BILL ANALYSIS Ó
AB 908
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
908 (Gomez) - As Amended March 18, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill increases the level and duration of benefits provided
in the Paid Family Leave (PFL) insurance program. Specifically,
this bill:
AB 908
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1)Increases the maximum duration of PFL insurance benefits from
6 to 10 weeks.
2)Establishes a minimum weekly benefit amount of $250.
3)Increases the wage replacement rate for PFL benefits from 55%
to either 65%, 75%, or 80% depending on an individual's wage
level as it relates to the "annual full-time minimum wage
level," and defines this term as a product of the California
minimum wage and 2,000 hours.
FISCAL EFFECT:
1)Increasing the benefit duration and wage replacement level
will result in a projected increased in expenditures from the
Unemployment Compensation Disability Fund (UCDF), the special
fund that pays for State Disability Insurance (SDI) and PFL
benefits, in the range of $700 million annually.
2)If utilization of the program grows due to the enhanced level
of benefits offered, expenditures could be slightly higher
than indicated here. For example, under assumptions of
increased claims of 5% for higher-income and 20% for
lower-income wage earners, increased take-up would result in
expenditures of an additional $110 million annually (UCDF).
3)EDD would likely adjust worker contributions to ensure
benefits are adequately funded. Currently, participating
workers pay around 1% of wages, up to the first $104,000 of
wages, to fund SDI/PFL benefits. On an ongoing basis, it is
projected the expansion of benefits as indicated in comment
(1), above, would require an increased contribution of 0.13%
of wages subject to the contribution. This could
hypothetically require, for example, the EDD to increase the
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contribution rate from 1.0% of wages to 1.13% of wages. In
practical terms, EDD adjusts the contribution by 0.1%
increments and so would likely require a higher contribution
of either 0.1% or 0.2% in each year, as compared to current
law.
4)Administrative costs to the Employment Development Department
(EDD), for information technology changes estimated at
$850,000 (UCDF).
COMMENTS:
1)Purpose. The author states this bill is a needed adjustment
to a program that has been a lifeline for working
Californians, but that many cannot access because wage
replacement levels are too low. Additionally, the author
points out many workers are guaranteed 12 weeks of job
protection through the Family and Medical Leave Act and the
California Family Rights Act, but they are often forced to
forgo their wages during leave because PFL only offers 6 weeks
of benefits. The author believes the modest expansion in this
bill will enhance economic security for California workers
while ensuring fiscal sustainability. The bill is
author-sponsored and supported by a coalition of labor,
women's rights, family law centers, and advocates for
low-income individuals, and small businesses.
2)Paid Family Leave Program. PFL was enacted in 2002 to extend
disability compensation to individuals who take time off work
to care for a seriously ill child, spouse, parent, domestic
partner, or to bond with a new minor child. California was the
first state to implement a paid family leave benefit. In
calendar year 2014, nearly 240,000 PFL claims were filed,
approximately 90% of which were bonding claims. Many confuse
the PFL program (which provides only wage replacement during
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leave) with the job protection guarantees in the federal
Family & Medical Leave Act (FMLA) and the California Family
Rights Act (CFRA); however, the changes to PFL benefits in
this bill do not affect these job protection laws.
The PFL program provides a cash benefit set at 55% of "base
period" wages for up to 6 weeks. The maximum weekly benefit
is currently set at $1,104 and is adjusted every year based on
the statewide average weekly wage. All private-sector
employees, and public-sector employees who have opted in,
participate in the program.
Studies have shown paid family leave policies have positive
impacts on infant and maternal health, have been associated
with greater labor-force attachment (women retaining jobs into
their pregnancy and returning to work after giving birth), and
have resulted in increased wages for some women. Surveys have
found no impact, or positive impact, on business from the
implementation of the program. However, policy reviews of the
program by researchers, the Senate Office of Research, and
others have recommended ways to strengthen the program,
including increasing the wage replacement rate to enhance
financial security for claimants.
3)Funding. Benefits for SDI and PFL are paid from revenues in
the UCDF, which in turn is funded through worker
contributions. EDD, which administers this program, is
authorized to increase worker contributions up to a maximum
rate of 1.5% of wages to fund SDI/PFL benefits. The fund has
been healthy, with expenditures and revenues in good alignment
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as well as adequate reserves. The state GF borrowed $303
million from the fund in the Budget Act of 2011 and another
$308 million in the Budget Act of 2012. Repayments of these
loans to the fund are scheduled in 2015-16 and 2016-17,
respectively.
4)Prior Legislation.
a) SB 1661 (Kuehl, Chapter 901 , Statutes of 2002) created
the PFL program.
b) SB 770 (Jackson, Chapter 350, Statutes of 2013) expanded
the definition of family to include in-laws, siblings and
grandparents.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081