After years of employers telling Connecticut lawmakers they can’t afford another minimum wage increase or a paid family medical leave program, it turns out that Connecticut government probably can’t afford those changes either.
Cost estimates for both programs provided by the Office of Fiscal Analysis showed the minimum wage increase and the paid family medical leave program combined would cost the state of Connecticut upwards of $100 million in higher salaries, start-up costs and administration expenses.
Minimum wage cost projections by OFA only account for an increase to $13.50 by 2020.
According to the proposed legislation, the full $15 per hour minimum wage would not take effect until 2022, further increasing the cost burden on state government as well as employers.
Both House Bill 5388 An Act Concerning a Fair Minimum Wage and Senate Bill 1 An Act Concerning Earned Family Medical Leave were passed out of the Labor and Public Employees Committee earlier this year. But the fiscal notes for both bills have bounced them out of the House and Senate and back to the Appropriations Committee and Finance, Revenue and Bonding Committee for review.
The increased minimum wage would cost an additional $45.3 million to the Department of Developmental Services for its Community Residential Services and its Employment Opportunity and Day Services program in 2020.
The Department of Social Services and the Office of Early Childhood Development would see increased costs of $14.7 million and $4.4 million, respectively.
The minimum wage increase would also drive up costs for Connecticut municipalities. The OFA used the town of Manchester as an example, which would see an increased labor cost of $130,000, potentially driving up property taxes.
The analysis notes the increase would affect state employee pay and benefits, resulting in an additional $380,000 for seasonal workers and another $425,000 at the Department of Transportation.
Similarly, start up costs for the proposed paid family medical leave program are estimated at $13.6 million, which would be covered by a $20 million bond. Total payments over the life on the bond would equal $30 million.
But yearly administrative costs are estimated to be “at least” $18.6 million, including an additional $408,000 for more staff at the Connecticut Department of Labor. The DOL already claims in can barely support its staff and recently tried to implement a tax on employers to fund the agency’s employee costs.
The analysis by OFA showed that currently 2,900 employers with 839,000 employees are affected by the federal Family Medical Leave Act. Under FMLA, employers with 75 or more employees have to provide up to 12 weeks of unpaid leave for family or medical issues.
Connecticut’s proposed bill would subject companies with two or more employees to that provision and add a small payroll tax to fund a state-run paid leave program. The Connecticut bill would effect 60,200 employers and $1.2 million employees and guarantee up to $1,000 per week of paid leave for 12 weeks per year.
Although state and municipal employees would not be covered under the family medical leave bill, the OFA notes that collective bargaining contracts could force both the state and municipalities to include workers in the program in the future.
Critics have previously pointed out the state’s medical leave fund would either quickly become insolvent or quickly have to raise the employee payroll tax due to the small employee contribution and large payout.
The high cost of both bills comes as Connecticut faces a $200 million budget deficit this year and next, with the potential for a $4.6 billion deficit in the next biennium.
Connecticut’s fixed costs, including pensions, retiree health care and debt service, are growing at approximately 5 percent per year, while tax revenue has largely been flat leading to major deficits and, in some cases, service cuts.
Prior iterations of the minimum wage increase and the paid family leave program have repeatedly passed out of the Labor Committee over past several years, but have yet to receive a vote in both Houses.
State employee labor union leaders have continually backed the bills, while Connecticut business associations and employers have argued the increased costs could slow growth, increase employee costs and lead to fewer jobs.
The minimum wage bill will be discussed during an Appropriations Committee meeting on Tuesday, April 17, while the paid FMLA bill will be discussed during a meeting by the Finance, Revenue and Bonding Committee.