Paid Family Leave Raises Serious Questions

A proposal creating a massive new government-run paid family and medical leave program cleared the Appropriations Committee this week despite serious doubts about its financial viability.

Under HB 6932, a paid FMLA program would be administered by the state Labor Department and funded by a mandatory employee payroll deduction at a level to be determined by DOL.

Employees of businesses of two or more employees would be able to take up to 12 weeks off per year, at 100% of their pay, to deal with their own illnesses, or those of a family member.

The bill also massively expands the state’s currently unpaid family and medical leave act to include businesses with two or more employees.  

According to the legislature’s nonpartisan Office of Fiscal Analysis, the paid FMLA program would cost the state at least $23 million to get off the ground in the first two years, with continuing costs thereafter. 

However, the estimate is based on a temporary disability insurance program in New Jersey, which has been in existence for 60 years. Connecticut has no such program, so comparing costs is like comparing apples to oranges. 

A better comparison is Washington State’s failed paid FMLA program–nearly identical to the Connecticut proposal–that was projected to incur more than $235 million in administrative costs every two-year budget cycle. 

Legislative advocates claim an amendment to HB 6932 will remove the net cost of the program to the state. In reality, the plan is to take a loan from the General Fund to get the program off the ground, and then pay it back with the employee payroll deductions needed to fund the program. 

In other words, even from the start, lawmakers intend to strip the program’s operating funds and divert them into the General Fund.

What’s more, the numbers don’t work. 

The bill allows employees out on leave to receive up to 100% of their pay, capped at $1,000 a week, for up to 12 weeks each year. 

One lawmaker suggested an employee would only need to contribute up to 0.25% of 1% of their pay each week to keep the fund solvent. 

If so, an employee making $52,000 a year and eligible for the maximum benefit of $12,000 a year will only have contributed $130 into the fund via payroll deduction during the same time period.

It doesn’t add up–particularly when an employee receiving 100% of his or her pay has no incentive to return to work early.

Further, what about all the money needed for the Labor Department to administer this program? And what of the fact that none of the current state budget proposals allocate funds available for the program to “borrow”?

Lawmakers should be wary of advocates pushing cure-all proposals that are too good to be true. In the end, there is always a cost.  In this case, it’s not very well hidden.   

For more information, contact CBIA’s Eric Gjede at 860.244.1931 | eric.gjede@cbia.com | @egjede