JFO Scores Paid Family Leave, and YIKES.

by Rob Roper

The Joint Fiscal Office released its report on the Paid Family Leave bill, and the costs to implement the program far exceed the $79 million (0.93%) payroll tax on employees. We must also consider things like the costs to temporarily replace workers on leave and the administrative costs or complying with the program.

The estimated administrative costs amount will cost employers an estimated $5.5 million, or 7.5% of benefits. What they don’t mention is the expected cost resulting from fines for businesses that don’t, can’t, or improperly comply with the record keeping necessary to track workers’ time off.

JFO did not provide an estimate of what it would cost to temporarily replace all workers state-wide who take leave, but did estimate that the cost for state employees alone could be as much as $12.6 million in 2020 – if the average leave time does not increase with the new benefit, which is a pretty big “if.”

The state will also need to invest $2.5 million in a new IT system to administer the program. We all know how well state IT systems work and how often they are implemented at or under cost.

JFO also warns the long term cost of the program is not realistic and likely to increase substantially beyond what the 1% payroll tax cap set in the bill will cover. The proposed Vermont benefit is more generous than the other handful of state plans that already exist (100% wage replacement up to $52,000 while other states range from 55% to 90%, and 12 weeks for family care as opposed to 4-8, for example).

There’s more. Here’s the full Fiscal Note.

- Rob Roper is president of the Ethan Allen Institute. 

{ 1 comment… read it below or add one }

Jim Bulmer April 8, 2017 at 1:04 am

Here we go again. They’re establishing benefits for which there is insufficient funding. How can that be? Simple, they did not do due diligence. How to solve the problem? Simple, they’ll find a new tax scheme to fund the shortfall. Will we ever learn????

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
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