Free Daily Headlines :

  • COVID-19
  • Vaccine Info
  • Money
  • Politics
  • Education
  • Health
  • Justice
  • More
    • Environment
    • Economic Development
    • Gaming
    • Investigations
    • Social Services
    • TRANSPORTATION
  • Opinion
    • CT Viewpoints
    • CT Artpoints
DONATE
Reflecting Connecticut’s Reality.
    COVID-19
    Vaccine Info
    Money
    Politics
    Education
    Health
    Justice
    More
    Environment
    Economic Development
    Gaming
    Investigations
    Social Services
    TRANSPORTATION
    Opinion
    CT Viewpoints
    CT Artpoints

LET�S GET SOCIAL

Show your love for great stories and out standing journalism

Glitch in 2011 Malloy/union pact rips hole in CT public colleges’ budgets

  • Education
  • by Jacqueline Rabe Thomas and Keith M. Phaneuf
  • October 23, 2013
  • View as "Clean Read" "Exit Clean Read"
Dan Livingston, chief negotiator for state employees in 2011, "This was not part of the discussion. That was not the deal."

Mark Pazniokas / The CT Mirror

Dan Livingston, chief negotiator for state employees in 2011, "This was not part of the discussion. That was not the deal."

The state employees’ union is calling on state legislators and Gov. Dannel P. Malloy to fix a glitch in the 2011 concessions deal that forces the public colleges and universities to spend millions of dollars more every year to bolster the cash-starved pension system.

“This was not part of the discussion. That was not the deal,” said Hartford attorney Dan Livingston, who represented the state unions in 2011 during their negotiations with the Malloy administration.

At issue are the nearly 900 employees of the University of Connecticut, Connecticut State Universities, the state’s community colleges and online Charter Oak State College who are switching from the state’s 401k-type retirement plan to the state’s pension system.

The state’s pension system is more attractive for many workers because it’s perceived as being more stable than a retirement fund that’s dependent on Wall Street. But the state’s pension system has been cash-starved for decades, and it requires a huge influx of funds to make up for past deficiencies. That money, union officials say, would be paid disproportionately by higher education institutions under the current system.

The State Employees Bargaining Agent Coalition, or SEBAC, negotiated an option for its members to switch to a hybrid retirement program similiar to the state’s pension fund in 2011 when it also granted the state numerous concessions, including a two-year wage freeze, an employee wellness health program and various restrictions on retirement benefits.

But while the Malloy administration said Tuesday that it will work with all agencies, including higher education, to manage their “budget obligations,” it didn’t address whether it would support changing the current funding structure.

“The ability of higher ed employees to change to the [State Employees Pension System] pension plan is economically advantageous to the state and to our employees,” said Karen Buffkin, Malloy’s deputy budget director, wrote Tuesday in a statement.

But Jim Howarth, the interim budget chief of the regents system, said, “I am looking at it as a major cost to us. To me, a person that switches costs us much more money.”

Pension system has a troubled past

The state’s pension system, has a troubled fiscal past, and the current controversy centers on how to pay for it.

As of its last valuation, the pension fund had $9.74 billion in assets — just enough to cover 42 percent of its long-term obligations. That’s an all-time low for the fund, which has been plagued by decades of insufficient savings.

Analysts typically cite a ratio between 70 percent and 80 percent as fiscally healthy.

That means that each year the state not only must pay into the pension fund to cover current workers’ future benefits, but it also must catch up on contributions it failed to make in years past.

This year’s total pension contribution equals nearly 55 percent of participating workers’ salaries.

The Alternate Retirement Plan — the 401k-type program — doesn’t have a troubled fiscal past. As a result, the state’s required contribution this year represents just 11 percent of workers’ salaries.

Example: For a university employee earning $50,000 annually, the difference is the university system’s paying a $5,500 annual contribution vs. a $27,500-a-year contribution to the state.

So as more higher education workers leave the 401k-type plan and join the pension “hybrid” plan that has identical benefits to other tiers in the pension system, what’s the cost?

SEBAC insisted in a letter to higher education employees last week that the hybrid plan should have been fiscally insulated from the pension system.

Livingston estimated colleges and universities would have had to contribute 5 percent of participating workers’ salaries to cover the actual costs of the hybrid pension plan, which — being new — also lacks the fiscal baggage of the pension system.

But the state incorporated the hybrid into the pension system.

So for every worker who left the alternate plan to join the hybrid, universities and colleges saw their shares of the pension contribution swell.

The Board of Regents for Higher Education system, where 335 employees at the state universities or community colleges have switched to a hybrid pension plan, is projecting a $13 million increase this year in total contributions owed to all types of retirement plans.

The UConn Health Center in Farmington, where 254 have switched, is looking at a $26.5 million increase.

UConn’s main campus in Storrs and its regional campuses, where a total of 301 employees have joined the hybrid plan, face a $25.6 million increase.

Those increases also are due to several factors, not just the added cost of the new hybrid system. State government is in the second year of a new effort launched by Malloy to catch up on deferred contributions to the pension fund. Also, most unionized state employees are getting raises this year after a two-year freeze as spelled out in the concessions deal. As salaries rise, so do required contributions to retirement plans.

Livingston said there is no doubt that this switch is costing the universities millions of dollars — or that it is allowing the state to reap the savings.

Roughly 20 percent of that state’s annual pension contribution comes from the federal government — which funds certain health care, defense and research jobs — and from public colleges and universities.

Whatever is left over, usually about 80 percent, comes directly from the state’s annual operating budget.

So every extra dollar that higher education pays that is one less dollar state lawmakers have to find in the state budget.

The plan “was not created, and must not be allowed, to create a windfall for the [state’s] General Fund at the expense of our Higher Education institutions,” said the SEBAC letter sent last week to its union members.

"We absolutely need a solution. The question is can we get there?" said Sen. Beth Bye, co-chair of the Higher Education Committee.

The CT Mirror

"We absolutely need a solution. The question is can we get there?" said Sen. Beth Bye, co-chair of the Higher Education Committee.

While 862 people have moved to the hybrid plan so far, about 3,500 employees still are eligible to switch.

If everyone eligible at the regents’ system alone — 17 institutions — were to switch to this new pension plan, it would cost the system $78.8 million a year, said Howarth, the regents’ system’s interim budget chief.

But Livingston argued the arrangement is unfair. That’s because workers who leave their 401k plan to get a pension already pay a fee to do so to get credit for the years they weren’t paying into the fund.

“Employees who move … pay the full actuarial cost of moving with respect to their past service — every penny,” reads the union memo.

For example, a 50-year-old employee with 20 years of state service earning $50,000 in his best year would have to pay $100,000 to switch to the pension.

The actual cost to the state, which administers the pension, for someone in this new plan is 5.2 percent of the employee’s salary, excluding the unfunded liabilities, Livingston said. The actual cost to the state for someone on the 401k plan is 8 percent.

“It is actually less expensive when people switch,” Livingston said.

What does this mean for students?

The state’s public universities have three main revnenue sources; federal funding, state funding and student tuition and fees.

Since most federal funding is itemized for specific purposes, that leaves the state or tuition and fees left to pick up this cost under the current funding structure.

“It’s a real problem. The regents will have less money to hire new faculty or will have to make cuts,” professor James Russell, who teaches at Eastern Connecticut State University and researches retirement policy, said during an interview.

The problem is on the radar of both the Senate chairwoman and Ranking Republican on the legislature’s Higher Education Committee.

“We absolutely need a solution. The question is can we get there?” said state Sen. Beth Bye, D-West Hartford, the Higher Education co-chairwoman. “It can’t just be tough luck, here’s what we decided.”

Solutions being considered include not requiring the state universities to pay the unfunded liabilities for those who transfer to the pension; the state would pick up the tab; or, continue with the current funding set-up.

Livingston said while the SEBAC agreement doesn’t clearly outline which reimbursement rate the universities would have to pay, the spirit of the agreement was not to force this huge cost on them.

“The current situation is unfair,” he said, pointing out that the way the situation has been presented by budget officials to the regents has left the impression that the problem is because employees are getting a more lucrative retirement plan vs. it being a problem in how the state is billing them.

Sen. Toni Boucher, R-Wilton, the ranking Republican on the Higher Education Committee, said it would be “illogical” not to include the unfunded liabilities for those who switch to the pension plan. When new employees join the pension plan, colleges are expected to pay the unfunded liabilities, so why not have the same rules for those who switch. However, she said, since it was Malloy who negotiated the contract with the union, the bill should not be left for the universities to pick up.

“They did not negotiate that contract. Let’s go back to how this problem occurred. They weren’t at the table when this deal was made. The responsibility lies with the executive,” said Boucher, who is exploring a run for governor in 2014.

“At the end of the day students and parents are going to end up paying,” she said.

Livingston said he is confident the problem will be resolved.

“Everybody is working on it,” he said.

SEBAC memo to its members

[iframe src=”https://s3.amazonaws.com/s3.documentcloud.org/documents/808732/sebac-memo-on-hybrid-costing.pdf” frameborder=”1″ height=”800″ scrolling=”yes” width=”630″]

Malloy/SEBAC agreement from 2011

[iframe src=”https://s3.amazonaws.com/s3.documentcloud.org/documents/808747/sebac-malloy-agreement-from-2011.pdf” frameborder=”1″ height=”800″ scrolling=”yes” width=”630″]

Sign up for CT Mirror's free daily news summary.

Free to Read. Not Free to Produce.

The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.

YES, I'LL DONATE TODAY

ABOUT THE AUTHOR

Jacqueline Rabe Thomas and Keith M. Phaneuf

SEE WHAT READERS SAID

RELATED STORIES
What we’ve lost, what we’ve learned during our year of COVID
by CT Mirror Staff

On March 6, 2020, Gov. Ned Lamont announced that the first case of COVID-19 had been detected in Connecticut, and within weeks, life as we knew it was a memory. Schools were shut down, universities emptied, businesses shuttered. Those of us who were fortunate enough to be able to work from home set up shop at our […]

1,500 Hartford school staff to be vaccinated this week at pop-up clinic
by Adria Watson

Vaccinations are taking place Thursday and Friday. A second round will be scheduled in coming days.

With billions in federal relief on the way to CT, legislators assert their role in deciding how to spend it
by Keith M. Phaneuf and Mark Pazniokas

With an unusual bill, state legislators are reminding Gov. Ned Lamont they have significant role in disbursing federal coronavirus relief.

As the push to reopen schools intensifies, Miguel Cardona and first lady Jill Biden travel to Meriden to show how this town did it
by Jacqueline Rabe Thomas and Adria Watson

Cardona said getting the nation's schools reopened is priority No. 1.

Bill would create sexual misconduct climate surveys for Connecticut’s colleges
by Adria Watson

The surveys would be conducted every two years.

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion Right to counsel is just as much a racial justice issue as a housing policy issue
by Pearson Caldwell

Despite the state and federal moratoriums on eviction, nearly 3,000 Connecticut families have faced eviction in the past 10 months. Over half of these families were Black or Latinx, even though these groups combined comprise less than a quarter of the overall population. The stop-gap measures pursued by the state are not enough. Connecticut needs a statewide right to counsel for tenants facing eviction to address the burning housing and racial justice crisis across the state.

Opinion We need justice, not politics
by Richard J. Colangelo Jr. and 13 State's Attorneys

The administration of justice should not be political. Prosecutors must be guided by the evidence in a case and the applicable law, not by partisan, political considerations. Political pressure should never sway a prosecutor’s decision-making.

Opinion Assisted suicide lobby spreads falsehoods to promote systemic ableism
by Stephen Mendelsohn

Proponents of assisted suicide repeatedly spread falsehoods to promote their lethal and ableist agenda.  The February 8 op-ed, “Aid in dying is not assisted suicide” is no exception. Suicide is defined as the act of taking one’s life intentionally.  The person who intentionally ingests a prescribed lethal overdose more closely fits the dictionary definition of suicide than the despondent person who jumps off a bridge.  The desire for suicide is a cry for help, even when redefined as a “medical treatment option.”

Opinion TCI will create a fourth gasoline tax
by Christian A. Herb

The Transportation Climate Initiative, or TCI, calls for a proposed emissions fee on gasoline to help battle climate change. On the surface, supporters say it is a small price to pay to help save the planet; and if you truly believe that this is the case, then you should consider voting for it. Despite the administration’s efforts to go out of their way to not call TCI a tax, the simple truth is that it will only create additional financial hardships on lower- and middle-income families struggling to make ends meet during the pandemic.

Artwork Grand guidance
by Anne:Gogh

In a world of systemic oppression aimed towards those of darker skintones – representation matters. We are more than our equity elusive environments, more than numbers in a prison and much more than victims of societal dispositions. This piece depicts a melanated young man draped in a cape ascending high above multiple forms of oppression. […]

Artwork Shea
by Anthony Valentine

Shea is a story about race and social inequalities that plague America. It is a narrative that prompts the question, “Do you know what it’s like to wake up in new skin?”

Artwork The Declaration of Human Rights
by Andres Chaparro

Through my artwork I strive to create an example of ideas that reflect my desire to raise social consciousness, and cultural awareness. Jazz music is the catalyst to all my work, and plays a major influence in each piece of work.”

Artwork ‘A thing of beauty. Destroy it forever’
by Richard DiCarlo | Derby

During times like these it’s often fun to revisit something familiar and approach things with a different slant. I have been taking some Pop culture and Art masterpieces and applying the vintage 1960’s and 70’s classic figures (Fisher Price, little people) to the make an amusing pieces. Here is my homage to Fisher -Price, Yellow […]

Twitter Feed
A Twitter List by CTMirror

Engage

  • Reflections Tickets & Sponsorships
  • Events
  • Donate
  • Newsletter Sign-Up
  • Submit to Viewpoints
  • Submit to ArtPoints
  • Economic Indicator Dashboard
  • Speaking Engagements
  • Commenting Guidelines
  • Legal Notices
  • Contact Us

About

  • About CT Mirror
  • Announcements
  • Board
  • Staff
  • Sponsors and Funders
  • Donors
  • Friends of CT Mirror
  • History
  • Financial
  • Policies
  • Strategic Plan

Opportunity

  • Advertising and Sponsorship
  • Speaking Engagements
  • Use of Photography
  • Work for Us

Go Deeper

  • Steady Habits Podcast
  • Economic Indicator Dashboard
  • Five Things

The Connecticut News Project, Inc. 1049 Asylum Avenue, Hartford, CT 06105. Phone: 860-218-6380

© Copyright 2021, The Connecticut News Project. All Rights Reserved. Website by Web Publisher PRO