Report: Fund Family & Medical Leave By Collecting Payroll Deduction Before Starting to Pay Benefits
The Institute for Women’s Policy Research found that creating a paid Family and Medical Leave insurance system in Connecticut would cost $13 million to start, and $462 million annually once it’s fully funded.
That’s $440 million in benefits to pay out to users of the system and $22 million in administrative costs.
However, proponents say the numbers shouldn’t scare lawmakers because the proposal is largely budget neutral.
“First year contributions will also offset initial staff hiring, although some budgeting from general funds may be necessary,” the report found. “Connecticut could also phase in the premium collection to self-fund the program start-up costs before beginning to pay FMLI benefits.”
The report found that if Connecticut collects 0.54 percent of pay from every employee in Connecticut — which works out to about $322 a year for private sector workers — then it would generate about $430 million annually to fund the costs of providing Family and Medical Leave Insurance and administration of the program.
The report warns against excluding low wage earners, who may not be able to take leave if they’re not able to access 100 percent of their pay, while on leave.
The report also suggests that in order to be eligible a worker will have had to work 920 hours in the year before they make the claim.
Currently, nearly three out of four employees who take leave are at least partly paid by employers under existing policies, including paid sick time, vacation, and other forms of paid time off. An estimated 287,962 workers annually take leave now.
The optimal amount of leave would be 12 weeks, according to the report, which corresponds to the amount a time employees can currently take in unpaid leave. The average amount of leave in California and Rhode Island, which have their own paid leave policies, is around 4 weeks.
The simulation models that the Institute for Women’s Policy Research used to project the highest likelihood of usage suggest a range of 95,000 to 108,000 people on leave at one time. And eligibility would not be tied to a specific employer.
“Given that an employee may pay into the fund for years, then switch employers and have an immediate qualifying event, it is not advisable to tie eligibility to weeks worked at a specific employer,” the report found.
In order to run the program and keep track of all the information, the Department of Labor would need to hire 120 people, according to the report.
The General Assembly paid $140,000 for the report, which was praised by proponents of the yet-to-be-drafted legislation.
“The report shows that the paychecks would be good, payroll deductions are modest, start-up costs are in line with other states, and we could expect maybe 100,000 Connecticut workers to take three to fifteen weeks of paid medical leave in any given year — about five percent of the state’s total workforce,” Sen. Mae Flexer, D-Danielson, said. “That’s not a burden to businesses. It’s a godsend to the families who need this time to care for themselves or a loved one.”
This year’s legislation is still being drafted and will be raised for a public hearing by the Labor and Public Employees Committee.
“I have been moved by the stories of people whose lives have been affected by the lack of a paid family leave law in Connecticut,” Rep. Peter Tercyak, who co-chairs the committee, said. “This report will help shape our ultimate legislation on paid family and medical leave.”
National Federation of Independent Business Connecticut State Director Andrew Markowski said the report still raises more questions than it answers, and without draft legislation it’s hard to fully understand the potential costs and implications for businesses.
“What is clear, however, is that the concepts contained in the report embody a mandatory payroll tax on all employees in the state, including small business owners, for a program that many may never even utilize,” Markowski said.
He said it’s still unclear how a small business would be able to stay in business if its entire workforce was out on leave for months at a time.
“While this proposal may attempt to guarantee wage replacement for employees out on leave, it does nothing to guarantee continuity of operations for our small businesses,” Markowski said. “Small business owners are already on edge given the fiscal uncertainty the state faces and the economic uncertainty they continue to face in their own businesses, so they nervously await more details on this proposal.”