Connecticut has paid out more than $1 billion in benefits to workers facing illness or caring for a sick family member since 2022.
But the Paid Family and Medical Leave program also has amassed nearly $640 million in unspent funds via the payroll tax it levies on most workers, a stockpile bigger than one year’s worth of expenses.
And while the program’s executive director and Gov. Ned Lamont’s administration say this financial safety net is necessary, Republican state lawmakers say it’s gotten out of hand.
“It’s an over-collection of taxes on the backs of middle-class families,” said Sen. Ryan Fazio of Greenwich, ranking Senate Republican on the Finance, Revenue and Bonding Committee who also is seeking his party’s gubernatorial nomination.
The CT Paid Leave Authority anticipated claims and other expenses would total $524 million this fiscal year, according to an actuarial report prepared in July by Spring Consulting Group of Boston. The same analysis estimated $505.7 million in tax collections and $23.3 million in investment earnings this fiscal year, or $529 million in total revenue.
“It’s completely unfair when you have [reserves] well over 100 percent … to continue to tax the worker” at the current rate, added Senate Minority Leader Stephen Harding, R-Brookfield, whose caucus recently proposed easing that burden on employees by one-fifth.
Created by Lamont and the General Assembly in 2019, the leave program is fueled by a 0.5% payroll tax levied chiefly on private-sector workers and a modest amount of investment earnings. Annual income subject to the tax is capped at the same level applied to the Social Security tax, which currently stands at $184,500.
A worker earning $100,000 per year would save $100 under the Senate GOP plan.
But others say the risk to the program outweighs the potential tax break.
“This program has already helped thousands of families focus on recovery instead of financial stress, and its continued growth shows how essential it is,” Lamont spokesman Rob Blanchard said last week, adding Connecticut imposes one of the lowest contribution rates among comparable states.
Benefits follow a sliding scale based on income, and the benefit rate is capped at 60 times the Connecticut minimum wage, which would amount to about $1,016 per week.
Erin Choquette, the program’s executive director, warned that paid family and medical leave is a relatively young program, and it’s still unclear how extensive the demand for benefits is.
“We need to plan for growth, because we have seen growth year over year,” she said, “and we’re not yet at full maturity.”
The authority’s Board of Directors reported $477.5 million in payroll tax revenues in the 2024-25 fiscal year, up 4.4% from 2023-24. Over the same period, benefits paid jumped 18.3% from $379 million to $448.3 million.
And while that’s a very small sample size, it reflects a program that’s still evolving.
“My responsibility and the board’s responsibility is to take into consideration all of those dynamic elements,” Choquette said.
The executive director also noted that paid family and medical leave is an insurance program and can’t be compared with major segments of the state budget, such as the General and Special Transportation funds, which cannot hold reserves greater than 18% of their annual spending.
One of the key solvency tests set by the board is: Could the reserve cover two years’ worth of benefit payments under an “adverse losses” scenario? What if claims grew sharply under extreme demand?
To cover that scenario, the program needs a reserve of slightly more than $510 million, which is just $130 million less than the unspent balance entering this fiscal year.
Choquette added there are signs the program reserve, which has grown steadily since its inception, is stabilizing or even about to drop — albeit modestly.
A financial update that the fund actuary delivered to the Board of Directors last Friday estimated the fund balance would shrink by 3.5% when this fiscal year ends, to about $617 million. And if the tax rate were dropped as Senate Republicans proposed — and if current demand for benefits continues — fund analysts have said the entire reserve would be exhausted and the program insolvent by 2031, Choquette said.
Sen. Julie Kushner, D-Danbury, co-chairwoman of the Labor and Public Employees Committee, echoed Choquette’s concern.
A health reserve is “the only way you can build an insurance fund,” Kushner said.
And while Connecticut has made great strides in providing income-replacement benefits for all workers, the Danbury lawmaker said she hopes it can expand assistance levels soon, particularly for middle class households. But if the tax receipts fueling the program are cut, “then I’m afraid we wouldn’t even have that possibility.”
But Harding and House Minority Leader Vincent J. Candelora, R-North Branford, both said that’s no reason to sit on a huge stash of dollars. Most programs, if projected enough years out into the future, show a deficit due to factors like inflation, and the legislature would have plenty of time between now and 2031 to restore a higher tax rate, if necessary.
“It’s clear right now we’ve over-taxed the population,” Harding said. “Those people need relief right now.”
Candelora said Connecticut legislatures and governors traditionally have held on to large, unnecessary program reserves — especially if a stockpile receives little media attention — and eventually redirects them for another purpose.
Lamont and his fellow Democrats in the General Assembly’s majority are struggling to find a second round of funds for a new child care expansion effort that many hoped would receive hundreds of millions annually for years to come.
The family and medical leave reserve could be a tempting target for child care advocates, said Candelora, whose caucus last year proposed a payroll tax cut that Democrats dismissed.
“We should continue to draw down on their paychecks when it’s not necessary?” Candelora asked. “It would be [adding] insult to injury if [legislators] were now turning this program into something they otherwise weren’t supposed to do.”
Kushner said she would oppose any effort to re-direct tax dollars from paid family and medical level benefits.
“Sweeping the fund would be a travesty in my opinion,” she said. “This is one of the most successful programs, I think, we have ever launched.”
