# Nobody really knows how much Minnesota’s Paid Family and Medical leave scheme is going to cost

The Minnesota Senate is set to debate a proposal to create a statewide paid family and medical leave (PFML) program today. The trouble is that nobody really knows how much it will cost.

## Working backwards

If enacted, this will establish a large new state bureaucracy and impose a new, regressive payroll tax of 0.7% so that:

Minnesota’s workers will be able to take up to 12 weeks of paid medical leave and 12 more weeks of paid family leave. This is double the leave offered by most of the 11 states that currently run such a program. The program would pay out up to 90% of regular wages that don’t exceed 50% of the state’s average, which is currently $66,000 a year, with higher-earners receiving smaller percentages above that amount.

But how much will it cost?

Last month I noted that **the annual cost of the PFML program has ballooned from $781 million to $1 billion, an increase of 30% in one year**. But we don’t really know if that number is right. When this measure was proposed in a previous session, the Fiscal Note accompanying it was admirably clear in setting out the assumptions behind that estimate of $781 million annually. The Fiscal Note accompanying this bill is not.

The total of annual payouts can be estimated with this equation:

*Average weekly benefit x Average weeks of leave taken x Number of recipients annually = Total annual payout*

The Fiscal Note gives us the sum — ‘Estimated Benefits,’ $1,014,416,044 — and number of ‘Estimated Beneficiaries’ — 204,057 — but not, this time, figures for the other two variables in our equation. We are left to guess.

## How much?

With regard to the ‘Average weekly benefit,’ two numbers have been given. In the Senate Jobs Committee, the Department of Employment and Economic Development (DEED) said it would be $850. In the House Jobs and Tax Committees, however, they said that the average weekly income for the average user is assumed to be $1,287 which would give an average weekly payout of $1,003 — an increase of 18% between committees.

This makes a big difference. If we plug $850 into our equation and keep the figure for average number of weeks taken from the previous Fiscal Note — 6.6 weeks — we get a total annual payout of $1.1 billion. If, however, we use the $1,003 number, the total annual payout climbs to $1.4 billion — an increase of $300 million, or 27%.

It matters a lot which of these numbers it is using and DEED isn’t able to tell us.

## How long?

Remember, though, that we have been given the sum of the equation ($1.1 billion) and the number of people using the scheme (204,057). With the numbers for average weekly payout ($850 or $1,003), we can, with a bit of basic math, figure out the assumed value for ‘Average weeks of leave taken.’

Table 2 shows the values we need to use for average weeks of leave taken to make the sum work for either of the given values for average weekly benefit: 5.9 weeks on average if the payout is $850 a week and 5.0 weeks if the weekly payout is $1,003.

**Table 2: Assumed values for paid family and medical leave estimates **

The trouble is that these estimates bear little relation to what we have seen in other states with similar schemes. In Washington state the average annual leave is 7.5 weeks per claim and 9.5 weeks per user; in Massachusetts, the average is 12 weeks, more than double either of our estimates.

If our assumption for average weeks of leave taken moves towards the experience in these states the the numbers for PFML blow up. In a best case scenario, with an average weekly payout of $850 and average weeks used those of Washington states *per claim* numbers, total annual payouts are $1.3 billion rather than the $1.0 given in the Fiscal Note. In a worst case scenario, with an average weekly payout of $1,003 and average weeks used those of Massachusetts, total annual payouts rise to $2.5 billion, 2.5 times the current estimated cost.

## Over the cliff

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.