Labor savings: The big unknown in Malloy’s new budget

It might be the single-largest x-factor in Gov. Dannel P. Malloy’s proposed budget revisions for the coming fiscal year.

When budget director Benjamin Barnes warned Wednesday that the workforce might need to shrink by “thousands” in 2016-17 to hit savings targets, labor leaders made two points.

They weren’t sure exactly what it means. But they were sure that it sounded bad.

And while the legislature now begins its review of the governor’s budget, the labor question might not be resolved by legislation alone, but also through collective bargaining.

Malloy, who has seen criticism of his budget policies intensify since winning re-election — as deficit projections continue to increase — tried a new approach Wednesday to reframe the debate.

The administration argued Connecticut no longer should rely on projections of how many additional dollars it needs to maintain its full array of services and programs.

Rather it should first determine what revenues it will receive — based on current tax rates — and then decide what core programs it will keep.

The administration’s approach hinges largely on across-the-board cuts — taking 5.75 percent this year out of each agency and from non-education municipal aid.

And Barnes warned Wednesday that a similar approach but with a deeper cut, about 9 percent, probably would be needed next year.

As programs and services are scaled back or eliminated, fewer staff will be needed.

Malloy was careful never to utter the word “layoffs.”

But Barnes said “we will be reducing the number of funded positions by several thousand. Exactly how that breaks out between attrition and layoffs is unknown.”

“That is short-sighted,” Lori J. Pelletier, head of the Connecticut AFL-CIO, said. “When you lay off state employees, you harm public services.”

But you also hurt communities,” she quickly added. “You hurt the economy. You are going to have state employees watching every penny” and afraid to spend money in their towns as they fear unemployment. “The people who are not working won’t be spending money either.”

“Any kind of austerity budget is only going to harm Connecticut’s citizens and stunt economic growth,” said Larry Dorman, spokesman for Council 4 of the American Federation of State, County and Municipal Employees.

“Eliminating jobs that provide vital services, like ensuring we have safe drinking water or caring for the disabled in our communities, is a dangerous path for our state,” said Jennifer Schneider, spokeswoman for the largest health care workers union, SEIU 1199.

Senate President Pro Tem Martin M. Looney, D-New Haven, hopes it won’t come to layoffs.

“We’re hoping that other savings can be found,” he said, adding that government can downsize in less painful ways.

According to Comptroller Kevin P. Lembo’s office, the state workforce has averaged 1,621 retirements per year — if you exclude two outliers.

In 2009, the last year an early retirement incentive plan was offered, 4,749 employees left service. And in 2011, when Malloy and the unions agreed to tighten benefits — but delayed the changes for several months to encourage retirements without cash incentives — 2,947 left the job.

But not all state jobs are equal, and vacancies in one agency cannot always be filled with employees from another department that might be overstaffed.

The unions and some legislators have argued since 2009 that some of Connecticut’s largest and most vital departments, such as Transportation and Social Services, are badly understaffed.

Leaders of the Republican minorities in the House and Senate said Wednesday that, while they welcome efforts to consolidate the workforce, Malloy is nibbling around the edges and avoiding the real means to cut labor costs: concessions.

Connecticut bargains collectively with all of its unions combined to fix retirement and other benefits. Wages and working conditions are negotiated separately with more than 30 different bargaining units.

The existing benefits contract with the State Employees Bargaining Agent Coalition runs through 2022, and the GOP has been clamoring since last April for Malloy to ask SEBAC to come to the table.

“The structural changes (that benefits concessions could bring) are meat here,” Senate Minority Leader Len Fasano, R-North Haven said. “There has to be more to this.”

House Minority Leader Themis Klarides, R-Derby, said Democratic rejections of the GOP call for immediate labor savings “is like an old record that used to skip over and over again. We’ve got to get very serious about structural changes.”

Fasano and Klarides got some company on Wednesday.

House Speaker J. Brendan Sharkey, D-Hamden, on Wednesday became the first Democratic legislative leader to  say the governor should seek to reopen the SEBAC contract.

“Our role at this time would be to encourage the governor to call for those” savings, he said.

The administration repeatedly has rejected this call, arguing that since it currently is negotiating new wage agreements with bargaining units — and hoping to cut costs there — now is not the time to seek benefits concessions.

Malloy also has another complication to handle.

The governor is seeking to restructure Connecticut’s cash-starved pension funds for state employees and for public school teachers. The goal is to lessen spiking pension contributions expected to slam the state budget a decade from now.

The governor is expected to have to negotiate with the state employee unions to rearrange payments into that pension fund, and might find them less than cooperative on this front if he asks for benefits givebacks at the same time.

Labor leaders have spent much of the past year reminding legislators and Malloy that they agreed to concessions packages in 2009 and in 2011.

And SEBAC weighed in on the concessions question for the first time Wednesday, issuing a statement with comments from three union leaders.

The theme was clear: Connecticut should look to the wealthy, and not its employees, to close the budget gap.

Cindy Stretch, an English professor at Southern Connecticut State University, said “the latest prescription for Connecticut’s budget woes is a double-dose of arsenic.”

“What’s wrong with our state budget is what’s wrong with our state economy: wealth is increasing, but almost all of it is going to a tiny, privileged few,” said adult probation officer Carmen Roda.

“Political wisdom says politicians won’t have the guts to ask the rich to pay their taxes during an election year,” added Xavier Gordon, a career development specialist for the Department of Labor. “But we think having the courage to do the right thing to move working families and the middle class forward is exactly what voters are looking for in a time of growing inequality and a shrinking middle class.”