Letter: Check the price tag on Minnesota's Paid Family and Medical Leave program before it’s too late

Opinion by John Reynolds

February 11, 2024 at 2:06 PM

Most Minnesotans check the price tag before we buy something, especially when it’s a large purchase. We want to know if it’s in our budget before we take it home.

Unfortunately, that’s not how the Minnesota Legislature works these days. Like teenagers with their first credit card, they decide what they want to buy first and then worry about paying for it later.

Minnesotans have seen this over and over in the past decade. Politicians jumped into major projects without understanding the real cost. Southwest Light Rail, MNLARS and MNsure are just a few examples of taxpayer-funded projects that turned into financial boondoggles.

The latest example is the new Paid Family and Medical Leave program, or PFML. Through a new tax on nearly everyone’s paycheck, PFML lets almost anyone take up to five paid months off per year for a wide range of reasons. This includes assisting friends, acquaintances, or anyone else – regardless of whether they’re related to or live with you – with whom there’s an “expectation” to provide care.

Before it passed, schools, cities, small businesses, and many others warned the program would cost far more than what state officials estimated.

These warnings were proved correct by an independent actuarial report released last fall. The report found that PFML will cost $200 million more every year than the Walz administration claimed. This program is funded by a new payroll tax, so the higher price tag means even more money coming out of your paycheck.

And that’s not the only place the PFML tax will show up. You’ll see it in your property tax bill because cities, counties and schools will need more money to pay for this unfunded mandate. You’ll see it in your groceries, at your daycare, and nearly every daily expense because PFML costs will be offset by higher prices.

Minnesotans should ask themselves how this keeps happening. When it comes to the biggest taxpayer-funded projects, why does this state keep getting it so wrong?

Part of the problem is that lawmakers rarely obtain independent cost estimates for major projects before passing them into law. In other words, they have to pass it to find out what’s in it.

That’s the case with PFML, which is essentially a government-run insurance company with 400 new state employees and annual budget of $75 million. PFML is both the largest mandate and largest single tax increase in the state’s history. Yet, lawmakers relied on deeply flawed cost estimates that leaned on assumptions from the program’s advocates.

The response so far has been frustrating. One of the PFML law’s sponsors said the annual $200 million cost overrun was “right in line” with expectations. There is no sign anyone will be held accountable, or that steps will be taken to protect taxpayers.

Fortunately, there’s still time to fix this before it’s too late. The National Federation of Independent Business is urging lawmakers to take simple steps this year to avoid another boondoggle.

First, check the price tag. Gov. Walz said the PFML tax would be just 0.7%, so that’s what the program should cost. If the actuarial report is correct, the PFML Tax could be anywhere from 30% to 70% higher than that. Lawmakers should make that rate permanent and make the program live within its means.

Second, make the program voluntary for small employers who can’t afford a mandate.

Third, create an affordable opt-in program for employees who still want coverage.

These recommendations are not far-fetched concepts; they are taken directly from the best parts of other state paid leave laws.

Let’s make a paid leave program that works for Minnesotans instead of a program that will bankrupt Minnesota.

John Reynolds is the Minnesota state director for the National Federation of Independent Business, which represents over 10,000 small businesses in Minnesota.

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