House lawmakers Thursday advanced legislation that would create a statewide paid family and medical leave program in Vermont, but the bill faces some of the same political hurdles that derailed a similar proposal last year.
The legislation advanced Thursday would impose a new payroll tax on virtually all workers in Vermont to raise the nearly $80 million needed annually to fund the paid leave benefit.
The bill would allow workers to take up to 12 weeks of paid leave to care for a newborn, or up to eight weeks of paid leave to deal with a medical crisis or to care for an ailing family member.
As Vermont looks to boost a labor force that has declined precipitously over the past decade, Waterbury Rep. Tom Stevens said paid leave is precisely the sort of benefit that will help the state retain and recruit younger workers.
“Imagine a family that can take time to be with their baby together, and not have to worry about the rent or the mortgage or the bills at a time when they should be rejoicing in their new family,” Stevens said. “This program will help attract more professionals to the state, encourage young people and families to stay in Vermont, and level the playing field for small businesses.”
The bill would use a 0.55% payroll tax to fund the insurance pool from which benefits would be paid out. The assessment would be paid entirely by workers, unless an employer opted to pay some or even all of the tax.
Opponents of the legislation, like St. Albans Town Rep. Casey Toof, said his constituents have made it clear to him that they aren’t interested in another financial mandate from Montpelier. For someone making the median household income in Vermont — about $58,000 — the assessment would amount to $318 annually.
“I heard my constituents loud and clear, and there’s no way I can support adding another $80 million to the tax burden of Vermonters,” Toof said.
The Democratically controlled House and Senate passed a similar paid leave bill last year, but Republican Gov. Phil Scott vetoed the measure.
Scott said it isn’t that he doesn’t support the paid leave concept. What he objects to, he said, is the mandatory nature of the Legislature’s proposal.
Scott earlier this year unveiled a proposal for a voluntary paid leave program that would include workers from both Vermont and New Hampshire. If workers want to participate, Scott said they can opt in to the payroll tax; If not, they wouldn’t see any deductions from their paychecks.
Scott’s director of policy and legislative affairs, Kendal Smith, said under the governor’s plan employers could also choose to purchase the paid leave benefit for their employees.
“The business can recognize the intrinsic value of offering this to their employees, but doing it in a way that works for them,” Smith said.
However, the six states that have adopted paid leave laws so far — California, New Jersey, Rhode Island, New York, Massachusetts and Washington — made them mandatory. And Democratic lawmakers, like Middlebury Rep. Robin Sheu, said there’s a reason they didn’t go with voluntary systems.
“What happens is you end up with something called adverse selection,” Scheu said.
“Adverse selection” happens when the people who sign up for an insurance program are statistically the most likely to draw down benefits. Leave it up to workers to decide whether or when to opt in to a paid leave program, and Scheu said the risk pool will be filled with people who anticipate using the benefit in the next calendar year.
“And then the rates go up, which means that people down the road may be less likely to opt in, because now they see it’s so expensive, so it becomes a downward spiral,” Scheu said.
Administration officials say that, based on preliminary talks with insurance carriers, they don’t think adverse selection will be an insurmountable problem in a voluntary program. House Democrats remain skeptical, however, and handily defeated an amendment Thursday that would have made the program voluntary.
While the underlying bill ultimately passed by a 92-52 margin, that vote could be significant as the paid leave debate wends its way through the final month and a half of the legislative session.
House lawmakers need 100 votes in order to override a veto. And unless House leadership can generate more support for the paid leave proposal in the coming weeks, Democrats won’t be in a position to override the governor’s veto power, should he choose to exercise it again in 2019.
