Though Gov. Dannel P. Malloy said last month that a projected shortfall in federal funds was forcing his administration to lay off almost 100 Labor Department workers, a deficit topping $14 million for labor personnel was identified nearly one year ago.
The administration used more than $10 million in state resources to avert layoffs last fall. But the governor’s office is projecting a larger deficit in the future and said Connecticut cannot continue subsidizing these positions.
But the layoffs are part of a larger administration plan to save $16 million annually in the state budget. The state also would close several labor department facilities, including offices in New Britain, Norwich and Windham.
Legislators from these locations, along with a major labor union, said Tuesday that the General Assembly should have been briefed on this issue last spring, and should have had a say in whether to spend more state funds to keep the offices open and the labor positions filled.
“It was a source of frustration and disappointment to our members that this was not brought to lawmakers” during the regular 2015 session, which ran from early January through early June, Larry Dorman, spokesman for Council 4 of the American Federation of State, County and Municipal Employees, said Tuesday.
Council 4 represents 85 of the 95 labor department employees who received layoff notices last month.
“It would have been great to discuss this during the session,” said Rep. Peter Tercyak, D-New Britain, co-chair of the legislature’s Labor and Public Employees Committee. He said the committee hopes to have an informational hearing on the labor department cutbacks later this year.
The governor attributed the layoffs to a projected drop in federal funding. According to his budget office, salaries for about 700 of the state agency’s 800 positions are funded with federal dollars that shrink as unemployment does. Connecticut’s jobless rate, which has dropped considerably over the past two years, stood at 5.7 percent when the Labor Department issued its last report on July 20.
Federal law allows states to retain unspent federal dollars to support labor department jobs in future fiscal years.
According to Malloy administration data, Connecticut spent $67.6 million in federal funds for state staff to run the unemployment program in 2012, and still had $18.8 million left over to help fund the next year.
By federal fiscal year 2014, which ended last Sept. 30, the annual cost had risen to $75.7 million and regular federal funds designated to cover it fell $14.1 million short.
The administration covered the difference by using a combination of state resources outside of the regular budget – various penalties, late fees and interest charges collected by the labor department and other miscellaneous revenues – and federal funds originally designated for other purposes.
More shortfalls are projected for the 2016 and 2017, and in the second year it’s expected to top $37 million, the governor’s budget office said.
According to Labor Department spokeswoman Nancy Steffens, the department’s federally funded staff rose from 664 to 754 from 2008 through 2013 as Connecticut faced The Great Recession and an initial, sluggish recovery from that downturn.
Over the last two years, as the job situation has improved, the department has used attrition to reduce the number of federally funded staff to 700.
“We exhausted all available state resources to support the program,” Gian-Carl Casa, spokesman for the governor’s budget office, said Tuesday, adding that the administration did not consider presenting this issue to the legislature this past session.
But while the governor said the pink slips only were driven by federal aid that won’t cover the state’s needs, his budget office also announced that the layoffs and other labor department cutbacks should save $16 million in state budget funds year after year in the future.
The administration also said it will try to find new state jobs for as many of the laid-off workers as possible, and also will offer employment and other job development services through other offices.
The problem with that last point, according to Tercyak and state Sen. Cathy Osten, D-Sprague, is that some sections of Connecticut still need employment services – locally and easily available.
“The reason these centers are where they are is because of the large numbers of unemployed we have in some areas,” Tercyak said, adding that his home community of New Britain still has great need for a local labor office. “Our cities are still distressed.”
Osten said she would meet this week with Department of Labor Commissioner Sharon T. Palmer to discuss how closing offices in Norwich and Windham would affect eastern Connecticut, which traditionally has higher unemployment rates than most other sections of the state.
“There is no drop in need” near these centers, Osten said. “I want to understand the Department of Labor’s process in deciding which areas should stay open.”