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$15 Minimum Wage, FMLA Bills Could Cost State Taxpayers Millions of Dollars

April 18, 2018 By Staff
$15 Minimum Wage, FMLA Bills Could Cost State Taxpayers Millions of Dollars

Fiscal notes from the minimum wage and family medical leave bills, which passed various legislative committees on Tuesday, come with a cost for state taxpayers.

Two bills seen as liberal priorities in the state legislature passed various committees on Tuesday, with forward momentum in the final weeks of the 2018 legislative session.

A bill to raise Connecticut’s minimum wage to $15 an hour by 2022 received a Joint Favorable report from the Appropriations Committee on Tuesday. A bill to expand paid family medical leave to the private sector received a Joint Favorable report from the Finance, Revenue and Bonding Committee on Tuesday as well.

Gov. Dan Malloy (D-Conn.) celebrated the passage of the minimum wage bill on Tuesday night.

“Every working person in Connecticut deserves to be fairly compensated – it’s that simple,” Governor Malloy said. “As I said at the start of this session, we should not allow another January to pass without an increase in the minimum wage, and I will continue to work with legislative leaders toward that goal. Today’s action by the Appropriations Committee is a welcome advancement of this important conversation that must ultimately result in a real step forward for all the low-wage workers in our state.”

What Malloy wasn’t so quick to talk about was the cost of both bills.

According to the nonpartisan Office of Fiscal Analysis (OFA), the minimum wage bill could cost the state tens of millions of dollars to implement.

Here’s how:

If the provisions of the bill are interpreted to require various human service agencies to increase contracts with private providers, it will result in a cost to state agencies to accommodate an increase in the minimum wage.

[For example,] [t]he fully annualized cost of DDS [the Department of Developmental Services] increasing provider reimbursement to accommodate an increase to $15 per hour (effective 1/1/21) for Community Residential Services (funded out of DSS) and Employment Opportunities and Day Services results in an increase in program costs of approximately $31.4 million [in fiscal year 2019] and $13.9 million [in fiscal year 2020] respectively.

Long story short: raising the minimum wage to $15 an hour costs state taxpayers more because the state has to pay workers a much higher wage.

According to OFA, the family medical leave bill will “[result] in a significant annual state cost beginning as early as FY 19.”

The bill establishes the FMLI program to provide wage replacement benefits to covered employees taking leave under certain circumstances. The program will incur start up administrative costs to DOL of at least $13.6 million prior to FY 21. The 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 bill includes authorization of $20 million of General Obligation (GO) bonds ($10 million in each of FY 19 and FY 20) for program start-up costs.

To the extent that the bonding authorized in the bill is fully allocated and expended, debt repayment of up to $500,000 on the bonds could begin as early as FY 20. Total debt service costs for $20 million of GO bonds issued at market rates in FY 19 and FY 20 is estimated to be approximately $30 million between FY 20 and FY 40.

Again, long story short: Family Medical Leave Insurance (FMLI) will cost tens of millions of taxpayer dollars, and the state will fund it by issuing more general obligation (GO) bonds.

Democrats are touting the passage of a $15 minimum wage and FMLA, but have they discussed the costs to state taxpayers enough?