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Capital Beat: Myths, realities in the paid family leave debate



Monitor staff
Sunday, April 22, 2018

There’s no question at this point: New Hampshire’s proposed state-run paid family and medical leave program is on the rocks.

Ever since Gov. Chris Sununu stated in a letter this month that he “cannot support” the program without further study, Democrats have been rushing to save a program that had until recently seemed a bipartisan, sure bet. And as the bill makes its way to a final verdict on the Senate floor, the rhetoric has sharpened this week.

“Instead of hiding behind bureaucrats, false standards, and false talking points, it is time for you to actually lead, governor,” said Senate Minority Leader Jeff Woodburn, D-Whitefield, on Thursday.

“Governor Sununu believes that we cannot create a program that people would come to rely on that could eventually collapse,” retorted Ben Vihstadt, spokesman for the governor.

Amid the clamor, claims and charges have ricocheted through the State House in recent weeks. Here are three of them, reviewed.

Claim 1: This program, as written, is guaranteed to be solvent.

Origin: New Hampshire Democrats.

Verdict: Not exactly.

Since the beginning, Rep. Mary Gile’s bill, House Bill 628, has come under fire over its solvency. Republican majorities in the House Commerce, House Finance and Senate Finance committees have raised questions as to whether the program, carrying an estimated $14.5 million start-up cost, can generate the participation rate necessary to sustain itself long term.

The worry is elemental: If any insurance program is voluntary, it’s hard to guarantee who signs up. While a plan discussed two years ago created a mandatory system, this year’s is decidedly voluntary.

But midway through the bill’s legislative journey, the state’s Department of Employment Security released an analysis that emboldened Democrats: a stress test of New Hampshire’s proposed program that suggested it could stay viable at varying levels of participation, from 100 percent down to 10 percent. That stress test relied on an earlier, more comprehensive study from the Institute for Women’s Policy Research, commissioned by the state in 2016, which analyzed potential models for state-run family leave insurance programs.

To supporters, the stress tests provide long-awaited validation. In a letter to the governor this week, Woodburn seized on the results to defend the program. “As you should know, this opt-out family and medical leave insurance is solvent down to a very low participation rate ...” he wrote.

But there are some significant caveats.

To start, the underlying 2016 study, led by researcher Jeff Hayes, is subject to an important limitation: New Hampshire’s proposed voluntary model is unique – every other existing state program imposes a mandate, creating a more controlled, dependable pool of users to spread risk.

The study relied on programs in three of those states – California, Rhode Island and New Jersey – to assess utilization trends and map them onto New Hampshire’s demographics. But as “no family and medical leave programs currently in operation have a large degree of flexibility in worker participation,” the study stated, “at this time there are few data available to corroborate the results or to gauge the accuracy of the participation levels modeled.”

The study was limited by another assumption: that the hypothetical program applied to both private and public sector workers. New Hampshire’s present proposal applies only to private sector workers, limiting the potential pool. Meanwhile, the voluntary systems analyzed in the study are for an opt-in system, not an opt-out, as the present proposal provides. That could affect the way people interact with it, potentially shifting outcomes.

Finally, the Institute for Women’s Policy Research report was never meant to be conclusive. The analysis of any voluntary program “should be considered exploratory,” the study states, adding that “these estimates should be considered a preliminary starting point” for policymakers.

Democrats have pushed back, arguing that even if the underlying study didn’t analyze an exact model of New Hampshire’s program, the stress tests, which applied all the way down to a 10 or 20 percent participation rate, demonstrated solvency even in the worst case scenario. But those stress tests are pegged to an 8.9 percent take-up rate – the term for how many people participating in the program actually use the benefit – which itself is modeled after Rhode Island, a mandatory program. In New Hampshire’s voluntary system, where, in theory, participants could opt out until within a year of whenever they think they’ll need the benefit, determining a take-up rate is an inexact science.

Put another way: If New Hampshire’s take-up rate were much higher than the assumed 8.9 percent, the solvency guarantees in the stress tests would be moot.

It’s a reality not lost on state agencies. Both the Insurance Department and the Department of Employment Security have warned in recent weeks that New Hampshire’s exact program needs further actuarial study; the former in a Feb. 21 letter, the latter in recent comments from the commissioner. That talking point has been taken up by the governor, who wrote in a letter this month that “a comprehensive actuarial analysis” on the specific program is required before he can support it.

Hayes, the author of the 2016 report, says he supports the move too – New Hampshire’s proposed program has changed considerably since his study. “I think that given the originality and uniqueness of what (New Hampshire’s) proposition is, I think another analysis is probably a great idea,” he said Friday.

All of this is not to say the program as written would not be solvent. The indicators that do exist suggest it could. It’s a bigger leap, however, for supporters to claim that its solvency is a sure thing.

 

Claim 2: The program is an income tax.

Origin: New Hampshire Republicans.

Verdict: Not quite.

This is a recent charge, one that first emerged in the corners of Twitter, got some airtime on the House floor, and now dominates the opposition. On Tuesday, Senate President Chuck Morse, R-Salem, assailed the bill, saying “there is little doubt that a program like this would lead to an income tax which I will never support in New Hampshire.”

A day later, Vihstadt, the governor’s spokesman, went a step further: “Regardless of what the Democrats may say, (the bill) is still an income tax,” he said. “End of story.”

It’s a loaded term in a state like New Hampshire, and one that has quickly latched to the bill. But while opponents of all stripes have used the phrase, few are on the same page on what they mean by it.

Some, including Vihstadt, say that the program’s onerous opt-out mechanism mean it effectively already is an income tax. As written, the bill allows those taking new jobs to opt out with their employer, but is silent on whether those already employed when the bill would take effect could also do so.

Supporters have said that this could be changed in the rules committee; the bill requires the Department of Employment Security to carry out a rulemaking process. But critics say the overall result is still too high a burden.

“Governor Sununu believes that by administratively trapping people in this program, HB 628 would effectively create an income tax, since money is directly being taken from Granite Staters’ paychecks, and they have few opportunities to prevent this,” Vihstadt said.

Others, like Morse, say that the program would “lead to” an income tax – a different argument. As the theory goes, a future Democrat-run Legislature could change the structure of the opt-out mechanism and keep everyone in the program. They might do so to address future solvency problems within the program, or simply to bolster it, the argument goes.

Greg Moore, state director of Americans for Prosperity, has a third definition: An income tax is a mandatory payment structure with winners and losers, one in which some who pay less get more, and others who pay more get less, he said Friday.

Under the proposed program, all participants would be guaranteed at least $125 a week in benefits, but the potential amount would be capped at 85 percent of the average New Hampshire weekly wage – close to $900 in practice. Because wealthier participants pay in more but receive proportionally less, the program functions like an income tax, Moore argued.

Still, others call the program a “backdoor income tax” – one levied on employers, who must offer the benefit and pay the premiums for each employee who uses it, but who would likely pass the costs to employees in the form of wage deductions.

Taken on their own, the concerns are each noteworthy. But the charges of an “income tax” run up against a hard reality: The program is, as written, substantively voluntary.

It’s a point Democrats have run with. “No Granite Stater would be obligated to pay a single cent to paid family leave insurance,” the party said in a Twitter post Wednesday.

The “income tax” label is specious at best. But for opponents, it’s politically irresistible.

 

Claim 3: In vowing opposition, Sununu has flip-flopped on a campaign promise.

Origin: New Hampshire Democrats.

Verdict: That’s complicated.

“Dear Governor Sununu,” begins one of two letters to the governor sent by Woodburn this week. The rest of it is less kind.

“Since we met on your first day in office and many, many times since, I have expressed a desire to work together to craft a family leave policy that you could support,” Woodburn starts. But “Despite a 2016 campaign promise from you to Granite Staters ...” he adds, “… your promises on family leave apparently amount to: Nothing.”

It is true that the governor has all but declared a veto over the present program. When it comes to his campaign promise, that’s more complicated.

Late in the 2016 gubernatorial campaign – Oct. 26 to be exact – Sununu was asked in a debate whether he would “support a paid family and medical leave program for all New Hampshire citizens.”

The answer was as emphatic as it was light on details: “Yes. Absolutely,” Sununu said, before immediately pivoting to other policy priorities. But the answer gave Democrats an easy soundbite throughout their campaign for the program – from deliberations last year to hearings this session.

The extent to which that statement was a promise is open to interpretation. A paid family and medical leave insurance program, however enthusiastically endorsed, was not part of the governor’s platform; the debate, hosted by NH1, was the first he was asked about it, Vihstadt said Friday. Moreover, the then-candidate was not asked about any specific model for a family leave program on the spot.

Vihstadt has since said that the governor “has always been clear” that he supports a voluntary, opt-in program and nothing else. A review of press conferences on Jan. 10 and March 21 revealed that the governor was careful to describe his ideal program as “truly voluntary.”

But Democrats say they heard a commitment loud and clear. And at the time of that debate, the only programs that existed followed mandatory models, raising the question of what, exactly, the future governor endorsed that day.

Either way, 18 months later, New Hampshire has now fully abandoned the mandatory route.

In true tradition, New Hampshire policymakers attempting to do what no one else has. In the end, it may prove to be the bill’s undoing.

(Ethan DeWitt can be reached at edewitt@cmonitor.com or on Twitter at @edewittNH.)