Paid family leave discussions take twist at Minnesota Capitol

ST. PAUL, Minn. (FOX 9) - In a hot labor market, Minnesota lawmakers in both parties agree that small businesses need help competing with big companies to attract workers.

The Republican-controlled Senate for the first time advanced a paid family leave proposal Monday, though it is vastly different than one Democrats have been unsuccessfully pushing for years. The Senate Commerce committee approved the GOP plan over Democrats' objections and sent it to the Senate floor.

The Republican plan allows for a new insurance product that employers of all sizes could offer to cover time off for a sick child or parent, paternity leave, or adoption. For companies with fewer than 50 employees, it creates business tax credits of up to $3,000 per worker enrolled in a paid leave program.

"Our tax credits are significant enough that it will enable companies with fewer than 50 employees to access this benefit," state Sen. Julia Coleman, R-Chanhassen, told reporters. "They want to offer this benefit, but it’s expensive and it’s hard to do."

The proposal caps tax credits at $50 million statewide, meaning 16,700 workers could be covered if each business got the maximum per-employee credit. But the cap is just a starting point, Coleman said.

Democrats who favor a more far-reaching program reacted with a mix of skepticism and optimism. Under the DFL's plan, workers could draw benefits from a state-run program funded by increased payroll taxes, which business groups and Republicans oppose.

State Sen. Susan Kent, the author of the DFL proposal in the Senate, said the Republican plan "just falls so short" because it's optional for employers. It relies on tax credits, forcing employers to front the cost, she said.

"It’s a cumbersome workaround to try to pretend like we’re addressing a very real issue without actually providing the type of benefit and support that families need and without being able to cover everybody," Kent, DFL-Woodbury, told reporters.

Democrats have said a broad-reaching program is necessary to help small businesses compete with larger ones as the U.S. economy faces a severe worker shortage.

Minnesota had just six unemployed workers for every 10 job openings in 2021, the most recent time the state Department of Employment and Economic Development conducted the survey.

Wages are rising at their fastest pace in years, and large companies are sweetening the pot by expanding benefits like paid family leave. But many small business owners say they do not have the scale necessary to expand employee benefits.

A study conducted by DEED in 2016 found that one-quarter of Minnesota workers have no access to paid leave. Certain segments of the economy are less covered, including 46 percent of low-wage workers and 42 percent of Black employees.

Ninety-five percent of Minnesota businesses have fewer than 50 workers, and 927,000 Minnesotans work at small firms, according to state data provided by Senate Republicans.

Coleman said paid family leave is an important issue both personally and to her friends. Coleman only had short-term disability coverage when she gave birth to her first child, she said.

"It’s been something I’ve been talking to my colleagues about and got them on board with. I think the timing is right now," she said.
Gov. Tim Walz called it a "positive development" that Republicans have come to the table on paid family leave, though he favors a state-run program.

"I don’t think you can shut down when somebody makes a move. This is the first time we’ve heard Republicans talk about it," Walz told reporters at the Capitol. "They’re obviously hearing from their constituents to the point where they thought it was important to introduce this."