0Human Services Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-391

Title:

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

Vote Date:

3/15/2016

Vote Action:

Joint Favorable

PH Date:

3/8/2016

File No.:

SPONSORS OF BILL:

Human Services Committee

REASONS FOR BILL:

To recoup costs for subsidized services provided to low wage earners who work as health care providers, day care workers, and service personnel earning less than $15 per hour.

RESPONSE FROM ADMINISTRATION/AGENCY:

None submitted.

NATURE AND SOURCES OF SUPPORT:

LINDSAY FARRELL, Connecticut Working Families, testified: “Exploitive corporations like Walmart, McDonald's and others have developed money-making models that rely on their employees receiving public subsidies such as HUSKY, food stamps, earned income tax credits, housing, child care and others. . . . These employers keep wages for their employees extremely low to maximize profits. This is not an unfortunate byproduct of the marketplace; it is a chosen business practice, adapted to outsource costs that are typically the responsibility of an employer onto public budgets.”

SARAH LEBERSTEIN, Senior Staff Attorney, National Employment Law Project, testified: “Large corporations pay low wages in Connecticut even as profits at many of these corporations have grown significantly in the post-recession recovery. Low wages force Connecticut's workers to rely on public assistance to afford basic necessities. Low wages paid by large, profitable employers present a significant cost to the public. The low-wage employer fee would provide a much-needed source of funding for child care and health care services to better meet the needs of Connecticut's working families. The experiences of several leading large employers demonstrate that higher wages are consistent with a profitable business model.”

DEREK THOMAS, Fiscal Policy Fellow, Connecticut Voices for Children, testified: “The rise in low-wage work is a double whammy to the state's fiscal health. First, as low-wage jobs grow faster than high-wage jobs, state revenue streams are hurt by decreased income tax revenue. Second, some of the largest and most profitable employers in industries that have seen the strongest growth during the recovery are relying on public assistance programs to subsidize the low wages they pay their employees.”

HELENE FIGUEROA, CSEA Local 2001, testified: “Forcing these bad-actor companies to pony up a fee for every employee that is not paid a living wage for a hard day's work is only fair. Applying those fees to critical social needs such as higher quality child care would lift many boats.”

JO-ANN JOHNSON, CSEA Local 2001, testified: “I am a child care provider in Bloomfield. I make it possible for employees to get and keep their jobs. . . . Why shouldn't really profitable corporations pay their employees a wage they can live on, or else pay into a state fund that would help their employees with child care?”

PAUL FILSON, Director, SEIU State Council, testified: “It is time for hugely profitable large corporations to pay their employees a decent wage. . . . Workers employed full-time by one of these low-paying employers are eligible for multiple public subsidies. Should the state and taxpayers encourage this model?”

LORI PELLETIER, President, Connecticut AFL-CIO, testified: “We support this legislation provided it will contain language exempting those employees covered by a collective bargaining agreement.”

BEVERLY BRAKEMAN, Political Director, UAW Region 9A, testified: “It is estimated that passage of this bill could bring millions of dollars into the state. . . . Childhood educators are under-resourced and over-worked. The majority are women and minorities. As Connecticut taxpayers we are subsidizing large, profitable corporations whose employees are paid such low wages that they need public assistance.”

ZAK LEAVY, AFSCME Council 4, testified: “This bill can be expected to collect between $250 million and $300 million, which would provide better funding for services such as care for elderly and disabled persons, child care subsidy programs, and other programs that help the families of low-wage employees.”

ANN PRATT, Organizing Director, Connecticut Citizen Action Group, testified: A recently published article reports “that New England states spent $1.8 billion on Medicaid and TANF expenditures to families that are working. Child care workers and home health care workers are most likely to be on public assistance programs because of their low wages. . . . This legislation will go a long way to substantially mitigate the hardship that so many Connecticut families are experiencing, and will hold large, profitable, multi-national corporations accountable.”

ERIN JOHANSSON, Research Director, Jobs With Justice, testified: This bill “would be a big step towards getting the state's largest low-wage corporations to pay their fair share, so employees, communities and taxpayers are not stuck bearing the burden of low wages.”

CRYSTAL WILLIAMS, Child Care Worker, testified: “Our state shouldn't be leaving its most vulnerable out in the cold. I've worked in child care for more than 16 years and I'm paid about $12.50 an hour, which means I struggle to make ends meet and skimp on groceries and bills. . . . As prices keep going up, my pay has stayed the same. Even after I got my CDA credentials there was no pay increase. . . . The low-wage employer fee would add much- needed money into state child care programs.”

TAMARA and DENISE HARWELL, Child Care Teachers, testified: “We do one of the most important jobs – nurturing and educating the next generations of Americans – but we're not paid enough to provide for ourselves or support our families. . . . Every family in my center is low income. They cannot afford to pay a nickel more.”

MICHELE MUDRICK, Legislative Advocate, Connecticut Conference, United Church of Christ, submitted testimony: “(The UCC) is in support of economic justice for all, and large, profitable corporations need to pay their fair share if they are not paying their employees enough to support their families' needs.”

WILDALIZ BERMUDEZ, Minority Leader, Hartford City Council, supports the bill. “As a resident and Council Member of our Capitol city, I've seen our residents having to struggle between important economic decisions that will impact their families forever, just because they cannot afford to live without government's assistance. Hartford has a large number of retail stores and chain restaurants that employ our residents but don't offer a living wage, affecting their ability to purchase goods and services.”

The city has limited resources to provide better education for residents, causing them to work at lower paying jobs. These employees are not just teens, but are often adults, mostly women, who need full time work to provide for their families. These women often need government sponsored child care, medical insurance and nutrition assistance.

The state will save money if public assistance programs should be subsidized by employers refusing to increase minimum wage. Employers will not leave the state because their customers live here and the amount of money they can make here.

Also submitting written testimony echoing the above were:

EDIE REICHARD, Day Care Center Director, Hamden

RORY GALE, Small Business Owner, Hartford

DESTINY RODRIGUEZ, McDonald's employee, Hartford

STEPHEN ANDERSON, CSEA Local 2001

Bridgeport Child Advocacy Coalition

NATURE AND SOURCES OF OPPOSITION:

MICHAEL SEID, Managing Director, MSA Worldwide, testified “It is essential to understand that while the franchisee and franchisor share a common brand, and while all franchisees in a system share that common brand, they are all independent business people... Making labor decisions, including the amount paid to staff, is not a brand standard that franchisors can establish or enforce under the law. SB 391 appears to make the improper assumption that the franchisor and franchisee have some collective control over each other's day-to-day business affairs. This is absolutely untrue. . . .

“With SB 391 the basic premise of a licensing arrangement changes in Connecticut for franchisors and franchisees, resulting in a market that is no longer a viable place for either to do business.

“SB 391 will damage the equity value built by existing franchisees in Connecticut as they will now have difficulty selling their businesses and likely will be unable to expand under the franchisor's marks. The additional costs imposed on the franchisors will, by necessity, be passed on to franchisees as well, and from them to consumers already challenged by the high cost of living in Connecticut. SB 391 will challenge the economic viability in Connecticut for all franchising.

ERIC GJEDE, Assistant Counsel, Connecticut Business & Industry Association, testified: “SB 391 is based on the false notion that all employees working for big box retailers and franchise restaurants are receiving state services. Furthermore, this bill will only serve to drive down the weekly wages of low-skilled employees, who will never see a dollar of the punitive tax it imposes.

“While the proponents believe this bill is targeting big business, and it is, it also impacts small businesses and low-skilled workers. To pay the penalties imposed in this bill, businesses will have to increase their prices or reduce costs by cutting back on employee hours. The result is fewer jobs and opportunities for low-skilled workers.

“Businesses across the country look at legislation like this and make the choice to grow their business elsewhere. One periodical characterized the nearly identical bill from last session as 'Connecticut's novel way to kill jobs.'

SUZANNE BATES, Policy Director, Yankee Institute for Public Policy, testified: “This tax would mean fewer entry-level private sector jobs in our state. Dr. Mark Gius, Quinnipiac University economics professor, says the effects of this tax for workers could include fewer jobs, lower wages and benefits, and more automation of jobs.

“The money collected by this tax would go into the General Fund, presumably to pay for services for those who earn low wages. In the long run, however, this tax will lead to fewer jobs and therefore more people who need services. This tax will not lift people out of poverty. Better jobs will.”

SCOTT FANNING, President, Connecticut Franchisee Association, submitted testimony: “This bill appears to be a back-door attempt to force small business owners to pay an effective minimum wage that is more than 50 percent higher than the current actual minimum wage. It uses a penalty tax to punish employers who are adhering to the law by paying at least the statutory minimum wage. . . . Small business owners, like the many Dunkin' Donuts family operators living and working in your districts, cannot afford the cost of these new mandates.”

National Federation of Independent Business submitted testimony: “This legislation is bad policy and not only will be a significant financial and administrative burden on employers, it also raises several legal and Constitutional questions – not to mention the lack of an actual nexus between the purported intent and the actual effect of the bill.”

WAYNE PESCE, President, Connecticut Food Association, submitted testimony: “This bill is an imperfect example of why Connecticut's business climate has a perception of being uncompetitive. This type of legislation exists nowhere else in the Unites States for good reason, and it adds an unintended disincentive to do business in our state.

“The grocery industry is a penny-profit business with a bottom line yield of 1 percent to 1.3 percent. If 250 employees of a business are making less than $15 per hour, and each works an average of 20 hours a week, that results in a tax of $5,000 per week for that business. A tax of this magnitude would leave our industry no choice but to reduce other benefits and raise grocery prices.

This tax would further subjugate the food industry's ability to recover and create additional jobs.”

Reported by: Nancy V. Ahern

Kristen Traini

Date: March 30, 2016