This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0856 - Changes the Minimum Wage Rate
L.R. NO. 3194-01
BILL NO. SB 856
SUBJECT: Minimum Wage
TYPE: Original
DATE: March 25, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue ($6,318,854) ($9,009,432) ($11,882,241)
Inmate Revolving
Fund (Unknown) (Unknown) (Unknown)
Insurance
Dedicated Fund ($6,875) ($16,500) ($19,250)
Grain Inspection
Fund ($15,147) ($8,250) ($8,250)
State Fair Fee Fund ($150,760) ($121,000) ($121,000)
Conservation
Commission Fund (Unknown) (Unknown) (Unknown)
Highway Fund (Unknown) (Unknown) (Unknown)
Road Fund (Unknown) (Unknown) (Unknown)
Department of
Natural Resources
Dedicated Fund ($122,800) ($283,000) ($348,900)
Unemployment
Insurance Trust
Fund $0 $0 ($15,734,000)
Partial Estimated
Net Effect on All
State Funds ($6,614,436) ($9,438,182) ($28,113,641)
*Numerous unknowns not included in the total.
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Federal (Unknown) (Unknown) (Unknown)
Total Estimated
Net Effect on All
Federal Funds (Unknown) (Unknown) (Unknown)
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government* ($651,315) ($887,460) ($948,918)
*Numerous unknowns not included in total.
FISCAL ANALYSIS
ASSUMPTION
The following agencies do not expect to be fiscally impacted: Department of
Labor & Industrial Relations-Division of Labor Standards, Senate, Veterans
Commission, Gaming, State Emergency Management Agency, Department of Health,
Office of the Governor, Department of Economic Development, State Auditor,
Lottery Commission, and Department of Public Safety
The Office of State Courts Administrator (CTS) as an employer expects little
appreciable impact on the budget of the judiciary. The CTS is unable to make
a projection with regards to the county budgets. Initially, there may be
come civil cases, but after a period of time the CTS would expect substantial
compliance. Oversight assumes the fiscal impact would be zero.
The Department of Corrections (DOC) indicates that the increase in the
minimum wage could adversely affect its Prison Industry Enhancement (PIE)
program. This program is operated in conjunction with the private sector to
provide employment opportunities to inmates who are paid minimum wage.
Increasing the minimum wage could discourage private sector employers from
participating in the program, resulting in a decrease in funds going into the
Inmate Revolving Fund. Twenty-five percent of the wages earned by offenders
are deposited into the Inmate Revolving Fund and used to support offenders in
education programs, drug treatment programs, residential treatment
facilities, other community-based sanctions, electronic monitoring or in work
or educational release programs. It is conceivable that these expenditures
would have to be requested through the appropriation process from the general
revenue (GR) fund. As a result, the fiscal impact has been shown as an
unknown loss to the Inmate Revolving Fund and a cost to GR.
The Department of Revenue (DOR) would incur additional costs related to
employment of its seasonal employees. DOR utilizes seasonal employees to
process mail, income tax returns and other seasonal type tasks. Assuming
that 250 seasonal employees are employed for 20 weeks at 40 hours per week,
DOR would pay for 200,000 hours per year of seasonal services. The
differential cost per hour to DOR would be $.50 in FY97; $.75 in FY98; and
$1.00 in FY99. FY97 would be prorated to six months since approximately 85%
of DOR's seasonal work occurs between January and June. FY98 would be
$150,000 and FY99 would be $200,000.
The Secretary of State (SOS) currently only has three employed permanent part
time employees who would be affected by this proposal. The incremental
increase in costs would be $1,234 in FY97; $2,813 in FY98; and $3,506 in
FY99. Oversight prorated FY97 costs to six months.
The Tax Commission (TAX) assumes that at least 177 employees in county
assessors' offices would be impacted. The cost was estimated at $380,450 of
which the state would reimburse one-half. Oversight has shown one-half as a
cost to the general revenue, with the remaining half being charged to the
local level. FY97 was prorated to six months.
The Department of Insurance (INS) utilizes approximately 11,000 hours of
departmental temporary services during a given fiscal year. These
individuals would be used for a variety of activities, but per Manpower
Temporary Services, they are seldom paid more than $5 per hour. The costs
represent the incremental increase and FY97 has been prorated to six months.
The Department of Agriculture (DOA) obtained an average of affected employees
at an hourly rate and calculated the difference in wages. Projections for
the Fair Week Employees were based on the closest approximation as the pay
rates and hours worked by these 400-500 employees hired for 11 days are not
readily available. It was assumed that the hours worked would equate to a
total of 42.77 FTE and would affect the general revenue, grain inspection and
state fair fee funds.
The House of Representatives (MHR) estimates costs based on approximately 31
employees working a varying number of hours in December, 1995. The
difference between the current wage and new potential wage was calculated.
The Springfield Public Schools estimated the potential increases at $158,202
in FY97; $185,094 in FY98; and $211,708 in FY99. The Springfield Public
Schools view this proposal as an unfunded mandate from the state.
MO Western State College indicates that this proposal would primarily affect
students and greatly reduce the amount of federal funds distributed as
financial work study funds.
The Department of Conservation (MDC) assumes that in order to maintain
equity the upper steps of the pay scale would have to be adjusted as well as
the lower end. The result would be costs of $557,500 in FY97; $1,184,500 in
FY98; and $1,324,000 in FY99. MDC also assumes that these costs should be
increased 7.65% for social security and Medicare, but no other fringes would
be included. These costs do not include any adjustments to the salaried
employee pay scale which may need to be increased to maintain equity between
salaried and hourly employees. The salaried employee pay scale currently
starts at an hourly equivalent of $6.75 per hour. Oversight has shown the
fiscal impact as unknown because it was not able to ascertain which portion
of the costs were related to just the individuals currently making less than
the minimum wage limits. The proposal does not provide for wage increases
for individuals currently surpassing the potential limits.
The Coordinating Board for Higher Education (CBH) expects to employ one
full-time intern year round. This individual is currently paid $4.25 per
hour. With the increases in the minimum wage, CBH expects to incur costs of
$2,080 in FY97; $4,420 in FY98; and $4,940 in FY99.
The Office of Administration (OA), Division of Personnel estimates costs to
cover 764 out of 36,588 employees in the Uniform Classification and Pay
System. Using 2.5% for the next three fiscal years, OA increased the current
FY96 grid by that amount. Then a comparison was conducted of any employee
that was under the new minimum wage. If the employee's salary was below the
new minimum wage the amount to bring employees up to the new minimum wage was
determined. Costs would be $24,458 in FY97: $89,508 in FY98; and $187,458 in
FY99.
According to the Department of Highway & Transportation (DHT) this proposal
would not immediately impact its current employees as DHT pays an hourly wage
of $6.79. The amount paid to summer student employees would be impacted
beginning in FY97 (i.e., half of May and the month of June). DHT currently
pays some of its' summer employees a higher wage than the $5.40 per hour paid
to the summer student employees. It was assumed that the current dollar
spread would be maintained after minimum wage was set at $6.25. Both the
Highway Fund and Road Fund would be impacted. Oversight has shown DHT as
unknown since the amounts calculated would be inflated. The proposal does
not mandate increased wages for employees currently above the limits in order
to avoid compression of the pay grid.
The City of Kansas City, MO estimates costs of $0 in FY97; $7,141 in FY98;
and $35,735 in FY99. It was assumed that no other immediate salary structure
adjustments associated with raising the minimum wage would be made.
Southwest MO State University estimates costs on the current wage of its
part-time and full-time employees. Costs would be $438,142 in FY97; $108,295
in FY98; and $126,489 in FY99.
The Department of Elementary & Secondary Education (DES) estimates costs
based on the assumptions that a 5.8% pay increase would occur in FY97; a 3%
pay increase would occur in FY98 and FY99; substitute personnel would be paid
at the same rate as the employee they are replacing and substitutes are used
5% of the time per year; and FY97 would be prorated to six months. Costs
would be $4,788 in FY97; $2,515 in FY98; and $2,783 in FY99.
Central MO State University estimates costs at $2,507,270 in FY97; $5,329,500
in FY98; and $5,956,500 in FY99. Costs are based on 2.2 million annual hours
plus 14% for benefits (i.e., retirement and social security). The 14% is a
blended rate of 18.34% for full-time employees and 7.65% for those receiving
only social security. Oversight averaged the amounts received by five other
universities of comparable size, thus, reducing the estimated costs to
$403,825 in FY97; $374,018 in FY98; and $389,767 in FY99.
The State Treasurer (STO) estimates costs for a total of 4,800 hours of work
by 10 interns for 12 weeks. The incremental increase would be $6,000 in
FY97; $7,200 in FY98; and $8,400 in FY99.
During FY95, the Department of Mental Health (DMH) hired 213 new employees
who are currently paid below the proposed minimum wage. Assuming an annual
increase of 2.5% the difference between the current and new wage limits would
be $.15, $.24 and $.34, with total average annual hours of 2,080 being
worked. It was assumed that the 2.5% increase would fund the proposed annual
increase of $.15 per year beginning January 1, 2000. DMH assumes that the
increased minimum wage could cause a compression of the pay scale.
Additionally, the increase could affect contracts with various providers as
the providers would have to increase wages for their employees which could
result in higher contract costs. Total costs, including fringe benefits,
would be $39,737 in FY97; $127,160 in FY98; and $180,143 in FY99.
The Department of Natural Resources (DNR) estimates costs for existing
positions that are classified as part-time and seasonal. DNR employs
seasonal/temporary laborers in five divisions, with the most significant
impact occurring in the Division of State Parks. In order to increase the
minimum wage as required and to maintain the same number of seasonal
employees, it would cost DNR $122,800 in FY97; $283,000 in FY98; and $348,900
in FY99. DNR believes that the full impact of this proposal cannot be
provided because in order to avoid compression of the pay scale certain
classifications could conceivably need to be re-evaluated. Since the
language of the proposal does not provide for such action, Oversight assumes
that any re-evaluation of classifications would be a budgetary issue. Only
costs related to the seasonal/temporary employees have been shown.
The Missouri Municipal League estimates costs for municipalities across the
state at $348,000 in FY97 and $480,000 in FY98 and FY99.
The University of Missouri System (UM) anticipates a significant fiscal
impact related to the increase in the minimum wage. Annual costs would be
expected to increase $176,451 per week in FY97 for annual costs of
$9,175,452. FY97 would be prorated to six months ($4,587,726); FY98 would
be $7,134,582; and FY99 would be $9,681,428.
The Jackson County Executive assumes that it would incur costs of $14,000 in
FY97; $25,000 in FY98; and $31,250 in FY99. The Jackson County Executive
assumes that the increase in the minimum wage would result in a compression
of the current pay scale. If all of its' 17,000 employees were to receive a
$.25 increase, it would cost $850,000. However, a system of relative value
is used in determining salaries. In order to avoid the compression and using
this system, every employee would receive approximately a 4% increase,
resulting in costs of $1.6 million.
Harris-Stowe State College estimates costs based on the difference between
current wages, salary based employer taxes, fringe benefits and the minimum
wage. Costs would be $10,066 in FY97 and $12,080 in FY98 and FY99.
The Department of Labor & Industrial Relations (DOL), Division of Employment
Security (ES) does not expect the federal administrative funds to be impacted
because ES workers are paid above the current minimum wage rate. However,
there would be a cost to the Unemployment Insurance Trust (UI) Fund because
the average weekly benefit amount of insured workers would increase while the
taxable wage base and employer tax rates may not increase as rapidly to
offset the higher payment amounts. The maximum weekly benefit amount on a UI
claim would be determined by a worker's highest quarter of wages for the base
period of the claim. The first quarter of 1997 would not become a part of
the base wage until new claims are filed on or after July 7, 1997.
Therefore, FY97 and FY98 would not be impacted. FY99 costs would be
$15,734,000. It should be noted that the benefit financing formula for the
UI Trust Fund should be able to recover the increased costs through a higher
taxable wage base for future years and higher tax rates for employers whose
average annual payroll would increase significantly due to increases in the
minimum wage.
Northeast Missouri State University estimates costs at $3,026,000 in FY97;
$3,297,000 in FY98; and $3,568,000 in FY99. Oversight averaged the amounts
received by five other universities of comparable size, thus reducing the
estimated costs to $403,825 in FY97; $374,018 in FY98; and $389,767 in FY99.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
GENERAL REVENUE
Costs-Department of Corrections (DOC)
Decrease in Inmate Revolving Fund (Unknown) (Unknown) (Unknown)
Costs-Department of Revenue (DOR)
Increase in Minimum Wage Related
to Seasonal Employees ($85,000) ($150,000) ($200,000)
Costs-Secretary of State (SOS)
Increase in Minimum Wage ($617) ($2,813) ($3,506)
Costs-Tax Commission (TAX)
Increase in Minimum Wage ($95,113) ($190,225) ($190,225)
Costs-Department of Agriculture (DOA)
Increase in Minimum Wage ($1,373) ($250) ($250)
Costs-House of Representatives (MHR)
Increase in Minimum Wage ($31,104) ($32,348) ($32,995)
Costs-Coordinating Board for Higher Education (CBH)
Increase in Minimum Wage ($2,080) ($4,420) ($4,940)
Costs-Office of Administration (OA)
Increase in Minimum Wage ($24,458) ($89,508) ($187,458)
Costs-Department of Elementary & Secondary Education (DES)
Increase in Minimum Wage ($4,788) ($2,515) ($2,783)
Costs-MO Western State College
Increase in Minimum Wage ($185,000) ($400,000) ($412,000)
Costs-Southwest MO State University
Increase in Minimum Wage ($438,142) ($108,295) ($126,489)
Costs-Central MO State University
Increase in Minimum Wage ($403,825) ($374,018) ($389,767)
Costs-State Treasurer (STO)
Increase in Minimum Wage ($6,000) ($7,200) ($8,400)
Costs-Department of Mental Health (DMH)
Increase in Minimum Wage ($39,737) ($127,160) ($180,143)
Costs-University of Missouri (UM)
Increase in Minimum Wage ($4,587,726) ($7,134,582) ($9,681,438)
Costs-Harris Stowe State College
Increase in Minimum Wage ($10,066) ($12,080) ($12,080)
Costs-Northeast MO State University
Increase in Minimum Wage ($403,825) ($374,018) ($389,767)
Costs-Non Responding Agencies
Increase in Minimum Wage (Unknown) (Unknown) (Unknown)
PARTIAL ESTIMATED NET EFFECT
ON GENERAL REVENUE ($6,318,854) ($9,009,432) ($11,822,241)
INMATE REVOLVING FUND
Loss-Department of Corrections
Decrease in Monies Resulting
From Decrease in Number of
Inmates Working (Unknown) (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
INMATE REVOLVING FUND (Unknown) (Unknown) (Unknown)
INSURANCE DEDICATED FUND
Cost-Department of Insurance (INS)
Increase in Minimum Wage ($6,875) ($16,500) ($19,250)
ESTIMATED NET EFFECT ON
INSURANCE DEDICATED FUND ($6,875) ($16,500) ($19,250)
GRAIN INSPECTION FUND
Costs-Department of Agriculture (DOA)
Increase in Minimum Wage ($15,147) ($8,250) ($8,250)
ESTIMATED NET EFFECT ON
GRAIN INSPECTION FUND ($15,147) ($8,250) ($8,250)
STATE FAIR FEE FUND
Costs-Department of Agriculture (DOA)
Increase in Minimum Wage ($150,760) ($121,000) ($121,000)
ESTIMATED NET EFFECT ON
STATE FAIR FEE FUND ($150,760) ($121,000) ($121,000)
CONSERVATION COMMISSION FUND
Costs-Department of Conservation (MDC)
Increase in Minimum Wage (Unknown) (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
CONSERVATION COMMISSION FUND (Unknown) (Unknown) (Unknown)
HIGHWAY FUND
Costs-Department of Highway & Transportation (DHT)
Increase in Minimum Wage (Unknown) (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
HIGHWAY FUND (Unknown) (Unknown) (Unknown)
ROAD FUND
Costs-Department of Highway & Transportation (DHT)
Increase in Minimum Wage (Unknown) (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
ROAD FUND (Unknown) (Unknown) (Unknown)
DEPARTMENT OF NATURAL RESOURCES
DEDICATED FUNDS
Costs-Department of Natural Resources (DNR)
Increase in Minimum Wage ($122,800) ($283,000) ($348,900)
ESTIMATED NET EFFECT ON
DEPARTMENT OF NATURAL RESOURCES
DEDICATED FUNDS ($122,800) ($283,000) ($348,900)
UNEMPLOYMENT INSURANCE TRUST FUND
Costs-Department of Labor & Industrial Relations
Division of Employment (ES)
Increase in Minimum Wage $0 $0 ($15,734,000)
ESTIMATED NET EFFECT ON
UNEMPLOYMENT INSURANCE TRUST FUND $0 $0 ($15,734,000)
FEDERAL
Loss-MO Western State College
Reduction in Federal Funds for
Work Study Funds (Unknown) (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
FEDERAL FUNDS (Unknown) (Unknown) (Unknown)
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
LOCAL
Costs-County Assessors
Increase in Minimum Wage ($95,113) ($190,225) ($190,225)
Costs-Springfield Public Schools
Increase in Minimum Wage ($158,202) ($185,094) ($211,708)
Costs-City of Kansas City, MO
Increase in Minimum Wage $0 ($7,141) ($35,735)
Costs-State Municipalities
Increase in Minimum Wage ($384,000) ($480,000) ($480,000)
Costs-Jackson County Executive
Increase in Minimum Wage ($14,000) ($25,000) ($31,250)
Costs-Non Responding Agencies
Increase in Minimum Wage (Unknown) (Unknown) (Unknown)
PARTIAL ESTIMATED NET EFFECT ON
LOCAL GOVERNMENT* ($651,315) ($887,460) ($948,918)
*POTENTIAL HANCOCK IMPLICATIONS.
FISCAL IMPACT - Long Range
Oversight assumes that this proposal would result in a long-range fiscal
impact. The proposal would provide for a $.15 increase on every January first
beginning on January 1, 2000.
DESCRIPTION
The proposal would require all employers to pay their employees an hourly
wage of no less than $6.25 as of January 1, 1997; $6.50 as of January 1,
1998; and $6.75 as of January 1, 1999. Beginning January 1, 2000, and every
January 1st thereafter the minimum wage would increase $.15.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Coordinating Board for Higher Education
Office of State Courts Administrator
Department of Economic Development
Department of Elementary & Secondary Education
Department of Highway & Transportation
Department of Mental Health
Department of Natural Resources
Department of Agriculture
Department of Corrections
Department of Health
Department of Revenue
Department of Public Safety
Office of the Governor
House of Representatives
Department of Insurance
Lottery Commission
Department of Conservation
Office of Administration
State Auditor
Secretary of State
Senate
Tax Commission
State Treasurer
Central MO State University
Harris-Stowe College
MO Western State College
Northeast MO State University
Southwest MO State University
University of Missouri
Jackson County Executive
Kansas City Manager
Missouri Municipal League
Springfield Board of Education
NOT RESPONDING: Attorney General, Department of Social Services, Lincoln
University, MO Southern State College, Northwest MO State University,
Southeast MO State University, City of St. Louis, St. Louis Public Schools,
St. Louis County-Director of Administration, St. Louis County Executive,
Kansas City Public School Board, Mayor of Jefferson City, Cole County
Presiding Commissioner, City of Springfield, Greene County