Backers of concession deal struggle to sell its long-term benefits
Gov. Dannel P. Malloy says the challenge of winning ratification of a new concession deal is plain to anyone with his habit of religiously reading online comments. No one, he says, seems to see the disaster just over the horizon if ratification fails.
The impetus for the concessions is a short-term crisis: How to fill a $1.6 billion gap in state’s current biennial budget. But Malloy, backed by union leaders, says the real value of the deal lies in the structural changes that could stabilize finances and benefits for a decade or more.
It’s been a tough sell.
One common refrain found in the comments posted by state employees is why not simply address the shortfall in the current budget with a pay freeze and furlough day? Why mess with health and pension changes that seem to be the biggest obstacles to ratification?
“If he is serious about being a leader he will drop the pension and health BS that isn’t going to save anything of significance in the next 2 years, and get to work on wages and furlough days – that’s real hard calculable savings that will fix his issue for this budget,” one state worker said in commenting on a Mirror story. “We can talk about the other stuff when time is not of the essence.”
“This deal is not needed to solve the budget deficit,” said another state worker. “Everyone is willing to take furlough days to get the needed savings.”
“We have a deal until 2017,” said a third. “Fix it then.”
Malloy said that approach would produce another stopgap solution, inviting exactly what some workers fear: future demands for more givebacks.
“Under that scenario you just bump from crisis to crisis to crisis,” Malloy said in an interview. “I can’t enter into a four-year, no-layoff clause and not bring about the structural changes, which everybody knows has to take place. It doesn’t mean they want it to take place.”
Too many state employees are judging the tentative agreement against what they have now, not what they could reasonably expect to have in 2017, when the current 20-year health and pension deal negotiated in 1997 by Gov. John G. Rowland expires, Malloy said..
Faced with unfunded liabilities for retiree health care, the trend is for states and municipalities to share more of those costs with employees and retirees or, in extreme cases, try to abolish the coverage.
“The benefit most at risk for state workers is retiree healthcare. Not only have most workers in the private sector lost access to coverage in retirement, more and more public employees are losing theirs, too,” said Ron McLellan, a 30-year state employee and the president of Local 511 of CEUI/SEIU.
A survey by the Connecticut Conference of Municipalities found that a strong trend of member municipalities negotiating contracts that either limit retiree health coverage or greatly share the cost with the beneficiaries.
In Norwalk, the Board of Education tried and failed in an arbitration case to eliminate retiree health coverage. It is not expected to be the last government entity to make the attempt.
In New Haven, the cost of employee benefits has been at the center of a bitter concession fight with John DeStefano, the liberal Democratic mayor who was the Democratic nominee for governor in 2006.
“Nationally, it used to be a Republican perspective,” said Jim Finley, the president of the conference. “There is now a bipartisan recognition, because the numbers don’t lie. Almost every chief executive now understands the need for reform.”
But Malloy says he sees little evidence that state employees see the near-certainty that their retirement benefits will shrink or grow more expensive in 2017, unless concessions are ratified now.
The problem, he says, was crystallized in another comment posted on The Mirror’s site over the weekend, after the administration and unions announced a new tentative agreement.
“I am 45 and have 11 years of state service…My plan all along was to work until age 55 and retire with (reduced) pension/health benefits…With this new deal I will have to work 3 years longer for less money even though I had a union contract…If this plan passes the early retirement penalties will be double…I don’t know what to do.”
It was signed, “state employee.”
“That’s the issue right there, that people in government believe they should have the ability to retire at 55,” Malloy said.
Normal retirement age for most state employees is 60 after 25 years of service or 62 with at least 10 years. State employees now have the right to retire at 55, but they pay the penalty of seeing their monthly benefit reduced by 3 percent for each year they leave early.
Under the concession deal, the penalty would double to 6 percent, most likely forcing employees to work longer, taking some pressure off the retiree health system, which provides primary coverage for state retirees until they become eligible for Medicare at 65.
“That will have a behavioral effect,” Malloy said.
In 2022, the normal retirement ages also would increase to 63 with 25 years of service and 65 with 10 years of service.
Malloy says he is the first governor in decades to take a long-term view of the state’s benefits and its revenue structure, which should give state employees some confidence that giveback demands will not become a biennial event.
His predecessor, Gov. M. Jodi Rell, negotiated a concession deal in 2009, which is one of the objections some employees have to the current deal. “Do you all think this is gonna be the end?” another employee said in a posted comment. “In a few years the state will be back for more.”
But Rell did nothing to increase revenues. In fact, she borrowed $1 billion in 2009 for operating expenses, which added to the structural deficit Malloy inherited.
By comparison, Malloy put a record-setting $1.5 billion in taxes on the table in February and swore off one-shot revenue and gimmicks, such as borrowing for everyday expenses.
As a result, some fiscal analysts believe the state could be producing sizable surpluses in the near future, barring a double-dip recession.
When Malloy and the State Employees Bargaining Agent Coalition announced their first tentative agreement, the focus was on the $1.6 billion the administration estimated it would save over two years.
But Malloy says more important was the actuarial projections it could save $21.5 billion over two decades, numbers based in part over higher retirement ages that would take effect in 2022 and an immediate doubling of the financial penalties for early-retirement.
Weighed against the immediate impact on the proposed budget pending before the General Assembly, the long-term savings got short shrift, he says.
“The $21.5 billion actuarial estimate of what the savings is was at most a footnote in stories,” Malloy says.
Mark Ojakian, the governor’s labor negotiator, said the state approached the concession talks with a two-track strategy of immediate cost savings to help balance the budget and long-term savings to stabilize the state’s finances.
“It was very difficult to balance those two, but we had to do it,” he said.
Ojakian said that union leaders saw the importance of sustainability to protect their member’s benefits over the long haul, but it is clear that many rank and file members have not.
“Absolutely, I am surprised people didn’t see past 2017,” Ojakian said. “And I was also surprised that people didn’t appreciate what is happening in other states, where collective bargaining rates were taken away altogether.”
In this effort to win ratification, it is one of the union talking points. A new leaflet giving reasons for ratification warns of “lost right to negotiate health care.”
Sprinkled among the 149 comments on a Mirror story reviewed by Malloy recently were indications some employees are taking a longer view.
“Yes,” wrote one employee, “i need my raise but i would rather see a little more stability for at least a few more years.”
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