Malloy warns of deeper layoffs if concessions deal is rejected

Gov. Dannel P. Malloy sent a pointed message to unionized state employees Thursday, warning that a failure to ratify a tentative agreement for labor savings would lead to thousands more than his previously threatened layoffs, reaching senior employees.

“We’re talking about a dramatic reshaping of state government with thousands more than 4,700 employees losing their jobs. It’s a major restructuring,” Malloy said during a wide-ranging press conference at the Capitol.

Malloy’s comments came as dozens of bargaining units in 15 unions are considering ratifying a two-year, $1.6 billion package of concessions and other labor savings recommended by their union leadership.

The governor said he reads comments posted online by some employees who speculate that a failure to ratify would prompt an “ERIP,” an early retirement incentive plan.”

“Let me be very, very, very clear. There will be no ERIP. I’ve seen the comments. I’ve made it clear. I’ve made it clear as a candidate. I’ve made it clear since I became governor,” Malloy said. “I’m not going to pay people to retire and further burden a pension system which as of the last Pew analysis was 42 percent funded.”

The governor’s comments parallel those of the union coalition, the State Employees Bargaining Agent Coalition, to their members, but Malloy said he has not been asked by labor leaders to reinforce their message. Malloy said layoffs would reach employees with more than 10 years experience, as he would eliminate entire agencies.

Matt O’Connor, a spokesman for the union coalition, said labor leaders are combating several misperceptions, including a belief that a rejection of the deal would lead to further negotiations or retirement incentives.

Those are not options for Malloy, who has promised to quickly cut labor expenses as he approaches July 1, the start of the new fiscal year, O’Connor said. The ratification process will continue until June 24, he said.

“You’ll have a governor who is out of time, out of patience and out of options,” O’Connor said. “He’ll use whatever tools are in his arsenal, and there aren’t many of them.”

“We’re making sure our members understand that,” O’Connor said.

The unions released a statement Thursday afternoon addressing what O’Connor called a misinformation campaign about the concessions and savings deal:

“Let’s all be honest with each other; there are outside forces who would love to see our tentative agreement fail and who would welcome the chaos that will ensue from thousands of layoffs and destructive cuts to public services. We cannot allow that to happen.”

Nearly 13 percent of the total $1.6 billion biennial savings is tied to language in the deal that would press all employees and retirees to join a Value-Based Health Care Plan. In this program, workers would commit to have regular physicals and other key health screenings. Those who don’t participate would face a $100 per month premium increase and a $350 per person deductible.

O’Connor said the new health program is not a concession for those who participate.

“That’s huge,” O’Connor said. “In this political and economic environment, to have the ability to say one’s health care coverage has been maintained is enormous. Those who opt out, they are going to pay more. That’s their choice.”

Malloy, who has been roundly criticized by Republicans for not obtaining deeper concessions, said the health changes can benefit the state and the employees.

“Whoever is trying to convince state employees that their medical plan is being radically changed must have other motives,” Malloy said. “I would hope that the unions themselves will do a good job communicating that fact.”

If the administration returns to layoffs, the governor said they could be ordered relatively swiftly, given that his staff had planned for that contingency before the tentative concession deal was announced on May 13.

“It has not gathered much dust in the intervening weeks,” he said.

But even if employee unions, which are expected to finish voting by mid-June, reject the package, the one-month lag between announcement and rejection could cause fiscal problems for Malloy, even if his administration is ready logistically to order layoffs as an alternative.

The governor has estimated state government could save roughly $100 million annually for every 1,000 workers laid off. And when his office issued 4,700 layoff notices in early May–most of those notices being recalled after the tentative deal was struck–the administration projected a $450 million savings for the fiscal year that begins July 1.

Malloy is counting on $700 million in savings next fiscal year from the concession deal.

If he intends to plug some or all of that gap with layoffs, he likely could not count on the same ratio of $100 million saved for every 1,000 jobs eliminated.

According to the nonpartisan Office of Legislative Research, several factors typically cut into layoff savings in the first year, and one of those is the notice that must be given. The warning period varies based on each bargaining unit’s contract, but it ranges from two to eight weeks.

Given the high end of that scale, and that the first round of pink slips was recalled, state government already could be into the new fiscal year–and already paying salaries to workers targeted for layoffs–before jobs could be eliminated.

Carrying the layoffs into the new fiscal year also would obligate the administration to make pension fund contributions to reflect those positions that were funded on July 1. Pension fund contributions are fixed for the year based on an actuarial study prepared the prior fall.

Former Gov. M. Jodi Rell’s calculated last November that had the administration laid off 5,000 workers–roughly 1/10th of the work force-in lieu of the concession deal struck with unions in May 2009, the savings in the 2009-10 fiscal year would have been just under $300 million.