Concession talks may be last chance for pension changes until 2017

Dannel P. Malloy’s been governor for only four months, but he might never again see the opportunity he has now to achieve a top priority of permanently shrinking two long-term labor costs: pensions and retiree health care.

If concession talks end without a deal, Malloy has no obvious leverage to force state employees back to the bargaining table before their current contract on pension and health benefits expires in 2017, three years after the next gubernatorial election.

“There is no question there is an enormous opportunity to achieve long-term structural reform now,” said Roy Occhiogrosso, senior adviser to Malloy. “But if it’s not achieved now, there are other ways and other times.”

Occhiogrosso declined to identify those times or ways.

Negotiators for the administration and SEBAC, the State Employees Bargaining Agent Coalition, were expected to resume talks today over Malloy’s demand for $1 billion in long- and-short-term labor savings. Although both sides have been scrupulous about keeping the talks confidential, it is believed that changes to retirement benefits are one of the remaining sticking points.

If the talks fail to yield savings, Malloy says he will carry out plans to lay off 4,742 employees to save $455 million, then propose another $545 million in spending cuts to the General Assembly.

Senate President Pro Tempore Donald E. Williams Jr., D-Brooklyn, who has strongly backed the governor’s approach to concessions and the budget, said the failure of concession talks would lead to a wide-ranging budget debate.

Malloy succeeded in prodding the legislature last week to adopt a budget that will remain incomplete until the governor’s delivers the labor savings or proposes a revised budget with $1 billion less spending. The revisions may be more difficult.

The legislature would look at some of Malloy’s options for spending cuts he floated last week, including deep reductions in local aid and the elimination of some agencies, as only “last resorts,” Williams said.

“It would be a huge debate,” Williams said. “I think it’s premature to say anything would be off the table.”

House Speaker Christopher G. Donovan, D-Meriden, labor’s strongest ally in the General Assembly, declined to discuss the challenges Malloy might face with budget revisions, or his efforts to cut retirement costs.

But Williams said the current fiscal crisis has given Malloy what may be his best opportunity for pension reforms, even if it is not his only opportunity.

“I don’t think it’s now or never but certainly this is an opportunity to look at short-term savings and long-term savings,” Williams said.

Union officials say they hear skepticism about whether labor would return to the table for pension issues during Malloy’s first term.

“I can’t say you’ve got one shot or not,” said Leo Canty, a vice president of the American Federation of Teachers-Connecticut, one of the unions in the coalition now bargaining with Malloy. But in union circles, he said, “that’s a question that’s asked all the time.”

Unlike previous governors who struggled with fiscal challenges, Malloy has looked beyond the next budget and demanded that state employees help reduce Connecticut’s long-term unfunded obligations for retirees.

“My first priority is to put the state on a sustainable basis so that we develop a plan to begin the process of funding our unfunded obligations,” Malloy said last week.

Not sexy stuff, but it is an approach that could save the state far more than previous labor concessions, which tended to focus on temporary givebacks, such as furlough days or pay freezes.

Pension and retiree health benefits were set in 1997, when the administration of Gov. John G. Rowland, now a radio host who criticizes Malloy for his approach to concession talks, signed a 20-year labor deal.

Governors typically require a fiscal crisis to bring labor to the bargaining table before the expiration of a contract, and Malloy has tried not to waste the fiscal crisis he’s inherited.

Joseph Brennan, a senior vice president for public affairs of the Connecticut Business and Industry Association, said the current economic situation has prompted an examination of rising pension costs.

“We hope the combination of economic and fiscal problems would generate enough pressure to make those substantive changes, not temporary fixes,” Brennan said.

An improving economy likely would lessen the political resolve to pursue the changes after this year, he said.

“If everything is rosy and tax receipts are coming in and unemployment is 4 percent, obviously there is less pressure to make those changes,” Brennan said.

Occhiogrosso said he understands why some people see this as Malloy’s only chance to change the pension system, but the governor has a minimum of four years to attack this issue and others.

He was reluctant to look beyond the coming weeks, whether the topic was concessions or Malloy’s ability to politically survive beyond his first term, should the concession talks fail.

“Four years of an administration is a long time,” he said. “And this guy is four months into his first term, so I think to draw any conclusions what might happen over the long term when you are only four months into an administration is hard to do.”