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Board or be left within the States. Personally, there is no doubt in my mind that the present set-up places very broad powers in the Social Security Board. However, that issue can be settled only by the Supreme Court and we will soon know the answer to it.

On the matter of financing, the Federal-State legislation provides that the State submit a budget and the Federal Board approve the budget. I do not differ at all with the substance of the report when I call attention to the fact that New York State has been appropriated some $700,000. We have not spent $350,000. Therefore it is clear on the face of it that the Board does appropriate more than we need, and it can scarcely prevent itself from doing so. That works out in a simple way. As you all know, you have to anticipate your expenditures 2 or 3 months before you can actually incur the liability. If we wait until the beginning of a quarter before we incur the liability-at which time we get the appropriation from the Board--we find ourselves in the dilemma of waiting an additional 30 or 60 days to get the people or the printing expense or rent, or whatever is involved. That fact in New York has caused us to spend half of what was estimated. The discrepancy will reduce considerably with the stabilization of State expenditures.

On the question of budget control I feel that although the Board has strong powers for controlling the expenditures, there will be no control of expenditures if we must rely solely on the Board's powersthat the actual control must come within the States themselves. Of course, control can scarcely be vested completely in any budget director within a State, no more than it can be completely under control of the Social Security Board. Bluntly putting it, money comes too easily. We can justify much more money than we have any right to spend, and I daresay that any intelligent administrator can so convince the director of the budget or the Social Security Board that he needs funds for a specific purpose, that it does not know what it is doing when it makes the budget appropriation. Therefore, if we in the States concentrate on control within the administration rather than try to get all that we can get from the budget or the Social Security Board, we can really accomplish the savings that could be made. The Board cannot stop it, because the incidence of the control is the fellow who requests the money for a specific purpose and undertakes to justify that expenditure.

Mr. Altmeyer has stated that all except two States have indicated that the employment service should be the channel through which benefits are paid, or that the employment service should be closely affiliated with the unemployment-insurance administration. There appears to me a wide discrepancy in points of view. The employment service is an experienced service in this country, even though the number of States in which it has been tried has been small. The employment service should be the designated agency through which these unemployment-insurance programs are carried out. In substance it is the same thing, because you cannot separate benefit payments from placement activities. Those States which have the commission form of administration and which have to coordinate agencies, one an employment service and one an unemployment-insurance administration, will inevitably encounter far more difficulties than the State, like New York, in which the industrial commissioner is responsible for both and there is a direct line of personal responsibility which leaves no room for controversy between the two so-called coordinate functions. That control should be a single-mind control rather than a cooperative control, and the quicker the employmentservice people get rid of the fear that the unemployment insurance is going to gobble them up, or the quicker the unemployment-insurance administrations get rid of the idea that they are going to be gobbled up by the employment-service people, the quicker we will come to a solution of these two inseparable functions.

May I say that in spite of the fact that New York is a big octopus, and we sometimes are accused of dominating the situation because of sheer weight, we want to give voice to the fact that we learned bow to do the things in our State from those States that can visualize the problem in a smaller unit, because in the smaller unit you can encompass the whole problem and the administrative machinery to solve the problem much more easily than in a State the size of New York, which has between 2 and 3 million workers and a hundred thousand employers.

Mr. WALLING (Rhode Island). I should like to ask Mr. Bowers a question which is bothering us in Rhode Island; he may have been able to work it out. How are you planning to work out the merit-rating estimates? I believe your law has a provision similar to ours.

Mr. Bowers. That is correct. The New York State law requires a study to be made and a plan to be worked out and recommended to the Governor and to the legislature by the industrial commissioner or his staff. Now you and I can sit down at a table and without any study write a merit-rating plan that will stand up within 95 percent of any scientifically prepared merit-rating plan. I am thoroughly convinced of that. It must involve a relationship of the contributions to turn-over in inverse proportion. Therefore a study of merit rating resolves itself into a study of labor turn-over and into the determination of an arbitrary point at which you cross the lines -at which you begin to give credit. In New York State we have a policy that credit should be limited to a minimum of 1 percent. In my judgment there is no simple answer to your question, Mr. Walling. The study really

. amounts to a study of labor turn-over. The rest of it is a matter of legislative policy.

Chairman Davie. I believe the gentleman from Wisconsin said something about employment offices. Is the Board at Washington to designate the employment offices that should be used?

Mr. RAUSHENBUSH. The employment service was touched on at a couple of points-offhand, I should say in about three respects. One was the matter of whether payment of benefits should actually be made physically at the employment service. I pointed out that as far as the Federal provision is concerned that does not appear to be required. The Social Security Board has some discretionary power there and in Wisconsin it has, on an experimental basis, approved payment by mail, which we believe is cheaper and perhaps quicker.

The second reference was relative to finances. As you know, the present set-up is that the Wagner-Peyser money is available to States which affiliate with the United States Employment Service on a 50-50 matching basis--a dollar of Federal money for every dollar of State money. The point was made that the State employment service, after all, has not only its direct unemployment-compensation functions but also its more general functions of placement in serving the entire community. It seemed desirable to continue the present Wagner-Peyser set-up and to say to each State that it should fully match the available Federal Wagner-Peyser money before the Social Security Board is asked to swing in to carry the rest of the load of expanded employment service necessary for unemployment-compensation purposes. The aid available under title III of the Social Security Act is on a 100-percent basis.

The third point is that the administrative set-up of the unemployment-compensation administration and the employment service, even if they are set up as separate divisions, should be under one agency, whether that be the industrial commissioner of New York, for instance, or whether it be Mr. Glenn Bowers under the industrial commissioner. I believe Mr. Bowers is in charge of both employment service and unemployment compensation, and that he has two subdivisions under him. That is just departmentalization. The vital point, which is urged in the report, is that there should be one agency which is over both. Mr. Altmeyer's paper pointed out that that is true in all but two of the unemployment compensation States at present. Whether it be under a commission, as in Wisconsin, or under another form of administration, it should be centralized. The report, therefore, did recommend exactly what Mr. Bowers was stressing—that whatever the set-up, there should be a single agency which is enabled to direct both unemployment compensation and employment service.

Chairman DAVIE. The New Hampshire statute provides that the benefits shall be paid at the employment service at such time as the commissioner may specify.

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Mr. Bowers. To clarify my point about the unity of the two functions-placement and insurance-benefit payments--in New York State we do have two bureaus, one an insurance control bureau, which is a fiscal and record-keeping unit, and another the State employment service. But those are staff agencies with respect to the field. We have one field service. We do not have a State director of the employment service directing the personnel in the field and another director of insurance control directing the employees in the field. There is one administrative supervisor of both functions in the field, and it is that form of organization which we fail to see in any other State as yet. It is that which I referred to as an inevitable result if we are going to have the absence of conflict. Two different functional directors cannot direct the same people without getting into trouble. The cooperation, therefore, is not the thing we should seek—it is the unity of functioning

Chairman Davie. I believe that the employment service is to find employment for unemployed people, but when it comes down to administering insurance that is another question. I do not quite agree with you on this cooperative effort. Of course I cooperate when I have to, and I think we all do. There was something said on personnel. Does anyone want to make any inquiry on that?

Mr. Bowers. The future of the unemployment-compensation appropriation is of course strictly a legislative matter for Congress, but I should like to raise the question as to the advisability, from the standpoint of public policy and economy, of continuing to collect taxes from two different sources to finance a single functioning unit. My own feeling is that there should be a single source for those funds, Camely, a pay-roll tax, and all expenses of the placement and insurance functions should be paid out of the funds from that single source. Then we would do away with all of the dual budget making, the dupliCation of controls, and have them all in a single unit. If that were the case, the Wagner-Peyser Act then would be allowed to lapse at the end of 1937, on which date I understand it expires, and there would be Do additional or future appropriations made under it

Mr. RAUSHENBUSH. There are two points I should like to make on that. First, those moneys are now coming from one source—the Treasury of the United States. The money raised under title IX is not specifically appropriated or earmarked. Congress appropriates the money available under title III annually, and does not take it out of the pay-roll tax. In any event, it is a very important, practical point, because the Social Security Board does not have all the money raised under title IX available for administrative aid by any means. The Social Security Board has only what Congress has appropriated to it. The difference comes on the 50-50 matching under the Wagner-Peyser Act and on the 100 percent Federal aid. My second point is that if your idea was to be carried out it would involve transferring the United States Employment Service, which is now in the Department of Labor, to the Social Security Board. That is a matter of no small importance.

Mr. BOWERS. Or vice versa with respect to the unemploymentcompensation administration,

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