ST. PAUL — Minnesota is officially on the way to creating a tax-funded, state-administered paid family and medical leave program for workers.
Gov. Tim Walz on Thursday, May 25, signed a bill creating a state program that would offer 12 weeks of family leave and 12 weeks of medical leave with a 20-week annual cap. All businesses would be required to participate or offer equivalent benefits. Benefits start in 2026.
Surrounded by lawmakers and advocates who have been working for a decade to establish paid leave in Minnesota, Lt. Gov. Peggy Flanagan said the program is a key piece of the Walz administration’s goal of helping working families and children.
“Everyone deserves paid time away from work, to heal, to grow and to live,” she said. “It's not a 'nice-to-have' — it's a 'must-have' if we truly are going to be the best state in the country to raise a family … when you're ready to come back, your job should still be there.”
Low-wage workers often do not have access to the same benefits as higher-paid members of the workforce. Advocates say one-third of Minnesota workers — about 900,000 people — don’t have any paid time off. House Bill Sponsor Rep. Ruth Richardson, DFL-Mendota Heights, said the program will help eliminate economic disparities among ethnic and racial groups.
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Senate bill sponsor Sen. Alice Mann, DFL-Edina, noted that lawmakers have been pushing for years to get paid leave in Minnesota, and the final bill is the product of about a decade of activism and policy development.
The bill was a priority this session for Democratic-Farmer-Labor lawmakers, who won complete control of state government in November.
Under the program, workers who use paid leave will qualify for compensation based on their wages. A worker who earns less than 50% of the state’s average weekly wage would get 90% of their normal pay. Workers earning more than 50% of the state’s average wage would get 66%, and those earning double the weekly average would receive 55%.
It will take a while for the paid leave program to start up. While the initial bill would have gone into effect in 2025, the final language calls for a start date of Jan. 1, 2026. Minnesota is establishing a new office to administer the program that will be staffed by about 400 new employees.
The math doesn’t work on this paid leave mandate. We believe a serious analysis of the payroll tax will show it needs to be much higher in order to avoid financial collapse.
The program would be seeded by $668 million from the record $17.5 billion budget surplus. Ongoing funding would come from a new 0.7% payroll tax split between employers and employees. It’s initially expected to create an additional $1.5 billion a year in taxes. Past estimates found workers would pay about $3 extra in taxes each week.
While the state will require employers to allow 12 weeks of medical and 12 weeks of family leave, a worker can only take 20 cumulative weeks a year.
Republicans, the National Federation of Independent Businesses and the Minnesota Chamber of Commerce also say they’re worried about a “one-size-fits-all” approach to paid leave for businesses ranging from mom-and-pops to Fortune 500 companies. GOP lawmakers also expressed doubt that the program would remain at current cost estimates.
In a statement on the bill’s signing, NFIB Minnesota state director John Reynolds called the plan “deeply flawed,” and said the cost of paid leave will likely be much higher than current estimates show.
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“The math doesn’t work on this paid leave mandate,” he said. “We believe a serious analysis of the payroll tax will show it needs to be much higher in order to avoid financial collapse.”
Businesses that do not offer paid leave through the Minnesota program can opt out if they offer the same or better benefits. There is also a reduced premium for businesses with 30 or fewer employees.
GOP lawmakers oppose a mandate or program run by the state but acknowledge that many Minnesotans want paid family and medical leave. In response, they’ve floated an alternative proposal that would create a private option for paid leave.
That proposal would have allowed insurers to sell leave plans to businesses. Proponents argue the arrangement would allow businesses to provide paid leave while avoiding higher taxes and administrative costs.
Follow Alex Derosier on Twitter @xanderosier or email aderosier@forumcomm.com .
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