DEED commissioned report finds that PFML payroll tax burden will increase by 23% in just four years

Back in April, I wrote that the cost of the DFL’s paid family and medical leave (PFML) scheme had risen by 30% in just one year, from an estimated $781 million annually in 2022 to $1 billion. But, as I wrote in May, when this major piece of legislation was passed, nobody really had a good idea how much it would cost:

Minnesota is about to enact a major piece of legislation which will transform the state’s economy without any real notion of what it will cost. We are flying blind.

We are governed by deeply irresponsible people. A new report commissioned by the state’s own Department of Employment and Economic Development (DEED) confirms this.

DEED commissioned Milliman, a “worldwide provider of actuarial and related products and services,” to:

…perform an actuarial analysis of the Paid Family and Medical Leave (PFML) program established in Minnesota…Our analysis focused on the expected costs of paying benefits to covered workers and maintaining solvency of the Minnesota PFML fund.

As enacted, PFML was estimated to pay out $1 billion annually funded by a regressive payroll tax of 0.7%.

Milliman’s report, however, projects significantly higher benefit and administrative costs than the state had estimated. In the first three years of the program, Milliman projects total PFML expenses of $4.42 billion – roughly $628 million more than state officials claimed while passing the bill.

As I’ve noted before, in these circumstances either the general fund covers the deficit, the regressive payroll tax gets hiked, or payouts are cut. Milliman finds that, to cover this forecast deficit in the PFML scheme’s finances, the payroll tax would need to be:  

Year 1: 0.70% 

Year 2: 0.92% (+31%) 

Year 3: 0.78% (+11%) 

Year 4: 0.86% (+23%) 

That works out at an increase of 23% in the burden of the regressive PFML payroll tax in just four years.

Voting for goodies is always the fun part. It is never as much fun once you start paying for them.