BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 908| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 908 Author: Gomez (D) and Burke (D), et al. AmendedAmended:8/31/15 in Senate Vote: 21 SENATE LABOR & IND. REL. COMMITTEE: 4-1, 6/24/15 AYES: Mendoza, Jackson, Leno, Mitchell NOES: Stone SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/27/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NOES: Bates, Nielsen ASSEMBLY FLOOR: 60-17, 6/2/15 - See last page for vote SUBJECT: Disability compensation: family temporary disability insurance SOURCE: Author DIGEST: This bill increases the level and duration of benefits provided in the Paid Family Leave insurance program, as specified. ANALYSIS: Existing law: 1)Established a family temporary disability insurance program, Paid Family Leave (PFL) that provides up to six weeks of wage replacement benefits to workers who take time off work to care for a seriously ill child, spouse, parent, or domestic partner, siblings, grandparents, grandchildren, and parents-in-laws or to bond with a minor child in connection AB 908 Page 2 with foster care or adoption. (Unemployment Insurance Code §3301) 2)Establishes the State Disability Insurance (SDI) Program for individuals who are unable to work due to sickness or injury, the sickness or injury of a family member, or the birth, adoption, or foster care placement of a new child. 3)Requires a claimant for SDI or PFL benefits to establish his or her medical eligibility for each period of disability by obtaining a certificate from a treating physician or practitioner that establishes the sickness, injury, or pregnancy of the employee, or the condition of the family member that warrants the care of the employee. As part of the certificate of eligibility to care for a family member, the physician or practitioner must provide an estimate of the time needed by the employee to care for the child, parent, spouse, or domestic partner. (Unemployment Insurance Code §3301) 4)Requires each employee to contribute to the Disability Fund to pay the costs of disability insurance benefits. The rate of these employee contributions ranges from 0.1% to 1.5% of wages, and are calculated and announced annually by the Director of the Employment Development Department based on the financial condition of the disability fund. (Unemployment Insurance Code §3301) 5)States that an individual is eligible to receive temporary disability insurance benefits equal to one-seventh of his or her weekly benefit amount for each full day during which he or she is unable to work due to caring for a seriously ill or injured family member or bonding with a minor child within one year of the birth or placement of the child in connection with foster care or adoption. (Unemployment Insurance Code §3301) This bill: 1)Increases the level and duration of benefits provided in PFL insurance program. 2)Increases the maximum duration of PFL insurance benefits from six to eight weeks on or after January 1, 2018. AB 908 Page 3 3)Establishes a weekly benefit amount of $250 for an individual's who disability base period is no more than $4,063, except the weekly benefit amount shall not exceed the amount of wages paid to the individual during the person's highest earning quarter divided by 13. 4)Creates a tier-based wage replacement based on income instead of a standard 55% wage replacement rate for PFL benefits. Specifically: a) 80% wage replacement for an individual whose highest quarter in his or her disability base period is more than $4,063 but no more than $5,000, with benefits set at 80% of the amount of wages paid in the individual's highest quarter divided by 13. b) 75% wage replacement for an individual whose highest quarter in his or her disability base period is more than $5,000 but no more than $15,000, with benefits set at 75% of the amount of wages paid in the individual's highest quarter divided by 13 or $308 (whichever is higher). c) 65% wage replacement for an individual whose highest quarter in his or her disability base period exceeds $15,000, with benefits set at 80% of the amount of wages paid in the individual's highest quarter divided by 13 or $865 (whichever is higher.) d) This wage replacement section shall become operative on January 1, 2017. Comments PFL is funded by an employee-paid payroll tax with benefit levels indexed to inflation, built upon California's long standing SDI system, which has provided income support for employees' medical and pregnancy-related leaves for many years. However, unlike SDI benefits, income from PFL has been deemed taxable by the Internal Revenue Service. Under the PFL program, workers can claim a cash benefit set at 55% of "base period" wages for up to six weeks. The maximum weekly benefit is AB 908 Page 4 currently set at $1,104 and is adjusted every year based on the statewide average weekly wage. The average claim in 2013 paid $527 per week for 5.4 weeks. National data show that two-thirds of women were working during their last pregnancy and that 70% of women took maternity leave with an average duration of 10 weeks. California's PFL program is funded through worker contributions and provides partial wage replacement (55% of prior wage levels) for up to six weeks for bonding with a new child or caring for a seriously ill relative. According to the author, although the PFL benefit enhances security for claimants who take leave to bond with children or care for sick family members, the benefit is simply insufficient to offer meaningful wage replacement for workers, especially those whose only source of paid leave is PFL. The author brings attention to one survey, in which nearly a third of respondents who were aware of PFL did not apply for it when family needs arose because the wage replacement level was too low - making it difficult for workers that live pay check to paycheck to meet their basic needs. The author notes that these workers cannot absorb the pay cut imposed by the current PFL benefit limits, particularly when it is coupled with the increased financial burdens that accompany supporting a newborn child or caring for a relative. The author also notes that these workers should be able to use the PFL insurance for which they pay. AB 908 increases the maximum benefit to eight weeks, as well as increase the wage replacement rate based on wage level ranging from 65% for a higher wage level to 80% for a lower wage level. According to the author these changes to the PFL program will make PFL a real option for most working families by reducing the financial burden when having a baby or caring for an ill relative. FISCAL EFFECT: Appropriation: Yes Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee: Increasing the benefit duration and wage replacement level would likely result in increased payments from the AB 908 Page 5 Unemployment Compensation Disability Fund (UCDF) in the hundreds of millions of dollars annually, assuming no change to the program's current utilization rate. If utilization were to rise, benefit payments would be higher. The worker contribution rate would be adjusted upward to ensure benefit payments can be maintained. The current rate is 1.0 percent. The Employment Development Department would incur IT-related costs ($844,000 one-time, $47,000 on-going) to implement the expanded benefits (UCDF). SUPPORT: (Verified8/28/15) Alliance of Californians for Community Empowerment American Association of Retired Persons American Association of University Women American Federation of State, County and Municipal Employees, AFL-CIO Breastfeed LA California Alliance for Retired Americans California Black Health Network California Breastfeeding Coalition California Child Care Resource and Referral Network California Domestic Workers Alliance California Employment Lawyers Association California Partnership California WIC Association California Women's Law Center California Work and Family Coalition Career Ladders Project Center for Law and Social Policy Child Care Law Center Children Now Communications Workers of America, AFL-CIO District 9 Communications Workers of America, AFL-CIO Local 9003 Community Clinic Association of Los Angeles County Congress of California Seniors County of Los Angeles Board of Supervisors AB 908 Page 6 County of Monterey Board of Supervisors County of Santa Cruz Board of Supervisors Courage Campaign Equal Rights Advocates Family Caregiver Alliance, National Center on Caregiving First 5 California Glendale City Employees Association Health Officers Association of California Jewish Labor Committee Western Region Legal Aid Society- Employment Law Center Mujeres Unidas y Activas National Association of Social Workers-California Chapter National Association of Working Women, California Chapter National Council of Jewish Women National Council of La Raza Next Generation Organization of SMUD Employees Parent Voices Raising California Together Restaurant Opportunities Center of Los Angeles San Bernardino Public Employees Association San Diego County Court Employees Association San Francisco Breastfeeding Promotion Coalition San Luis Obispo County Employees Association School Employees Association of California Small Business Majority Small School Districts' Association St. Anthony Foundation Teamsters Local 986 The Center for Popular Democracy The Health Officers Association of California The Women's Foundation of California Tradeswomen Inc. Tulare County Breastfeeding Coalition Tuolumne County Breastfeeding Colition UFCW Western States Council Ultra Violet Western Center on Law and Poverty Western Regional Advocacy Project Zero to Three, National Center for Infants, Toddlers, and Families 9 to 5 California AB 908 Page 7 OPPOSITION: (Verified8/28/15) None received ARGUMENTS IN SUPPORT: Proponents note that California's PFL program is wholly funded through worker contributions and covers all private sector workers and some public sector workers. Proponents bring attention to research that shows that paid family leave not only improves the ability of working families to meet the obligations of their family members, but employers benefit from reduced turnover as families that benefit from paid family leave are more likely to stay in the workforce. Proponents also highlight a recent study that found that women who take paid family leave are 39 percent less likely to receive public assistance and 40 percent less likely to receive food stamps in the year following a child's birth. Proponents argue that AB 908 will make PFL work for all workers by addressing two critical aspects of the benefit design. For many workers, the 55 percent wage replacement level is simply insufficient to offer meaningful wage replacement, especially when PFL is the only source of paid leave. They argue that PFL's current wage replacement level of 55 percent coupled with increased financial burdens when having a baby or caring for a relative makes it financially impossible for workers to use their PFL benefits. Proponents argue that in addition to wage replacement levels, the six weeks of paid leave offered by PFL is far less than nearly every other developed county. Proponents bring attention to the fact that in comparison to the thirty-eight Organization for Economic Co-operation and Development countries, the median amount of fully-paid leave available for mothers is over five months. Proponents also argue that longer paid leave is associated with a range of positive physical and mental health benefits for families and children, as well as improved early child development. AB 908 Page 8 ASSEMBLY FLOOR: 60-17, 6/2/15 AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Williams, Wood, Atkins NOES: Travis Allen, Bigelow, Brough, Chang, Dahle, Gallagher, Hadley, Harper, Jones, Lackey, Mayes, Melendez, Obernolte, Patterson, Steinorth, Wagner, Wilk NO VOTE RECORDED: Chávez, Beth Gaines, Kim Prepared by:Deanna Ping / L. & I.R. / (916) 651-1556 8/30/15 19:42:22 **** END ****