OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

sSB-221

AN ACT CONCERNING PAID FAMILY AND MEDICAL LEAVE.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

Labor Dept.

GF - Cost

None

150,000

State Comptroller - Fringe Benefits1

GF - Cost

See Below

59,910

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 - Cost

See Below

See Below

Labor Dept.

GF - Cost

See Below

See Below

Labor Dept.

Family Medical Leave Compensation Trust Fund - Cost/Revenue Gain

See Below

See Below

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

Municipal Impact:

Municipalities

Effect

FY 17 $

FY 18 $

Various Municipalities

Potential Cost

See Below

See Below

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 17, as well as a potential cost to various municipalities beginning in FY 18. These impacts are explained in detail below.

Expanded FMLA State Employee Impact

The bill's expanded eligibility for FMLA 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 FMLA monthly.2

This bill would result in costs to certain state agencies with large numbers of employees such as the Department of Correction (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 $2,975 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.

Expanded FMLA Municipal Impact

The bill expands private sector FMLA provisions to municipalities. 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 a shift covered by an employee with a higher salary, or by an employee working an overtime shift.

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 beginning January 1, 2018. 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 $209,910 in FY 18 and $419,820 annually thereafter associated with one Principal Attorney ($100,000 for salary and $39,940 for fringe costs), two Staff Attorneys ($75,000 for salary and $29,955 for fringe costs), and one Administrative Assistant ($50,000 for salary and $19,970 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 3,185 employers with 1,042,067 employees covered by existing FMLA law; it is projected that the bill would expand coverage to approximately 60,600 employers with approximately 1,626,000 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 approximately $13.6 million in FY 17 and up to $18.9 million annually thereafter, 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 March 1, 2017. Consequently, it is assumed the General Fund will cover the costs of the program until such time that FMLC Trust Fund revenues are sufficient.4

The FY 17 start-up costs include approximately $4.7 million in salaries and fringe costs, $7.7 million for information technology, $776,700 for overhead and capital needs, and $340,000 for outreach and marketing. The fully annualized cost of program administration increases to approximately $18.9 million beginning as early as FY 18.

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 17. 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 costs identified in the “Implementing Paid Family and Medical Leave Insurance Connecticut” report undertaken by the Institute for Women's Policy Research pursuant to a contract with the Labor Department.5

The Out Years

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

 

Institute for Women's Policy Research "Implementing Paid Family and Medical Leave Insurance Connecticut"

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 39.94% of payroll in FY 17 and FY 18.

2 According to a 2015 Department of Administrative Services study.

3 On average, the cost to DOC for a Corrections Officer to work one overtime hour is $39.62.

4 The bill specifies that any funds expended from the General Fund for the purpose of administering the FMLC program be reimbursed no later than June 30, 2018.

5 Section 413 of PA 15-5 JSS required the Labor Commissioner to contract with a consultant to create an implementation plan for a paid family and medical leave program by October 1, 2015, including an actuarial analysis and report on the employee contribution level needed to ensure sustainable funding and administration for the program.