to go to work, they don't phone me or any of my staff and say, I have left welfare, close my case. I am working at--

Mr. Owens. Doesn't that further--

Mr. Turner. I am working at the city or whatever. So what we have to do is do a survey, a study to determine that, to take a sample, and we have done that.

Here's what the sample shows. The sample shows that we did -- and then confirmed by an independent sample done by the Rockefeller Institute and funded by the U.S. Department of Health and Human Services -- that of people who leave the welfare rolls for any reason, about 6 months to a year later approximately 60 percent of them are employed. Of the balance, about 13 percent are back on TANF, and about 9 percent are receiving SSI. And then the balance are living with family, friends and doing other things. So everybody is accommodated in one way or another. In New York City coming back on welfare is okay so long as you get back to work.

Mr. Owens. Thank you, Mr. Chairman.

Chairman McKeon. Thank you. Mr. Deal.

Mr. Deal. Thank you, Mr. Chairman.

Thanks to this very distinguished group of people who have testified here today.

At the outset, I want to commend Mr. Carroll and Mr. Bernhard from their company perspectives for what they have done; and UPS, of course, has been one of the leaders, and I commend them for that. And from my knowledge of UPS, anybody who can work for UPS, they have to be pretty well on the ball and be willing to be attentive to their job duties. Mr. Carroll, thank you four your personal testimony, the importance of a job and a working parent in a family household changing and breaking the cycle of poverty. I thought that was especially appropriate.

Let me throw out something that may be a little bit simplistic, but my view of how a lot of this came to be a problem is perhaps simplistic. But in the absence of government programs to sustain you in a place, we saw great migrations of people across our country to go where the jobs were in the past.

Being from the south, we saw great migration of our population, of course, to the northeast because jobs were there. They were in the inner city environments, and people in the agricultural south didn't have jobs so they migrated to where the jobs were. But I view a large part of what we are now seeing is as those jobs disappeared or at least have not kept pace with the available work force, we now see in my part of the country very, very low unemployment figures. In fact, employers are begging for people to come to work.

In my congressional district the two largest industrial-type employers are the poultry industry and the carpet industry. And it is not uncommon in the poultry industry, for example, to find that 80 percent plus sometimes of their work force are noncitizens because they can't get domestic workers to come. They hire anyone who shows up at the door who is willing to come to work. And they have had to supplement the absence of those workers with noncitizen work force, most of whom are very dedicated workers, by the way. But they don't, by and large, possess any of the skills that we are talking about here. They don't even speak English, most of them don't, initially. They don't have a high school diploma. But they are hard workers, and they are willing to go to work.

So my question is this: If we have seen a transition here of people being locked into a place where there are no jobs, and I know we have tried to address it with inner city encouragement, of empowerment zones and that sort of thing to make the employers come to where the people are, but have we ever thought about the prospect of giving some kind of financial aid to help transition the people to where the jobs are? It doesn't have to be from the big city to a more rural environment. In my State there are counties within my State where just 50 to 60 to 70 miles away there are jobs but they don't or won't move because there is no incentive, no help for them to do so.

Has there been any study, anybody looking at the prospects of that kind of transition as a way to address the welfare problem?

Mr. Rector. I could speak to that a little bit.

I think you have stumbled on to one key, important factor. When we talk about a depressed inner city community most people forget that the populations in those northern urban centers were not there since the beginning of time. They specifically migrated there or their parents did after 1950 to obtain employment. The nature of manufacturing changed and manufacturing jobs moved into the exurbs from the inner city, but there was not a subsequent migration out of those communities.

I believe you are correct. One of the reasons why there wasn't a migration out was because we paid people to stay in an area where there was less employment, and we paid them not to work, we paid them not to be married, we created a disaster. I would say, however, that the key to that is not so much to offer people ways of getting out, as to simply say, welfare will no longer be a one-way handout. Okay? Once you sincerely make that change, then everything else changes and it all starts to fit.

And as an example of that, we could look at inner city Milwaukee. Inner city Milwaukee is I think the only city in the Nation inner city where there is a sincere 100 percent work requirement on AFDC. Case load has gone down over 70 percent. And the New York Times just this year wrote about the new boom industry not outside of Milwaukee but in inner city Milwaukee. What is the new boom industry? H&R Block. People filing for taxes for the first time. That comes from the New York Times. Within the inner city there is vastly more employment potential than anyone in the welfare industry, in the welfare establishment recognized. The key is to say to individuals, there is no choice. If you want to get welfare, you have to work. Once you do that, people have a lot more potential and there are many more jobs available, even in the inner city, than anyone ever imagined.

Mr. Deal. Thank you, Mr. Chairman.

Chairman McKeon. Thank you. Mr. Andrews.

Mr. Andrews. Thank you, Mr. Chairman.

I thank the panel as well.

I want to say to Mr. Carroll how much I appreciate the work of UPS and his work individually. I have ridden the bus that you made reference to. It transports many of my constituents who live in the Camden, New Jersey, area to the Philadelphia International area. And one very late night in January of 1998 I rode the bus and experienced the trip, and I am happy to say that program continues to work very well to this day. We appreciate it.

I think the focus of the hearing can be boiled down to a fairly simple proposition. In a job market where employers, as Mr. Deal just said, are begging to hire people, those heads of households who are not yet working must have some very significant issue in their lives, whether it is something they created or inherited or had put upon them, there is some significant issue, whether it is substance abuse, lack of job skills, lack of child care, lack of transportation, not living in an area where jobs are plentiful and being created. It seems to me we look at this -- the issue is not what new money must we spend to address this problem. It is fixing the loss of the money that we have already committed can be properly spent.

In the 1997 Balanced Budget Act there were, over the cost of 2 fiscal years, $3 billion committed toward this effort. The data that we have says that at this point $1.8 billion of that money has been awarded as grants, but as of June 30th, 1999, only 182 million, about 6 percent, if my math is correct, has actually been expended.

Now, I think the Cardin legislation is very good. But it is prospective. It talks about a future authorization of more money on top of what has been done. And I support that there should be more. But I wanted to be sure that we are not only prospective in the spending of new money but that we are retroactive in changing the rulings so this money that has been put forward and appropriated in fiscal '98 and '99 can be used. I think that is very, very important.

And I want to ask those on the panel and I have drafted a bill which I want to share with my colleagues on the committee. We should do that.

But I want to ask those on the panel, either from their direct experience as an employer or from their studies that they have done, what would you do with the next dollar that you had to spend if you were responsible for dealing with the population that we are talking about? We gave you another dollar, what would you do with the next dollar that you had to spend to address this problem? And I would ask anyone on the panel to offer their opinion on that.

Mr. Primus. Congressman, I fully buy the premise of your question. It is also true and there have been studies that subject that it is not just one issue, it is when you have multiple employment barriers that you have the most difficulty in moving recipients from welfare-to-work.

I think you are absolutely right that if you do anything in the welfare-to-work reauthorization bill that you need to loosen those requirements and apply them to monies in the pipeline. I think the Department of Labor understands that, and I thought that actually was a part of the Cardin bill. I will go back and look. But I thought that the new requirements which I think are much better do apply to monies that are in the pipeline.

Mr. Andrews. We just need to be sure though that in the budget gymnastics that very often happen around here that money is not rescinded, reprogrammed, reclaimed. It is one thing to say that you say you may spend the money on something. If the money is already out of the safe and gone somewhere else, you can't spend it.

Mr. Primus. Right. I think there is -- it is very hard to say where you would spend your dollar, the next dollar. I guess, you know, I think additional child care or additional dollars. I guess I would attack that 100 percent non-custodial problem so that when dads pay, mothers are actually better off. That means more TANF will be spent, but I guess I am firmly against 100 percent tax rates. If we really want dads to pay, they have to know that their children are better off as a result.

Mr. Butler. I would like first to underscore a point that Commissioner Turner made earlier, which is that we have a profound coordination problem between funding streams, between TANF and welfare-to-work. And I think that has to be addressed as well. It is not -- although I think the restrictions on how the dollars can be used are a problem, there are some very significant implementation issues and issues related to duplication of service that need to be addressed as well.

And I think Jason's idea of thinking about rationalizing these in one institutional structure, that request addresses this in a more, you know, comprehensive way, makes a lot of sense. I think there are some efforts to make that happen. But I would -- you know, I think that is important not to forget, that there are real implementation issues around accessing these dollars as well.

In terms of spending the next dollar, I really think the focus has to be on education. And I think it is easy to say that people should combine work and school, but it is just not often possible for working families to be able to do that, particularly single-parent working families. And yet we know that post secondary education is the way to career advancement for the vast majority of people in our society.

Mr. Andrews. It is kind of amazing that we expect people that have dealt with the welfare problem their whole life to do something that people with Ph.Ds and law degrees don't have to do: three full-time jobs, being a student, a parent, and employee. I don't know many people who can do that that are sitting up on this podium. I can't.

Mr. Butler. If someone meets the work test and has in good faith lived up to work requirements and has worked, and then it seems to me the quid pro quo may well be thinking you can go to school and you can reduce your work hours to some extent. Because we recognize that you are trying to do the right thing and we also recognize that you are not getting very far in terms of moving up in labor market. So I would look in that direction.

Mr. Turner. I would like to add to what David said. Most of the things in New York City that are constraining us at this point are not absence of funds. There is only so much funds that can be absorbed by the poverty industry in New York City and most urban areas without there being management improvements at the same time.

Let's take substance abuse, for instance. In New York, as in most places, you can use a Medicaid card and check into any substance abuse provider that you want to. You can stay there as long as you want, and you don't have to actually improve your condition, you can check out.

What the problem there is not the absence of substance abuse slots but whether the individuals going into those slots are obligated to stay there and get better. The only way to do that is by using management techniques that rationalize the unwieldy system there. The same is true with child care and training slots. I would argue that we need to do much more in this that area.

Mr. Andrews. My time has expired, but let me conclude by saying that that clearly does not characterize the area of the country that I represent. There are long waiting lists for substance abuse detox and rehab. There are long waiting lists for subsidized child care. If New York has been able to exceed that, that is to your credit, but it is not true where I come from.

Thank you, Mr. Chairman.

Chairman McKeon. Thank you. And that also brings out why we have 435 of us. Because our areas are all different. That is what makes it difficult to, you know, to come together and try to solve these problems, because every area is different. And again that is a benefit from this kind of a panel. Mr. Martinez.

Mr. Martinez. In the very short time we have left I want to talk to Mr. Bernhard. Because in your statement you talked about the difficulty of taking these people and putting them to work sometimes because of poor attendance and bad attitude.

The welfare-to-work program, unlike the job training partnership training program, requires you to get a job first before you receive benefits. And so if you are just coming out of a -- let's say if you are addressing the people that are long-term welfare recipients, who are not used to working, who have been getting by pretty well really with health care benefits and a lot of other things, that now that they go to work they have to think about providing for themselves, the people that you have actually hired for this program, you have interacted with the New York Transportation Department and all those other -- how many do you have actually working now?

Mr. Bernhard. Welfare recipients at our company? Currently, we have one person.

Mr. Martinez. One. The reason I bring that out is because there are other kinds of programs like an adult education program in my district that tries to place the people that are getting through the adult education.

Now I hired two people -- I use this as an illustration -- one, the first check that that person got they immediately went to Las Vegas and blew it all. The other person all of a sudden became appreciative that they had a regular paycheck, she worked and she gained experience and gained raises, went out and got herself a new car, she started a whole new life-style. And now because she is developing a life-style that she has got to work to maintain, she has an incentive to work and maintain it.

So you have two people come out of the same program, one dismal failure, the other a success. That is what you are going to have. So even without our Federal program, we have people, UPS a good example, I know a gentleman that worked in a UPS station who came as just as ordinary laborer, he is now one of their top management people. Worked hard within the company.

There are others that have begun to work there that haven't lived up to the rigorous requirements of UPS, and they have fallen by the wayside. So there is always the individual's ability and capability and attitude that lay into this thing. Somewhere in this whole system we have got to figure out a way that you say, well, go to work where before you can get rid of these benefits. These people need something before that. They need something that will help them stay there.

Mr. Bernhard. Maybe from more of a global perspective I understand what you are asking. Our company will invest in somebody who may not have all the required skills. We will train them. We have historically as a company not taken advantage of every single employer aid program that is out there. We will develop them ourselves. And we have developed them ourselves.

Time didn't allow, but the other Congressman's questions on if you had the dollar to spend, again from the grass roots or where the tire meets the road, as Congressman Goodling said, I think knowing our particular area, our particular unemployment rate, our particular location, I would probably invest that dollar in transportation. I can train them. We can train them. And we have demonstrated that over the years. We first got to get the folks from point A to point B. And I would tell you that that probably has a fairly strong correlation to some of the issues such as attendance, some of the other supporting reasons for why people don't succeed in a job.

Mr. Martinez. You see, since I first got to Congress when we were passing the Job Training Partnership Act, immediately -- and I understand how some of these programs get a unique interpretation by local government -- when the Job Training Partnership Act was first enacted, the County of LA used it to take every welfare recipient off the welfare roll because of the stipend that went with the Job Training Partnership Act. We put these people to work or put them in the training programs and work experiences where they weren't going to last, they really weren't going to materialize the benefit that was originally designed in the program. Because as long as that stipend lasted they would be on the job and then they wouldn't go on to future employment.

But it was a unique idea, taking all the welfare recipients, except it wasn't allowed and so we had to stop. The court issued a cease and desist order.

But the idea struck me then there ought to be some coordination between the welfare organization and the job training partnership. And now through WIA, which is the new JTPA, I understand in some places that is taking place, but in other places it is not.

You talked a little bit about that, Mr. Butler. Would you care to expand on how important it is that they all coordinate so we don't have duplicate efforts, that we are making the best use of our dollar that we are spending out there for training?

Mr. Butler. I think WIA is a move in the right direction. It is different in different places. But in Los Angeles, this, for example, is a very big issue. And you see the welfare folks right now trying to think about how they can coordinate with the PIC and the JTPA world so they can have good access to these desperately needed retention services. And who is supposed to do it? It is kind of who's on first, who does what problem that, you know, is profound and really takes some work and some focus on the details.

Mr. Martinez. Part of it is our responsibility to make these things clear and provide technical assistance and advice to those people that they understand, and we have to redraft these things so there is more coordination.

Mr. Butler. I agree.

Chairman McKeon. We have a vote on, and you have sat here for all morning now and you've been very patient with us.

I really would have liked to asked Mr. Carroll. You mentioned a couple of times how your family, how you were on welfare when you were young and how that cycle has to be broken. I would like to know how that happens. I think that is the real key.

You know, we talk about basic -- you can train people to do a job, but how do you instill attitudes of being there on time and feeling responsible to carry out a job, those kind of things? Those are very difficult to teach on the job. Can you answer something like that in just about 30 seconds before I miss a vote?

Mr. Carroll. Sure. One of the things that I know at UPS when we hire people a lot of the companies in the partnership developed these programs call mentoring programs where you have an another employee that will take a person, a big brother, big sister. As a matter of fact, the majority of the mentors in UPS are now ex-welfare recipients. They have an understanding. They have a relationship -- sometimes you are a little nervous about talking to the supervisor or something and they have been there.

You know, we had the two alarm clock system where you have a back-up alarm clock. We have all kind of things that you would have to try to help people.

Then I remember, you know, mothers who don't want to leave their children for the first time and now you have another mother who has made the transition and can identify with some of the apprehension but also can encourage her from the standpoint that the child will appreciate it in the long run and back-up baby-sitters and all kinds of things like that.

So what happens is there comes an understanding of where the people are and where they are trying to get to.

Chairman McKeon. Great idea.

Thank you very much. I appreciate your testimony. We probably will be coming up with some legislation to fix some of these things, and we will be contacting you for help and ideas on that. If you think of something that you didn't get to say that you would like to say, would you please get it to us? We will get it in the record. Thank you very much.

WRITTEN STATEMENT OF SENATOR DANIEL AKAKA, U.S. SENATE, WASHINGTON, DC – SEE APPENDIX K

[Whereupon, at 1:10 p.m., the Subcommittee was adjourned.]