Testimony to
Senate Standing Committee on
Labor and Senate Standing Committee on Social Services

“Issues Affecting Families in the Workforce:” Paid Family Leave Proposals

Presented by
Kenneth J. Pokalsky
Vice President

March 24, 2015

On behalf of The Business Council of New York State, Inc., thank you for this opportunity to discuss “paid family leave” proposals currently before the state legislature. The Business Council is New York’s largest state-wide employer association, representing nearly 2,400 private sector employers with an estimated one million employees. Our members are in all economic sectors, and located throughout the state.

We appreciate that the current Senate/IDC proposal has attempted to address some issues of concern raised by The Business Council and others.   However, we have already expressed our opposition to a new paid leave mandate on private sector employers, including the proposal included in S.4205, Part GG, as well as the legislation approved in the Assembly last week, A.3870 (Nolan).  I would like to address several issues of concern.

Economic Conditions – We have raised concerns about regional economic conditions across New York State, and especially in upstate New York, in response to several proposed labor mandates, including paid leave and minimum wage.  There is a false impression that the private sector economy is uniformly strong across the state. The numbers tell a different story.

While job growth in New York State has exceeded national levels over the past decade - 7.5 percent in New York versus 4.5 percent nationwide – job growth within the state has been very uneven.   Since 2003, private sector job growth in Upstate New York has been under 2 percent (1.88 percent), about one-seventh the private sector job growth in New York City (13.65 percent.)

Likewise, while New York State has recovered from the 2009 recession quicker and further than the U.S. overall, recovery has been extremely uneven across New York. Statewide, private sector jobs are about 4.8 percent above their 2008 pre-recession levels. But more than half of the state’s counties outside the MTA region, 27 of 50, have yet to fully replace private sector jobs lost in the 2009 recession (i.e., they have fewer private sector jobs today then in 2008.)

In short, with much of the state still experiencing relatively slow economic recovery and ongoing job growth challenges, we believe it to be counter-productive to impose new labor cost mandates on the private sector.

State Comparisons - One might conclude from recent advocacy efforts that paid leave is the “norm,” and New York State is behind the curve in this policy area.  That is simply not true. A paid leave mandate would place New York apart from the majority of states, and impose burdens on New York employers not generally found in other states. According to the National Council of State Legislators, only three states - California, New Jersey and Rhode Island - currently implement mandated paid family leave programs. (While the state of Washington adopted legislation in 2007, its implementation was and remains suspended.) We also note that just five states – California, New Jersey and Rhode Island, plus Hawaii and New York – impose any form of temporary (non-work) disability insurance mandate on employers, and no state has adopted such a program since Hawaii did so in 1969.

We also note that the current New York proposals differ in significant ways from these other state’s laws. The Assembly proposal would provide a much longer leave period than any current state program – New Jersey and California both provide six weeks of paid leave per 52 week period, and Rhode Island provides for four.  In comparison, the Assembly proposal would provide 12 weeks of paid leave (the Senate/IDC bill proposal provides 6 weeks.) Moreover, the New Jersey, California and Rhode Island all provided that their paid leave programs are 100 percent employee funded. The Senate/IDC bill provides for mix of state and employee funding; while the Assembly bill allows only $0.45 per week increase in the allowable employee contribution, leaving the employer to pay the difference.

Cost of Mandatory TDI Benefits - Both the Senate/IDC bill, as currently presented in S.4205, and the Assembly bill passed by that house last week (A.3870) also increase the maximum benefits under the state’s mandatory, employer provided temporary disability insurance (i.e., non-work related disability) benefits. The current statutory maximum benefit is $170 per week.  The Senate/IDC bill increases this threshold to 50 percent of a claimant’s average weekly wage, with the benefit capped at 50 percent of the state average weekly wage.

Given the current state average weekly wage, the Senate/IDC bill would establish a new maximum benefit of more than $600, 3.5 times the current level. The Assembly bill increases the maximum TDI benefit to two-thirds of the claimant’s average wage, up to a maximum of 50 percent of the state average weekly wage.

We have receives some preliminary estimates of premium impacts, based on a consideration of both the Senate/IDC and Assembly bills. We have been told by insurance actuaries that the increase in the disability benefit only, the range is between 1.5 times to 3 times of the current premium. This projection does not reflect the fact that people are more likely to go on disability with increased benefit levels. For the increased disability benefit plus the paid family leave component, assuming the incidence of leave will increase by a percentage similar to California, the range of increase is 2 times to 3.5 times of the current premium.

We appreciate that the intent of the current Senate/IDC budget proposal may have been to leave the TDI maximum benefit unchanged. Nonetheless, we question the likelihood of avoiding future TDI benefit increases if the state adopted a significantly higher cap for voluntary paid leave.
As mentioned, both the Senate/IDC bill and the Assembly bill leave the cost of any enhanced TDI benefit largely for the employer to pay.
Cost Sharing - The Senate/IDC bill specifies that the cost of this program in its first year, 2016, will be paid from the state General Fund, and that in subsequent years there will be some unspecified degree of state and employee cost-sharing, providing further that employers will not be required to contribute to the cost of the family leave program. (Employers would be required to bear the cost of any increased premiums related to increased TDI benefits.)  However, we question how this cost-sharing mechanism would be implemented. Under current law, employers are obligated to secure TDI coverage from private carriers or the State Insurance Fund, and pay premiums directly to those providers. It is unclear how state funds could be efficiently disbursed to several hundred thousand premium-paying employers. One concern is that this cost-sharing arrangement could be a step toward a “SIF-only” state for TDI coverage, since that would be the most direct approach to applying a state share of premiums. The Assembly allows the employee share of total TDI/PFL costs to go up from $0.60/week to $1.05 per week.

Cost of Other Coverage Mandates - It is important to consider the additional cost and staff impact of a new paid leave mandate in context of existing coverage mandates imposed on New York State employers.

New York has the fourth highest-cost workers’ compensation coverage among the states.  According to an annual study conducted by the state of Oregon, premium costs per $100 of payroll in New York State are 48 percent above the national average. Based on New York State Workers’ Compensation Board data, our Public Policy Institute calculated that the total cost of New York’s workers’ compensation system in 2012 to be about $6 billion, approximately the same as it was before the state’s 2007 reform legislation.

While New York State historically was a low to moderate UI tax state, New York employers are paying increased UI taxes, required to repay some $3 billion in federal UI fund borrowing. The Tax Foundation rates New York as more costly than 30 other states for unemployment insurance taxes; and the Council on State Taxation shows that total UI taxes in New York, at $3.2 billion in in 2013, was more than all but three other states (California, Illinois and Pennsylvania.)

In short, these existing coverage mandates, along with other factors such as overall tax levels, energy costs and others, pose significant cost-of-doing business challenges for New York’s private sector employees. We are concerned with paid leave and other proposals that would contribute further to the state’s cost structure.

Consistency with FMLA – We have repeatedly heard concerns from human resource professionals from Business Council member companies that the lack of consistency between the federal Family Medical Leave Act and state-level paid leave proposals will result in administrative challenges. Major differences include:

In closing, I want to emphasize that employers recognize the importance of paid leave to their employee’s well-being, and to an employer’s ability to attract and retain talent.  A recent national survey by the WorldatWork Association (an HR professionals’ membership association) found that three-quarters of employers saw paid leave programs as important in order to compete for talent, and that seventy percent of employers with a PTO bank-type system and sixty percent of employers with a traditional system said that they market their paid leave programs as a key employee benefit when attempting to attract new employees.

We believe it is important to allow employers to fashion their overall leave policies based on their own circumstances and capabilities, and within the context of company-specific compensation plans.

Mandatory leave legislation impose one-size-fits all requirements on employers, regardless of company-specific capacity for employee compensation and workforce flexibility.

For these reasons, The Business Council does not support the adoption of a new employer mandate for paid family leave.

I welcome any questions or comments you may have.