OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

HB-6932

AN ACT CONCERNING PAID FAMILY AND MEDICAL LEAVE.

AMENDMENT

LCO No.: 7677

File Copy No.: 385

House Calendar No.: 241


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 16 $

FY 17 $

Labor Dept.

See Below - Cost

4.8 million

13.4 million

State Comptroller - Fringe Benefits1

See Below - Cost

1.4 million

3.9 million

Treasurer

Connecticut Retirement Plans and Trust Funds - Cost

75,000

None

Treasurer

Connecticut Retirement Plans and Trust Funds - Cost

See Below

See Below

Various State Agencies

All Funds - Potential Cost

See Below

See Below

Note: All Funds=All Funds

Municipal Impact:

Municipalities

Effect

FY 16 $

FY 17 $

Various Municipalities

Potential Cost

See Below

See Below

Explanation

The amendment strikes the underlying bill and its associated fiscal impact.

The amendment 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 amendment'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 amendment 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 amendment'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 or delayed and would not have a fiscal impact on the state.

The amendment 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. 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.

Expanded FMLA Municipal Impact

The amendment 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 amendment 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 amendment 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 amendment.

Expanded FMLA Administrative Costs

The amendment expands the FMLA law by reducing, from 75 to two, the minimum number of employees that makes an employer subject to FMLA. The amendment 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 amendment would expand coverage to approximately 98,000 employers with approximately 1,666,400 employees.

FMLC Program

The amendment 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 amendment 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 March 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 amendment specifies that the FMLC Trust Fund must reimburse the General Fund for any costs incurred for administering the program and providing compensation to covered employees no later than June 30, 2016. To the extent that sufficient funds are available through the FMLC Trust Fund by that point, this could potentially offset any general fund costs incurred.

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

Sources:

Core-CT Financial Accounting System

 

Department of Administrative Services

 

New Jersey Department of Labor

 

Report of the Connecticut Family Medical Leave Insurance Task Force

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 38.65% of payroll in FY 16 and FY 17.

2 According to a 2014 Department of Administrative Services study.

3 On average, the cost to DOC for a correction officer to work one overtime hour is $39.