As Legislative Debate On Paid Family Leave Looms, Report Says Cost Could Hit $79 Million

Jan 6, 2017

A proposal to make Vermont the fifth state in the country to ensure paid family and medical leave for all employees in the state could come with price tag of as much as $79 million, according a report released this week by the Vermont Commission on Women.

Lawmakers have been talking for years about the possibility of a statewide paid family and medical leave program in Vermont. A major sticking point has been that no one knew how much it would cost.

A $170,000 feasibility study, funded by the U.S. Department of Labor, has provided the answer. And while the program won’t come cheap, supporters say the benefits outweigh the cost.

“For all of these [paid leave] models, the total cost would be less than 1 percent of the full payroll in Vermont,” says Cary Brown, executive director of the Vermont Commission on Women.

Less than 1 percent of payroll might not sound like much. Translate that into dollars though, and you get a high-end cost of $79.4 million.

That particular version of the program would give workers 100 percent wage replacement for up to 12 weeks of leave. People could use the program to take time off after having a baby, or to care for an ailing loved one, or to recover from an illness or injury of their own.

The report costs out some less generous leave plans as well. But even at $40 million for the low end of the cost range, the report is causing sticker shock for some.

“Not surprisingly one of the biggest things that pops out is probably the price tag,” says Bill Driscoll, vice-president of Associated Industries of Vermont.

The likeliest way to pay for the mandatory, statewide program is through what supporters call a "payroll deduction,” and what critics like Driscoll call a “payroll tax.” The money would go into a statewide insurance pool that employees could draw from when they have a qualifying event.

Driscoll says it’s great if employers want to provide their workers with paid family leave. He says that doesn’t mean lawmakers should proceed with a mandate.

“Employers really need more flexibility to determine what kinds of benefits are best, what will get the best return for them and their employees. And there should really be more of flexibility to pursue those, rather than have an across-the-board mandate such as this,” Driscoll says.

"Employers really need more flexibility to determine what kinds of benefits are best, what will get the best return for them and their employees." — Bill Driscoll, vice-president of Associated Industries of Vermont

Lindsay Deslauriers, Vermont director of Main Street Alliance, a coalition of left-leaning business owners, says most small-business owners would love to provide employees with paid family leave. The reality, she says, is that they simply cannot afford it.

“With a statewide family and medical leave insurance program, Vermont has an opportunity to build economies of scale that are going to help our small businesses be more competitive employers, and be able to participate in a program like this,” Deslauriers says.

Deslauriers says the cry from the business community for a more qualified, better-trained workforce has been clear. She says Vermont might not always be able to compete on wages.

“This is a way for Vermont, as a small-business state, to be competitive with those young professionals, to entice people to live and to work here,” Deslauriers says.

"With a statewide family and medical leave insurance program, Vermont has an opportunity to build economies of scale that are going to help our small businesses be more competitive employers, and be able to participate in a program like this." — Lindsay Deslauriers, Vermont director of Main Street Alliance

Brown says it’s also a way to rectify gender inequities in the workplace. The benefit would apply equally to men and women. But it’s women, by and large, who stay at home after the birth of a newborn, or leave work to care for a sick family member.

“To have the ability to take time off from work and then return to work is very significant when you’re looking at the overall lifetime earnings and career trajectory of women in Vermont,” Brown says.

The study, conducted by a Maryland-based firm called IMPAQT International, also suggests the program would bridge the opportunity gap between lower-income Vermonters and their more financially comfortable neighbors.

The amount of paid leave being taken annually by people making less than $20,000 a year would jump by 20 percent, according to the report, compared to less than 10 percent for people making $75,000 or more.

The administrative costs of a statewide program aren’t insignificant, and could be as much as $5.5 million, according to the report. But the study found that Vermont would see $3.5 million a year in avoided childcare costs with a statewide paid family and medical leave program. And it says that the program would keep 1,800 families annually from dipping below the federal poverty line.

"To have the ability to take time off from work and then return to work is very significant when you're looking at the overall lifetime earnings and career trajectory of women in Vermont." — Cary Brown, executive director of the Vermont Commission on Women

“We know that when women have access to this leave … after they have a new baby, they’re more likely to return to the same employer, for instance. They’re less likely to use public assistance,” Brown says.

South Burlington Rep. Helen Head is the Democratic chairwoman of the House Committee on General Housing and Military Affairs, the panel that will oversee whatever paid family bills are introduced this year.

Last year, the Legislature passed a bill that requires employers to provide five days of paid sick leave.

“What we realized when we passed that is there is still unmet need for people who need a longer period of time to recover from an injury or surgery or care for a loved one,” Head says.

Head says there may be a role for government in ensuring every worker has that kind of benefit.

Driscoll says lack of paid family leave is no doubt a challenge for families who might benefit from it. But he says that’s not a reason to inject more uncertainty, and higher cost of doing business, into a business community still trying to figure out how to absorb the impacts of the paid sick leave legislation.

“You don’t necessarily help the situation by adding new costs onto the system,” Driscoll says.

And Main Street Alliance might not have the broad coalition of supporters that fought so hard for paid sick leave.

Daniel Barlow is the public policy director at Vermont Businesses for Social Responsibility, one of the business groups that rallied for paid sick leave. Barlow says his group supports the paid family and medical leave proposal in concept, but he says his membership is more interested in focusing on improving access to affordable childcare.

"[Vermont needs] to be sensitive to the demand we are putting on employers." — Lindsay Kurrle, commissioner of the Vermont Department of Labor

Even if the Democratically controlled Legislature gets behind the idea of paid family and medical leave, supporters of the program still face a major obstacle. Gov. Phil Scott has vowed to reject any proposal that requires new taxes, or imposes new mandates on Vermont businesses.

Lindsay Kurrle, commissioner of the Vermont Department of Labor for the Scott administration, said in a statement that, with the paid sick leave law only now going into effect, Vermont needs “to be sensitive to the demand we are putting on employers.”

“As the governor has said in the past, employers need time to absorb new laws and regulations,” Kurrle said. “I look forward to reviewing the report more closely in the coming weeks."

Deslauriers says she thinks the proposal falls right into the Republican governor’s economic wheelhouse.

“This is a program that is driving right there, right at economic development, right at support for small businesses, right at affordability for the state,” she says.