Breaking down the numbers behind paid family leave legislation
Depending on whom you ask, it will cost anywhere from $5 million to $80 million just to implement a paid family medical leave program — but that's when people are comparing apples to oranges, and some estimates from last year are already outdated.
Gov. Ned Lamont recommended putting $5,170,575 in next year's budget as "one-time startup funding." Testifying before legislators on the paid leave bill in mid-February, a Connecticut Business & Industry Association vice president said taxpayers would be on the hook for $13 million in startup costs. Senate Republican Leader Len Fasano, R-North Haven, said it would cost $80 million just to start the program internally.
Where are all these numbers coming from?
Chris McClure, spokesman for the governor's budget office, said the confusion comes from whether people are aggregating administrative costs that come out of the operating budget with capital costs that come from bonding, or are just talking administrative costs.
Sen. Cathy Osten, D-Sprague, agreed, telling The Day, "I think that everybody's talking around the issue and I think we need to come up with a simple Excel sheet ... so we're not trying to pull from different bills and different forms."
When including bonding costs, McClure estimates the program will cost about $50 million over four or five years.
On Feb. 19, the Labor and Public Employees Committee voted 9-5 — that's nine Democrats in favor and five Republicans opposed — to give a joint favorable report to the House and Senate bills, which contain the same text and which had a public hearing on Feb. 14.
While Osten, who is vice chair of the committee, voted to move the bill forward, she said she is not willing to support the bill's passage unless some changes are made.
"I think I'm up to 20 different serious concerns on areas where we will not be able to fund it," Osten said. For example, she wants to make sure the required deductions in a normal paycheck are still getting taken out, has concerns about an escalator clause to ensure solvency, and wants to get bipartisan support, like she saw last year.
Lamont has also submitted a version, and the committee intends to hold a hearing on all three bills.
Estimates for program startup costs
No bill has yet been referred to the Office of Fiscal Analysis, which provides fiscal notes that include cost estimates, but there is a fiscal note for last year's proposed PFML bill. Like this year's bill, it would institute a 0.5 percent payroll tax, provide 100 percent of wages up to $1,000 per week, and fund up to 12 weeks of leave.
Last year's fiscal note said the program would incur administrative startup costs of at least $13.6 million for the Department of Labor.
This is the document to which Eric Gjede, vice president of government affairs for CBIA, referred in his testimony. Gjede suspects the numbers would be higher this year.
Last year's fiscal note broke down startup costs into $4.7 million in salaries and fringe costs, $7.7 million for information technology, $776,700 for overhead and capital needs, and $340,000 for outreach and marketing.
If passed, last year's bill would have authorized $20 million of bonds. The fiscal note estimated the future debt service costs for that at $30 million.
In a statement released Feb. 19, Senate Republican Leader Len Fasano, R-North Haven, said it costs at least $80 million just to start the program internally.
While acknowledging that paid family medical leave "is an issue that needs to be addressed this session," Fasano slammed this year's bill, saying those who introduced it "want to satisfy their political base even if that means putting forward policy that doesn't have a chance of passing."
Nicole Rall, spokeswoman for Fasano, said in a follow-up email to The Day that the $80 million figure the senator referenced "was a rough number estimated by the Department of Labor commissioner provided in a meeting Sen. Fasano had with him. This number is comparable to the value private industry says it would cost for technology and software to make sure proper payments are made and managed in the system."
Department of Labor spokeswoman Nancy Steffens said in an email that Commissioner Kurt Westby agrees that the $50 million figure McClure provided is a good estimate. Steffens said the $80 million figure likely refers to the amount Washington state requested for its program.
The Office of Fiscal Analysis in February released a synopsis of Lamont's Fiscal Year 20-21 budget plan, which shows a breakdown for the governor's $5.2 million ask. That startup figure includes $3.5 million for partial-year funding of 45 staff and fringe costs, assuming an average salary of $80,500; $1.2 million for facilities and $435,000 for information technology costs.
Estimates for staffing to administer the program
The estimate of 45 staff is close to the estimate of 40 that Campbell, Gallo & Robinson lobbyist Brian Coughlin provided in a meeting with The Day's editorial board in January.
Campbell said he spoke to employees of the Department of Labor in Washington, a state with about twice as many residents as Connecticut and 80 people administering its paid family leave program, one that is more complicated than Connecticut's proposal.
Employees in Washington began paying into the program Jan. 1, 2019. New York passed a paid family leave plan in 2016 and began phasing it in last year.
While Connecticut's plan calls for 100 percent coverage of weekly wages, New York's will only be at 67 percent once the phase-in is complete in 2021. The law for Washington — which splits its 0.4 percent payroll tax 63-37 between employee and employer — is also for partial wage replacement.
The other states to have paid family leave plans are California, New Jersey and Rhode Island.
Last year, former Department of Labor Commissioner Scott Jackson said that based on a 2015 report from the Institute for Women's Policy Research, 120 employees would be necessary. Osten said what she has heard from the Department of Labor is that 40 employees would be needed to set up the program, and it would grow to about 130 once there are claims to process.
Maddie Granato, policy manager for the Connecticut Women's Education and Legal Fund, noted that the estimate of 120 employees came from a report written before other states had passed leave programs, so she expects the figure to be lower. But she stressed that numbers at this point are estimates and not "back-of-the-paper math we're scribbling down."
Based on last year's proposed bill, IWPR — working with economists from Northeastern University and the University of Massachusetts — developed an updated model, releasing a fact sheet in April of last year.
IWPR estimated that 68,051 workers in Connecticut would claim benefits per year, with an average benefit of $698 per week for an average of 7.2 weeks. Adding in administrative costs of $15.9 million brings the total annual cost of the program to $334.8 million.
Considering Connecticut private-sector employees had $67.5 billion in earnings taxable under Social Security, getting to the $334.8 million figure involves a 0.495 percent tax on base earnings.
These estimates were based in part on the 2012-2016 American Community Survey, and costs are in 2016 dollars. The taxable maximum for Social Security in 2016 was $118,500. For 2019, it is $132,900.
Lamont's budget proposal estimated the program would raise about $400 million annually.
This year's bill states that if the Department of Labor determines that solvency of the program is at risk, it can increase the amount of earnings subject to the payroll tax beyond the Social Security maximum, with approval from the General Assembly. This is different from last year's bill, which said that if the department determines employee contributions aren't sufficient, it can "reduce the aggregate number of days or weeks offered to covered employees to levels that ensure the program's solvency."
Granato stressed about the numbers of paid family leave, "I think we need to wait until the fiscal note comes out of the bill to really know for sure what we're working with."
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