L&I secretary: Shale gas will drive employment

May 11. 2012 3:00AM

Jim T. Ryan

Secretary Julia Hearthway said she's modernizing the state Department of Labor and Industry to better help businesses and workers.

Julia Hearthway is secretary of the Pennsylvania Department of Labor & Industry. Photo/Submitted

But doing so doesn't require more money, she said.

In the second half of an April 27 interview, Hearthway talked about how Labor and Industry can expand programs while living within a budget. The administration has stressed fiscal restraint since Gov. Tom Corbett's 2010 election, and the department and other state agencies have faced steep cuts.

Hearthway also extolled Pennsylvania's budding Marcellus Shale natural gas industry, which has helped boost employment in the state's mining and logging sector by 6,600 jobs in the past year, or a 20 percent increase, according to the state's March job counts.

That job growth can be expanded to include other sectors and parts of the state outside the major gas fields in the northern and western parts of the state, she said.

Q: Last year and this year, Labor and Industry will see about a 17 percent cut in its budget. How do you bolster programs and work within those fiscal constraints?

A: The short answer is you're much more efficient at what you do. We have funds now. We have funds to have a job-matching system. We have a job-matching system now, it's just not very effective. We have funds to even help people put together résumés. None of that would require increased revenue. It would require spending the revenue much, much more effectively. I do not need an increase in the budget to make this happen. I need to realign how we're using our money. There is certainly spinning wheels that goes on. (Someone says:) "Well, let me keep doing this." It's not working! So let's stop putting the money in this system and instead use the money for this other system. We have a core system to work with. It's replacing something. It's not adding to something. It's taking out what's not working and putting in what's working.

I did insurance fraud for a decade. For a large part, it deals with financial crimes. So I understand numbers. I understand the bottom line. I look at that carefully. I don't want our budget overdrawn. I want to have this office function within its means and use the money the way it should be used. I have no worries that can happen with this. I don't need an increase in moneys to do it.

What does work in Labor and Industry? What programs are outdated, redundant or need to be replaced?

In keeping with workforce and businesses, I do think our job-matching system needs to be replaced. The core system would be the core system for any job-matching, so that can stay. But we need to fix how it's applied and how individuals access it. Make it much, much easier: more individual-friendly, business-friendly and consumer-friendly. That's one aspect.

We've found inefficiencies and focuses that need to be redirected. For example, most of the workforce investment funds are divvied out to the workforce investment boards. That system that was put in place so they would know the local communities, know the businesses well, that's working. But we do need to tweak how that's done. Perfect example is Marcellus Shale. Pennsylvania is going to start roaring back economically and one major part of that engine will be the gas industry. We need to make sure that these individual workforce investment boards are nicely well-connected so that there's this seamless chain of opportunities in the gas industry flowing throughout the state. So that those opportunities in western Pennsylvania are not just in western Pennsylvania, but that they flow through the rest of the state. We're working with the southeast (part of the state) on a number of initiatives so that they are prepared to feed into that industry, in terms of actual workforce directly with the industry. Not all of it has to be on-site. In fact, most of it eventually is not on-site where the wells are. All of the other ancillary businesses (will benefit). Manufacturing will also see a boom, partly as a result of this, partly because of other factors in manufacturing.

The individual workforce investment boards for the most part, I think, are doing very well. But now we need to connect them better. We need to connect those regional opportunities better. We need to make that seamless. We need to have them build on each other's successes and not allow them to be silo-ed. I think there's a tendency to do that when you have local control, which I'm for. But you also want to make sure in a global economy you don't cut off opportunities that a local community never would have intended to do.

When we talk about Marcellus, there's a lot of opportunity for jobs and ancillary industries. Pennsylvania and other parts of the country have been through this cycle before where a natural resource is developed and then it falls off. How is the state preparing for that inevitability?

Natural gas is at its very beginning stages, particularly from an economic development standpoint, in Pennsylvania. We are decades and decades away from losing that. This is a natural resource and a business industry that will serve Pennsylvania well certainly in my lifetime, my children's lifetime. This is here for a while. But I think you bring up a point that we're not in an economic environment where you have a fix and it's a fix for life. That just doesn't exist anymore. Careers like that rarely exist anymore. You have to have a flexible economy where you're always looking for the next thing that's going to happen. Right now, it's gas and that's very long term, stable. I grew up in the oil industry. … That was more than 50 years of a robust economy in the United States. Now it's dissipated and gone overseas ... We have at least 50 years with the gas industry, so Pennsylvania's looking very good for the foreseeable future. But your point is well taken. You don't just have one industry and then what happens when it ends? You be prepared when it ends. That doesn't mean you give up that opportunity when it may not last … We just have to be aware of that and plan for it. That doesn't mean you don't start up an economy because eventually it will falter, and we'll move on to something else. That's not the solution. No, you start it up. You utilize it. You go great guns. And you make sure you're always looking for the future. You make sure you're always looking for the next best thing. That's what any great businessman does; that's what any businesswoman does. They say this is looking great now, but they don't rest on their laurels. They know it's making a great profit now, but they know three years from now it may not. There's going to be something else that takes it over, but you just have to stay ahead of the game. That's a robust economy. That's good. That's not bad. The fact we'll have the industry end, OK. Then we'll go on to something else. But we'll take full advantage of it while it's here and hopefully leverage it into the next great economy.

We already have the benefit of history in seeing some of these things happen in Pennsylvania: the collapse of the coal industry, the collapse of the steel industry. And we went through nearly 40 years of economic depression in some of those areas. What are we doing now to prepare for that inevitability with a resource we know is finite?

I'm trying to answer your question, but it's an impossible question because you're asking me to answer what should we do 50 years from now. Let me be pessimistic and say what should we do 10 years from now when that gas industry's faltering. We need to see where we're going 10 years from now, but we need to be aware of it. I cannot tell you now what industry will replace the gas industry. I can tell you we should always be on the lookout for that. I can't tell you in preparing for it, what should we do in a very specific way other than to say it won't last forever? Pennsylvania fared better than most states in this economic recession because we had a very diverse economy. So I guess one immediate answer to that question is to keep it diverse. Don't put all of our eggs in the Marcellus Shale basket. It's a great basket. We all want to prosper from it, but that doesn't mean we neglect all the other industries that are important to Pennsylvania. So I guess that is a current answer to your question. But where do we go after it falters? I can't predict that. It's too far in advance, but we can put things in place to always be looking for that, always looking for opportunities.

We have a very robust biotech industry in Pennsylvania. We don't want to ignore that, and we want to keep that going to see what's there tomorrow and the next day to make that grow. History is the guidepost we have to know what to do. But it is not clairvoyant. It is very difficult to see what opportunities we would have in the future. We just have to make sure Pennsylvania keeps being diverse and just because we have one great opportunity, like the good businessperson, we don't rest on our laurels and we look for all the other great opportunities.

What are other plans to retrain and re-employ workers, as well as build up businesses in coming years?

We want to make an environment for business that is job-growth-friendly. The governor has this Jobs First PA program and it's a number of initiatives. One of those initiatives is Pennsylvania Inc. and it's an initiative where a business owner will find an easy way to get what they need from state government and a one-stop place for them to go. So instead of coming to Labor and Industry for one thing, say for uniform construction codes, and then going to PennDOT to check something else and then the Department of State to check on licensing for something else, electronically, there will be one place they can go on the Internet, a portal for state government will be at their fingertips so they can cut through that red tape. That's critical for business.

On the other end, we want to help those businesses that want to hire, but the time and resources it requires has them just a little too strapped to do that.

We have a program called Keystone Works, where we will utilize the funds already being paid for unemployment compensation to allow an employer to train those individuals. So that individual can have on-the-job training. Right now someone can go for classes, get training and collect unemployment, but they can't be on a job and do that. They would lose their unemployment benefits. This program will allow them to have on-the-job training without a salary and still collect their unemployment benefits for up to eight weeks. After (that), businesses have invested hopefully enough time and training in that individual to bring them along to meet those needs and then hire them. They get off unemployment, and the employer gets a trained individual ready to hit the ground running. That lost time all businesses have until they get someone up to speed isn't there and there's a small stipend as an encouragement to keep that individual on. So for every four weeks that person is employed, the employer gets $375, up to $1,500, just to help them get over that edge of the cost of bringing someone new on. We know how expensive that is for employers to hire someone new. A lot of businesses out there want to do that, but they just can't bite that bullet. So we'll help them do it with this program.

Do you have anything else you would like to talk about?

Pennsylvania right now has a significant and serious debt problem with the unemployment compensation trust fund. We're just under $4 billion we owe to the federal government. This is a heavy, heavy burden on Pennsylvania. It is a lot of borrowing. A lot of states had to borrow, but Pennsylvania has one of the larger debts in the nation. Paying that debt back now, it's due. And businesses are going to see their taxes rise significantly to pay back that debt. The problem is, even in paying it back, we have a fund that is insolvent. So we need to do two things: We need to pay back that debt and we need to bring the UC fund to solvency. We have a fix for this. This is not an unfixable problem. We have a fix for this. And the governor and Labor and Industry and the entire cabinet are working to do that. But this is an issue where we need to work quickly, and government can work quickly. We need to fix this problem. If we don't, it will hurt jobs. Unemployment compensation is largely funded by employers and it's a per employee tax. The more employees you bring on, the higher an employer's tax is. So we need to do this. We need to pay off the debt and bring the fund to solvency. And do it in a fiscally sound way so that it doesn't stop this economic growth that Pennsylvania's seeing.

I understand we're waiting on the legislature to approve a bill that will address the insolvency.

We have a series of bills and the administration has put together a package proposal that's addressed in those bills. We've been working on it since last year and that's one of my tasks. The governor is like: "Fix this. Fix this problem fairly. Don't let it interfere with Pennsylvania's economic growth." We have a series of proposals. If you pull these bills together, it will be fixed. One of them is floating a bond. That's refinancing this debt and that's a very important, key piece of this, but it's only one piece. And that needs to be passed. We're talking on a daily basis with key leadership in the legislature, various business communities, union leaders to come together to fix this problem. I think you'll see this in the very near future.

Are there things Labor and Industry can do as a department to reduce that debt at this point?

It needs a legislative fix. We need to change the laws to do this. We can't do this without legislation. So it needs legislation and it needs to be passed.

Aside from the bond issue, what are some of the other key components of that?

We're looking at various components in how the unemployment benefits — the availability of unemployment. Unemployment was meant to be for those individuals who are connected with the workforce that lost their job through no fault of their own. We're looking at the edge of that. We're trying to focus in and tighten that so it serves its original purpose. We're also looking at trends. I'm going to circle back to our workforce investment. The best answer to all of this is getting everyone employed again. You get far fewer people on unemployment, the problem fixes itself much faster. But in connection with that we have to go back to its original purpose. And we want to make sure we're serving well those people who need this. And looking to update parts of the legislation; there are parts that haven't been updated in over 30 years. So again back to our original discussion on assumptions. Certain assumptions are made as to how well a person is connected to the workforce and what their benefits would be. I want to stress that there are little pieces … We have to approach this in a deliberate and thoughtful way so that the impact to those who need it is minimal. We want to keep the core system intact and that's helping those individuals who lose a job and need that extra help. But we're looking at those edges to see where can we tighten those things, so we can use those core funds for that purpose and not spread them so thinly. And I think we're going to find some savings in that regard. That's what we've been going back and forth with the legislature on: fine tuning the package for that.

And you said we can expect to see some movement on this in the near future?

I'll give you the pressing deadline. If we pay off our debt by Nov. 10 to the federal government, we get two years of interest-free borrowing. We need to do that. We need to have that now. If we wait, the solution becomes even harder. We become deeper in debt and coming out of it will be much harder. So if we want a solution that's as painless as possible, then we have to do it now.

Reworking Labor & Industry

Last week – Labor and Industry Secretary Julia Hearthway discussed her transition from the Attorney General's office, her policy development methods and how the administration is restructuring programs to connect companies and job-seekers.


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