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Last Thursday, the D.C. Council held a day-long hearing on proposed legislation that, as introduced, would provide almost all the District’s workers with up to 16 weeks of paid leave for family, medical, and even military situations.
Toward the end of that session, D.C.’s Chief Financial Officer Jeffery DeWitt testified that there currently is not enough information for his office to make a final judgment on the bill’s costs, an independent certification required for it to become law. DeWitt did say, however, that the expected costs of the proposed benefit (from paying out and administering it) would likely exceed anticipated revenue, which OCFO has initially pegged at nearly $476 million. A Districtwide paid-leave fund would be financed by a tax of no more than one percent on employers’ gross wages.
DeWitt’s testimony followed those of others who had studied the proposal and reported a gaping range of projected costs, from, approximately, $280 million by the Institute for Women’s Policy Research to $720 million by the firm IHS Economics and upwards of $1 billion by some academics. How could their conclusions have varied so widely?
“I think the main thing is they overestimated the take-up rate,” says Heidi Hartmann, president of IWPR. “There are three main variables: who’s going to take it up, how long are they going to take it up, and how much is it going to cost? Also any interactions between them: If the benefit is higher, you might take it for longer than if it weren’t.”
Hartmann wasn’t necessarily digging at the other researchers’ work. Instead, she was trying to explain how a group of experts could reasonably disagree about economic modeling: essentially, by working with different assumptions.
“The key difference in the estimates results from our estimates of the number of individuals who would participate in the paid leave program,” writes Jim Diffley, senior director at IHS Economics, in an email to City Desk. “Our estimate is based on the experiences in New Jersey and California, applied to the considerably more generous D.C. bill, particularly as to wage replacement.” (In addition to those states, Rhode Island also has a paid-leave program.)
These assumptions matter because the D.C. Council’s Committee of the Whole must now figure out a way to make the legislation viable. A third public hearing on the paid-leave proposal is scheduled for Feb. 11. But before that day, Chairman Phil Mendelson says he hopes the committee can prepare a draft print—or revision—that will be closer to whatever final version gets voted on by the Council. Because the bill is so complicated, Mendelson says the draft print will allow the committee to clarify or tighten up some provisions to focus the discussion on possible changes.
“It would be a mistake to send the bill as is, I mean for it to be entrenched, because I think all that has to be in play to ensure the bill provides maximum benefits while at the same time it’s not unfriendly to businesses,” Mendelson says, referring to specific provisions like the wage-replacement rate and the duration of the paid leave. “I think it’s possible to strike that balance. We’re just not sure where it is yet.” He adds that the bill could ultimately make the District “more competitive in the region” on account of a “level playing field” among businesses who locate in D.C.
At-Large Councilmember David Grosso, who largely authored the bill, says Thursday’s hearing shed light on the importance of the “overall administration of the program” for him. He adds that he’s hoping to have a third-party administrator (TPA) mechanism built into the draft print, such that the District can better estimate administrative costs of the program: D.C. would put out a request for proposal to an external vendor that would manage the paid-leave fund rather than a city agency. Thus, an individual requesting paid leave would apply for it through the TPA, which would then attempt to determine their eligibility, check for fraud, and pay them their wages directly. At the hearing on Thursday, City Administrator Rashad Young testified that administrative costs would be “significant”; potentially upwards of $25 million per year.
“It would take the burden off businesses and the government,” Grosso explains of the potential TPA. “It’s not that complicated to do. We’re going to take all these variables and put them through the models to see what we can get.”
Grosso adds that he’s mindful of how tweaking the wage-replacement rate for paid leave could also affect the take-up rate: If policymakers lower the share or maximum amount of wages that workers can be reimbursed, then fewer might choose to apply for paid leave. In turn, this could have a regressive effect on the District’s low-wage workers.
“One tweak affects the other,” the councilmember explains.
Precisely who benefits and how much from whatever paid-leave program goes up for vote seems to be among local lawmakers’ major concerns. At-Large Councilmember Elissa Silverman says she “feels very strongly” that having a high wage-replacement rate is essential for the program. (As introduced, the bill would let employees who make up to $52,000 per year recoup 100 percent of their wages; those who make more than this amount would get “50 percent of average weekly wages in excess of $1,000 up to a maximum weekly benefit [of] $3,000”). Silverman says she’s looking forward to drilling into the analyses presented on Thursday, which she thinks is “pivotal information.”
“We want to make sure the program works for the city, gets a clean fiscal-impact statement, and is the best for us.”
Photo by Darrow Montgomery