A1980 —

A1980 AAPFISCAL StatementESTIMATE MAY 17, 2018 ASSEMBLY APPROPRIATIONS COMMITTEE   STATEMENTLEGISLATIVE TOFISCAL  ESTIMATE ASSEMBLY, No.

1980   STATE OF NEW JERSEY 218th LEGISLATURE   DATED:

 MAYJUNE 17,28, 2018          TheSUMMARY Assembly  AppropriationsSynopsis: Committee reports favorably Assembly Bill No.

1980.Establishes a partial return to work TDI program.

       ThisTypes bill establishes a partial return to work program, which permits the payment of TemporaryImpact: Disability Insurance (TDI) benefits on a reduced basis to temporarily disabled workers who are otherwise eligible for TDI benefits but only able to return to work on a reduced basis while recovering from disability.  The bill provides that the amount of the part-time TDI benefit is equal to the full-time TDI benefit amount minus the wages paid to the worker during a week.

     Annual Thisexpenditure bill permits a worker to receive partial TDI benefits if that worker has been completely unable to work due to disability and hasrevenue beenimpacts, receivingState fullDisability TDIBenefits benefitsFund.  forAnnual atState leastrevenue sevenimpact, consecutiveProperty days. Tax InRelief contrast,Fund. current law provides for benefits only during the time that the worker is completely unable to work due to the disability.

     Agencies ThisAffected: bill sets a maximum duration of eight weeks for partial benefits, unless the Division of Unemployment and Temporary Disability Insurance of the Department of Labor and Workforce Development, after a review of medical documentation, approves an extension beyond eight weeks, but not more than 12 weeks in any case.  Employers are not required to permit a worker to return to work on a reduced basis, but if a worker is able to return to work on a reduced basis but the employer does not permit the worker to do so, the worker will remain eligible for benefits until fully recovered from the disability and able to perform the duties of employment.  The bill does not, in any case, increase the total number of weeks of disability benefits for any worker.

     Department Asof reported,Labor thisand billWorkforce isDevelopment. identical to Senate Bill No.

844,Department asof also reported by the committee.Treasury.

  FISCAL  IMPACT:Office of Legislative Services Estimate Fiscal Impact     State Expenditure  Up to $1,000,000   Revenue Impacts,               State Disability Benefits Fund                 Property Tax Relief Fund     Indeterminate   Indeterminate         ·         The Office of Legislative Services (OLS) estimates that the establishment of a partial return to work (PRTW) program for individuals who are injured and receiving Temporary Disability Insurance (TDI) benefits may have an annual impact on TDI benefit expenditures from the State Disability Benefits Fund (SDBF) of up to $1,000,000.  As the TDI program is partially funded through an assessment on workers’ wages, the rate for which is set annually to cover anticipated program expenditures, this bill may also result in a corresponding indeterminate annual revenue impact on the SDBF.

     ·         TheRhode OfficeIsland ofimplemented Legislative Services (OLS) estimates that the establishment of a partialsimilar return to work program (PRTW)in for2006.  personsAccording injuredto anddata receivingobtained Temporarythrough Disability Insurance benefits (TDI) may have an indeterminate annual impact on TDI expenditures from the StateAssistant DisabilityDirector’s Benefitsoffice Fundof (SDBF).  As the TDIRhode programIsland isDepartment partiallyof fundedLabor through& anTraining, assessmentapproximately onthree workers’percent wages,of whoseindividuals ratewho iswere setcollecting annuallyTDI tobenefits coverin anticipatedRhode programIsland expenditures,participated this bill may also result in athe correspondingPRTW indeterminateprogram annualfrom revenueto impact2017.  on The the SDBF.        The OLS projectsextrapolated that thedata bill may also have an indeterminate annual impact on State gross income tax collections to estimate the extentfiscal PRTWimpacts participants will receive different amounts of tax-exemptthis TDIbill. benefits and taxable wage income than they would receive absent the PRTW.

     ·         The OLS cannotprojects determinethat the directionbill ormay magnitudealso ofhave thean bill’sindeterminate fiscal impact becauseon anyannual impactState ofgross aincome PRTWtax willcollections be determined greatly by choices of both employees and employers, and the OLS cannot with any certainty predict behavior in this regard.  The choice to return to work full-time, part-time, or continue to collect full-time benefits is dependent upon the person’sextent disabilitythat andPRTW financialprogram needparticipants towill returnreceive todifferent fullamounts wages.  Since employer consent is required for returning to work part-time, the needs and circumstances of employerstax-exempt are additional variables in this regard.        TDI savingsbenefits and additionaltaxable Statewage gross income taxthan revenuethey willwould bereceive realized whenever a person returns to work part-time who, absent the bill,PRTW wouldprogram.   have·         stayedWhile onRhode full-timeIsland’s tax-exemptPRTW benefitsprogram ratherdecreased thanits return to work full-time and earn taxable wage income.  Conversely, additional TDI expenditures andfrom reduced$451,133 Statein gross2012 incometo tax$332,847 revenuein will2017, result whenever a person26 returnspercent toreduction, workthe part-timetotal who,amount absentof theRhode bill,Island’s wouldtemporary havedisability returnedbenefits tohas workincreased full-timeby rather11 thanpercent stayin on2017, full-timeas TDIcompared benefits. to  2012.

    BILL DESCRIPTION         The bill establishes a PRTW program which permits the payment of TDI benefits on a reduced basis to temporarily disabled workers who are otherwise eligible for TDI benefits but able to return to work on a reduced basis while recovering from disability.        Currently, the New Jersey TDI law provides for benefits only during the time that the worker is completely unable to work due to the disability, up to 26 weeks.  The bill permits partial benefits only after a worker has been completely unable to work due to disability and receiving full TDI benefits for at least seven days.  The bill sets a maximum duration of eight weeks for partial benefits, unless the Division of Unemployment and Temporary Disability Insurance in the Department of Labor and Workforce Development, after a review of medical documentation, approves an extension beyond eight weeks, but not for more than 12 weeks.  The bill does not increase the current maximum of 26 weeks for which a worker may receive disability benefits.        The bill provides that the amount of the part-time TDI benefit is the full-time TDI benefit amount minus the wages paid to the worker during a week.  Full-time TDI benefits are equal to two-thirds of the worker’s weekly wage, up to a maximum of percent of the Statewide average weekly wage, or $637 a week in 2018.

      Employers are not required to permit a worker to return to work on a reduced basis.  If a worker is able to return to work on a reduced basis and the employer does not permit the worker to do so, the worker will remain eligible for full-time TDI benefits until fully recovered from the disability and able to perform the duties of employment.

    FISCAL ANALYSIS   EXECUTIVE BRANCH         None received.

  OFFICE OF LEGISLATIVE SERVICES         The OLS estimates that the establishment of a PRTW program for individuals who are injured and receiving TDI benefits may have an annual impact on TDI benefit expenditures from the SDBF of up to $1,000,000.  As the TDI program is partially funded through an assessment on workers’ wages, which assessment rate is set annually to cover anticipated program expenditures, this bill may also result in a corresponding indeterminate annual revenue impact on the SDBF.  The SDBF is also funded by an experience rating tax applied to wages paid by employers.

      The OLS projects further that the bill may also have an indeterminate annual impact on State gross income tax collections to the extent that PRTW program participants will receive different amounts of tax-exempt TDI benefits and taxable wage income than they would receive absent the PRTW program.

      The OLS cannot determine the exact magnitude of the bill’s fiscal impact because any impact of a PRTW program will be determined greatly by choices of both employees and employers and the OLS cannot with any certainty predict their behavior in this regard.   The choice to return to work full-time, part-time or continue to collect full-time benefits is dependent on the person’s disability and financial need to return to the full salary.  Since employer consent is required for returning to work part-time, the needs and circumstances of employers are additional variables.  If predicting savings, one must assume that individuals who choose to return to work part-time would have stayed on full-time benefits, rather than return to work full-time, absent the bill.  Conversely, if predicting additional expenditures, one must assume that individuals who choose to return to work part-time would have returned to work full-time, rather than stayed on full-time benefits, absent the bill.

      Rhode Island implemented a similar program in 2006 and, according to the most current data available to the OLS from the Rhode Island Department of Labor and Training, approximately three percent of individuals collecting TDI benefits in Rhode Island have participated in the PRTW from 2012 to 2017.        While Rhode Island’s PRTW program decreased its expenditures by 26 percent from 2012 to 2017, the benefit has increased state expenditures by 11 percent in 2017 as compared to 2012.  As an overarching caveat on limitations of this Legislative Fiscal Estimate, it is important to understand that the OLS cannot conclusively project that the outcomes of the Rhode Island’s program will be homologous in New Jersey.  Accordingly, the OLS calculates, extrapolating data from Rhode Island’s PRTW program and using data provided by the New Jersey Department of Labor and Workforce Development through the OLS Discussion Point process, that the State may incur in TDI benefit expenditures from the SDBF of up to $1,000,000 for PRTW program purposes.

      Although certain individuals in Rhode Island have chosen to participate in the PRTW program and receive only a portion of their full-time TDI benefit, it is not possible to conclude with any certainty what the behavior of these individuals would have been in the absence of the PRTW program.  Given this lack of information, the OLS cannot draw on Rhode Island’s experience in estimating the fiscal impact of a New Jersey PRTW program.        It is possible that three percent of New Jersey beneficiaries, similar to their Rhode Island counterparts, will choose to participate in the PRTW program, or about 4,000 beneficiaries.  However, it cannot be determined with certainty if these individuals would choose to return to work earlier for their full pay or continue to receive full-time disability benefits in the absence of the PRTW program.

    Section:

Commerce, Labor and Industry Analyst:

Juan C.

Rodriguez Associate Fiscal Analyst Approved:

Frank W.

Haines III Legislative Budget and Finance Officer     This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).