OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 ↓ (860) 240-0200

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

sSB-1044

AN ACT CONCERNING THE RECOUPMENT OF STATE COSTS ATTRIBUTABLE TO LOW WAGE EMPLOYERS.

OFA Fiscal Note

State Impact:

Note: GF=General Fund

Municipal Impact: None

Explanation

The bill establishes a quarterly fee on certain employers at the rate of $1.00 per work hour for each employee paid $15 per hour or less. This results in a potential revenue gain of up to $152.6 million in FY 16 and up to $305.1 million annually thereafter. This also results in a cost of approximately $14.4 million in FY 16 and approximately $19.2 million annually thereafter to the Department of Labor (DOL).

COST IMPACT

The bill requires the Labor Commissioner to adopt guidelines for determining and collecting fees by October 1, 2015, and to begin collecting fees no later than 60 days after the close of the quarter for which they are assessed. Administration of this program is estimated to result in a cost of approximately $19.2 million annually, including collections, data management, audit and all associated fringe benefit costs. The estimate is based on the current cost of agency management services under the unemployment insurance system.

The bill allows covered employers to file a complaint with the Labor Commissioner, who must investigate and hold a hearing. This is anticipated to result in a cost of approximately $311,962 in FY 16 and $415,950 annually thereafter for salary ($75,000) and fringes ($28,988) associated with the hiring of four Staff Attorneys.

Additionally, the bill allows the Labor Commissioner to request that the Office of the Attorney General (OAG) investigate certain violations. The OAG already has authority over wage violations. The bill is not anticipated to have a fiscal impact on OAG because it is not expected to lead to a higher rate of violations of wage and hour laws.

There is no impact to the Judicial Department from OAG to bring a civil suit to the Superior Court. The number of appeals is not anticipated to be great enough to need additional resources. The court system disposes of over 450,000 cases annually.

The bill also establishes the Connecticut Low Wage Employer Advisory Board, whose members serve without compensation but are reimbursed for travel expenses. This results in a cost to DOL of less than $1,000 in FY 16 and in FY 17 for mileage expenses.

REVENUE IMPACT

The revenue estimate assumes approximately 146,710 of the 743,328 employees who work for firms with at least 500 employees would be covered under the bill. Additionally, the estimate assumes that the average annual hours worked per covered employee is approximately 2,080, based on hourly and annual wage data by job category and percentile compiled by DOL. Under the bill, it is uncertain how certain types of income (overtime, bonus, etc.) would be treated. Consequently, no adjustments are made to account for how this income would be treated. Additionally, the estimate assumes no behavior change on the part of employers or employees.

The bill specifies that the Labor Commissioner deposit the proceeds of the fee into a new, non-lapsing Human Service Support Account.  This account is intended to support and improve certain activities of the Departments of Social Services and Developmental Services and the Office of Early Childhood.  The fiscal impact of this new account is uncertain, as the bill is unclear whether the support is intended to expand or offset current state expenditures for the required activities.

The Out Years

The annualized ongoing cost impact identified above would continue into the future subject to inflation. The potential revenue gain described above would continue into the future subject to wage inflation and fluctuation in the number of jobs paying above and below $15 per hour.