Critics say it’s a new tax on already struggling businesses. Backers say it will help them compete
By Jennifer Brown, The Colorado Sun
Eight months into a pandemic, Colorado voters will decide an issue made even more relevant by current circumstances.
Should Colorado create a state-run family leave program that would allow all workers — from waitresses and mechanics to accountants and engineers — to take paid time off when they have a serious illness, need to care for a loved one, give birth or adopt a child?
Proposition 118, an idea years in the making but one that failed to pass at the state legislature six times, pits a grassroots, Democratic-backed campaign against the power of business and chambers of commerce statewide.
The ballot measure asks Colorado workers and employers each to contribute 0.45% of weekly paychecks into a statewide pool managed by the Colorado Department of Labor. Beginning in 2024, workers could apply to the fund to receive pay during time off from work — as much as $1,100 per week.
“We have cancer patients skipping their second round of chemotherapy because they can’t afford to lose their paychecks,” said state Sen. Faith Winter, a Democrat from Westminster who has worked for six years to pass such a program. “I think there is a better way. Every other country in the world, other than Papua New Guinea and us, has figured this out. Eight other states have figured this out.”
Yet, for a swath of the business community, it’s a social program that would create a $1.3 billion, untenable insurance pool for workers through one more payroll tax.
“This proposal is a massive, new $1.3 billion tax increase that will come out of every employer’s budget, every employee’s paycheck, to create a massive new state agency that’s destined for bankruptcy,” said Rachel Beck, vice president of government affairs for the Colorado Springs Chamber of Commerce.
Who would Proposition 118 help?
One in four working women in Colorado go back to work within two weeks of giving birth. And the majority of Colorado workers, about 80%, do not get paid leave through their jobs, according to the women’s advocacy group 9to5 and the Colorado Fiscal Institute.
The ballot proposal would cost the average worker about $4.50 per week, based on the average median income for Colorado of about $1,000 per week, or $52,000 per year. That’s an average of $234 per year for participating employees.
Winter, the leading proponent, said she spent about $5,000 to give one of her employees at a nonprofit paid time off after the woman had a baby, calling a statewide paid leave pool a “much better deal.” More than 130 businesses, including many small businesses, are supporting the ballot measure for that reason, she said.
“It takes the burden off of business by ensuring there is a very affordable way for our smallest mom-and-pop businesses to provide these benefits that larger businesses do,” she said.
Employers with fewer than 10 employees could opt out of the program. But workers at those small shops could still decide to pay into the pool, as could gig workers driving for companies such as Uber or Grubhub, and those who are self-employed.
Here are the key details of Proposition 118:
— Workers would get up to 12 weeks of paid time off to care for a new baby or adopted child, recover from an illness, or take care of a relative who is seriously ill.
— Employers and employees would together contribute 0.9% of the employee’s wage (that’s 0.45% each from the employer and the employee) into a statewide fund starting in January 2023. Businesses with fewer than 10 employees are exempt. Local governments and school districts could opt out. State employees are included.
— Workers, beginning in January 2024, could receive a percentage of their salary while they take time off, not exceeding $1,100 per week. Low-income workers, those earning less than half of the state’s average pay, would get the highest percentage of their salaries at 90%.
— Employees are eligible to apply for benefits after they’ve earned $2,500. If they’ve worked at their job for 180 days, their job is protected when they take paid time off.
— Employers could choose to purchase paid-leave insurance on the private market instead of through the state program. In that case, their employees would not have to pay into the state pool either.
— The state Department of Labor could up the combined employer-employee contribution to 1.2%, still equally split, should the fund face higher-than-expected demand.
Why are businesses groups against it?
The Colorado Chamber of Commerce and the National Federation of Independent Business are against Proposition 118, in particular because of the current state of the economy.
Small businesses, including restaurants and retailers, already are struggling to make payroll and even to keep their doors open because of the coronavirus pandemic, said Beck at the Colorado Springs Chamber of Commerce.
One of the chamber’s members, a husband-and-wife team with two businesses in downtown Colorado Springs, continued to pay employees even when COVID-19 shut their doors to customers, Beck said. By now, despite coronavirus relief loans, the couple has tapped their savings and is struggling to make payroll.
Nearly 70% of the chamber’s members have 25 or fewer employees. “They are just asking for help,” Beck said. The pandemic has clobbered Colorado with 700,000 people filing for unemployment since March, an economic crisis that has disproportionately affected women, Beck said. Adding a new tax on employers isn’t the best way to jumpstart hiring, she said.
Business leaders also point out that many Colorado businesses already offer paid leave, although the ballot measure’s organizers suggest those are only large companies, the Amazons and Googles of the business world.
Besides the additional expense for employers, business leaders said Proposition 118 amounts to an unnecessary expansion of government — a new social program that would require an estimated 200 state employees to evaluate applications for paid time off and calculate benefits.
“This would create the most expensive and most expansive program of its kind in the country,” Beck said.
Eight other states and Washington, D.C., have family leave programs, and in recent years, some have expanded benefits to make sure the poorest workers were able to take advantage of the program. California, for example, just upped its maximum benefit for low-income workers to 90% of their regular paycheck, the same as Colorado’s proposal. When the benefit was capped at 60-70%, the state’s lowest-income workers couldn’t afford to take the time off.
“Eight other states have made this program solvent,” Winter said. “They’ve been so solvent that they’ve expanded their programs. We believe it’s going to be a strong program for Colorado.”
As for the timing of the ballot measure, the supporters counter that employers and workers would not have to start contributing for two years, time to allow for economic recovery from the pandemic.
Would the insurance pool have enough money to cover the costs?
The 0.9% employer-employee contribution laid out in Proposition 118 comes from an actuarial study provided to a bipartisan task force that studied paid family leave last year. Like other programs across the country, high demand — or low demand — for paid time off could trigger fluctuations in the required contributions.
The actuarial report from AMI Risk Consultants recommended contributions that would range from 0.71% to 0.87% of a worker’s salary during the next 10 years in order to make the fund solvent, less than the 0.9% the ballot measure stipulates.
To come up with that range, actuaries simulated 10,000 years of claims for various insurance coverages. The group rated the fund solvent “with an 87% confidence level,” according to the campaign behind the measure.
Opponents, however, have countered with a study by the Common Sense Institute, a conservative-leaning, business-backed organization, that said the program could run out of money.
That September report, which criticized the Colorado plan for providing some of the most generous benefits in the country, predicted that more Coloradans may take advantage of paid leave than supporters are expecting.
If 6.2% of eligible workers took paid leave instead of the expected 3.53%, collections in the first year would not cover the benefits, the institute concluded. The group also said employers could end up paying twice — first to contribute to the state pool and again to replace workers while they took paid time off.