Labor deal rejected; Malloy wants authority to cut budget himself

An AFSCME local representing correction officers rejected the concession deal in voting tallied today, formalizing what has been apparent for days: the unions’ tentative agreement with Gov. Dannel P. Malloy for $1.6 billion in savings over two years is dead.

Malloy said he will ask the legislature in a special session Thursday to authorize him to now make the necessary spending cuts to balance the budget, rather than present detailed revisions for lawmakers to approve. He said granting him that authority would be the quickest away to amend the budget.

The governor said that his cuts would include mass layoffs of state employees, but after a meeting with mayors of the state’s five largest cities, Malloy pledged to preserve as much state aid to municipalities as possible, a recognition that local budget and tax rates are set.

“I’m going to do everything in my power to minimize that impact,” Malloy said, particularly in the upcoming fiscal year. The governor added he has made “no hard decisions” yet about any specific reductions in town aid.

House Speaker Christopher G. Donovan, D-Meriden, said the House will want to see a detailed plan for cuts before a voting on granting Malloy the expanded rescissionary authority.

With votes from the last of nine AFSCME bargaining units complete, the largest state employee union has rejected a deal that the administration says would have saved $1.6 billion over two years, though fiscal analysts have questioned the number, and provided job security for four years.

The final vote by AFSCME, the only union big enough to block ratification by itself, was 6,781 to 5,547 to reject. Another union, the Connecticut Employees Union Independent, had previously rejected the agreement, 1,692 to 1,498.

With results from two unions not expected until Sunday, a majority of SEBAC, the State Employees Bargaining Agent Coalition, have ratified the deal that would have frozen wages for two years and made long-term changes to health and retirement benefits.

In fact, a majority of the members of 15 unions and the 34 bargaining units in the coalition voted to ratify, 20,981 to 14,796.

But coalition fell short under its complex rules: 14 of the 15 unions must ratifiy, and the unions in favor must represent 80 percent of all unionized state employees. It fell short of both measures. As the union represents one third of all union members, AFSCME’s rejection was sufficient to deny SEBAC the 80-percent threshold.

Based on previous statements by Malloy and his staff, the administration now is expected to issue about 7,500 layoff notices, a staggering 16 percent of the unionized workforce. Tim Bannon, his chief of staff, said the administration will finalize layoff plans over the weekend.

No notices are going out today, he said.

A union spokesman, Larry Dorman, said he hoped that the governor would not act on layoffs until after the union leadership meets Monday to consider their options. “It’s important not to go nuclear,” Dorman said.

But it was unclear what options, if any, the unions have. Malloy has ruled out re-negotiating, a position that another spokesman, Matt O’Connor, says that the unions believe is firm.

Asked about the possibility of a new vote, Dorman said, “I can’t see that happening right now.”

On Thursday, Malloy called a special session of the General Assembly for next week to either approve revisions to the biennial budget that takes effect July or to grant him recission authority to make the necessary cuts. He has ruled out further tax increases to close the gaps created by the failed concession deal: a $700 million shortfall in 2011-12 and $901 in 2012-13.

Today, he made clear he wants the authority to make the cuts, a move that spares legislators from now voting on programmatic cutbacks. The legislature has long granted the governor limited authority to unilaterally reduce many budget accounts by up to 5 percent, though municipal aid cannot be touched.

Malloy wants to raise the limit on rescissions to 10 percent, and more importantly, to end the exemption for municipal aid. The Democratic legislature refused to grant him that authority during the regular session, but it is likely he will get his wish next week.

Senate President Pro Tempore Donald E. Williams Jr., D-Brooklyn, was not immediately available to comment on Malloy’s suggestion that the politically difficult budget cuts be left to him.

Instead, Williams issued a statement broadly supporting the governor.

“Given the rejection of the labor agreement, it’s critical that we act decisively before the beginning of the new fiscal year,” Williams said. “We support the governor’s call to action and will work with him to ensure that Connecticut has a balanced budget.”

But while many segments of the budget technically are subject to the rescission clause, realistically they also cannot be touched. For example, state employee salaries and benefits, which represent nearly 30 percent of next fiscal year’s $20.14 billion budget, are set by contract. Medicaid, which is more than 20 percent, is governed by federal entitlement rules that require states to serve all eligible patients, and debt service, about 11 percent, also is a legal obligation.

Past governors generally have cut spending by no more than $150 million through rescissions.

Doubling the limit to 10 percent presumably would allow Malloy to cancel closer to $300 million in spending. But ending the exemption for municipal grants, which total about $2.8 billion, would allow the governor to cut another $280 million without having to seek legislative permission.

The governor said that he understood why lawmakers were reluctant during the past session to expand the Executive Branch’s power while there still was hope for a labor deal. But he said Connecticut must be prepared to move quickly to balance its budget to retain its fiscal reputation before the bond rating agencies on Wall Street.

“I think that’s the  best way to reassure the market place about Connecticut’s earnest drive to balance the budget,” Malloy said.

His budget chief, Benjamin Barnes, already had issued a memo to department heads, instructing them to prepare for the start of the fiscal year on July 1 on the assumption that ratification had failed.

Malloy said he wasn’t aware of any legal options state union leaders might have to call a second vote or proposed a modified package of concessions, adding he wasn’t worrying about such questions right now.

“Not my job,” he said. “We’re going full steam ahead. … I don’t have the liberty of time.”

Malloy, who has said a failed concession deal could mean as many as 7,500 employee layoffs over the next two fiscal years, predicted that his administration more likely would issue pink slips close to that total in the first year.

And the governor also noted that, since union rules governing layoff notices would prevent any layoffs taking effect until after the next fiscal year begins on July 1, the longer they are delayed, the less savings would be achieved in 2011-12.

But Malloy quickly added he wasn’t making such plans cavalierly. “I’m sure they will be devastating to the state’s economy,” he said. “That’s why I fought so robustly to avoid that.”

If 7,500 unemployed were added to the jobless ranks for May, the unemployment rate would have jumped from 9.1 percent to 9.4 percent.

But the current benefits contract between the state and its unions, a deal that runs through 2017, is not sustainable, the governor said, adding that ignoring this problem and not addressing the budget deficit would be even more devastating for Connecticut’s economy in the long run.

And though he didn’t name former Gov. John G. Rowland by name, Malloy laid at least a portion of the blame for the state’s current fiscal woes on Rowland, whose administration signed the 20-year union health care and retirement benefits deal that runs through 2017.

“My hands are tied through 2017,” Malloy said, adding that the legal guarantee that unions have protecting their costly health and retirement benefits are what made the prospect of concessions so difficult.

The 11 unions to vote yes:

• New England Health Care Employees Union, District 1199/SEIU, representing 7,700 nurses, doctors, social workers, technicians and others in a various of agencies and facilities, including the UConn Health Center.
• AAUP at the University of Connecticut, representing 2,000 faculty and researchers at the main campus in Storrs and regional campuses in West Hartford, Waterbury, Torrington, Stamford and Avery Point.
• Connecticut Association of Prosecutors, representing 260 state prosecutors.

• Connecticut Federation of School Administrators, representing 61 principals and others at 18 vocational technical high schools.
• Connecticut Police and Fire union, representing about 900 public-safety personnel across state government, with the exception of state police officers.
• AFT Connecticut, representing 6,800 employees in higher education, health care, vocational education and other areas.
• AAUP in the Connecticut State University system, representing 1,150 faculty, counselors and others.
• AAUP at the UConn Health Center, representing 550 faculty.
• Administrative & Residual Union, representing 3,300 state administrative workers.
• Congress of Community Colleges, representing 2,000 faculty and professional staff.
• CSEA/SEIU Local 2001, representing 3,900 workers, ranging from bridge inspectors to state police supervisors.

The unions voting no:

• Connecticut Employees Union Independent, representing 4,500 maintenance and service employees.
• AFSCME Council 4, representing 15,600 employees across state government, inlcuding correction officers, social workers, higher-education administrators, and clerical workers.

The unions voting today, with results not expected until Sunday:

• Connecticut State Police Union, representing 1,150 troopers, sergeants and master sergeants.
• IBPO/SEIU Local 731, representing 750 judicial marshals.