(The Center Square) – A paid family leave insurance program that Colorado voters will decide on in November could cost employers in the state $1.34 billion in premiums once the program matures, a new report estimates.
Proposition 118 would establish the Family and Medical Leave Insurance (FAMLI) program offering up to 12 weeks of paid medical leave and another four weeks for pregnancies. Under the measure, employers and employees would contribute 50/50 to premiums that are capped at $1,100 per week. The program would initially require employees to contribute 0.90 percent of their wages for premiums.
A fiscal report from March estimated that the state would bring in an estimated $626 million in tax revenue from premiums for fiscal year 2022-23, and $1.3 billion for fiscal year 2023-24.
In 2025 once the program is matured, Colorado employers would pay an estimated $1.34 billion in premiums, said the report, presented Wednesday by the Common Sense Institute, a free-enterprise think tank.
“This would be an effective increase of the corporate income tax of 204 percent,” the report said.
The Common Sense Institute’s modeling found that if the program’s claim rate in its first year (2024) is 6.2 percent with a 9.5 weeks average leave length, it would be insolvent based on 2023 premium collections.
In 2025, if the premium is set at the capped 1.2 percent, the program could handle a 7.5 percent utilization rate at 10.2 weeks average leave length, but any higher and the program “would face insolvency and likely require further legislative action.”
The report noted that comparatively, California had a 5.45 percent claims rate and 13.1 weeks average in 2019; New Jersey had a 4.08 percent percent claims rate and 8.8 weeks average in 2018; and Rhode Island had a 7.10 percent percent claims rate and 11.9 weeks average in 2017.
The state’s fiscal report for the measure assumed a 3.53 percent claims rate for 12 weeks of leave, but the institute said it believes that participation in the program would increase as it ages.
“The one-size fits all policy could disproportionately impact small businesses since they have smaller profit margins compared to large firms,” said CSI Development Research Partners Fellow Lisa Strunk, who added that the program could lead to layoffs, benefit reductions or closures.
The report also found that as an employer, state government would have to pay out between $39 million and $94 million each year. The measure would allow local governments and employers that offer eligible plans to opt out of paying premiums.
Colorado Families First, the issue committee backing the measure, argues on its website that the program “will ensure that as we rebuild Colorado’s economy, it will be ready to keep Colorado’s people, communities, and workplaces healthy and safe.”
Joe Kabourek, campaign manager for Colorado Families First, called the study "a single, flawed analysis that contradicts the findings of numerous independent, nonpartisan economists and experts, who agree that the modest policy presented in Proposition 118 is solvent, affordable, and a good investment for Colorado’s families and businesses."
"The Institute’s analysis invents utilization rates that are purposefully exaggerated to simulate insolvency and have no attachment to the realities we’ve seen in other states that have implemented paid leave, including states with more generous leave programs," he added in a statement. "The nonpartisan actuarial study that informed the [FAMLI Task Force] report extensively analyzed Colorado’s projected utilization rates and premium rates necessary to maintain solvency of the program and Proposition 118 reflects the task force’s recommendations."
This story has been updated with response from Colorado Families First, which supports Proposition 118.