Vermont Business Magazine Governor Phil Scott today did what was expected he would do with the recently passed family leave bill except that he did it faster than expected. Scott announced his veto of the bill Friday afternoon and that he will move forward with his own voluntary paid family and medical leave program. He said he vetoed H107 because it levied a $29 million payroll tax on Vermont workers to fund a mandatory paid leave program.
The Vermont House passed H.107, the Paid Family and Medical Leave bill, January 23 on a vote of 89-58. The Senate had passed it on a 20-9 vote on January 17th.
The Democratic leadership in the House would need 100 votes to override the veto.
“I share the goal to provide a program that allows workers time to take care of family and personal health needs, and to bond with new children,” said Governor Scott. “That’s why my administration has advocated for, and acted on, a voluntary paid family and medical leave plan.”
The governor’s veto message (included below) outlines his objection to raising a $29 million payroll tax on all Vermont workers. He also outlined concerns that the bill didn’t account for all costs to establish and administer a new state benefit and bureaucracy.
Scott said he believes the state can work towards the same goal by starting with a voluntary program that doesn’t rely on a payroll tax. His voluntary plan is already moving forward, having reached an agreement with the Vermont State Employees Union to provide a paid family and medical leave benefit to state employees and using this 8,500-member pool to create an affordable family and medical leave insurance option.
The state is currently seeking insurance providers through a competitive bidding process. The selected insurer will not only provide paid family and medical leave coverage to state employees, it will also be required to make the coverage available for purchase by Vermont employers and individuals at a rate comparable to the state rate.
“My administration’s approach is voluntary for employers and employees. It can be accomplished more efficiently, affordably and quickly, without a $29 million payroll tax that Vermont workers simply should not be burdened with, and without putting the risk of underfunding on taxpayers,” he added.
The bill would levy a 0.20 percent payroll tax, with the opt-in costing the worker 0.38percent.
The bill ensures that any employee who works at least 675 hours in the past four calendar quarters for a company (with 10 or more employees who work at least 30 hours a week) is eligible for paid family leave and may choose to opt in for personal medical leave. Those in lower income brackets would receive proportionally higher wage replacement. Eligible employees may take up to 12 weeks for bonding leave (if two parents are eligible, each parent receives up to 12 weeks), 8 weeks for family care leave, and 6 weeks for voluntary medical leave.
A personal medical leave piece is an opt-in program for employees who choose to have personal medical leave as part of the program.
Vermont House Speaker Mitzi Johnson released the following statement today in response to the Governor’s veto of the Paid Family and Medical Leave Bill, H.107.
“I am incredibly disappointed that the Governor chose to veto the Paid Family and Medical Leave bill. The impact of paid family leave on the lives of Vermonters cannot be understated. Our members represent their constituents across the state and supported this bill because they heard first-hand how needed this bill is and how twelve weeks of paid family leave, or eight weeks of family medical leave, would grow our workforce, attract young people, and support the lives of working Vermonters.
“The Governor speaks often of compromise and his willingness to work across the aisle. Unfortunately, he never shared the details of how much his program would cost Vermonters, nor did he put a good faith effort into standing up the program. It’s telling that Governor Sununu of New Hampshire walked away from the two-state proposal.
“The Legislature’s bill represents a significant movement by the Legislature toward his position. It’s disappointing that he is unable to accept this compromise proposal that will benefit so many Vermont families.
“The good news for Vermonters is that the Legislature will have an opportunity to stand with them and override this misguided veto. This debate is not over and the House will take prompt action next week.”
The Governor’s veto message to the Legislature is included below:
“Pursuant to Chapter II, Section 11 of the Vermont Constitution, I am returning H.107, An act relating to paid family leave, without my signature because of my objections described herein:
“Reversing our demographic crisis and the negative economic impacts it is creating across the state, is the only way to ensure we can continue to invest in essential services and shared priorities, such as a more expansive paid family and medical leave program. We must not pass, and I will not support, legislation that worsens the affordability challenges and regional economic inequity in our state.
“I share the goal to provide a program that allows workers time to take care of family and personal health needs, and to bond with new children. That’s why my administration has advocated for, and acted on, a voluntary paid family and medical leave plan.
“Our approach is voluntary for employers and employees. It can be accomplished more efficiently, affordably and quickly, without a $29 million payroll tax that Vermont workers simply should not be burdened with, and without putting the risk of underfunding on taxpayers.
“This voluntary plan is already moving forward. We’ve come to an agreement with the Vermont State Employees Union to provide state employees with a paid family and medical leave benefit. This allows us to create an 8,500-member base to establish an affordable family and medical leave insurance option for all Vermonters.
“We’ve issued a request for proposals (RFP) for insurance companies to bid on covering state employees as of July 1, 2020. The successful bidder will also be required to make the coverage available for Vermont employers and individuals at a rate comparable to the state-rate. And, we expect to be able to make it available at least a year before H.107 is projected to provide benefits to Vermonters.
“This approach gives the state flexibility, and we could always add to it, or even make it mandatory in the future if deemed necessary. But we’ll have a stronger foundation and tested administrative structure to build on. I truly believe this is an approach that will make this important benefit available to Vermonters more quickly, and is a more economically and fiscally responsible – lower cost – path to getting where the Legislature proposes to go in H.107. Importantly, it doesn’t require a $29 million payroll tax that we all know could grow.
“My objections to H.107 also extend beyond the tax on workers. H.107 creates a cumbersome bureaucracy with the potential for long-term administrative issues and costs for the Departments of Tax (Tax), Labor (VDOL) and Financial Regulation (DFR) – and the program as a whole. No other program in state government is simultaneously administered by three different Departments, as H.107 proposes for this program. And H.107 fails to take into account increased administrative costs at Tax and DFR, and underestimates the costs at VDOL, which will add to pressures on the General Fund.
“For years, Vermonters have made it clear they don’t want, nor can they afford, new broad-based taxes. We cannot continue to make the state less affordable for working Vermonters and more difficult for employers to employ them – even for well-intentioned programs like this one. Vermonters can’t afford for us to get this wrong, especially at their expense.
“Based on the objections outlined above, I cannot support this legislation and must return it without my signature pursuant to Chapter II, Section 11 of the Vermont Constitution.”
Source: Montpelier, Vt. – Governor 1.31.2020