Honest, Sustainable & Affordable FMLA – or None at All

The Governor and legislative leaders have promised us a paid FMLA plan that will cost only one-half-of-one-percent of each worker’s payroll. They have also promised that the benefit will cover up to $900 or $1000 per week in lost wages for 12 – and sometimes more – weeks every year. 

As we demonstrated earlier in the session, these promises cannot hang together. A benefit that generous would send the program bankrupt with anything more than a 2 percent use rate. Under the governor’s plan, a lack of funding would automatically increase the payroll tax, which would necessarily increase use rates as employees increasingly thought of the benefit as a paid-for savings program rather than an emergency option. This would create a vicious cycle that would send the payroll tax spiraling. 

A legitimate government is one that is a responsible steward of our money. If it promises that the payroll tax stops at one-half-of-one percent, it must mean it. Any supportable paid FMLA proposal must be re-written to flip the independent and dependent variables. Let the payroll tax be fixed unalterably at one-half-of-one percent. Then let the benefit float automatically to fit within the revenues generated by that tax. 

If the resulting benefit would not provide enough to justify the program, then we have absolute evidence:  Connecticut cannot afford paid FMLA – at least not now. 

A theme has developed over the course of this legislative session. Again and again the administration and General Assembly leaders have offered bills on reasonably attractive but wholly unachievable premises. 

The real headline grabber here so far is the tolling plan – which, as we have indicated elsewhere, faces a highly unlikely path to federal authorization in anything like its current form. Even if it were likely of authorization, the numbers that supporters are relying on to sell the plan were put together by a pro-tolls consulting firm with a long history of overestimating the benefits, and underestimating the costs, of tolling. In other words, toll proponents are – negligently at least, and perhaps knowingly – selling us sweet nonsense.

The various paid FMLA proposals provide another example of this fundamental bait and switch. Proponents have promised significant benefits that will be paid for by the merest trifle – a payroll tax of just one-half of one percent. Not enough for anyone to miss, in exchange for the piece of mind of having a salary match of up to $1000 per week for up to 12 weeks a year should anything go wrong with one’s own health, or one’s family’s health, or one’s close friends’ health.   

The governor’s bill is slightly less generous, though not much. That bill, though, recognizes the obvious: the one-half-of-one-percent payroll tax won’t be anything like enough to pay for this benefit. As we at Yankee have demonstrated, even a 2.5 percent use rate will bankrupt the program. In the governor’s bill, any approach to insolvency will result in automatic increases in the payroll tax rate to bring the program back into balance, with a cushion.   

This mechanism will result in skyrocketing payroll taxes as more and more people see significant portions of their paychecks disappearing for a benefit to which they feel increasingly entitled, and therefore grow increasingly inclined to take part in themselves. 

It’s a recipe for disaster and a hallmark of irresponsible governance. 

If the governor and his allies in the legislature really believe that the state can afford a one-half-percent payroll tax to fund a paid FMLA benefit, then let him propose a bill or amendment that genuinely does so. 

It should fix the payroll tax at that level and automatically to adjust the benefit so that it is affordable at one-half percent given the number of employees taking advantage of it. If too many employees are taking advantage of the benefit at a certain generosity level, then the benefits will have to be lowered to keep the program solvent at the half-percent tax. If there’s money left in the program at the end of a fiscal year, the benefit can be made concomitantly more generous. 

That is the way – and the only way – to design a benefit that will be sustainable at the cost proponents of paid FMLA are claiming is affordable. 

What if the benefits are too low at that half-percent payroll-tax rate to allow many employees to take advantage of the benefit? Well, that would mean that the program just couldn’t work at a half-percent payroll tax. In which case, it’s a good thing that the governor and his allies agreed to fix the program. Otherwise the costs would have soared. 

Will one-half-of-one-percent payroll tax be enough to fund this program or not? If the governor and his allies believe that it is, then he should introduce revised legislation that fixes the tax at that level and allows the benefit to float, sure in the knowledge that his estimates are correct and that he is not selling a financial fantasy to the state. 

Will one-half-of-one-percent payroll tax be enough to fund this program or not? If the governor and his allies believe that it is, then he should introduce revised legislation that fixes the tax at that level and allows the benefit to float, sure in the knowledge that his estimates are correct and that he is not selling a financial fantasy to the state. 

If the governor and his allies are not sure that one-half percent will be enough then he should stop selling his plan as though he believes it is. 

One honest course of action would be to level with the people by telling us how much by way of payroll tax he thinks will actually be enough. Then he should fix that figure in a revised proposal that still floats the benefit while fixing the tax. The proposal with a higher fixed figure would not be as attractive, but it would at least be honest, and not another irresponsible leap into the unknown. And legislators could vote, and the people could act, on solid information and in the bright light of real knowledge. 

The other honest course of action, if the governor recognizes that one-half percent will not be enough, would be to withdraw the bill entirely in recognition that Connecticut just cannot afford a workable paid FMLA program right now. 

There are two paths to responsible and honest government. We urge the governor and FMLA’s supporters to pick one, and either to revise the bill as we have suggested or to withdraw it. Continuing along the current route is not a responsible or forthright option.