COMMONWEALTH OF HOUSE OF REPRESENTATIVES

APPROPRIATIONS COMMITTEE BUDGET HEARING

DEPARTMENT OF LABOR & INDUSTRY

STATE CAPITOL HARRISBURG, PENNSYLVANIA ROOM 140, MAJORITY CAUCUS ROOM

WEDNESDAY, FEBRUARY 22, 2017 1:00 P.M.

BEFORE: HONORABLE STANLEY SAYLOR, MAJORITY CHAIRMAN HONORABLE JOSEPH MARKOSEK, MINORITY CHAIRMAN HONORABLE HONORABLE JIM CHRISTIANA HONORABLE SHERYL DELOZIER HONORABLE GEORGE DUNBAR HONORABLE HONORABLE HONORABLE HONORABLE HONORABLE HONORABLE WARREN KAMPF HONORABLE FRED KELLER HONORABLE HONORABLE NICK MICCARELLI HONORABLE HONORABLE MIKE PEIFER HONORABLE JEFF PYLE HONORABLE MARGUERITE QUINN HONORABLE HONORABLE JAMIE SANTORA HONORABLE HONORABLE KEVIN BOYLE HONORABLE HONORABLE HONORABLE HONORABLE MADELEINE DEAN HONORABLE MARIA DONATUCCI HONORABLE MARTY FLYNN HONORABLE EDWARD GAINEY 2

1 (CONT'D.)

2 HONORABLE HONORABLE 3 HONORABLE -BRANEKY HONORABLE MIKE O'BRIEN 4 HONORABLE HONORABLE 5

6 MAJORITY NON-COMMITTEE MEMBERS:

7 HONORABLE HONORABLE CRIS DUSH 8 HONORABLE KRISTIN PHILLIPS-HILL HONORABLE 9 HONORABLE HONORABLE BRETT MILLER 10 HONORABLE ERIC NELSON HONORABLE BOB GODSHALL 11 HONORABLE HONORABLE 12 HONORABLE ROB KAUFFMAN HONORABLE 13 HONORABLE KATE HARPER HONORABLE JOHN TAYLOR 14 MINORITY NON-COMMITTEE MEMBERS: 15 HONORABLE 16 HONORABLE HONORABLE 17 HONORABLE HONORABLE MATT BRADFORD 18 HONORABLE HONORABLE JOHN GALLOWAY 19 HONORABLE MIKE SCHLOSSBERG HONORABLE BILL KELLER 20 HONORABLE

21 COMMITTEE STAFF:

22 DAVID DONLEY, EXECUTIVE DIRECTOR (R) RITCHIE LAFAVER, DEPUTY EXECUTIVE DIRECTOR (R) 23 MIRIAM FOX, EXECUTIVE DIRECTOR (D) TARA TREES, CHIEF COUNSEL (D) 24

25 TRACY L. MARKLE, COURT REPORTER/NOTARY PUBLIC 3

1 INDEX TO TESTIFIERS

2 NAME PAGE

3 KATHY MANDERINO, SECRETARY DEPARTMENT OF LABOR & INDUSTRY 4 4

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1 ---oOo---

2 (THE TESTIFIER WAS DULY SWORN.)

3 MAJORITY CHAIRMAN SAYLOR: Madam

4 Secretary, you may begin.

5 MS. MANDERINO: Thank you, Chairman

6 Saylor, Chairman Markosek, members of the

7 Appropriations Committee, and people of

8 Pennsylvania.

9 I'm here today to talk to you about the

10 Department of Labor & Industry, and I have

11 submitted written testimony for the record. I

12 just want to highlight a few things; and that

13 is, please take a minute or two to read that

14 testimony, the highlights, the accomplishments

15 of the Department of Labor & Industry and all of

16 its divisions in workers' compensation.

17 The workforce development in the Office

18 of Vocational Rehabilitation, with the Office of

19 Unemployment Compensation, and the Safety and

20 Labor Management Divisions have been something

21 that I have been so proud of, that you can be so

22 proud of, and that the people of Pennsylvania

23 can be very proud of; and I want those to not go

24 unnoticed.

25 Having said that, for those of you who 5

1 know me, I don't believe in doing anything but

2 addressing the elephant in the room. And we

3 have an elephant in the room today, and that is

4 our wounded unemployment compensation system.

5 I very much expect a lot of questions

6 about that. I am prepared to answer them to the

7 best of my ability. The people of Pennsylvania,

8 the unemployed people of Pennsylvania, right

9 now, have an unemployment compensation system

10 that isn't working for them. They deserve

11 better, and I'm here to give you every bit of

12 information that I can so that we can get that

13 system up and operating the way it should to

14 serve the needs of the citizens of Pennsylvania.

15 And with that, Mr. Chairman, I am ready

16 for questions from the Committee.

17 MAJORITY CHAIRMAN SAYLOR: Very good.

18 First Representative is Representative Pyle.

19 REPRESENTATIVE PYLE: Madam Secretary,

20 always a pleasure to see you. How have you

21 been?

22 MS. MANDERINO: Very good.

23 REPRESENTATIVE PYLE: That's excellent.

24 Chairman's doing some different things this

25 year, and I have your printed testimony and much 6

1 appreciative.

2 One of the things I wanted to pose to

3 you is the Governor's proposal to hike the

4 minimum wage to 7.25 to $12 an hour. I only

5 have two questions: The first is, the last time

6 we looked at doing this, I believe, was 2010.

7 Is that -- I'm not sure about that. But it was

8 sometime around then. And when we did this --

9 or pardon me, 2014 -- the Congressional Budget

10 Office estimated that raising the minimum wage

11 to 10.10, less than the 12 that's being

12 proposed, would decrease nationally about

13 500,000 jobs and in the Commonwealth about

14 20,000 jobs.

15 Have you done a study on job losses that

16 would occur if we went from 7.25 to $12 per hour

17 as a minimum wage?

18 MS. MANDERINO: Thank you,

19 Representative Pyle. As you mentioned, the

20 Governor has proposed that in the past that we

21 go to 10.10. This year he's proposing that we

22 go to $12 an hour. The Department very much

23 supports that initiative.

24 With regard to the impact, there are a

25 lot of different ways to measure that. I know 7

1 that you're not unfamiliar with that. There

2 have been a lot of measurement over the years.

3 I did not personally do a study at the

4 Department of Labor & Industry; although, our

5 Minimum Wage Advisory Board does do a report on

6 minimum wage and that report is actually coming

7 out in the next week.

8 It doesn't directly address your

9 question, but there are a lot of national

10 reports that are out there on the impact of

11 raising the minimum wage. I think we can all be

12 honest and say that you can find a study that

13 will support minimum wage, whatever your

14 position is.

15 But it's the position of this

16 Administration, which I support, that raising

17 the minimum wage so that families who work hard

18 can provide for their needs is an important

19 thing to do.

20 And I know you heard from the Revenue

21 Secretary with regard to the impact that the

22 Governor's Office has estimated that will have

23 on budget revenues, as well.

24 I do know that in Pennsylvania, we have

25 in the past, raised the minimum wage. We 8

1 haven't done it since 2007. But every time

2 Pennsylvania has raised the minimum wage, as

3 well as every other state has raised the minimum

4 wage, the arguments about job loss get made; and

5 after a short-term adjustment, usually the job

6 growth continues and that's what we're expecting

7 will happen here.

8 REPRESENTATIVE PYLE: Second question,

9 Chairman: You serious?

10 MS. MANDERINO: I am.

11 REPRESENTATIVE PYLE: You don't think

12 that when we raise the minimum wage from the

13 7.25 to $12, given the inference of the

14 Affordable Care Act, which is cutting down small

15 business, like me mowing grass -- we are losing

16 small businesses by the slew, to use the

17 technical phrase. And you don't think taking

18 the minimum wage from 7.25 to $12 an hour is

19 going to result in job losses?

20 And in all honesty, ma'am, and I know

21 you, if you tell me you think that's a correct

22 statement, I'll believe you.

23 MS. MANDERINO: Okay. As I said, I

24 believe there will be short-term adjustments.

25 It happens in the economy no matter what kind 9

1 of changes are made. But in the long-term, I

2 think it will be good for people, it will be

3 good for family, it will be good for businesses,

4 and it will grow our economy.

5 REPRESENTATIVE PYLE: Thank you.

6 Chairman, that will conclude my questions.

7 MAJORITY CHAIRMAN SAYLOR:

8 Representative Flynn.

9 REPRESENTATIVE FLYNN: Thank you, Madam

10 Secretary. As Pennsylvanians and as

11 Representatives, we're all very focused on jobs

12 and we want more good-paying jobs here in

13 Pennsylvania. You know, it's often a lot easier

14 to keep jobs than create them. You know, saving

15 jobs and preventing losing jobs avoids layoffs

16 for families.

17 And the Strategic Early Warning Network

18 or SEWN is a federally-funded program that's

19 designed to provide help for businesses that are

20 having problems, particularly manufacturers,

21 kind of help them turn things around and solve

22 problems before layoffs occur.

23 If we can get the help to businesses and

24 avert layoffs, we all win. SEWN has been very

25 effective, particularly out in southwestern 10

1 Pennsylvania, but also across the state.

2 Can you give us an update of the layoff

3 aversion services like SEWN, and do we

4 anticipate any changes to the program in this

5 coming year?

6 MS. MANDERINO: Thank you very much,

7 Representative Flynn. You are absolutely

8 correct in terms of the value of the Strategic

9 Early Warning Program. It is federally funded;

10 it allows states to get in there when they hear

11 of potential layoffs or business closings or

12 even just disruptions in business that could

13 have a negative effect and really provide the

14 resources that company needs to transition their

15 workers, if you can't turn it around; but more

16 importantly, get in there early and try to help

17 them with resources, save jobs and strengthen

18 their company.

19 Just in the last year, the SEWN program

20 has worked with a number of different referral

21 services in Pennsylvania; 14 new companies of

22 the 56 total referrals were referred by private

23 sources. The industrial resource centers are

24 working with folks, the local economic

25 development agencies; our unions and local 11

1 companies are all feeding information to SEWN.

2 SEWN works not just through the funds

3 that we get from the feds at Labor & Industry

4 but also with our partners over at DCD and

5 really tries to bring all of the resources of

6 state government to bear on the issue.

7 In the last year, 92 total manufacturers

8 were served; that was up from 78 the year

9 before; 56 new clients were served; 1500, almost

10 1600 total job losses averted and 27 different

11 counties were touched by the good work of the

12 SEWN process.

13 So we see the SEWN program, the

14 Strategic Early Warning Program, as something

15 that really benefits Pennsylvanians,

16 Pennsylvania employers, and Pennsylvania

17 workers; so thank you for recognizing that good

18 work.

19 REPRESENTATIVE FLYNN: And do you

20 anticipate any changes in the upcoming year?

21 MS. MANDERINO: Well, the SEWN program

22 is administered by -- we put out a request for

23 proposals and RFP for the operator of the SEWN

24 program. For the last three years, the Steel

25 Valley Authority has been the operator of the 12

1 statewide SEWN program.

2 That RFP is actually out on the streets

3 now for renewal; and so whether or not the same

4 vendor will be chosen during the RFP process is

5 too early to tell, but we do expect the program

6 to continue.

7 We haven't heard anything at this point

8 from Washington that the program is vulnerable

9 to going away. We don't know what will be

10 appropriated and come to the states for the

11 operation of it at this point.

12 REPRESENTATIVE FLYNN: Thank you.

13 MAJORITY CHAIRMAN SAYLOR: We've been

14 joined by Representative Murt and by

15 Representative Neilson. With that, we go to

16 Representative Grove.

17 REPRESENTATIVE GROVE: Thank you, Mr.

18 Chairman. Madam Secretary, good to see you.

19 Question one: In the Governor's budget

20 book, it reflected a decrease in the amount of

21 surplus from the Unemployment Compensation

22 Contribution Fund. Normally, it's about $300

23 million of surplus; it's down to about $165

24 million.

25 With the implement of Act 144 of 2016, 13

1 the UC fix of last session, it was supposed to

2 expedite solvency by two years. Can you explain

3 what's happening within that fund?

4 MS. MANDERINO: Okay. Thank you. If I

5 understand the question correctly, and if I

6 don't, you can help clarify, but at the end of

7 last session the changes that were made to the

8 UC law, both to allow an additional 44,000 folks

9 who were not eligible for unemployment to come

10 on, there were also some changes in terms of the

11 amount of benefits and all of those things.

12 The projection for the Unemployment

13 Compensation Fund, we want to get to 250 percent

14 of kind of what you need in the trust fund; and

15 that's considered solvent. So in aiming to get

16 to 250 percent, we were, prior to the Act -- I

17 guess it was Act 44, the most recent

18 legislation, we were projecting solvency at

19 2025. If we had just added the seasonal workers

20 or the -- I don't like that term -- but if I say

21 that, everybody knows what I mean -- if we had

22 just added the additional folks for eligibility

23 and made no other changes, we would have pushed

24 solvency off for a year, to 2026.

25 But because of the additional changes 14

1 the General Assembly has, right now it looks

2 like we will hit that 250-percent solvency two

3 years earlier or one year earlier, depending on

4 how you want to calculate it, in 2024.

5 The one thing I do want to caution

6 folks, this is something that we monitor on a

7 regular basis. Looking at what does solvency

8 mean and how are we, it's really a snapshot in

9 time.

10 So as we look at the snapshot today,

11 based on all of the assumptions that we were

12 using today, which I think are very reasonable

13 assumptions and the same assumptions the General

14 Assembly has been using, adjusted for whatever's

15 happening in the economy, we are anticipating

16 reaching solvency in 2024.

17 Now, anything else could change that,

18 could either accelerate that timetable or push

19 it back, economic changes or others. But right

20 now, we're looking at 2024, which I think is

21 good news.

22 REPRESENTATIVE GROVE: So we're still on

23 track? That was just basically a snapshot in

24 time?

25 MS. MANDERINO: Yes. 15

1 REPRESENTATIVE GROVE: Okay. And then

2 part of the government, that work section of the

3 Governor's budget book, the Governor is

4 proposing changes to Acts 534 and 632,

5 specifically workers' comp, some kind of old

6 laws that were put into place prior to workers'

7 compensation.

8 Can you explain what changes you're

9 looking for and the exact amount of savings

10 we'll see with making those changes?

11 MS. MANDERINO: Okay. I'm not familiar

12 with the Act numbers, but I think I understand

13 what it is that you're referring to. We have

14 made a lot of -- the workers' comp system -- a

15 little primer, the workers' comp system, again,

16 which is actually most of what Labor & Industry

17 does, is not paid for by General Fund dollars

18 but paid for either by federal funds user fees,

19 etc.

20 So the Workers' Comp System and what it

21 takes to operate and administer that, is paid,

22 basically, in terms of by a surcharge or a

23 premium on the amount of workers' comp -- or

24 from workers' comp insurers. So every year, we

25 take a look at what it takes us to operate and 16

1 then decide kind of what adjustments we need in

2 terms of how much the workers' comp fund folks

3 are assessed for the premium to run that.

4 We have done a lot of efficiency

5 measures in workers' comp over the years that

6 have allowed us to charge less some years. This

7 year, I think we're asking for the amount of the

8 surcharge as it normally is because there are

9 some anticipated regular computer upgrades and

10 things that have to happen. And if I am

11 answering this incorrectly, someone will tell

12 me; but I think that's what you were asking.

13 REPRESENTATIVE GROVE: You are. So Acts

14 534 and 632 -- well, I definitely know Act 534.

15 They were put into statute prior to workers'

16 compensation. It provided workers' comp

17 benefits to individuals within certain

18 corrections and certain special needs homes.

19 MS. MANDERINO: Yeah. I'm not -- can I

20 get back to you? Because I also know the only

21 other thing in the budget under workers' comp

22 that's kind of like -- that's dropping it, are

23 the Black Lung payments, which is kind of a

24 small class of folks that -- and that is

25 actually state dollars that were taken on as a 17

1 state obligation like, many, many moons ago; and

2 there aren't that many people left, quite

3 frankly, to collect those benefits; and so that

4 number's decreasing.

5 But I'm going to ask if I can get back

6 to you with more specificity, if I didn't answer

7 that correctly.

8 REPRESENTATIVE GROVE: I appreciate

9 that. Thank you, Mr. Chairman.

10 MAJORITY CHAIRMAN SAYLOR: Very good.

11 Representative Gainey.

12 REPRESENTATIVE GAINEY: Madam Secretary,

13 how are you?

14 MS. MANDERINO: Good. Thank you.

15 REPRESENTATIVE GAINEY: Always good to

16 see you. I have a question. I want to

17 piggyback sort of on the U.S. call centers. Do

18 you believe you have adequate staff to continue

19 to the performance that you've been doing

20 throughout the past? And if not, what is it

21 going to take to make sure that you're

22 adequately staffed throughout the state to run

23 an efficient system?

24 MS. MANDERINO: Yeah. Thank you very

25 much for that question. And this is a very 18

1 serious dialogue that I think all of us, General

2 Assembly and Administration together, have to

3 have.

4 Let me start by saying that, from the

5 Department's position, we believe that we were

6 running a very effective, efficient system that

7 was delivering quality customer service to the

8 unemployed people of Pennsylvania up to and

9 including December 18th.

10 We were able to do that because the

11 General Assembly had, through legislation,

12 provided additional state resources through the

13 SIIF Fund to supplement the declining federal

14 dollars that states all across the country have

15 been getting from the federal government.

16 From my perspective, as close as we can

17 get back to where we were on December 18th, is

18 where we need to be. I do want to remind folks

19 that the pain that you're seeing visibly from

20 the people of Pennsylvania -- and I have been to

21 not only our service centers but also our tax

22 collection offices and the other components of

23 our Unemployment Compensation System -- I have

24 been to our Career Links in the past couple of

25 weeks that have been inundated with folks who 19

1 are trying any way to get access to their

2 benefits; and so I know that we are not

3 delivering the kind of service that we need.

4 And so while we are starting to see a

5 sliver of light in the short-term in terms of

6 what our customers are experiencing, it will

7 boomerang back up in April when we have another

8 quarter change and a lot more people are

9 eligible. So I look forward to working with you

10 to figure out how we solve this.

11 And if I can, Mr. Chairman, I know there

12 will be more questions; but let me take this as

13 an opportunity to explain a little bit broader

14 perspective in terms of what's happening around

15 the country. Pennsylvania was not, by far, the

16 only state that was supplementing its

17 Unemployment Compensation Administration with

18 state dollars.

19 At least the last survey of the National

20 Organization of the State Workforce and

21 Unemployment Administrations, their last survey

22 counted 39 states that have been supplementing

23 their unemployment compensation delivery system

24 with state dollars in order to deliver good

25 customer service to their constituents. 20

1 Ohio is anticipating putting -- I can't

2 think what their base is -- they're anticipating

3 putting another 25 million in this year.

4 California puts in 140-some million additional

5 state dollars and their estimates in their

6 budgets this year is another 50 million on top

7 of that.

8 That is not to say that's what I think

9 we need in Pennsylvania, but the $57 million

10 that we were using at the end -- in 2016, was

11 very much needed; and I hope that we will get

12 back as much as we can to that place, where we

13 can deliver the services.

14 We have had wait times on our telephone

15 calls as high as a disgusting six hours, if

16 people can get through. We have had folks

17 dialing and dialing and dialing and not getting

18 through, which causes even more jams in the

19 system.

20 And the bottom line is, these are folks

21 who have paid in the Unemployment Compensation

22 System; and they deserve to be able to get their

23 money out when they need it.

24 REPRESENTATIVE GAINEY: Madam Secretary,

25 I just want to say thank you. And I agree; I 21

1 received a lot of calls, as well, from

2 Pennsylvanians and I agree they definitely have

3 to have a process that they can utilize to help

4 get their benefits.

5 Again, thank you.

6 MAJORITY CHAIRMAN SAYLOR:

7 Representative Sonney.

8 REPRESENTATIVE SONNEY: Thank you, Mr.

9 Chairman. Madam Secretary, good to see you.

10 MS. MANDERINO: You too, Curt.

11 REPRESENTATIVE SONNEY: We're going to

12 stick on unemployment for a few more minutes

13 here. You know, as you're aware, Act 34 was put

14 in place. And as a former Legislator, you're

15 very well aware that, you now, we oftentimes do

16 legislation that has a sunset. And usually when

17 we do that, there was a specific purpose for

18 that money to be used within that timeframe.

19 So could you explain to me what you

20 believe that specific purpose was under Act 34

21 and why you didn't fulfill that purpose within

22 the timeframe?

23 MS. MANDERINO: Thank you for the

24 question. I will -- no surprise to you, I won't

25 accept your premise; but let me just say that 22

1 the purpose is very clear. I don't have to say

2 what I think it is, because it was written in

3 the legislation.

4 And in the legislation it said the

5 purpose of the SIIF Fund was to improve services

6 -- delivery of Unemployment Compensation to the

7 consumers and make improvements in the

8 infrastructure as the Department thought

9 necessary. And I believe that the Department

10 has been a very good steward of those dollars

11 and has accomplished a lot in both of those

12 areas.

13 Let me first talk about service

14 improvements: During the course of the four

15 years that we had the SIIF dollars, the

16 Department, at the same time while reducing

17 complement by about 23 percent, was able to,

18 through better work processes and efficiencies,

19 better training of our staff, and the

20 implementation of some new technologies,

21 greatly improved our customer service to the

22 unemployed people of Pennsylvania. We went from

23 not meeting our federal benchmarks in terms of

24 how the US Department of Labor measures state's

25 effectiveness in serving their unemployed 23

1 customers, to meeting our significant

2 benchmarks. Going from first-time pays, which

3 was probably one of our most important measures

4 that you have to have the money out the door to

5 folks within 14 days after they apply, we went

6 from -- and I stink with numbers as my staff

7 knows -- I know I've given it to the General

8 Assembly before.

9 REPRESENTATIVE SONNEY: Well, Madam

10 Secretary, if I may?

11 MS. MANDERINO: Please.

12 REPRESENTATIVE SONNEY: You know,

13 there's no doubt that you were doing a great job

14 until this year, obviously; and that was

15 financial concerns, the layoffs, you know; so

16 today we're not doing a very good job at all.

17 Do you believe that any of those

18 efficiencies that you are able, you know, to

19 implement during that four-year period, do you

20 believe that they are really showing to the

21 constituent who is trying to access the system

22 today? In other words, you know, I've seen a

23 lot of people come into my local district

24 offices, both unemployment claims and TRA

25 claims, and they're different. 24

1 MS. MANDERINO: Yep.

2 REPRESENTATIVE SONNEY: But a TRA claim

3 demands personal attention; it cannot be taken

4 care of, you know, online.

5 MS. MANDERINO: No.

6 REPRESENTATIVE SONNEY: You know, it

7 demands personal attention. And, also, when it

8 comes to the regular unemployment, if you don't

9 answer the questions just quite right, you know,

10 on the computer, there again, you are triggered

11 into a slot where it demands personal attention.

12 You know, how come these types of things

13 weren't -- or can they be made more automated?

14 And, if so, you know, are we heading in that

15 direction of making this a lot of more

16 automated?

17 MS. MANDERINO: Yes and no. Let me be

18 very clear about that. I won't go into the

19 numbers. I finished with the service. Let me

20 also -- the second part of that was

21 infrastructure improvement. The infrastructure

22 improvements that we made to telephone systems,

23 as well as, finishing and continuing the

24 implementation of the tax services and the other

25 databases, were accomplished. 25

1 With regard to the benefits, the part of

2 the system that delivers the benefits, the part

3 of the system that was what everyone refers to

4 as the failed IBM contract that was canceled in

5 2012, and thus, was on the heels of the SIIF

6 funding.

7 And since you acknowledged that we both

8 live in the General Assembly, I'll acknowledge

9 something I learned in the General Assembly; and

10 that is, people hear what's important to them to

11 hear. So if it was important to somebody to

12 hear that with the passage of these SIIF dollars

13 we were going to get more people in chairs to

14 answer the phones so that the call wait times

15 and the lines at the CareerLinks went down,

16 that's what people heard. And we did that.

17 If it was important to people to hear

18 that we were going to modernize the computer

19 system, that's what people heard; and we have

20 not completed that process, so I will

21 acknowledge. I don't know why people thought

22 that process was going to be completed by the

23 end of 2016. We sunset a lot of things around

24 here. It's a chance to look at it again with

25 fresh eyes and decide whether the need still 26

1 exists. That's where we are right now with --

2 REPRESENTATIVE SONNEY: Madam Secretary,

3 and I know my time's up, but just, you know, yes

4 or no, do you believe that sometime in the

5 future, okay, that we can do a computerized

6 modern efficiencies that can, you know, reduce

7 the need for these call centers and allow the

8 constituents to be able to do much more of this

9 online?

10 MS. MANDERINO: The purpose of benefit

11 modernization, Ladies and Gentlemen, is not so

12 that we can take the human factor out of

13 delivering Unemployment Compensation Benefits to

14 our system.

15 We're operating a 40, almost 50-year-old

16 legacy system that is put together with chewing

17 gum and duct tape. The reason to modernize our

18 computer system is so that it doesn't fail and

19 we literally can't get the checks out the door.

20 REPRESENTATIVE SONNEY: Thank you.

21 MS. MANDERINO: In modernizing our

22 system --

23 MAJORITY CHAIRMAN SAYLOR: Madam

24 Secretary.

25 MS. MANDERINO: Sure. 27

1 MAJORITY CHAIRMAN SAYLOR: I've got to

2 cut you off there.

3 MS. MANDERINO: You know me, Stan.

4 MAJORITY CHAIRMAN SAYLOR: Sure. I

5 appreciate your passion, Madam Secretary. But I

6 will ask you, as I ask members, to try and keep

7 your answers short because members only get 5

8 minutes. That time flies by very quickly.

9 At this point, I'd like to recognize

10 Representative Boyle.

11 REPRESENTATIVE BOYLE: Great to see you,

12 Secretary Manderino, you know, as a fellow

13 Philadelphian.

14 Speaking for a lot of Democrats and for

15 a lot of progressives, probably the most

16 exciting part of Governor Wolf's budget was the

17 increase in the minimum wage. And I'm a strong

18 advocate of increasing the minimum wage, as I

19 think basically every Democrat in the State

20 House and the State Senate.

21 So that's why I couldn't not respond to

22 my esteemed colleague from across the aisle from

23 Armstrong County when he openly questioned

24 whether an increase in the minimum wage would

25 lead to a lack of job growth. I would point out 28

1 to my Republican colleagues that, right now,

2 Pennsylvania, we are bottom. We are the worst

3 state in the northeastern United States for job

4 creation. And, oh, by the way, we also have the

5 lowest minimum wage. So I think any sort of

6 connection between a low minimum wage and job

7 creation is a faulty one.

8 So I wanted to point that out. And

9 then, also, my question to you was, certainly as

10 a State Legislature, the two big issues that

11 relate to workers and to labor that we're

12 dealing with this term, I know Senator Scott

13 Wagner is a strong advocate, State Rep Daryl

14 Metcalfe is a strong advocate in the State

15 House, is right to work and also paycheck

16 protection.

17 I just want to make sure that you were

18 aware of all the studies out there that show

19 even adjusting for inflation, for metropolitan

20 areas, adjusting for basically every metric that

21 people -- workers in labor unions make more and

22 receive better benefits and work under safer

23 worker conditions than do people who are not

24 unionized. I just wanted to make sure that

25 you're aware of that. 29

1 Thank you.

2 MS. MANDERINO: Thank you.

3 MAJORITY CHAIRMAN SAYLOR: Okay. I

4 wanted to recognize Representative Rader who has

5 joined us, as well. And the next questioner is

6 Representative Hahn.

7 REPRESENTATIVE HAHN: Thank you, Mr.

8 Chairman. Good afternoon, Madam Secretary. How

9 are you?

10 MS. MANDERINO: Good. Thank you.

11 REPRESENTATIVE HAHN: Good. I want to

12 follow up on Representative Sonney's with the

13 unemployment compensation. So you talked about

14 the computer systems and being upgraded.

15 A lot of people are coming into the

16 office, and I have to tell you I am not an IT

17 person or have filed things online, but it's not

18 my thing. So we have people coming in, they've

19 worked; they filed out their unemployment

20 online. They wait the number of weeks, whatever

21 they think, and then they get nothing. And then

22 they're told, well, we don't have any record of

23 that. Did you take a screen shot of that? I

24 can tell you most of the people in my district,

25 including me, probably don't know how to take a 30

1 screen shot.

2 So they're learning. They come back.

3 So there's no recourse for them is what I'm

4 told. And do you feel there is a recourse for

5 them? I have people, they're losing six weeks

6 of unemployment because what we're told by the

7 Legislative office is, the computers are not

8 syncing. Do you find that to be a problem with

9 your computer system?

10 MS. MANDERINO: Yeah. We have a very

11 old system; that is true. And the screens and

12 the questions, the way they're asked, are not

13 customer friendly; and we're very aware of that.

14 And the reason we can't change those is

15 going back to what I talked about with the gum

16 and the duct tape. We have a system that's

17 built 40, 50 years ago, a COBOL. And over the

18 decades, we have had six or seven layers put on

19 top of them that don't really talk to each

20 other. So every time you try to change

21 something on the screen, you can break six other

22 things in the system; so we don't change a lot.

23 Our modernized system will solve a lot of that.

24 Having said that, does somebody want to

25 whisper in my ear? Because I don't think what 31

1 you're saying is accurate, and I don't have the

2 best way to explain it.

3 (CONFERRING WITH STAFF.)

4 Thank you. My understanding is that we

5 have not received any complaints, so if you

6 actually have one, please get it to my

7 Legislative office --

8 REPRESENTATIVE HAHN: I have several.

9 MS. MANDERINO: -- because in all of the

10 years, the people get something back out of the

11 system. We do know that folks will put

12 something in and not be able to know at the time

13 they put it in whether or not they're

14 automatically eligible. That is correct.

15 But they do get something back from the

16 Department then telling them what their

17 determination is. They do get a determination

18 letter back from the Department.

19 Now, with a more modernized system, some

20 of the stuff that has to be done manually now

21 will be able to be done through a more modern

22 system.

23 MAJORITY CHAIRMAN SAYLOR: Madam

24 Secretary, I've got to again ask you to please

25 keep your answers just shorter, only because 32

1 members' time is limited.

2 REPRESENTATIVE HAHN: Sorry. But what

3 is their recourse? So you just said people

4 think they're not going to get -- do they get

5 something that says you filed and you'll hear

6 something in X number of weeks?

7 So the average person thinks they filed

8 their benefit and they haven't. And they wait

9 the time, and then we get the answer back from

10 the unit that we have gone through. And they

11 will say, We don't have documents of them

12 filing. Can you give me something to prove they

13 filed? Well, they don't have that. And is

14 there a recourse? What can they do? Is there

15 an appeal process? Is there something that they

16 can do?

17 MS. MANDERINO: Yeah. Thank you. Can I

18 ask a follow-up question? Because now I think I

19 understand what you're saying. Are these recent

20 incidents that you're talking about, or they

21 historic incidents?

22 REPRESENTATIVE HAHN: Recent. Since,

23 you know, December, January.

24 MS. MANDERINO: Okay. So here's where

25 we are: On December 18th, I had 234 people in 33

1 call centers taking claimants. Now I have 124.

2 So we have (indicating), literally, a stack of

3 those things that we are getting through; and

4 that is the backlog that has been created.

5 So I don't think that it is that we

6 don't have anything --

7 REPRESENTATIVE HAHN: But they're being

8 told the computers aren't syncing. So the

9 paperwork is not there. So that's the problem

10 we're having. But do you understand? So the

11 people think they filed the claim and haven't.

12 MS. MANDERINO: Yeah, I do understand.

13 It's not that the computers aren't syncing.

14 There's a mismatch in the information that is

15 currently in our system versus what they put in

16 the system; and so therefore, it takes manual

17 intervention in order to solve that issue, and

18 that's where you're stuck in the backlog.

19 So the backlog isn't just, I finally got

20 through on the phone. The backlog is all the

21 work that has to happen after you get off the

22 phone.

23 REPRESENTATIVE HAHN: All right. Thank

24 you.

25 The other thing that I had, someone 34

1 filed for Unemployment Compensation, had their

2 determination notice they were approved, and

3 their payment was being delayed. Why would that

4 happen?

5 MS. MANDERINO: Delay in payment could

6 happen for a lot of different reasons. So what

7 I'd like to do -- I mean, it could happen in

8 terms of what comes back from an employer, in

9 terms of information that comes back later; so

10 what I would like to do is get that specific

11 instance from you and get you a specific answer,

12 because there are a myriad of different reasons

13 that that could happen.

14 REPRESENTATIVE HAHN: Thank you.

15 MAJORITY CHAIRMAN SAYLOR: Madam

16 Secretary, I've got to put in a little question

17 here, as well. I know Leader Reed, as well as

18 my office, has received complaints that they

19 didn't get their checks in a timely fashion as

20 was mentioned, as well as, a screen issue from

21 constituents in my district, as well, and Leader

22 Reed's district. So I just wanted to make the

23 Department aware that that seems to be a

24 consistent problem, where people fill things out

25 and then it's lost in the computer system. 35

1 MS. MANDERINO: Mr. Chairman, we are

2 operating a wounded system.

3 MAJORITY CHAIRMAN SAYLOR: I understand

4 that.

5 MS. MANDERINO: The patient is bleeding

6 out on the gurney.

7 MAJORITY CHAIRMAN SAYLOR: And I

8 understand that.

9 MS. MANDERINO: So the best way we can

10 fix that, is to get that patient into the

11 operating room and get him healed.

12 MAJORITY CHAIRMAN SAYLOR: I don't

13 disagree with you, Madam Secretary.

14 MS. MANDERINO: Okay.

15 MAJORITY CHAIRMAN SAYLOR: I just wish

16 we could do it a lot faster.

17 MS. MANDERINO: Okay. Thank you.

18 MAJORITY CHAIRMAN SAYLOR: With that,

19 we're going to move to Representative Schweyer.

20 REPRESENTATIVE SCHWEYER: Thank you, Mr.

21 Chairman. To your point, Mr. Chairman, about

22 doing it a lot faster, House Bill 34 has been

23 introduced in the House, which mirrors the

24 legislation that we had passed last year that

25 would immediately restore the funding for the 36

1 remainder of this calendar year, which is what

2 we needed to do so that we can continue moving

3 up and running. And so any and all help that I

4 can get from my colleagues in moving forward

5 that legislation that was passed in an

6 overwhelmingly bipartisan fashion at the end of

7 last year, would certainly be very welcome.

8 But going to my notes here, Madam

9 Secretary, first and foremost, thank you for all

10 of your help to all of our offices. I think I'm

11 the only one here in this room that has the

12 unique situation of actually watching one of

13 those call centers being closed and watching

14 people moving furniture out. Because that

15 happened in the 100 block of Hamilton Street in

16 downtown Allentown back on December 19th. And I

17 know the date, because I met with the employees

18 on the 16th about -- you know, trying to offer

19 any and all recourse my office, officially or

20 unofficially, could provide to them. And we

21 lost 87 employees in Allentown alone.

22 And my colleagues, to the credit of both

23 sides of the aisle, have done a nice job, I

24 think, today of outlining the impact it's had to

25 those beneficiaries across the Commonwealth in 37

1 terms of the incredible amount of wait time that

2 we have, the incredible amount of delays that

3 folks are getting in terms of actually receiving

4 their benefits. And there's been mention about

5 what the real-life implications are for those

6 beneficiaries in terms of missing rent payments,

7 missing mortgage payments, not being able to

8 send their kids to the doctor, etc., etc., etc.

9 So we've talked about that.

10 Now, so what I want to do is sort of

11 change the subject just a little bit and ask a

12 very specific question. Were you, as Secretary

13 of the Department of Labor, happy with the

14 performance of the employees at the Allentown

15 center, the Altoona center, and the Lancaster

16 center, the three that were closed?

17 MS. MANDERINO: Yes.

18 REPRESENTATIVE SCHWEYER: So there was

19 no major management issues there? They were

20 performing their tasks well; they were

21 delivering services to the folks of

22 Pennsylvania? And so, ultimately, those centers

23 were performing at a good level?

24 MS. MANDERINO: Absolutely. Every one

25 of our centers were doing exactly what they were 38

1 supposed to do. There were no good choices in

2 terms of how to reduce $57 million out of our

3 budget overnight.

4 The decisions that were made reflect not

5 a single iota on the quality of the work that

6 our employees did to deliver good services to

7 the people of Pennsylvania.

8 REPRESENTATIVE SCHWEYER: Okay. So to

9 be clear, because the legislative action or

10 inaction, depending on your perspective, we

11 drained $57 million out. As a result, 500

12 Pennsylvania employees are out of work who were

13 otherwise doing exceptional work for the

14 Commonwealth of Pennsylvania, and the result is

15 all these problems. Okay. Thank you.

16 Now, getting back to the issue about the

17 employees, if we were able to fund these centers

18 tomorrow and we have a joint session tomorrow,

19 the Governor signs the legislation, how quickly

20 could you ramp back up in terms of hiring people

21 and getting folks back on the payroll for the UC

22 centers?

23 MS. MANDERINO: First of all, it's not

24 just the customer service centers. We did

25 across-the-board cuts, so it's all of our other 39

1 offices, tax services, etc.

2 Having said that, here's my

3 reality: The Lancaster lease is broken; the

4 keys have been handed in. The Allentown lease,

5 keys will be handed in on the 28th of this

6 month. The infrastructure is out of all of

7 those locations.

8 The Altoona office, we own that

9 building; so that building is our most immediate

10 location that can be ramped back up.

11 Additionally, I have empty seats, meaning room

12 for more people to work, in Scranton and in

13 Harrisburg.

14 How soon can we get back up? To be

15 perfectly honest, it's probably somewhere

16 between three and six weeks, based on recall

17 notices and all that kind of stuff. So it would

18 probably be phased in, and it probably will

19 take, I'm pretty sure, three to six weeks to get

20 there.

21 REPRESENTATIVE SCHWEYER: Okay. So best

22 case scenario -- Mr. Chairman, I'll wrap up very

23 quickly, sir; and I appreciate your leeway. So

24 best case scenario, we pass the legislation.

25 We're still looking to a month to a month and a 40

1 half to be able to start reducing those call

2 times, start getting checks processed sooner;

3 and that is still just phase one of a multiphase

4 implementation for getting the centers --

5 MS. MANDERINO: Yes. Significantly,

6 again, if we can act tomorrow, we can get action

7 done before April 1st, which is the next quarter

8 change and another big influx of people, number

9 one.

10 Number two, I just want to caution folks

11 that -- I very much appreciated where we were at

12 the end of the session, but it was a stopgap

13 measure. I understand that folks want the

14 information that they are hoping that they will

15 see, to assure themselves on how effectivity we

16 were running the system, and that that may not

17 come until the Auditor General's report is done.

18 Having said that, I have no interest in

19 putting a band-aid on a problem and ripping it

20 back off in another couple of months. That

21 won't serve the people of Pennsylvania well and

22 that certainly won't serve our employees well.

23 So a short-term solution followed by a long-term

24 solution is what we need.

25 REPRESENTATIVE SCHWEYER: Duly noted. 41

1 Thank you, Madam Secretary. Thank you, Mr.

2 Chairman.

3 MAJORITY CHAIRMAN SAYLOR:

4 Representative Knowles.

5 REPRESENTATIVE KNOWLES: Thank you, Mr.

6 Chairman. And it's always good to see you,

7 Madam Secretary. I want to go back to the

8 closing of the centers. And you stated how --

9 what a great job they were doing and how

10 wonderful they were, and I don't disagree with

11 that.

12 My first question is: What criteria

13 then was used in -- because there's all kinds of

14 accusations being made as to why the centers

15 were closed, strategically; and I think you

16 probably know about that.

17 Can you tell me, specifically, why those

18 three centers were selected to be closed?

19 MS. MANDERINO: First of all, since

20 Representative Schweyer acknowledged that a

21 center in his district was closed, let me debunk

22 -- rumor number one is that the closures were

23 based on the politics of where they were

24 located. That is just not true. As I said,

25 there were no good choices. 42

1 Do we have performance measures for the

2 metrics for the centers? Yes. Was that the

3 criteria that I used? Only in part. Do we have

4 costs for operating the centers? Yes. Was that

5 a metric I used? Only in part. Do we have

6 considerations about which side of the state the

7 centers are located in, and was that a metric I

8 used? In part. Did I have information about

9 what the economic climate of the regions were

10 where I was going to have to be laying off

11 employees? Yes. That was a criteria I used, in

12 part.

13 In the end, quite frankly,

14 Representative Knowles, it was a crummy decision

15 that I had to make. And I take it totally on

16 myself, because I didn't want anyone else to own

17 it because there were no good choices. It was

18 literally a combination of how the money matched

19 up. And if I closed -- if I downsized all the

20 centers, I still had big infrastructure costs.

21 REPRESENTATIVE KNOWLES: Okay. Madam, I

22 have a lot of questions I want to ask.

23 MS. MANDERINO: Go ahead.

24 REPRESENTATIVE KNOWLES: Okay. The

25 second question is: Can you remind me of what 43

1 the amount was in terms of the four-year -- the

2 yearly transfer that was made into the Service

3 and Infrastructure Improvement Fund? How much

4 was that annually?

5 MS. MANDERINO: It varied. The first

6 year, I think it was 40 million; the second year

7 it was 30 million; and then the legislation was

8 written that in years three and four, it was the

9 difference between what the feds gave us and

10 $190 million.

11 And so in the third year, that figure

12 was, I can't remember, 50 something; and then in

13 the fourth year, it was 57 million.

14 REPRESENTATIVE KNOWLES: Can you give

15 me, off the top of your head, or provide us with

16 a breakdown on how much of that money was used

17 to make improvements on the system and how much

18 was used to pay people?

19 MS. MANDERINO: Well, I can give you,

20 off the top of my head, exactly how it was used.

21 The Service and Infrastructure Fund, combined

22 with the federal dollars that we got to

23 administer, as far as the Department was

24 concerned, was one pot of dollars that we had to

25 administer the Unemployment Compensation System. 44

1 Those two sources together had to do the

2 job and deliver it. And every year, the

3 decision was made, in terms of how that was

4 allocated. Now, when I got to the Department,

5 and this is more an accounting measure, but I

6 think people need to understand that, it kind of

7 went in the pot; and I think just for accounting

8 ease, the SIIF dollars were being allocated for

9 personnel costs, but that didn't mean we weren't

10 making infrastructure improvements. We made

11 infrastructure improvements.

12 When I got there, I said, let's do our

13 accounting different and let's code things

14 different in our SAP system so that we can track

15 the money a little bit differently, and we did.

16 But in the end, they were both going for both

17 purposes.

18 REPRESENTATIVE KNOWLES: Okay. So the

19 money was not used specifically for what it was

20 intended?

21 MS. MANDERINO: It was used for exactly

22 what it was intended. It was intended to be

23 used to improve services to customers and to

24 make infrastructure enhancements as the

25 Department deemed appropriate. That's how it's 45

1 written in the legislation and that's how it was

2 used.

3 REPRESENTATIVE KNOWLES: Okay. My last

4 question, if I may, Madam Chair? The thing that

5 I just can't understand is, the Governor agreed

6 that there would be a four-year sunset. That

7 was agreed upon. Am I correct on that?

8 MS. MANDERINO: I don't know whether the

9 prior Governor agreed to that or not. I do know

10 the legislation, for example -- I'm trying not

11 to be -- but we often sunset things for the

12 purpose of reevaluation, not necessarily for the

13 purpose of falling off the cliff.

14 REPRESENTATIVE KNOWLES: Well, I guess

15 my point is: Why would you become dependent on

16 those dollars when you knew that after that

17 period of time that you weren't going to have

18 that money, so now all of a sudden we're making

19 all these dramatic, drastic changes in the

20 system that's hurting the people of

21 Pennsylvania? Thank you very much.

22 MS. MANDERINO: The system today is what

23 a system looks like running only on federal

24 dollars. If you're satisfied with what the

25 system looks like today, you're satisfied with 46

1 what a system looks like running only on federal

2 dollars.

3 If you're not satisfied with what the

4 system looks like today, then I think that we

5 need to revisit the issue of a state supplement

6 through SIIF or some other mechanism.

7 MAJORITY CHAIRMAN SAYLOR: Okay.

8 Representative Bullock.

9 REPRESENTATIVE BULLOCK: Thank you,

10 Chairman. Thank you, Madam Secretary. It's

11 great to see you today. You made some

12 references, or at least suggested, that the loss

13 of the SIIF funding had also impacted other

14 areas of the Unemployment Compensation Fund

15 System, besides the call centers.

16 Can you give us a little more detail on

17 how that impacted the operations of that system?

18 MS. MANDERINO: Well, sure. And it's

19 just -- again, to reemphasize that paying out

20 the benefits is not the only aspect of

21 delivering Unemployment Compensation Systems.

22 We have a whole division that deals with

23 the employers and making sure that we're getting

24 the tax dollars in. And that part of the UC

25 System also had significant layoffs. We have 47

1 the Audit Division that determines whether or

2 not there are overpayments, why, and tries to

3 kind of get those rectified and make sure that

4 they don't happen and get them collected if they

5 do.

6 We have the Fraud Investigation Unit

7 that makes sure, and particularly lately, it's

8 been doing a lot of work with the feds, the

9 federal government, in terms of organizing rings

10 that try to kind of syphon Unemployment Benefits

11 off of state coffers; so we have a lot of

12 different components of the unemployment -- we

13 have the judges that -- or really they're called

14 the first-line reviewers, but the folks if

15 there's a dispute between the employer and the

16 employee about whether you're eligible for

17 benefits, that's our Unemployment Compensation

18 Board of Review.

19 And all of those parts of the

20 Unemployment System were -- had significant

21 layoffs due to the loss of theses dollars.

22 REPRESENTATIVE BULLOCK: Thank you.

23 And in addition to your layoffs, I'd like to ask

24 the Secretaries to share their diversity in

25 their employment. I'm not sure you have those 48

1 numbers and how it was impacted because of your

2 loss of employees.

3 MS. MANDERINO: I do have my complement

4 numbers. I do think they were modestly impacted

5 by our layoffs. Our complement went down to

6 about 4270, so we were at a high 4900, just

7 under 5,000 and we went down to 42. We still

8 have -- we have a minority -- we're

9 predominantly female. I think 69 percent of our

10 workforce is female; about 12 percent of our

11 workforce is minority. I know that,

12 particularly, we are feeling the pain in our

13 service centers of the loss of some of our dual

14 language speakers, particularly Spanish speakers

15 and other Hispanic descent speakers because of

16 where they fell in the seniority ladder or, you

17 know, which call center they were at; and so we

18 lost some of our dual-language speakers.

19 REPRESENTATIVE BULLOCK: Thank you. And

20 that's surely a loss to Pennsylvania families.

21 I see we have a little bit more time. So I'm

22 going to ask you another question in a different

23 area. There were some questions about the

24 minimum wage increase proposals on the table.

25 Have you had any conversations with other 49

1 colleagues in other departments about the impact

2 the minimum wage increase would have on the

3 safety net, and the reduction of reliance on the

4 safety net?

5 MS. MANDERINO: Yeah. I'm going to

6 leave for Secretary Dallas, some real numbers,

7 A, because I stink at numbers; but, B, yes, we

8 are very aware both, you know, at Labor &

9 Industry, at Department of Human Services, in

10 the Department of Revenue, at the Department of

11 Aging, in the Department of Community and

12 Economic Development of all of the different

13 aspects that an increase in the minimum wage

14 would have; and there very much is an

15 expectation that the reliance on public benefits

16 for such things as SNAP, food assistance, and

17 perhaps even medical assistance will decrease as

18 people's earnings increase.

19 REPRESENTATIVE BULLOCK: Thank you,

20 Madam Secretary. Thank you, Mr. Chairman. I

21 have no further questions.

22 MAJORITY CHAIRMAN SAYLOR:

23 Representative Dunbar.

24 REPRESENTATIVE DUNBAR: Thank you, Mr.

25 Chairman. Welcome, Secretary. And, 50

1 unfortunately, I want to continue on the same

2 line. And, double unfortunately, I do love

3 numbers; so hopefully we can reach some type of

4 agreement here.

5 First off, as Representative Sonney

6 said, everything apparently seemed to be going

7 relatively swimmingly and well. And as

8 Representative Schweyer said, you know, we had

9 the bill that ran out, which I voted for and

10 supported it and will continue to support.

11 MS. MANDERINO: Thank you.

12 REPRESENTATIVE DUNBAR: But I guess the

13 real question is: Where were we going? Did we

14 just accelerate the inevitable? Because I'm

15 looking at the different numbers that I'm

16 seeing, and most of these are coming from the

17 four-year closure and spending plan for UC call

18 centers that the Governor's Office had put out.

19 And as I look at this, your average

20 quarterly spending was about $47 million a

21 quarter with all the call centers open, which is

22 about 188 million a year, plus the 15 million

23 for the UC Ben Mod contract, which is about 203

24 million a year to keep the present level that we

25 had. 51

1 With the 57 million, if we would have

2 passed it, you would have had approximately 231

3 million, which would have got us through this

4 year. But the '17-'18 year, we would have been

5 right back here anyhow. So what was the plan?

6 And, secondly, how much are you actually

7 saving every time we close a UC center? Because

8 the savings, I don't think, are even going to

9 get us close to where we need to be. So we want

10 to get back to where we were, what

11 Representative Sonney said. But how?

12 MS. MANDERINO: Well, let me answer that

13 in two stages: The 15 -- or the House Bill -- I

14 keep calling it 2375, but the House Bill that

15 the House passed that didn't make it across the

16 finish line, was what I would call a stopgap.

17 It was not going to solve the problem;

18 it was going to allow the status quo to continue

19 until the General Assembly, along with the

20 Administration, figured out what kind of system

21 do we want in the future and what do we want it

22 to look like.

23 REPRESENTATIVE DUNBAR: And I will agree

24 with that wholeheartedly looking at the numbers,

25 but I think the failure on all our parts was 52

1 understanding that it was just that, a stopgap.

2 MS. MANDERINO: Yes. As I mentioned in

3 my earlier remarks, this is not a situation

4 unique to Pennsylvania. Thirty-nine other

5 states are on an ongoing basis using state

6 dollars to administer their Unemployment

7 Compensation System, including at the high, in

8 California this year, expecting to be 175

9 million state dollars put in.

10 So what I guess I would turn back to you

11 is, what kind of system do we want for the

12 citizens of Pennsylvania? I want a system that

13 is as similar as it was on December 18th. And

14 what I think that is going to cost is probably

15 in the short-run what it was costing us on

16 December 18th.

17 In the long-run, I think with the

18 computer modernization, that we will see some

19 efficiencies. The efficiencies won't be that we

20 won't need to rely on state dollars. The

21 efficiencies will be probably about ten percent

22 in personnel that we think we can handle through

23 attrition.

24 If we want a different kind of system

25 than what we had last year, I think we should 53

1 figure that out together. Because, as you know

2 now, you're the ones that get the calls even

3 more than I do when the system isn't working the

4 way our citizens expect it to.

5 REPRESENTATIVE DUNBAR: Yeah. So not to

6 put words in your mouth or numbers either, so

7 you're saying $50 million a year?

8 MS. MANDERINO: Well, I think in the

9 short-run, and when I'm saying the short-run,

10 not next year but in the next four years, if you

11 looked at those charts that we put together for

12 the Appropriations Committees -- now, there are

13 a lot of assumptions in those charts.

14 The assumptions are that pretty much

15 everything stays the same, meaning our federal

16 dollars stay flat. They could go down, or if

17 there's a big recession and unemployment goes

18 way up, they could go up.

19 It makes a lot of assumptions. But it

20 painted a very dire picture, which was, by the

21 end of the four years, assuming nothing changed,

22 we would not have any call centers where people

23 can call in.

24 REPRESENTATIVE DUNBAR: So what is the

25 cost savings by closing the call centers? 54

1 MS. MANDERINO: Can you rephrase that,

2 so I can understand what you're trying to get

3 to?

4 REPRESENTATIVE DUNBAR: Understandably,

5 how much annually do we save in expenditures by

6 closing a call center? We've closed three of

7 them. So what would be the annual savings from

8 closing those three --

9 MS. MANDERINO: Well, --

10 REPRESENTATIVE DUNBAR: -- or every

11 additional one the Governor's proposing?

12 MS. MANDERINO: You know what, without

13 having that chart in front of me, I don't really

14 know because every call center is a different

15 size and a different monetary configuration.

16 You know, if it's in a state office building, if

17 it's privately leased, if it's in an expensive

18 urban area or less expensive rural area, if --

19 we have some that have 120 people; we have some

20 that have 80 people. And then the people who

21 work in those, if it's a younger workforce,

22 their salaries are less expensive; so it's kind

23 of hard for me to answer that.

24 MAJORITY CHAIRMAN SAYLOR: Madam

25 Secretary, as the rules that I set up, I need to 55

1 have that answered to the Committee within 48

2 hours, what each of the call centers that were

3 shut down cost; what the state is saving per

4 call center; what the Lancaster center saved;

5 what the Altoona center saved; what the

6 Allentown center saved the Department of Labor;

7 what those real costs were. So we need those

8 within 48 hours. Okay?

9 MS. MANDERINO: Yep.

10 REPRESENTATIVE DUNBAR: Thank you. My

11 time's up. Thank you.

12 MAJORITY CHAIRMAN SAYLOR:

13 Representative Daley.

14 REPRESENTATIVE DALEY: Thank you, Mr.

15 Chairman. Madam Secretary, it's good to see

16 you. I have a question on a completely

17 different topic, and I have a lot of information

18 I want to put out about it. So my question will

19 be short, my explanation a little bit longer;

20 but I need to stay within my 5 minutes.

21 So the Pennsylvania Assistive Technology

22 Foundation is actually sited in the district

23 next door to mine, but the executive director is

24 in my legislative district.

25 They provide financing for 2,931 56

1 Pennsylvanians, with more than $35 million they

2 put out in loans. This means that people can

3 buy hearing aids, adaptive vehicles, tablets,

4 seat lifts, chairs, stair glides. They can make

5 home modifications, such as roll-in showers,

6 ramps, lowered kitchen counters. The foundation

7 helps people work and live in their own homes

8 and not be forced into a nursing home and also

9 to be active in their community.

10 So the line in the budget, which is

11 Pennsylvania Assistive Technology devices, is

12 flat funded in the budget and I believe it's

13 been flat funded since the Corbett

14 administration. But if $50,000 was added, that

15 additional funding could be leveraged to another

16 $200,000. An additional $100,000 in their

17 budget could be leveraged to 400,000 additional.

18 So that increase of a hundred thousand,

19 would take that line item back to the time

20 before Governor Corbett's cut of a hundred

21 thousand.

22 So what I want to ask, Is this an area

23 that the Department can advocate for an

24 increase?

25 MS. MANDERINO: Thank you, 57

1 Representative Daley. And you must have a

2 corner of my old district, because the director

3 was in my legislative district when I was in the

4 General Assembly.

5 REPRESENTATIVE DALEY: I think it got

6 moved into mine.

7 MS. MANDERINO: There you go. Having

8 said that, they do fabulous work and I'm a big

9 supporter of everything that they do. And I

10 would suggest, politely to you, as well as to

11 our friends of Assistive Technology, that the

12 advocacy forum right now is in the General

13 Assembly and I will attest to the good work they

14 do.

15 REPRESENTATIVE DALEY: So I appreciate

16 that. I had a feeling that might be your

17 answer. The only other question I have is, Do

18 you have any insight on identifying how the line

19 item name can be changed so that it's not

20 devices? Because it's called Assistive

21 Technology Devices; that's not what it is. It's

22 Assistive Technology Financing. And I'm only

23 asking, it sounds like nitpicking, but I think

24 when you look down, you want to be called the

25 right thing. Any ideas? 58

1 MS. MANDERINO: I have no idea how those

2 line items get named, so --

3 REPRESENTATIVE DALEY: So maybe I can

4 ask the Budget Secretary.

5 MS. MANDERINO: Yes, or Chairman

6 Markosek or Saylor.

7 REPRESENTATIVE DALEY: All right. Thank

8 you very much, and thank you for your responses.

9 I stayed away from the unemployment. I know

10 you're getting a lot of questions. Your staff

11 has been helpful when my office has called, but

12 it has -- it's clearly been just a mess. So

13 thank you for what you are doing. And I do get

14 your IT issues, because I had an old IT legacy

15 system once and it was a mess. So some sympathy

16 there. Not much. We need to get our people to

17 get their checks. So thanks.

18 MAJORITY CHAIRMAN SAYLOR:

19 Representative Santora.

20 REPRESENTATIVE SANTORA: Madam

21 Secretary, thank you for being here. Couple

22 questions: When did you receive the federal

23 funding?

24 MS. MANDERINO: I'm sorry. Which

25 federal funding? 59

1 REPRESENTATIVE SANTORA: The 133

2 million.

3 MS. MANDERINO: I think --

4 REPRESENTATIVE SANTORA: 134 million.

5 MS. MANDERINO: No, I understand your

6 question now. You're talking about UC dollars.

7 I believe it comes to us in quarterly payments,

8 or is it biannually? The federal -- let me --

9 the federal fiscal year is different than the

10 state fiscal year. It comes to us --

11 REPRESENTATIVE SANTORA: To September.

12 MS. MANDERINO: Yes, October 1 through

13 September 30th; and we get it quarterly.

14 REPRESENTATIVE SANTORA: Okay. So at

15 133 million, you made some decisions based on

16 $56 million of state funding to layoff

17 approximately 500 people?

18 MS. MANDERINO: Yes, I believe, if I'm

19 following your question.

20 REPRESENTATIVE SANTORA: I'm trying to

21 understand why we didn't go with the 133 million

22 that was going to be coming in. Back of a

23 napkin math, I got -- I have 8 months. If it

24 started in September and you laid off in

25 December, I'm just confused on that matter. 60

1 MS. MANDERINO: Yeah. When we ran the

2 -- I think I understand your question. When we

3 ran the numbers, actually starting back in

4 August but continually on a practically weekly

5 or bi-weekly basis from August until November

6 18th when we had to do the layoff notices, once

7 we hit April of this year, April of 2017, we ran

8 in the red and we never recovered from it, based

9 on when our quarterly payments were coming in.

10 And so the longer I delayed any kind of

11 layoff, the more I would have to layoff to get

12 out of the red and back into the black. And

13 that was the decisions that were being made all

14 along, is the longer we delayed, the sooner we

15 ran the red ink that we couldn't get out of.

16 But based on the -- what we had in

17 federal dollars and the end of state dollars on

18 December 30th, come April of this year, we ran

19 red ink that we couldn't recover from.

20 REPRESENTATIVE SANTORA: So could we

21 have laid off less and made it to June?

22 MS. MANDERINO: No. If we laid off

23 less, we would have ran red ink before April.

24 REPRESENTATIVE SANTORA: Before April.

25 Okay. So my other question then reverts to -- 61

1 the state funding was $56 million, 500 people.

2 Are all these people making over a hundred

3 thousand dollars a year?

4 MS. MANDERINO: No. The average cost of

5 our workers in our complement is in terms of --

6 what they make is 49,7, I believe; and I don't

7 -- and it's probably a little lower in UC, just

8 based on the pay grades of the folks in there.

9 REPRESENTATIVE SANTORA: Okay. So you

10 also mentioned you have a group that was part of

11 the layoffs that was responsible for delinquent

12 receivables and -- what were the delinquent

13 receivables prior to the layoffs, total

14 delinquent receivables?

15 MS. MANDERINO: I do have a figure.

16 I'll make sure I provide it to folks. I know we

17 provided it in the past. It's a high number. I

18 think one of the things you have to understand

19 about that high number is, it's kind of like

20 court costs and fees. There's a lot of what

21 I'll call folks on the books that will never be

22 able to be recovered from. The business went

23 out of existence. The person is no longer

24 there.

25 REPRESENTATIVE SANTORA: You're not 62

1 allowed to write those off after you know that

2 the business is gone?

3 MS. MANDERINO: Yeah, we do not write

4 them off and I don't know if that is a policy

5 decision of us or the US DOL.

6 (CONFERRING WITH STAFF.)

7 MS. MANDERINO: It's our policy

8 decision, at this point.

9 REPRESENTATIVE SANTORA: So if I

10 refreshed your memory on some of these numbers,

11 would you be able to give me the percentage that

12 should be written off?

13 MS. MANDERINO: I would rather you ask

14 the question and me get you those answers in

15 writing.

16 REPRESENTATIVE SANTORA: So I understand

17 delinquent receivables as of June to be about --

18 from the employer side -- to be about $197

19 million. I understand that the delinquent

20 employee withholding receivables was about 2

21 million in change; the interest receivables, $97

22 million, $97.4 million; penalty receivables,

23 over $8 million; fee receivables, 1.9, for a

24 total of $307 million.

25 What are we doing to collect this money? 63

1 That's a lot of money and would solve a lot of

2 problems.

3 MS. MANDERINO: Yeah. Thank you. We

4 are very aggressive in our collections. And if

5 you look at how Pennsylvania stacks up, someone

6 will correct me if I'm wrong, but I'm thinking

7 that that's 4 percent of our -- why do I have

8 that 4-percent number stuck in my head? Well,

9 let me do this: I know that as we compare to

10 other states we are not out of the norm in terms

11 of what happens there; so let me get all that

12 information to you.

13 REPRESENTATIVE SANTORA: Okay. But I'm

14 worried about Pennsylvania. I'm not worried

15 about other states.

16 MS. MANDERINO: Okay.

17 REPRESENTATIVE SANTORA: $307 million

18 seems like a lot of money. And I'll give you

19 the benefit of the doubt that a percentage of

20 those companies are gone and you're never going

21 to see that money. However, the money that's

22 still available, we have to get much more

23 aggressive on, because these numbers solve your

24 problems.

25 MS. MANDERINO: Actually, thank you for 64

1 that question. But let me -- they don't solve

2 my problem, and here's why: Those numbers,

3 every penny that is recovered there, goes into

4 the trust fund. The trust fund dollars are not

5 allowed to be used to administer the

6 Unemployment Compensation System.

7 The feds give you different money for

8 administering the Unemployment Compensation

9 System.

10 REPRESENTATIVE SANTORA: Okay. Thank

11 you for that answer.

12 MAJORITY CHAIRMAN SAYLOR: Very good.

13 Representative Kim.

14 REPRESENTATIVE KIM: Thank you, Chairman

15 Saylor. Good afternoon, Secretary. I'm going

16 to go back to the minimum wage. The Federal

17 Reserve Chair and many economists have said that

18 wage stagnation is one of the last factors

19 before we head into a full recovery from the

20 recession.

21 In 2016, which I'm sure you know, the

22 inflation adjustment wage was one-third below

23 the 1968 level, even though productivity has

24 doubled since 1968. And just a reminder, 7.25

25 an hour full-time is only $15,000 a year. 65

1 I believe raising the minimum wage to a

2 liveable wage is so important for a number of

3 reasons, but one is to increase the purchasing

4 power of low-wage workers, which in return helps

5 the local economy and local businesses.

6 Most of the northeastern states have

7 already raised the minimum wage; in fact, four

8 states that surround Pennsylvania: Maryland,

9 Ohio, New Jersey, and New York all have a high

10 minimum wage and a lower unemployment rate. I

11 think that's important to note.

12 As policymakers, we need to make these

13 changes, too, with our neighboring states. If

14 we could agree on a higher minimum wage,

15 whatever that magic number is, how important to

16 you is it to attach it with a cost-of-living

17 adjustment and would you be open and think it's

18 more helpful if it's a graduated minimum wage,

19 anything higher than 7.25?

20 MS. MANDERINO: Yeah. Thank you very

21 much, Representative Kim, for your advocacy for

22 increasing the minimum wage; and I really don't

23 want to speak out of school. It is the

24 Governor's, kind of position, to set the policy

25 for our Administration. You know he supports 66

1 the minimum wage. I don't know if he has come

2 out publicly for -- with a position with regard

3 to an automatic cost-of-living escalator, so I

4 will reserve that answer for the Governor.

5 If I may, Chairman, get back to the last

6 question, too? I misspoke with regard to what

7 goes into the trust fund. And the bulk of the

8 dollars that I was being asked about do go into

9 the trust fund, Representative. The penalties

10 and interest, should penalties and interest be

11 able to be recoverable in those instances,

12 penalty and interest does not have to go into

13 the trust fund.

14 So to the extent that there could be

15 penalties, additional penalties and interest

16 captured, that amount could go into the actual

17 administration of the fund. And I didn't mean

18 to deceive; I just misspoke.

19 MAJORITY CHAIRMAN SAYLOR:

20 Representative Kim, were you done? Okay. I

21 wanted to make sure you were done.

22 MS. MANDERINO: Oh, I'm sorry, Patty.

23 I'm sorry.

24 MAJORITY CHAIRMAN SAYLOR: Okay.

25 Representative Quinn. 67

1 REPRESENTATIVE QUINN: Thank you, Mr.

2 Chairman. Good to see you again.

3 MS. MANDERINO: Good to see you.

4 REPRESENTATIVE QUINN: The Governor's

5 executive budget proposes loan forgiveness of

6 the $4 million provided in the Uninsured

7 Employers Guaranty Fund, UEGF, from the

8 Workmans' Compensation Fund that occurred in

9 2015-'16.

10 Without that loan forgiveness, this fund

11 would likely have a $4-million deficit. This is

12 on top of the $6.1 million that was statutorily

13 transferred in '15-'16. The budget also calls

14 for the enactment of legislation to sustain the

15 fund on a long-term basis.

16 In your opinion, what legislative fixes

17 are necessary to make this fund solvent and less

18 reliant on loan transfers?

19 MS. MANDERINO: Thank you very much for

20 that question. The Uninsured Employers Guaranty

21 Fund, quick primer, was created by the General

22 Assembly to make sure that workers who were

23 injured and whose employers were not carrying

24 workers' compensation coverage could get

25 coverage for their injuries. 68

1 The mechanism the General Assembly set

2 up was kind of a small surcharge on premium. So

3 the administration of the Workers' Comp Fund,

4 that's a fund that surcharges premiums and then

5 UEGF did, too. The Workers' Comp Admin Fund has

6 a very healthy surplus. The UEGF Fund surcharge

7 has never, since its inception, been adequate

8 enough to cover the costs that are coming into

9 that system.

10 Now, on our end, from the Department, we

11 made a major change last year that's saving

12 administration -- cost of delivering the

13 services. That use to be farmed -- that used to

14 be paid out on an external contract to

15 administer that fund. We brought it internally,

16 internal last year, and have our State Workers'

17 Insurance Fund, which also knows how to process

18 workers' claims doing that. That's saving

19 $500,000 a year.

20 But in order to get it done correctly,

21 we need to adjust what it is that is allowed to

22 come into the UEGF Fund from employer surcharge.

23 REPRESENTATIVE QUINN: Okay.

24 MS. MANDERINO: And it's also a

25 snapshot. I'm sorry. I know you want me to 69

1 give short answers, and it's very hard for me.

2 I'm not -- but the -- what comes into that fund

3 in terms of claims is very unpredictable. It's

4 on a claim-by-claim basis.

5 So we can have a catastrophic claim next

6 year that can totally throw it out of whack and

7 we just don't know that.

8 REPRESENTATIVE QUINN: So what I wanted

9 to ask is, In addition to having more money come

10 into that fund, I'd like to see some measures

11 being taken for reforms. For example, a 2014

12 Labor & Industry audit showed an alarming 87

13 percent of the claimants hadn't filed a tax

14 return, and nearly a third could not prove the

15 wages that they've earned.

16 Are you willing to work with us to try

17 and find a combination, of not just new

18 assessments coming in, but from reforms from

19 those who are eligible for the fund?

20 MS. MANDERINO: Thank you,

21 Representative Quinn. We are always available

22 and anxious to work with the General Assembly.

23 I know there's legislations out there. There's

24 actually a couple of different proposals out

25 there. I do think that you -- as you know, it's 70

1 a little bit complicated, for example, when you

2 get to the wage issue; because if somebody's

3 employer wasn't carrying workers' compensation

4 coverage, they probably weren't doing a lot of

5 things correctly on the books with regard to

6 their business; but you still have an injured

7 worker.

8 REPRESENTATIVE QUINN: I'm going to

9 quick look back to your Department of Labor &

10 Industry here. Of your line items, you've got

11 an increase in the GGO and then a slight

12 increase in the transfer to the Vocational

13 Rehabilitation Fund.

14 My neighbor here in Montgomery County is

15 always keen and a wonderful Legislator with

16 regard to these. But is that increase -- are

17 you going to be able to deliver the same level

18 of services or are you having more people come

19 in to a very slight increase of $5,000? What do

20 you intend that to be used for?

21 MS. MANDERINO: Thank you. We do

22 believe with what the Governor is asking for

23 with regard to OVR that that will allow us to

24 continue to maximize federal drawdown into that

25 program. That's a 2179 matching program. And 71

1 thanks to the General Assembly for getting us up

2 to that level. And we believe what we've asked

3 for will keep us at the level of maximizing, and

4 we have been serving more people. We've served

5 an additional, particularly in terms of young

6 people with preemployment transition services,

7 we're really expanding our outreach to younger

8 populations.

9 REPRESENTATIVE QUINN: Thank you.

10 MAJORITY CHAIRMAN SAYLOR: Very good.

11 Representative Krueger-Braneky. Thank you.

12 REPRESENTATIVE KRUEGER-BRANEKY: Thank

13 you, Mr. Chairman; and thank you, Secretary, for

14 joining us here today. I first became

15 acquainted with the Department of Labor &

16 Industry as a nonprofit executive director

17 working in economic development. And through

18 that role, I helped to launch an industry

19 partnership.

20 It was focused on Green Stormwater

21 Infrastructure. And the small amount of seed

22 funding that was received through the state has

23 now helped to create over $14 million in revenue

24 growth for the companies participating,

25 projected supporting about a thousand jobs a 72

1 year in the southeastern region.

2 So I was curious to see that the

3 Industry Partnership Program was being moved out

4 of the Department of Labor & Industry. Can you

5 talk about that a bit?

6 MS. MANDERINO: Yeah, sure. And I thank

7 you for highlighting the value of industry

8 partnerships and what it really has done for

9 companies and for incumbent workers, because

10 it's really an incumbent worker and business

11 growth program.

12 DCD and Labor & Industry have been

13 working extremely closely in the last two years

14 on all of our economic development and

15 employment and training initiatives. Many of

16 the businesses that were using industry

17 partnerships, we're also using WebNet; and it

18 was kind of a natural fit.

19 Plus, the DCD is really taking a lead in

20 terms of all of the agencies in being the

21 one-stop shop for kind of employers. They have

22 a real outreach, a real ability within their

23 system in terms of their advanced teams that

24 work with employers. So while this tool's being

25 moved into their toolbox, we very much expect to 73

1 be continuing to work with them on all of the

2 economic development and employment training

3 initiatives in the state.

4 REPRESENTATIVE KRUEGER-BRANEKY: So will

5 the scope of that program, the Industry

6 Partnership Program, be impacted any way by the

7 transfer to another department?

8 MS. MANDERINO: I don't think so. I

9 think, if anything, it will be enhanced; because

10 it will be able to be combined with other tools

11 that are more naturally -- have been more

12 naturally in DCD's toolbox.

13 REPRESENTATIVE KRUEGER-BRANEKY: Okay.

14 Thank you. And then second question -- I see

15 the green light is still on, Mr. Chairman. I

16 think we're learning the new system here. So

17 another question around job creation: Yesterday

18 we got into a conversation with the Independent

19 Fiscal Office around tax credits and noted that

20 there is tax credits every year that don't go

21 through the same amount of scrutiny that

22 appropriated budgets do, but it's still taxpayer

23 dollars. And, oftentimes, these tax credits are

24 going to multinational corporations based out of

25 state and not necessarily delivering on the jobs 74

1 that they promise.

2 So can you talk, from a job creation

3 standpoint, what you think we need to be doing

4 from a policy perspective to actually stimulate

5 good job creation in Pennsylvania?

6 MS. MANDERINO: From the corner that I

7 sit in terms of the workforce development, you

8 know, we like to say that we have two

9 customers: It's the employer and it's the

10 worker. But from my perspective, as I've talked

11 to employers, quite frankly, while we see the

12 worker more often, we need the employer to make

13 the system work.

14 And so I think that everything that we

15 can do and continue to do in Pennsylvania to

16 encourage job growth within our employers is

17 critical. I place particular emphasis on

18 manufacturers in Pennsylvania. We have a very

19 robust manufacturing sector in south central and

20 in other areas. We're doing a lot with them for

21 growth. We're really concentrating on sector

22 strategies, working with our industries by

23 regions to figure out which sectors are the most

24 important to grow, and connecting them back all

25 the way through the system with our Workforce 75

1 Development Boards, with our Career and

2 Technical Education School, with our secondary

3 schools in terms of career pathways for young

4 people, all feeding kind of the industry sectors

5 and the on-demand industries in Pennsylvania.

6 And I think if we continue along that

7 path, we will serve our citizens in our

8 Commonwealth well.

9 REPRESENTATIVE KRUEGER-BRANEKY: And

10 then just the flip-side of the UC conversation

11 we've been having for most of the afternoon, the

12 UC System doesn't just serve workers; it serves

13 employers, as well.

14 Have you gotten complaints from

15 employers about the breakdown in the system?

16 MS. MANDERINO: I think that one's a

17 little bit too early to tell. But it will

18 manifest itself in the backlog as we start to go

19 through it, yes.

20 REPRESENTATIVE KRUEGER-BRANEKY: Okay.

21 Thank you so much.

22 MS. MANDERINO: Right now, we've been so

23 concentrated on just trying to triage and get

24 the benefits out the door to the people who need

25 it to put food on their table, but there's the 76

1 whole fallback that comes from that in all the

2 other parts of the system.

3 REPRESENTATIVE KRUEGER-BRANEKY: Well,

4 the solution from last session had broad

5 bipartisan support in the House. I'm hoping our

6 friends in the Senate join us in solving the

7 problem this session. Thank you.

8 MS. MANDERINO: Thank you.

9 MAJORITY CHAIRMAN SAYLOR:

10 Representative Brad Roae.

11 REPRESENTATIVE ROAE: Thank you, Mr.

12 Chairman; and thank you, Madam Secretary. Okay.

13 I have a question about unemployment. If I'm

14 reading these numbers right, in 2012, you got

15 about $167 million of federal money. The

16 unemployment rate was about 7.8 percent. In

17 2016, you only got 134 million of federal money,

18 but the unemployment rate was only about 5.7

19 percent.

20 So, you know, during that time period,

21 you're getting 20 percent less money from the

22 federal government to administer unemployment;

23 but unemployment is 28 percent less than it was.

24 So I guess my question, if you could briefly

25 explain, if the unemployment rate is a lot lower 77

1 than it was before, how come you're struggling

2 so much financially?

3 MS. MANDERINO: We're struggling

4 financially because we lost the SIF Funds, but

5 that's not the answer you want me to give you.

6 REPRESENTATIVE ROAE: Hold on. Hold on.

7 In 2012, there was only federal money, $167

8 million. In 2016, there was 134 million federal

9 dollars, plus either 52 or 56 million of the

10 state money; so it was actually like 180 or 190

11 million, so it was actually more money than in

12 2012, with a lower unemployment rate.

13 MS. MANDERINO: Let me answer that in

14 two phases: The infrastructure costs remain the

15 same, regardless of your unemployment system.

16 And as a matter of fact, they grow, because

17 every year it costs us more to try to maintain

18 this legacy system as we work towards the

19 replacement.

20 So your infrastructure costs stay the

21 same and/or grow, whether it's the cost of your

22 computer, the cost of your leases, the cost of

23 keeping the lights on. Your personnel costs

24 every year grow, whether it's the cost of

25 living, the cost of health benefits, etc. 78

1 So all of those things continue to

2 increase, which is why I could say to you, we

3 had a 23-percent reduction in personnel costs --

4 excuse me -- complement, the number of people

5 working the UC system increased by 23 percent;

6 but the costs didn't --

7 REPRESENTATIVE ROAE: Excuse me. Is

8 that before or after the 500 that got laid off

9 all at once?

10 MS. MANDERINO: That was before.

11 REPRESENTATIVE ROAE: Okay.

12 MS. MANDERINO: That was before.

13 REPRESENTATIVE ROAE: Okay.

14 MS. MANDERINO: I do have the numbers in

15 terms of how much we had reduced the complement

16 before the layoffs, and we had already reduced

17 complement by several hundred. Barb, do you

18 remember the number?

19 (CONFERRING WITH STAFF.)

20 Yeah. Okay.

21 REPRESENTATIVE ROAE: I mean, it seems

22 like the funding's fairly proportional with the

23 unemployment rate, and I just -- it just seems

24 like now that unemployment is back at more

25 historical levels, historical funding, it just 79

1 seems like it would work.

2 MS. MANDERINO: That would be true if we

3 had zero growth of cost of living for absolutely

4 every aspect of the system. But I don't think

5 that's the case in your household and certainly

6 not the case in mine, and it's not the case in

7 the UC household either.

8 REPRESENTATIVE ROAE: Okay. Now, as far

9 as the call centers go, I found it frustrating

10 that before the 500 people were laid off, the

11 Labor & Industry website said people will start

12 getting slower service due to staffing cuts.

13 I would have thought that after that

14 actually happened is when that would happen.

15 But my question is: I heard, and I don't know

16 if this is true, but I'm going to ask you;

17 because you're right here. I heard that there's

18 two days a week they don't take phone calls. Is

19 that accurate?

20 MS. MANDERINO: Okay. I see where

21 you're going.

22 REPRESENTATIVE ROAE: And there's a

23 reason for that. I'm sure there is.

24 MS. MANDERINO: Yes. First of all, I do

25 not believe that there was ever anything put on 80

1 our website before the layoff.

2 REPRESENTATIVE ROAE: I can get you a

3 copy of it.

4 MS. MANDERINO: Before the layoff

5 notices. The move from -- I talked about how

6 the service center employees do much more to

7 process a claim than just answer the phone. And

8 so what we had done a couple of years ago that

9 really improved our efficiency, was moved to --

10 REPRESENTATIVE ROAE: Excuse me one

11 second. We're almost out of time. Just real

12 briefly, do you let unemployed people know what

13 two days a week it's pointless to call, so they

14 don't bother trying to call?

15 MS. MANDERINO: Yes, our no-call days

16 are posted. They've always been posted on our

17 website.

18 REPRESENTATIVE ROAE: What days are

19 they, just so we know.

20 MS. MANDERINO: Tuesdays and Fridays, I

21 believe.

22 REPRESENTATIVE ROAE: Okay.

23 MS. MANDERINO: I'm sorry. Wednesday

24 and Friday.

25 REPRESENTATIVE ROAE: That's very 81

1 helpful. Wednesday and Friday?

2 MS. MANDERINO: Yes.

3 REPRESENTATIVE ROAE: Well, thank you so

4 much. I appreciate it.

5 MAJORITY CHAIRMAN SAYLOR:

6 Representative Dean.

7 REPRESENTATIVE DEAN: Good afternoon,

8 Madam Secretary. How are you? Good to see you.

9 MS. MANDERINO: Good.

10 REPRESENTATIVE DEAN: Thanks for all

11 your information today. And just to recap

12 briefly and pivot off the UC centers, really

13 what happened, in my mind, is you inherited,

14 first of all, a computer system 40 to 50 years

15 old and yet a mission to increase efficiencies.

16 And it seems like you were chugging

17 along and doing just that at a time when, and to

18 give this body it's due, the Pennsylvania House

19 recognized the need and passed legislation; sent

20 it over to the Senate that would have supported

21 the 500 jobs and 500 Pennsylvanians who lost

22 their jobs through no fault of their own. And

23 it wasn't because they weren't needed. We still

24 needed them. And in a cruel twist of irony,

25 they were serving those who were unemployed and 82

1 they became unemployed during the holiday

2 season, so that they went home to try to figure

3 out how they're going to receive benefits, how

4 they're going to pay their mortgages and their

5 rents.

6 These are human beings that have lives

7 that were directly affected by the failure of

8 government to do what it needed to do, failure

9 of the Senate to pick up the ball, the Senate

10 leadership to pick up the ball and say, how do

11 we fix this problem so we don't cause a crisis?

12 But we caused a crisis. And so you have had to

13 spend a whole lot of time focusing on that.

14 And I thank you for that, and I admire

15 you for doing it. I hope we will right this. I

16 hope that my colleague's legislation will come

17 forward very, very fast and that you will be

18 able to invest in technology and create

19 efficiencies. And as you say, reduce

20 complement, through attrition or whatever other

21 natural means there are. But people waiting,

22 and my constituents are doing this, waiting on

23 the telephone 2, 3, 4-plus hours is insane for

24 benefits that they paid for. This is not for a

25 handout. This is not for a gift. It's for 83

1 benefits they paid for. Something grossly wrong

2 with that.

3 So let me pivot to the positive.

4 MS. MANDERINO: Thank you.

5 REPRESENTATIVE DEAN: As the Secretary

6 of Labor, I'm sure you really want to be

7 thinking about the future and progress for

8 Pennsylvania to get us off the benchmark that

9 we saw in 2013, where we were 46th in job

10 growth.

11 I think the Chairman said today that we

12 are last in job growth in the northeast, and I'm

13 sure you're a problem-solver that wants to say,

14 how do we turn that kind of statistic around

15 after we solve -- in addition to solving those

16 other larger problems.

17 So minimum wage, I think, is one way to

18 begin. The other thing we learned from the IFO

19 is that the demographics in Pennsylvania are

20 older Pennsylvanians; that older Pennsylvanians

21 are aging out of the workforce; that it's

22 estimated almost 200,000 Pennsylvanians will age

23 out of the workforce and so there will be that

24 kind of job loss.

25 How do you want Pennsylvania, through 84

1 policies, through good legislation, through

2 sound budgeting, how do you want us to grow

3 jobs, to grow our economic engine?

4 MS. MANDERINO: When I travel the state

5 and talk to employers, and I try to do that

6 literally weekly, I talk to employers who see

7 their companies poised for growth and don't feel

8 that they can get the talent that they need.

9 Pennsylvania is not losing population,

10 but we're not gaining it as quickly as other

11 states. Our migration into our state is not

12 from other states, but significantly from other

13 countries.

14 I want to say all those things to put

15 this together. We have got to make sure, from

16 cradle to grave, that we are preparing our folks

17 for the jobs that are there and where the

18 employer see their potential to grow.

19 We have a lot of work to do in our

20 education system to make sure that our young

21 people are prepared. We have to connect career

22 pathways from education to businesses so that

23 the young people are coming out with the skills

24 that they need. And the role that my Department

25 plays with that, along with the Department of 85

1 Education, is to do everything that we can to

2 make sure that those connectors are there. And

3 we cannot afford to leave anybody behind.

4 And one of the roles of our State

5 Workforce Policy when it comes down to workforce

6 development is to concentrate our resources on

7 folks who have the greatest barriers to

8 employment, because we can't write them off any

9 longer.

10 We can't write them off if they came

11 from an environment where they didn't get the

12 education that they needed in the first end. We

13 have to make sure they get it. We can't write

14 them off because they have a language barrier.

15 We have to make sure they get over that barrier.

16 We can't write them off because they had a prior

17 incarceration but now they've paid their times.

18 We have to get them past that barrier, because

19 our employers have jobs for them if we can get

20 them there; and that's the major emphasis of our

21 workforce policy: connecting education and

22 business, making career pathways, and making

23 sure we're serving people with the greatest

24 barriers to employment.

25 REPRESENTATIVE DEAN: Thank you, 86

1 Secretary.

2 MAJORITY CHAIRMAN SAYLOR: Very good.

3 Representative Helm.

4 REPRESENTATIVE HELM: Thank you, Mr.

5 Chairman and Secretary Manderino. I'd like to

6 touch on OVRs. Even though you just talked

7 about it, I have a little bit of a different

8 question.

9 So what are the current and proposed

10 funding levels for the Office of Vocational

11 Rehabilitation, including state and matching

12 federal funds? Does the Governor's proposed

13 budget allow you to continue to draw down all

14 available federal funds?

15 MS. MANDERINO: Yes. I said earlier, I

16 stink with numbers. I know they're right there

17 on the budget formula, but I know last -- step

18 back two years ago, we were not maximizing our

19 federal dollars.

20 The General Assembly gave us an

21 additional $5 million in '15-'16 in order to

22 draw down maximum federal dollars, and we did.

23 In '16-'17, you gave us another $2 million in

24 order to maximize federal dollars, and we did.

25 That enabled us to serve a lot more folks and 87

1 particularly to spend about $20 million on

2 preemployment transition services for young

3 people with disabilities while they're still in

4 school to make their transition to work.

5 With what the Governor's asking for in

6 this budget, we believe we will continue to be

7 able to maximize our federal dollars and draw

8 everything in to serve all the people of

9 Pennsylvania with disabilities and get them into

10 working towards competitive integrated

11 employment.

12 REPRESENTATIVE HELM: Thank you. Also,

13 a question: Can you give a brief update on the

14 Governor's executive order on Employment First,

15 issued last year, in an effort to increase

16 employment opportunities for people with

17 disabilities?

18 MS. MANDERINO: Yes. I'm very pleased

19 to say that the Governor has us all working very

20 hard within the cabinet on Employment First. As

21 a matter of fact, I was just on a phone

22 conference led by Secretary Dallas, who's

23 heading our team. I think the first report on

24 the executive order will be coming out next

25 month. But all of the agencies are working 88

1 together to see how we can maximize our

2 resources and move forward with that.

3 OVR has always -- our mission has been

4 very much in sync with what Employment First is

5 all about, because we serve -- our goal is to

6 serve people and get them into employment in the

7 community.

8 And so from that perspective, we've been

9 lending a lot of resources to the Governor's

10 initiative on Employment First. And I really

11 don't want to kind of steal any thunder about

12 the progress, and I'd rather let the report,

13 which I think is expected out in a couple of

14 weeks, give a fuller picture of what all the

15 agencies are doing.

16 REPRESENTATIVE HELM: Thank you, Mr.

17 Chairman. Thank you, Madam Secretary.

18 MS. MANDERINO: Thank you.

19 MAJORITY CHAIRMAN SAYLOR:

20 Representative Galloway.

21 REPRESENTATIVE GALLOWAY: Thank you, Mr.

22 Chairman. Good afternoon. Good to see you

23 again, Kathy.

24 MS. MANDERINO: Good to see you.

25 REPRESENTATIVE GALLOWAY: First, I want 89

1 to start off by thanking you and your staff.

2 It's been very -- you know, since I took over as

3 the Democratic Chairman of Labor here in the

4 House, it's been great communication between you

5 and your staff, anything I've asked for, and

6 I've asked for a lot, and I understand that. So

7 I appreciate you, and I'd like to pass onto your

8 staff that that they're -- you've got a

9 top-notch staff.

10 MS. MANDERINO: Thank you.

11 REPRESENTATIVE GALLOWAY: Second, you

12 know, a little over 35 years ago, I started my

13 own business in IT as a COBOL programmer. It

14 was the first, you know -- maybe I shouldn't

15 date myself like that -- that was the first

16 programming language I used. You know, it's

17 hard to believe there are still some places out

18 there that still use COBOL.

19 But it's 2017. You know, it's been a

20 long time coming and, you know, people have to

21 understand that technology has moved forward and

22 the upgrade of that technology saves money. And

23 the focus, you know, I understand the focus --

24 your focus on keeping the lights on, on keeping

25 the checks coming; but certainly an upgrade in 90

1 hardware and infrastructure has a savings

2 component that shouldn't be underestimated.

3 Third, the UC fix, I want to thank you.

4 You nailed it. We need a short-term fix to buy

5 us time for a long-term solution. You said it

6 in 10, 12 words. That's exactly what we need,

7 and I thank you for bringing that to the table

8 and saying it so succinctly.

9 I'll finish on one thing, something I've

10 asked often. Enforcement: Enforcement is a big

11 part of what you do. We pass laws all the time.

12 We pass these bills.

13 Governor puts out all kinds of

14 procedures. And enforcement oftentimes comes

15 down to, specifically, concerning things like

16 misclassification and prevailing wage, but

17 specifically misclassifications.

18 We've been receiving complaints -- you

19 know, we passed a huge misclassification bill a

20 couple years ago, mainly because of the amount

21 of money, you know, the millions and millions of

22 dollars we were losing in an underground

23 economy; and the enforcement of that bill came

24 to your office. Are you receiving a spike in

25 the last year or so in the amount of complaints 91

1 from individuals and businesses of others that

2 are breaking the law as it relates to

3 misclassification and prevailing wage?

4 MS. MANDERINO: Thank you, Mr. Chairman.

5 If I may just again reemphasize that we do need

6 a long-term fix on unemployment. And you said

7 that number --

8 REPRESENTATIVE GALLOWAY: I did mention

9 that. Short-term fix first for a long-term

10 solution. Thank you.

11 MS. MANDERINO: Number two,

12 misclassified workers touches the Department in

13 two ways. But one is just misclassified workers

14 when it comes to UC and workers' comp

15 collections, and that's not what you're asking

16 me about. You're asking me about misclassified

17 workers in terms of Act 72 and the construction

18 of the --

19 REPRESENTATIVE GALLOWAY: I'm asking

20 about from a user standpoint. Someone calls the

21 Department and says, I know somebody's doing

22 something wrong. I want to know the process

23 from there on out. And I want to know if

24 there's a spike in the amount of reported calls,

25 and what does it look like for an end user? 92

1 What happens in the Department? As far as

2 enforcement and as far as an end user, what

3 communication goes back to the end user as far

4 as whether or not this complaint was valid?

5 MS. MANDERINO: Okay. Let me stay with

6 Act 72, which is misclassified construction

7 workers, because that's a specific act of

8 authority.

9 We didn't -- in the last year, we had

10 185 new investigations opened. And as a result

11 of that and a few that were open prior to that,

12 we had 187 entities that were found to have

13 violated the Act. The Department collected 383

14 million in administrative penalties in 2015.

15 But after that, we've collected over 600,000 --

16 I'm saying that wrong. We collected 383 in

17 penalties in 2015; 600,000 between 2015 and

18 2016; and that was a huge spike, because prior

19 to 2015, only $12,000 worth of penalties were

20 collected from 2011 to 2015.

21 Then what happens with that, let me get

22 back to you with an answer to that, because I

23 don't know how to answer that correctly. I see

24 the red light. Okay, Mr. Chairman.

25 MAJORITY CHAIRMAN SAYLOR: Yes. Thank 93

1 you. Representative Delozier.

2 REPRESENTATIVE DELOZIER: Thank you, Mr.

3 Chairman. Hello. Over this way (indicating).

4 Make you go back and forth. I have a couple

5 questions on two separate issues. So quickly,

6 the first one deals with an issue with two

7 committees that I've served on with Consumer

8 Affairs and Labor & Industry.

9 The one call system that we have in the

10 legislation that has been proposed back and

11 forth, just want to take this opportunity to try

12 and ask a few quick questions about that

13 particular proposal and your views on that.

14 One, to start, is, Do you support the

15 transfer over to the PUC and does the Governor,

16 as well?

17 MS. MANDERINO: Yes, the Governor

18 supports the transfer of the PA One Call to the

19 UC. And the Department will continue to

20 administer that system's enforcement of PA One

21 Call as aggressively as we can, so long as the

22 Department has PA One Call within our

23 responsibility.

24 I do know that there have been a couple

25 of hearings on that in the last session, and I 94

1 just want to urge the General Assembly to take

2 up seriously the issues that we have raised

3 during those hearings. Because regardless of

4 whatever agency enforces PA One Call, it is

5 paramount that the enforcement agent have

6 comprehensive data about the utility strikes

7 that happen in Pennsylvania in order to be able

8 to do its job.

9 Under the current law, there's no

10 requirement that facility owners, operators,

11 excavators, the folks who might have a hit, have

12 to report those hits to our agency. As a matter

13 of fact, the biggest collector of whether those

14 hits happen and what happens is PA One Call

15 themselves.

16 And despite repeated requests since I've

17 gotten into the Department, they are not willing

18 to share the information about the hits with the

19 Department. And if they're not willing to share

20 with the enforcement agent where the hits are

21 happening, we can't properly enforce. So

22 whatever you do with regard to legislation and

23 whoever you put enforcement with, you have to

24 make sure that the enforcing agency is required

25 to receive the information about the hits so 95

1 that they can make sure that they are keeping

2 the public and the workers safe.

3 REPRESENTATIVE DELOZIER: Okay. And

4 what do you believe will be the impact on Labor

5 & Industry if we switch that out and move it

6 over to the PUC?

7 MS. MANDERINO: We will continue to

8 enforce all the other labor laws that we

9 enforce.

10 REPRESENTATIVE DELOZIER: So there's

11 minimal impact then necessarily with -- how many

12 employees do you have working with the

13 enforcement and oversight of this?

14 MS. MANDERINO: Yeah, because the

15 underground utility law is an incident-based

16 issue, we use our inspectors that do a lot of

17 other labor law, labor compliance work in the

18 field for that purpose. We have 69 -- why's 69

19 sticking in my head? I'm looking for Shawn.

20 (CONFERRING WITH STAFF.)

21 Oh, we have 32. I was combining BOIS

22 and labor law. We have 32 labor law compliance

23 investigators and we have other investigators in

24 our Bureau of Occupational and Industrial

25 Affairs that we had started some cross-training 96

1 between.

2 REPRESENTATIVE DELOZIER: Okay. And how

3 much of the dollars from the fees come to Labor

4 & Industry to cover the cost of enforcement from

5 PA One Call?

6 MS. MANDERINO: Well, the -- PA One Call

7 actually was one of the few areas where, when we

8 got fees, we kept them in the Department.

9 Everything else went into the General Fund,

10 which is a discussion for another part of my

11 budget, if anybody wants to ask me that

12 question. But it was covering the cost of what

13 we were doing for --

14 REPRESENTATIVE DELOZIER: So your fees

15 were covered? So the costs were covered?

16 Okay. And switching real quick over before the

17 time runs out is, we had a hearing in the Labor

18 Committee dealing with many issues, but the SWIF

19 Fund and outstanding debt.

20 One of the issues that was raised by

21 folks from your agency, and that's something

22 that raised a lot of flags, as well as interest

23 to fix that; because there are many companies

24 that might be bad actors that don't pay in leave

25 and may form a new business under another name. 97

1 And because SWIF is the last resort, they're

2 required to provide that insurance.

3 Would you support legislation that would

4 require and give more teeth to the Agency to be

5 able to go after those bad actors in order to

6 bring those dollars in, and possibly be able to

7 give authority to deny insurance, if they know

8 and can validate that that is a bad actor?

9 MS. MANDERINO: Yeah. I mean, we would

10 very much like to work with the General Assembly

11 on any solution. I think it's always a

12 balancing act that you have to play between

13 driving businesses underground and making the

14 problem worse versus trying to keep them

15 operating their business correctly.

16 So, you know, we talked a few minutes

17 ago about the UEGF Fund and we don't want to

18 drive people out of getting workers' comp

19 insurance and then we drive those injured

20 workers into the UEGF Fund. But I think there

21 are some things that we can try to accomplish

22 together to make a better balance.

23 REPRESENTATIVE DELOZIER: Okay. I look

24 forward to working with you on it. Thank you.

25 MAJORITY CHAIRMAN SAYLOR: I did want to 98

1 recognize that we've been joined by

2 Representative Kate Harper and Representative

3 John Taylor here.

4 Next questioner is Representative

5 Miccarelli.

6 REPRESENTATIVE MICCARELLI: Thank you,

7 Mr. Chairman; and thank you, Madam Secretary. I

8 had to chuckle when you asked if we actually

9 read your testimony. It's almost like you were

10 a Rep yourself at one point.

11 So my first question is: During the

12 budget impasse that we had, somehow the call

13 centers had been kept open. And I was wondering

14 if the same ideas that kept them open during the

15 budget impasse were considered, and were there

16 any conversations to that effect?

17 MS. MANDERINO: Remember that, even

18 though we had the signature dollars from SIIF,

19 we have -- the majority of the money comes from

20 the feds, so there was never a fear -- well, let

21 me say it differently; because actually I

22 started down the wrong path. The SIIF dollars

23 came to us whether or not the budget passed,

24 because they're not coming out of the General

25 Fund. The SIIF dollars were authorized for us 99

1 to be able to take a portion of the employee

2 contributions to the trust fund and move it over

3 and use it for administration. So those dollars

4 were there, and they were authorized by the SIIF

5 legislation, not by anything that happened in

6 the Appropriations Bill. Does that make sense?

7 REPRESENTATIVE MICCARELLI: It does.

8 And just kind of a follow-up to that, is there

9 any way that these call centers could be opened

10 or there could be a decision made to open them

11 sooner rather than later? I heard your timeline

12 of three to six weeks. Pending, you know,

13 legislation like Representative Schweyer's

14 coming forth, is there a way the Governor could

15 do that?

16 MS. MANDERINO: With all due respect,

17 Representative Miccarelli, I'm not going to

18 recommend to my boss that we open anything on a

19 wing and a prayer. We can't afford to do that.

20 That's why we had to make such a hard decision

21 about doing those layoffs immediately when we

22 knew that the dollars had disappeared.

23 I actually had proposed doing it

24 earlier, because I didn't think it was going to

25 get over the finish line. But so long as there 100

1 was a chance that it was going to get over the

2 finish line, we delayed notification of layoffs.

3 I can't, in good conscience, say, let's

4 just hope that the General Assembly's going to

5 give us money and call people back earlier.

6 That's just not right. Their lives are

7 disrupted now enough.

8 REPRESENTATIVE MICCARELLI: Okay. So

9 there is the ability, but you're saying that the

10 circumstances being what they are, you don't

11 think it would be prudent?

12 MS. MANDERINO: Well, the ability would

13 be, in a short-run, to front-load dollars that

14 then in the back-end will make you run out of

15 money and make you have to lay even more people

16 off. So it just doesn't make sense to me.

17 REPRESENTATIVE MICCARELLI: Okay. And

18 just my final question: In your Department, and

19 maybe you don't have the information with you,

20 what percentage of your employees are veterans?

21 MS. MANDERINO: Actually, I think I do

22 have that number, if you just give me a minute.

23 Is this in my -- I think that's in my complement

24 folder. You know what? Let me get you that,

25 Representative Miccarelli, -- 101

1 REPRESENTATIVE MICCARELLI: Call me

2 Nick.

3 MS. MANDERINO: -- because I'm pretty

4 sure we keep that statistic.

5 REPRESENTATIVE MICCARELLI: Thank you

6 very much, Madam Secretary. Thank you, Mr.

7 Chairman.

8 MAJORITY CHAIRMAN SAYLOR:

9 Representative Boback.

10 REPRESENTATIVE BOBACK: Thank you, Mr.

11 Chairman. Good afternoon, Madam Secretary. I

12 have a different type of question. My

13 understanding is that L&I, through its Office of

14 Vocational and Rehabilitation Fund, has funded

15 the ACES initiative; and that, of course, is

16 Access College Employment Success; and that's to

17 build a capacity for students who have

18 intellectual disabilities. And I find that it's

19 a very worthwhile, good program.

20 Of course, finding jobs, nice-paying

21 jobs, that would certainly take many of them out

22 of dependence on DHS benefits. Well, more

23 specifically, the DREAM Partnership, which is a

24 subsidiary of UCP in central PA, was the grantee

25 for the ACES fund this year. And the grant was 102

1 for five years. But my understanding is, it was

2 funded for three, but years four and five they

3 won't receive funding.

4 I was wondering, is that true? And if

5 so, is there something else that they could

6 apply for to continue this worthwhile program?

7 MS. MANDERINO: Yeah. Thank you,

8 Representative Boback. And the ACES and the

9 DREAM Program do wonderful work. They were

10 funded for three years with a possibility of

11 extension should there be additional money.

12 They were funded out of a pot of money

13 that we got for four years from the General

14 Assembly, called the Reemployment Fund; that is

15 another fund, a pot of money, that was part of

16 the original Act 34 negotiations. And that pot

17 of money ended this December, as well.

18 So unless the General Assembly

19 reauthorizes a state appropriation for the

20 Reemployment Fund, that pot of money doesn't

21 exist anymore. Having said that, at OVR, we are

22 doing a lot of work and putting a lot of RFPs or

23 proposals out on the street for folks to provide

24 preemployment transition services for young

25 people with disabilities. That's very much 103

1 in-line with the scope of what the ACES Program

2 was doing.

3 Now, the federal dollars have a little

4 bit different rules in terms of what you have to

5 do than what the state dollars did. And they

6 also have to be bid for through the competitive

7 RFP process, but that is an avenue for possible

8 continuation of that program. It may need to be

9 revamped to meet federal requirements a little

10 bit more.

11 When we had just state dollars involved,

12 there was a little bit more flexibility in terms

13 of what needed to be done for the program

14 requirements.

15 REPRESENTATIVE BOBACK: And I appreciate

16 you being on top of that. Thank you. My second

17 question has to do with our -- the CILs, the

18 Centers for Independent Living. And I believe,

19 the last I looked, it was level funded. But is

20 there something else that your Department can do

21 maybe with partnership with them? Because there

22 again, very worthwhile program.

23 MS. MANDERINO: Yeah. And if you'll

24 recall, last year we had requested -- in our

25 budget request, we had asked for additional 104

1 money for the CILs, because what they are

2 getting from Pennsylvania is under -- is kind of

3 not what the national average is for other

4 states; and they do do such good work, the

5 Centers for Independent Living, supporting

6 people with disabilities for the supports they

7 need to live independently.

8 Having said that, in these tight budget

9 times, it was -- we would have liked to have

10 asked for a lot more money for a lot of things,

11 but I think you guys know looking at that number

12 that we couldn't do that this year.

13 REPRESENTATIVE BOBACK: Thank you.

14 Thank you, Mr. Chairman.

15 MAJORITY CHAIRMAN SAYLOR:

16 Representative Keller.

17 REPRESENTATIVE KELLER: Thank you, Mr.

18 Chairman; and thank you, Madam Secretary, for

19 being here today. Quick question: I'm over

20 here on this side of the room.

21 MS. MANDERINO: Oh, there you are.

22 REPRESENTATIVE KELLER: The question I

23 have, it deals with the Governor's GO-TIME

24 initiatives. And I imagine you're familiar with

25 the website padotgovdotgotime. You have -- or 105

1 the Department of Labor & Industry has about ten

2 items on there.

3 How frequently are they updated on that

4 site so that people can see the progress towards

5 the completion of them?

6 MS. MANDERINO: Oh, I don't know how

7 frequently they're updated on that site. But if

8 you have one in particular that you want us to

9 --

10 REPRESENTATIVE KELLER: Here's where I'm

11 going to go with this. Okay?

12 MS. MANDERINO: Go ahead.

13 REPRESENTATIVE KELLER: Because I looked

14 on the site, and almost everything that I found

15 on the list of items, and this isn't just your

16 department, but it's across many, has fiscal

17 year '15-'16 in them; and some of them are still

18 in progress.

19 And I guess my question is: If we have

20 these initiatives that we're looking at putting

21 in place to better service -- because a lot of

22 these categories are efficiency, consolidation,

23 better use of resources, improve customer

24 service, reduce resources. That's on about

25 three or four of them, a use of resources, 106

1 efficiency, consolidation, all for the

2 Department of Labor on the GO-TIME website.

3 And my question is: You know, how are

4 we managing them and where's the visibility for

5 somebody who would want to check and see how

6 we're doing? Because we're spending a lot of

7 state resources on these items, and I'm not

8 saying they're not beneficial, but how do we

9 follow up on them to see if we're getting --

10 MS. MANDERINO: Actually, somebody just

11 passed me a note. I do believe it's the GO-TIME

12 initiative within the Governor's Office of

13 Administration that does the updating, but they

14 do get updated quarterly.

15 Having said that, let me just give you a

16 few. Although, I think these are already

17 updated on the website. But if they're not,

18 they will be in the next time; because we have a

19 couple of them that I can just mention that are

20 a hundred percent complete from '15-'16.

21 Our modernizing personnel resources at

22 Unemployment Compensation, which was really

23 reevaluating from top to bottom how the offices

24 were organized, reducing some management

25 positions and reclassifying them as 107

1 non-management positions; that saved $269,000 a

2 year.

3 REPRESENTATIVE KELLER: Actually, you

4 know what? I believe that, you know, we're

5 making progress; because I'm looking here and

6 there's four of them that are marked completed,

7 Items No. 92, 93, 97, and 101. They're all

8 marked completed.

9 But it goes back to, and I guess I'm

10 going to hit on the whole thing here, we have

11 the tool for this and we look at the

12 unemployment call center problem that we have

13 and there's been money invested in upgrading our

14 computers. Is that correct or not? I mean, we

15 have had money for that?

16 MS. MANDERINO: I'm going to go way back

17 to before 2006 when Pennsylvania got federal

18 dollars to upgrade the computer system. That

19 was the IBM contract that everyone's familiar

20 with. It was broken out into three phases. The

21 first two phases did get completed. The third

22 phase is the one that failed and was cancelled.

23 Where we are now, is we're in the

24 process of finishing the evaluation process of

25 the vendors who bid on phase three; and that 108

1 will get underway this year.

2 REPRESENTATIVE KELLER: Okay. When did

3 you start that process?

4 MS. MANDERINO: Actually, it started

5 back in 2013.

6 REPRESENTATIVE KELLER: Okay. That's

7 good. How long does it take to evaluate?

8 Because here I'm going to go to a timeline. I

9 mean, we should have some kind of -- like, an

10 engineer, they use a Gantt Chart that says, this

11 activity begins now --

12 MS. MANDERINO: Actually, we do have --

13 and I think we shared it, you know, that UC

14 modernization flow chart that we put together

15 that has a timeline. We do show every phase of

16 where it is, so I thought that had gotten at one

17 point -- maybe it got to the Labor Committee,

18 but we'll make sure it gets to you.

19 REPRESENTATIVE KELLER: Okay. With

20 dates of when things are anticipated to begin

21 and end and -- so knowing that we had this

22 problem for several years, when did we actually

23 start looking into it? Because we're down here

24 now --

25 MS. MANDERINO: In 2013. And what I 109

1 mean by that, when Secretary Hearthway decided

2 to get out of the IBM contract, they immediately

3 started to figure out the next steps. And not

4 wanting to mess it up again, I guess, for lack

5 of a better way to say it, there was a very

6 systematic approach by the Department that

7 started with visiting other states that had had

8 successful systems, figuring out what it is that

9 they had done correctly.

10 They did a whole evaluation internally

11 of how we did things; decided that we needed to

12 look more for a -- figured out what the flaws

13 were in the first system and then started to

14 build the RFP for going out for a new system.

15 That process took them through 2014. By

16 the time I got there in 2015, we were ready to

17 hit the street with getting the RFP out on the

18 streets, which we did at some point in late 2015

19 or early 2016. Oh, here's my flow chart. So I

20 actually have a flow chart, and it's

21 color-coded.

22 REPRESENTATIVE KELLER: I know we're

23 running short on time, but I guess I'm just --

24 MS. MANDERINO: Okay.

25 MAJORITY CHAIRMAN SAYLOR: We are 110

1 running out.

2 REPRESENTATIVE KELLER: If I could just

3 make one statement, because I didn't have a

4 chance to say a lot of things.

5 MS. MANDERINO: Go ahead.

6 REPRESENTATIVE KELLER: I mean, if I was

7 running a business and my business depended on a

8 website that my customers could use effectively,

9 I would not have tolerated that performance

10 from anybody. And I think it's just pretty poor

11 that we, as the Commonwealth, the 20th largest

12 economy in the world, are having this much

13 trouble in holding people accountable to deliver

14 services for which we paid.

15 MAJORITY CHAIRMAN SAYLOR: Okay.

16 Representative Kauffman.

17 REPRESENTATIVE KAUFFMAN: Thank you, Mr.

18 Chairman; and it's good to see you, Madam

19 Secretary.

20 During the House debate on House Bill

21 2375, which you've mentioned last session, I

22 think many House members had the impression that

23 the Department would be closing two to three

24 service centers and delay the benefit

25 modernization portion if the additional funding 111

1 for SIIF did not come through.

2 Instead, the Department closed three

3 service centers and laid off staff in other

4 areas. And since the furloughs were announced,

5 there's been some conflicting information out

6 there.

7 On one hand, some of us were informed

8 that the Department had budgeted for a

9 $15-million payment for the benefit

10 modernization portion, I believe we had that

11 conversation in my office, for the first quarter

12 of this year.

13 On the other hand, we've been told by

14 the Department that the Department may not be

15 prepared to select a vendor until this fall.

16 And I've had other stakeholders in my office

17 inform me that they've been told that this $15

18 million does not exist.

19 And so I just want to get some

20 clarification on the record. Will the

21 Department be prepared to select a contractor

22 for the Benefit Modernization Project? How much

23 has been budgeted? When will that be done? Is

24 there $15 million sitting around waiting for

25 that? Could you answer to that entire issue? 112

1 MS. MANDERINO: Okay. We do our -- we

2 have three different -- we do our budgets in

3 Unemployment Compensation based on the federal

4 fiscal year; although, the dollars came in

5 differently.

6 So the federal dollars flow October

7 through September 30th. The SIIF dollars flowed

8 on a calendar year. Back in June and July when

9 we were being asked, what were the plans -- I

10 shouldn't say June or July, because it was

11 really August and September when we had the

12 House Labor Hearings on Unemployment.

13 Everything was very fluid: What would

14 you do if? And we ran so many different

15 scenarios. What would the scenario look like if

16 SIIF ended and we didn't do Benefit

17 Modernization? What would the scenario look

18 like if SIIF ended and we did do it? What would

19 the scenario look like if we downsized all the

20 centers versus called them?

21 So to the extent that we were trying to

22 be responsive to the specific questions we were

23 being asked, if that caused confusion, I

24 apologize. But I also have to tell you that my

25 mindset in our judgments changed as time moved 113

1 on, too.

2 REPRESENTATIVE KELLER: I understand all

3 that. I guess my question is: Where are we on

4 the $15 million, and where is the Benefit

5 Modernization, and when are we going to have a

6 contract?

7 MS. MANDERINO: Right. Let's talk

8 fluidity again. When we were asked last, I

9 think it was April or June, and we said we

10 thought, based on the normal procurement process

11 in Pennsylvania, we were told that it takes 90

12 to 120 days once your RFP responses come in to

13 get your kind of -- know that you're at a place

14 to select a vendor. So based on that normal 90

15 to 100 days, we thought we should have a vendor

16 selected in mid-January of 2017.

17 We didn't have a normal selection

18 process. We had the vendors say, you have a

19 really complex RFP and so we need more time to

20 answer. We didn't want to get it wrong a second

21 time, so we granted the extra time to answer.

22 Then when we were doing the scoring process, it

23 was a lot more complicated and so the scoring

24 process took longer than we thought it would.

25 Having said all that, when I talked to 114

1 you in January, and I thought it wouldn't be

2 until fall based on that timeline, I also, based

3 on the feedback I got from you, went back and

4 said, Where can we save time? Where can we --

5 so we sat down and we went through the whole

6 timeline with the Office of Administration, with

7 the Office of General Counsel, to see where we

8 can squeeze time out of that timeline.

9 So where I am today is that, I think by

10 the second or third week of June, on my best

11 estimate right now -- on the second or third

12 week of June, I'm going to be signing on the

13 line with a vendor for Benefit Modernization.

14 But that's my snapshot today.

15 REPRESENTATIVE KELLER: And do you have

16 $15 million sitting to make that payment?

17 MS. MANDERINO: Because when I sign --

18 well, it's not necessarily a payment. You have

19 to have the dollars -- whenever you kind of put

20 a contract in through the system, you have to

21 have the dollars in reserve to get that started.

22 So the other judgment call that happened

23 over the course of these past six months, is

24 realizing what bad shape we were in our legacy

25 system. There was something that we tried to 115

1 test, and it's going out of my head, but there

2 was some change that we tried to test that we

3 kind of went through all those levels of, as

4 Galloway said, about the COBOL system and the 17

5 layers that are top of it and we tried to test a

6 simple algorithm; and it almost crashed the

7 system.

8 And that was a huge wake-up call as to

9 why we can't afford to delay Benefit

10 Modernization. And one of the other reasons why

11 from where I was six months ago to where we

12 ended up in December, that we thought no matter

13 how horrible this is about laying people off, we

14 can't afford not to keep Benefit Modernization

15 on track, because forget about whether people

16 are there to answer the phones, if something

17 crashes, irreparably, we don't have a way to

18 deliver the benefits.

19 So I don't mean to be misleading. I

20 mean to try to explain to you how fluid the

21 parameters have been around trying to keep this

22 system moving forward and serve the people of

23 Pennsylvania.

24 REPRESENTATIVE KELLER: Okay. Thank

25 you. Am I done? 116

1 MAJORITY CHAIRMAN SAYLOR: You're done.

2 REPRESENTATIVE KELLER: You took way too

3 long to answer that question, Madam Secretary.

4 MS. MANDERINO: I'm sorry. I will see

5 you on March 1st.

6 REPRESENTATIVE KELLER: Guess what? I

7 get my second shot at you next Wednesday.

8 MS. MANDERINO: That's right. I will

9 see on March 1st.

10 MAJORITY CHAIRMAN SAYLOR: Madam

11 Secretary, thank you for coming today. I did --

12 one of the things that I think I've had a pet

13 peeve -- I've been here 24 years in the

14 Legislature -- you came in same time I did, in

15 1992, as a Legislator -- is that we in the

16 General Assembly and the taxpayers of

17 Pennsylvania, as well as the Governors, have

18 allocated hundreds, if not billions, of dollars

19 over the many years I've been here, to

20 technology upgrades. And every time I talk to a

21 Secretary, they're still operating in the beta

22 or whatever computer technology of what was 30

23 or 40 years ago. And the frustration I have,

24 and I'm going to ask to be honest with you, I'm

25 asking the Auditor General to audit every 117

1 Department for the technology money spent.

2 Because I don't think we've gotten our

3 taxpayers' moneys worth in technology upgrades.

4 Because I've got to be honest with you,

5 it doesn't look like we have. And it's not just

6 your Department; it's every Department. And

7 it's not just this Administration; it's all

8 Administrations.

9 We have spent millions of dollars in

10 contracts for computer upgrades, and we still

11 are not where we need to be; and that's very

12 frustrating to me as a member of the General

13 Assembly, that I'm allocating dollars -- we

14 should be able to, with modernization -- county

15 government, on a regular basis, modernize their

16 systems and they're constantly up to date.

17 We always seem to be years, decades, in

18 some cases, behind in modernizing our system.

19 So I'm mentioning it to you, Kathy, because you

20 and I are friends. But I think it's time, and I

21 am sending a formal letter to Auditor General

22 Eugene DePasquale, asking for an audit of all

23 computer technology contracts, where they have

24 had cost overruns and where they have failed to

25 meet the needs of this Commonwealth. 118

1 Because something is wrong when we are

2 not able to keep our agencies up to date that

3 best service our taxpayers of Pennsylvania.

4 MS. MANDERINO: I didn't get to tell the

5 good story in workers' comp, but we do have a

6 successful upgrade that's serving the customers

7 well.

8 MAJORITY CHAIRMAN SAYLOR: And I look

9 forward to that. Thank you, Madam Secretary.

10 MS. MANDERINO: Thank you.

11 MAJORITY CHAIRMAN SAYLOR: The Committee

12 will reconvene in 5 minutes.

13 (Whereupon, the hearing concluded.)

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1 CERTIFICATE

2

3 I hereby certify that the proceedings and

4 evidence are contained fully and accurately in the notes

5 taken by me on the within proceedings and that this is a

6 correct transcript of the same.

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8 ______

9 Tracy L. Markle, Court Reporter/Notary 10

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