By Rob Roper
Joyce Manchester, a senior economist for the Vermont Joint Fiscal Office, testified before the House Committee on Housing, Military and General Affairs regarding the estimated cost of implementing the proposed mandatory, government-run Paid Family Leave program. The total estimated annual price tag is $106 million. This number does not include start-up costs, and is potentially underestimating the ongoing administrative costs, perhaps significantly.
As for those start-up costs, the program would require a new IT system to operate. Estimates for this were between $500,000 and $80,000,000. That’s not a typo. Apparently, the options run the gamut from the tech equivalents of a Lamborghini to a unicycle. Committee chair Tom Stevens settled on an estimate of $10 million as a reasonable starting point for purposes of discussion and future analysis. But this is a wild guess, and, of course, we all know how well the state does with new IT systems (think Vermont Health Connect).
This Paid Family Leave proposal, for which the $100 plus million necessary to pay for it would come from a brand new payroll tax, would guarantee some (more on defining “some” in a later post) employees 12 weeks of leave at full pay up to a little more than $1000 per week for bonding with a new child, or 6 weeks to help care for a sick relative. If the costs exceed these conservative estimates, and many think the certainly will, the payroll tax rate will be increased to meet the demand for revenue.
David Simendinger, president of Champlain Farms, which operates 36 convenience stores in Vermont, testified following Manchester. He was blunt, saying, “This has the potential to bankrupt us.” Simendinger further noted that there is no incentive in the bill to encourage someone who takes advantage of the Paid Leave program to return to work when the money runs out.
It is hard enough for Vermont employers to find workers, and once found, depend upon them to reliably show up for work. A government program that pays employees their full salaries not to work will make this dynamic even more difficult for employers.
Simendinger speculated that if this passes, on day one there will be a lot of employees out there figuring out how to game the system so that they can spend six weeks of summer caring for a “sick relative” while receiving 100 percent of their salary at taxpayers’ expense.