OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

SB-391

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

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

Labor Dept.

GF - Revenue Gain

Up to 150.3 million

Up to 300.6 million

Labor Dept.

GF - Cost

11 million

14.6 million

State Comptroller - Fringe Benefits1

GF - Cost

3.4 million

4.5 million

Note: GF=General Fund

Municipal Impact: None

Explanation

The bill establishes a quarterly fee on certain employers at a rate of up to $1.00 per work hour for each hour worked by an employee paid on average less than $15 per hour. This results in a General Fund revenue gain of up to $150.3 million in FY 17 and up to $300.6 million annually thereafter. This also results in a cost of approximately $14.4 million in FY 17 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, 2016, and to begin collecting fees during the first calendar quarter of 2017. 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 $445,328 in FY 17 and $593,771 annually thereafter for salary ($106,076) and fringes ($42,367) associated with the hiring of four Staff Attorneys.

There is no fiscal impact to the Judicial Department from allowing the Attorney General to file suit in Hartford Superior Court. The number of suits is not anticipated to be great enough to need additional resources. The court system disposes of over 500,000 cases annually.

REVENUE IMPACT

The revenue estimate assumes approximately 148,472 of the 752,255 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 Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation. The revenue gain described above would continue into the future subject to wage inflation and fluctuation in the number of jobs paying above and below the wage threshold triggering the fee.2

Sources:

Labor Department Labor Market Information

 

United States Census Bureau

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 The bill includes a provision increasing the wage threshold at which the fee becomes payable beginning on January 1, 2023.