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At the second of three Council hearings on the topic, held Thursday, experts and Councilmembers considered how much a proposed paid-leave bill supported by a majority of the Council and much of the public would cost D.C.
As it turns out, the answer is far from clear.
As drafted, the legislation would create one of the most generous paid-leave programs in the country, providing up to 16 weeks of leave for family or medical reasons that meet certain “qualifying conditions” (for example, needing to take care of a sick relative or to raise a kid). The benefit would be supported by an up-to-one-percent tax on private employers that would furnish a Districtwide fund designed to pool risk: essentially a form of government insurance.
Members of the business community have opposed the legislation since it’s been on the Council’s agenda, arguing that it would harm their bottom lines and, ultimately, make D.C. less economically-competitive than its neighbors. Labor and family-welfare groups have countered that a robust paid-leave policy would allow for greater economic stability among D.C.’s workers (federal employees who live in the District could opt into the program by paying a modest fee)—actually bolstering the economy by making workers more productive and the District more attractive.
On Thursday, though a series of public witnesses put forth those benefits, the discussion kept returning to the nuts and bolts of funding and administering paid leave. Mayor Muriel Bowser‘s office, represented in testimony given by City Administrator Rashad Young, noted that more study of the legislation is needed, and proposed a “multi-sector working group” to hash out its impacts. Young also brought up potential budgetary “tradeoffs” that may arise to cover any deficits—maybe affecting D.C.’s initiatives for affordable housing, homelessness, and public education.
The administrative costs of managing the paid-leave benefit, Young added, could range from $25 to $50 million per year; start-up costs, such as those related to building a tech-based platform for paid leave, would also be significant. Young said the executive branch supports a firm paid-leave policy “in principle,” but wants to make sure it’s viable.
“The proposal before you is progressive, but it’s not entirely outside the scope of what’s out there,” explained Vicki Shabo, the vice president of the National Partnership for Women & Families. She added that her group has found that workers “rarely” take all the paid-leave they have available to them, noting that five states (New York, Hawaii, California, New Jersey, and Rhode Island) mandate temporary-disability insurance, similar to paid-leave policies.
If enacted as is, D.C.’s paid-leave benefit would provide a maximum wage-replacement of 100 percent (for those making up to $52,000 per year), while in other states, the maximum wage-replacement hovers closer to 50 percent.
Three groups that conducted fiscal analyses based on the proposal presented conflicting conclusions at the hearing. The Institute for Women’s Policy Research, which received a grant from the Obama administration’s Department of Labor to study paid-leave, reported that Council’s current proposal would cost a total $280.8 million, or 0.63 percent of total earnings for covered workers, a year, with an average weekly program replacement wage of $1,065.
However, the firm IHS Economics predicted that the policy could create a shortfall of about $380 million, due to an estimated $721 million in costs, or more than two-and-a-half times what IWPR projects. “We do conclude that the contributions [through taxes], totaling $338 million, specified in the Act are not sufficient to meet expenses,” IHS’ report reads. “Contributions would need to be more than doubled, an increase of 113%, to meet this expenditure.”
When D.C.’s Chief Financial Officer Jeffery Dewitt testified to the committee, he said his agency’s estimated cost of the proposed benefit, which was not specified in his remarks, would exceed the nearly $476 million per year that would be collected through the one percent tax on employers as a function of gross wages, thus producing a deficit.
“We believe the substantially higher benefits will drive higher participation rates and longer duration of benefits that will result in a disparity of revenues collected and benefits paid,” Dewitt explained. “Also, we expect there will be substantial administrative costs to establish the program relating to start-up, that is, office space, technology…”
Notably, the proposal could not become law unless OFCO certified it. There are still outstanding issues, Dewitt said, such as the fact that there are no funds identified in the District budget and financial plan to administer the benefit. In addition, the CFO noted, the taxes on employers required of the policy would rank as the fourth-highest D.C. tax:
“One frustrating thing about today’s hearing is that we have some very layered and complicated material to understand, and it’s hard to do that even overnight, I imagine,” At-Large Councilmember Elissa Silverman said.
Meanwhile, Chairman Phil Mendelson, who heads the Council’s Committee of the Whole, pushed back against the notion that the working group suggested by the Mayor’s office was needed to further study the paid-leave bill.
“We are the task force,” he said of the Council’s legislative process at the end of the hearing.
A third Committee of the Whole hearing on the proposed legislation is scheduled for Feb. 11, before any amendments are made.
Photo by Darrow Montgomery; charts via OFCO