It doesn’t matter what you name it…IT’S STILL A BAD BILL

As the Committee room filled with mostly opponents, and then the legislators on the committee, you could almost feel the wrecking ball hitting New Mexico’s business community. Sometimes I wish my gut feelings were wrong…but once again they proved to be right. Yesterday on a close 6-5 mostly partisan vote the House Commerce and Economic Development Committee sent House Bill 11 to the House floor. Rep. Marian Matthews (D-Bernalillo) joined the Republicans in voting no. The bill is sponsored by Reps. Christine Chandler (D-Los Alamos, Sandoval and Santa Fe), Linda Serrato (D-Santa Fe) and Patricia Roybal Caballero (D-Bernalillo). The bill title is now Family Wellness and Welcome Child Act instead of PFMLA. Whatever you call it, it's bad for small business and every tax paying citizen in the state. So, what's in this 35-page bill that has so many business people concerned? We'll walk you through it…but first here is how the Chamber weighed in yesterday.

In Santa Fe you have to have friends, and we are glad to have Terri Cole, president and CEO of the Greater Albuquerque Chamber as a partner in many of our fights.  The Committee Chair only allowed for 10 people to speak in favor (out of over 40 in the small room) and 10 opposed. Terri Cole  provided the following testimony on behalf of the Greater Albuquerque Chamber, New Mexico Chamber of Commerce and Gallup-McKinley County Chamber of Commerce::

"I want to start by acknowledging the obvious hard work put into this committee sub that reflects some of our long-standing concerns. Respectfully, however, we oppose this legislation and continue to believe that it’s capable of hurting small businesses in our state.

"This bill still imposes a tax increase on employers and on every worker in the state. Especially amid multi-year, billion-dollar budget surpluses, the notion of imposing new taxes on small businesses and workers is discouraging – and it’s unnecessary. The state can afford to provide these benefits and should simply pay for it.

"It is disappointing that this bill is being considered without a proper fiscal analysis. As with previous versions, it could be underwater from the get-go – especially with the addition of the Welcome Child 'refunds,' which would trigger even higher taxes.

"Businesses are struggling to find full-time employees, and even though the time has been reduced, this is still a real burden to small businesses.

"I’ve testified before that a narrowly-tailored bill – one that focuses solely on maternal and paternal leave – would likely pass this Legislature with near-unanimous support. And, most businesses would support it as well. It would be less disruptive to the workplace, wouldn’t require a tax increase to implement, would provide a much more predictable type of leave, and be very hard to abuse. That bill would be easy to implement, less costly and bring people together.

"We ask the committee to vote 'no' on this proposal." 

We weren’t alone. When the committee chair asked how many in the room were opposed, hands from every corner flew up. Small business owner after small business owner related how this would hurt their businesses. Claims by proponents that small businesses throughout the state support HB 11 ring pretty hollow. Despite claims that this will be good for small businesses, we've heard from them, and it just isn't so. We also are thankful to Amigo Automotive employees who took time out of their day to make the trip to Santa Fe. Thank you, Kobee Benett and Shae Jim who spoke to the fact, that another tax, more money out of their check, no matter how small it may seem, is a big deal. 

Gallup McKinley County Chamber CEO Bill Lee sent the following letter to the chair and committee members:

Madam Chair Gallegos,

Members of the Committee,

I’m Bill Lee President and CEO of the Gallup McKinley County Chamber of Commerce representing over 300 businesses and their employees.  We stand in opposition to HB

We want to address our added concerns with the committee substitute.  Changing the name from “Paid Family and Medical Leave”, to the “Welcome Child and Family Wellness Act” does not drastically change the contents of the bill.  In fact, most of the flaws in HB 11 still exist in the substitute and the name change on the bill only serves to create confusion, hide bad policy, and provide political cover, giving legislators the ability to say they did not vote for Paid Family and Medical Leave, they voted for the Welcome Child and Family Wellness Act.

The bill, if passed, will still amount to the largest tax increase ever imposed on New Mexicans.  Yes, the substitute does lower the percentages, but this smaller contribution amount also only lasts for three years and then the costs will rocket upwards with the full cost of the program put squarely on small businesses and their employees. Even the bill’s sponsors must agree that costs will rise, since there are mechanisms in the bill allowing for unending tax increases.  The substitute calls for an independent actuarial to be done to help determine the tax to be paid, the bill’s sponsors promised in the last committee to provide an actuarial, but since we now have a substitute, I’m sure they will say the actuarial they have does not apply.  Even so, why not have an actuarial done to let New Mexicans know what the true cost of the plan will be before we pass this legislation?

Proponents of the bill will say that the bill is even more affordable now that the rates are lowered, what they don’t take into account is that this is another tax on top of all of the others that come out of their checks. What about the possibility of added tax burdens from municipalities and counties who may have to raise taxes or cut services to implement the program. Our school districts will also need additional dollars from the legislature to offset the costs. All of that funding is provided by tax paying New Mexicans.

We were happy to finally see small changes made to the legislation, but just like the name change they don’t really do anything to significantly improve the bill. Please stand with us in opposing HB 11.

What's Inside This Renamed (for Political Cover) 35-Page Bill?

The bill, 35 pages long and only available for public scrutiny 24 hours before the committee hearing, now has two parts:

Family Wellness - Family wellness grants up to 6 weeks of paid leave for medical treatment, bereavement, military deployment, "safe leave" (abuse, stalking, etc.) and adoption or fostering of a child. The amount paid is a formula of the minimum wage amount plus 67% of the employee's wages capped at the mean average wage in New Mexico, which is about $55,000. 

Welcome Child - grants up to 12 weeks of maternal or paternal leave and pays $9,000 over three months to one of the parents to, allegedly, defray child care costs. We say allegedly because why would there be that much childcare if at least one of the parents is staying home? Moreover, zero-cost childcare is available through the Early Childhood Care and Education Department. Color us confused.

Family Wellness  

The cost of the Family Wellness program is paid from payroll taxes levied on both the employee (55%) and the employer (45%). Initially the premium is .2% of an employee's wage, split 55-45, but quickly transitions to whatever the Workforce Solutions Department sets the premium rate after six months. Quite disturbingly, there was no fiscal impact report (FIR) available so everyone is flying blind regarding total cost and whether the premiums will be sufficient to pay benefit claims and maintain solvency of the fund. 

Based on previous fiscal analysis, our best guess is that the new payroll tax will generate something north of $200 million, making it still one of the largest tax increases in New Mexico history. Proponents say that it's only a few bucks a month, but Shae Jim from Gallup offered a dose of the reality.  Shae lives on the Navajo Nation and told the committee her budget is thin; she has to drive quite a distance to get to work and a few bucks just takes away from her gas money. It's the real world versus the view from Santa Fe.

What's it Really Cost a Small Business?

Committee member, Rep. Mark Murphy (R-Chaves) made an excellent point - it's not so much about the cost of the premiums (it’s a tax), it's about the cost of losing employees for an extended period. First, it's unlikely a small business can find a replacement as they can't find enough employees now - that's why many restaurants are closed for lunch and on Mondays and Tuesdays. 

Small businesses don't have HR departments, they have to hire a temp agency at added cost and likely pay premium wages - traveling nurses are a good example. Even if they find someone, the search and hiring process probably takes two or three weeks, then there's training and then it's almost time to let them go because the employee is returning to work. It defies common sense. Another alternative is to work remaining employees’ overtime at premium wages. Either way the small business is saddled with a big expense, not to mention loss of productivity, which is another cost. Businesses in rural New Mexico are especially hard hit - there are no temp agencies and everyone in town that wants to work already has a job. 

Welcome Child Program

This one is a real baffler from a fiscal viewpoint. The cost of the "refunds" (we put that in quotes because we have no idea what's being refunded) is supposedly to be paid out of the Early Childhood Education and Care Department (ECEC) budget. Really? Let's take a look at that for a second. The requested ECEC budget this year is $995 million - a $250 million increase over last year for needed services including child care, PreK and several other programs. 

Nowhere on that list is the Welcome Child program. What's it cost? Because we don't have an FIR we don't know - BUT check this out. If we take just the "refunds" of $9,000 and multiply it by the number of births in New Mexico annually (21,000) that's $189 million. Where is ECEC supposed to come up with that kind of money? AND it doesn't include actually paying out the benefits. This could potentially eat up half or more of the ECE budget. Workforce Solutions Department Secretary Sarita Nair subtly mentioned that the governor has been very clear about how ECEC money is to be used. We read that as this ain't on the governor's list.

Bureaucracy Doesn't Come Cheap

The Workforce Solutions Department (one of the most business friendly and well run agencies in state government – we say that sarcastically) will be tasked with administering both programs. The secretary estimates it will take over 200 people at an annual cost of $23 million. Representative Matthews inquired about how long it would take to hire this number of people and is it possible to find qualified people? The Secretary thought so, since there's about a two-year ramp up and outside vendors could possibly be used for some of the work. However, she also acknowledges that the vacancy rate in her department is currently 17% and that, "like any other business, we struggle to find employees." Another complication is that a new governor will come aboard on Jan. 1, 2027, right when the taxes start to be collected and a year away from benefit payments. That could mean a new secretary of Workforce Solutions that has to pick up the ball without fumbling. 

Matthews Amendments Shut Down

Representative Mariane Matthews (who has been on the right side in opposing this bill) brought forward amendments to exempt community care providers, nonprofits and seasonal workers from the programs. There’re good reasons to consider doing so but, we'll skip that explanation for now. Matthews presented her amendments when committee Chair Doreen Gallegos (D-Doña Ana) hit the pause button while she and Minority Leader Gail Armstrong (R-Catron, Sierra, Socorro and Valencia) left the room to consult with Legislative Council Services about proper procedure.

It turns out that the committee had failed to adopt the committee substitute for HB 11, so they had to back up and do that. So far so good. Before Matthews could get back to her amendments, there was a motion to table them, which immediately passed. She never got to finish her presentation, no testimony was taken on the amendments and no committee discussion was allowed. That's not only unusual but also very discourteous (more proof that the deck was stacked from the get-go) . Matthews flatly said that she's voting no on this bill until these issues are dealt with...here comes a floor amendment. 

Wrapping Up

No matter what you name this train wreck…it’s still an expensive train wreck. There are too many uncertainties, too little fiscal insight and too little transparency. Representative Armstrong says she's going to try to get the bill referred to House Appropriations and Finance as the bill contains an appropriation. It should absolutely go there along with a good fiscal impact report. We'll see if she's successful. Right now, the bill is slated to hit the House floor and we will do our best to keep you posted.