OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 ↓ (860) 240-0200

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

sHB-6932

AN ACT CONCERNING PAID FAMILY AND MEDICAL LEAVE.

OFA Fiscal Note

State Impact:

Note: All Funds=All Funds; GF=General Fund

Municipal Impact:

Explanation

The bill expands the state's current Family Medical Leave Act (FMLA) law as it applies to the private sector, state and municipalities, and establishes a Family and Medical Leave Compensation (FMLC) program. This results in a significant annual state cost beginning in FY 16, as well as a potential cost to various municipalities beginning in FY 16. These impacts are explained in detail below.

Expanded FMLA State Employee Impact

The bill's expanded eligibility for leave is expected to result in an increase in the number of state employees out on leave. Currently, it is estimated that between 3% and 6.1% of executive branch employees are on family or medical leave at any given time. The state averages about 1,000 new applications for leave monthly.²

This bill would result in costs to certain state agencies with large numbers of employees such as the Department of Corrections (DOC), Department of Emergency Services and Public Protection (DESPP), Department of Children and Families (DCF), Department of Mental Health and Addiction Services (DMHAS) and the Department of Developmental Services (DDS). These agencies would incur overtime costs to cover shifts for those employees taking leave under the bill's provisions. For example, if one correction officer uses 10 accrued sick days, DOC may incur overtime costs as high as $2,925 to cover the 10 day period.³ For the majority of agencies, the workload of employees on leave will be absorbed among co-workers and would not have a fiscal impact on the state.

The bill prevents an employer, including the state, from requiring employees to use their accrued paid vacation, personal, family or sick leave during the time they are out on FMLA. It is unclear if an employee can simultaneously receive paid sick time from their employer and FMLC benefits while they are on FMLA leave. Any of the above potential costs associated with increased leave are not expected to be realized until at least FY 17, as employees become eligible for the new FMLA benefits.

The bill is also unclear as to whether certain state employees would be entitled to regular wages while out on leave. To the extent that the state would be required to pay for regular wages while employees are on leave, there would be a significant cost to various state agencies beginning in FY 16.

Expanded FMLA Municipal Impact

The bill expands private sector FMLA provisions to municipalities, and also expands the number of people eligible to take FMLA. Municipalities currently must comply with federal FMLA requirements. However, there is a potential cost to the extent that the bill requires municipalities to provide benefits beyond what is required under federal FMLA.

For example, a municipality would incur increased costs if an employee (who is ineligible for FMLA under current law) goes on FMLA leave and has his shift covered by an employee with a higher salary or by an employee working an overtime shift.

The bill also: 1) makes school paraprofessionals who have worked less than 1,250 hours ineligible for FMLA; and, 2) prohibits employees from taking FMLA for bone marrow or organ donation. To the extent that this reduces the number of municipal employees taking leave, there is a savings that partially offsets the cost in the bill.

Expanded FMLA Administrative Costs

The bill expands the FMLA law by reducing, from 75 to two, the minimum number of employees that makes an employer subject to FMLA. The bill also extends allowable leave under FMLA to caring for grandparents, grandchildren, and siblings, in addition to relatives covered under current law. This results in a cost to Department of Labor (DOL) of $311,963 in FY 16 and $415,950 annually thereafter associated with one Principal Attorney ($100,000 for salary and $38,650 for fringe costs), two Staff Attorneys ($75,000 for salary and $28,988 for fringe costs), and one Administrative Assistant ($50,000 for salary and $19,325 for fringe costs).

This estimate is based on the current costs for handling all FMLA inquiries and investigating complaints of alleged violation. There are currently 3,127 employers with 1,054,635 employees covered by existing FMLA law; it is projected that the bill would expand coverage to approximately 98,000 employers with approximately 1,666,400 employees.

FMLC Program

The bill establishes the FMLC program to provide wage replacement benefits to covered employees taking leave under certain circumstances. This results in estimated administrative costs to DOL of $5.9 million in FY 16 and $16.9 million in FY 17, including fringe benefits.

The bill specifies the costs of administering the FMLC program are to be covered by the FMLC Trust Fund, which receives revenue from employee contributions as determined by the Labor Commissioner. However, no contributions to the FMLC Trust Fund are anticipated to be collected before February 2016. Consequently, it is assumed the General Fund will cover the costs of the program until such time that FMLC Trust Fund revenues are sufficient.

The FY 16 start-up costs include approximately $3.4 million in salaries, $1.3 million for fringe costs, $1.1 million for information technology, equipment, and postage, and a one-time cost of up to $25,000 for actuarial or consultant services associated with determining projected revenues and expenditures from the FMLC Trust Fund. These costs are annualized to approximately $16.9 million beginning in FY 17.

Additionally, establishing the Family and Medical Leave Compensation (FMLC) Trust Fund will result in a one-time estimated cost to the Connecticut Retirement Plans and Trust Funds (CRPTF) of $75,000 in FY 16. The estimate is comprised of: (1) $50,000 for legal fees and (2) $25,000 for Consulting/Portfolio structure, including asset allocation.

There would also be an annual cost for investment management fees and the cost of administrative services provided by the Office of the State Treasurer (OST). This cost is calculated as a proportional share of the annual expenses incurred in the operation and maintenance of CRPTF. It varies between funds based on the way each fund's assets are allocated. As an example, the Other Post Employment Benefit (OPEB) Trust Fund, which had an asset value of approximately $100 million in FY 14, paid approximately $660,000 for annual expenses. The cost to the FMLC Trust Fund would depend on: (a) the asset value of the fund and (b) the way those assets were allocated in the CRPTF.

Administrative cost estimates are based on the administrative costs of the New Jersey Family Leave Insurance and Temporary Disability Insurance programs. The New Jersey programs cover an average 29,283 claims annually; the FMLC program is projected to cover approximately 53,500 claims annually.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation