Governor’s Paid Leave “Fix” Leaves the Biggest Problems Untouched – Thomas Jefferson Institute for Public Policy

Earlier this year, I warned that Virginia’s proposed Paid Family and Medical Leave Act would create one of the most expansive and expensive paid leave programs in the country.

I had hoped the Governor’s new amendments issued just before midnight last night would fix those concerns.

They don’t.

The legislation would still establish a statewide insurance system funded by mandatory payroll contributions from workers and employers while offering unusually generous benefits — up to 12 weeks of paid leave replacing about 80 percent of wages.

The Governor’s substitute trims some provisions and clarifies others, but it does not address most of the concerns raised in my earlier analysis. In short, the Governor’s substitute polishes the edges but leaves the underlying policy unchanged.

A few welcome trims

To be fair, the substitute does make several modest improvements.

The General Assembly version of the bill created additional bureaucracy around the program, including a new advisory board and expanded administrative coordination requirements. The Governor’s substitute removes those provisions. 

That’s a sensible step. Virginia hardly needs another advisory board.

The substitute also tightens the definition of who qualifies as a “family member” eligible for care through leave benefits. The original bill allowed leave to care for someone with a vague “close association equivalent to a family relationship.” The substitute still allows coverage for a close family relationship but requires that person to be living in the same home as the caregiver to qualify. I remain baffled that the Governor has left the definition of a family member to be so broad. This is ripe for abuse and will surely lead to lost jobs.

Still among the most generous programs in the nation

Even with the Governor’s revisions, Virginia’s proposal would still rank among the most generous paid-leave systems in the country.

Workers could receive:

• Up to 12 weeks of paid leave annually
• About 80 percent wage replacement
• Eligibility beginning on day one, for most employees
• Benefits capped at roughly the state average weekly wage.

By comparison, several existing state programs provide significantly lower wage replacement. New York replaces about 67 percent of wages, while California replaces roughly 60–70 percent depending on income, but only for 8 weeks.

Generous benefits increase participation and participation drives costs.

The payroll tax and automatic increase remains

Those costs will be financed through mandatory payroll contributions from workers and employers.

Estimates suggest an initial contribution rate around 0.7 percent of wages, though the exact rate would likely be higher and would be adjusted annually automatically depending on program costs.

And that’s the key issue: the tax rate is not fixed and grows without the requirement of a vote.

If participation exceeds projections the payroll tax would increase. Several states with paid leave programs have already experienced higher-than-expected utilization rates, but in most states, policymakers are forced to vote on the increased contribution levels. Oddly, the bill does not provide an option to lower benefits instead of raising taxes.

Once programs like this are established, benefits rarely shrink and taxes usually rise.

A government insurance system for medical, military and domestic violence

The substitute leaves intact the program’s basic structure: the state would administer the leave insurance program through the Virginia Employment Commission.

Workers would apply to the state for benefits. Employers would remit payroll contributions to a government-managed trust fund. The state would determine eligibility and payments.

In effect, Virginia would create a new government-run insurance system covering most workers in the Commonwealth for medical leave, as well as for leave to accommodate a family member’s military deployment or return and to have time to handle domestic violence needs – the last two of which are unique to Virginia’s bill.

But mandates come with costs. Payroll taxes ultimately show up somewhere: in higher prices, lower wages, fewer jobs, or reduced benefits. All of this reduces affordability and increases unemployment.

Those economic trade-offs matter for a state that competes aggressively for business investment and job growth against much lower tax and more business friendly neighboring states.

Teachers are still covered

One issue the Governor’s substitute does not change at all is the treatment of public school teachers. Teachers employed by local school divisions would still be covered by the program and eligible for extended paid leave.

In a Richmond Times-Dispatch column earlier this year, I warned that policies increasing extended teacher absences can disrupt learning for students. Schools already struggle with substitute teacher shortages and maintaining instructional continuity.

The data bear that out. A 2023 RAND survey found that 77 percent of U.S. public schools reported difficulty filling substitute teacher positions.

When teachers are absent for extended periods, schools often rely on long-term substitutes or rotating coverage from other staff. That means students lose continuity in instruction, something especially harmful for struggling learners.

The point is not that teachers should never take leave. School systems already provide leave through existing policies and contracts.

But a statewide leave mandate designed primarily for the private workforce does not account for the unique structure of the classroom, where a teacher’s absence can disrupt an entire year of planned instruction.

The Governor’s substitute trims bureaucratic provisions but does nothing to address this educational impact. Most states exempt public schools from this mandate.

The real question for lawmakers

The debate over paid leave is often framed as a question of compassion. But a one size fits all government mandate that will likely increase unemployment and force reductions in pay to account for the added payroll costs, is hardly compassionate. 

Many employers already provide paid leave voluntarily as part of competitive compensation packages. Many, if not most, employees would likely choose higher pay over greater paid leave.

The Governor’s substitute removes a few bureaucratic pieces and clarifies some definitions. Those are improvements.

But they do not address the fundamental concerns about program cost, scope, and long-term fiscal risk. The Governor’s substitute trims the branches, but the tree is still enormous.

Elections have consequences, and based on the initial responses in the General Assembly, employers should begin planning on this expensive and expansive paid medical, military, and domestic violence insurance program.

Derrick Max is the President & CEO of the Thomas Jefferson Institute for Public Policy and may be reached at dmax@thomasjeffersoninst.org