OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

SB-32

AN ACT CONCERNING WORKING FAMILIES' WAGES.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 15 $

FY 16 $

Labor Dept.

GF - Cost

None

less than $5,000

Office of Early Childhood

GF - Cost

None

$785,764

Various State Agencies

Various - Cost

Approximately $103,000

Approximately $383,000

Municipal Impact:

Municipalities

Effect

FY 15 $

FY 16 $

Various Municipalities

STATE MANDATE - Cost

See Below

See Below

Explanation

The bill results in increased payroll and contract costs to the state and municipalities. The bill raises the state minimum hourly wage from $9.00 to $9.15 on January 1, 2015; from $9.15 to $9.60 on January 1, 2016; and from $9.60 to $10.10 on January 1, 2017.

Payroll Impact

An increase in the state minimum wage will have a fiscal impact on the payroll of state and municipal employees (primarily general workers, summer workers, seasonal workers, student and senior workers). There would also be a direct increase1 in social security fringe benefit costs. The state payroll and fringe costs are estimated to be $49,000 in FY 15, $195,000 in FY 16 and $358,000 in FY 172.

The bill also increases costs to municipalities that employ minimum wage workers. For example, New Haven employed approximately 1,100 minimum wage workers in FY 12. If New Haven continued to employ the same number of minimum wage workers that it had in FY 12, the city would incur increased costs of approximately $30,000 in FY 15, $120,000 in FY 16 and $220,000 in FY 17.

As an additional example, the Town of Avon employed approximately 60 seasonal minimum wage workers in its Parks and Recreation and Public Works departments in FY 12. If Avon continued to employ the same number of minimum wage workers that it had in FY 12, the town would incur increased costs of $5,600 in FY 15, $22,000 in FY 16 and $41,000 in FY 17 as a result of the bill.

The impact to municipalities will vary depending on the number of minimum wage workers they employ and the extent of the services they provide. At least one town currently has implemented an hourly minimum wage ordinance of $10.10 effective in FY 14. Thus, it is estimated that the bill will not result in a fiscal impact on that municipality.

Contract Impact

In addition, the bill will increase certain state contract costs. All state service contracts exceeding $50,000 require the state to pay standard wage (which is higher than the bills proposed minimum wage increase) and therefore would not be impacted. However, service contracts (such as custodial) below the $50,000 threshold are exempt from this requirement and would be impacted. In addition, numerous non-service contracts in which vendors employ staff at minimum wage would also be impacted. Many contracts entered into since 2008 have a provision that allows the contractor to seek a price adjustment if the minimum wage is increased. As a result, the timing of these impacts is uncertain.

In general, labor costs comprise approximately 80% of the cost of these contracts. The full impact to state contract costs is difficult to quantify. The Department of Administrative Services has identified approximately 150 contracts worth an estimated $3 million that would be potentially impacted, resulting in increased annual costs estimated at $29,000 in FY 15, $115,000 in FY 16 and $211,000 in FY 17. The Department of Transportation has similarly identified several contracts which would be impacted, resulting in potential increased annual costs estimated at $25,000 in FY 15, $73,000 in FY 16, and $78,000 in FY 17. In total, it is estimated that state contracts could be impacted by approximately $54,000 in FY 15, $188,000 in FY 16, and $289,000 in FY 17.

Administrative

The bill results in a cost of less than $5,000 to the Department of Labor in FY 16 and FY 17 associated with the printing and distribution of posters that are provided to employers at no cost to the employer, which address minimum wage laws.

Family Child Care Providers

The bill will result in increased costs of $785,764 in FY 16 associated with the Family Child Care Provider collective bargaining agreement. The agreement specifies the rate for unlicensed providers shall be one-third of the state's minimum wage and shall reflect any increases on January 1, 2016 or January 1, 2017. The payment for these providers is made through the Office of Early Childhood via the Child Care Services- TANF/CCDBG (Care4Kids) account.

Other

The bill may result in additional costs to some municipalities and state agencies due to wage compression. This refers to an increase in wages currently slightly above a new minimum wage due to an increase in the minimum wage.

The Out Years

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

FY 19 $

Labor Dept.

GF - Cost

less than $5,000

None

None

Office of Early Childhood

GF - Cost

$3,108,312

$4,644,737*

$4,644,737*

Various State Agencies

Various - Cost

Approximately $647,000

Approximately $1,214,000

Approximately $1,214,000

*The agreement is effective through June 30, 2017.

Municipal Impact:

The annualized ongoing fiscal impact identified above would continue into the future subject to the number of workers and hours employed.

Sources:

City of New Haven

 

Core-CT Financial Accounting System

 

Town of Avon

1 Employers are liable for 6.2% Social Security and 1.45% Medicare taxes.

2 Estimate does not include costs to non-appropriated funds, such as the operating funds for the constituent units of higher education.