Budget panel backs deal to stretch out spiking CT pension costs
The legislature’s Appropriations Committee issued a dual-endorsement Tuesday of a new plan that would allow Connecticut to defer billions of dollars in required contributions to the state employees pension fund until after 2032.
Senators on appropriations endorsed it 10-2, while representatives voted 30-10 in favor. Because of a technicality in the way the legislature considers labor agreements, the committee’s senators and representatives have to vote separately on the deal. The votes represent only an endorsement, not approval, by the committee members.
Labor agreements pending before the General Assembly can be resolved one of only three ways, regardless of how any committees with jurisdiction over such matters vote:
- The agreement can be ratified by default, provided neither the House nor Senate votes to reject it within 30 days of the deal’s submittal to each chamber’s respective clerk.
- The agreement can be ratified by formal votes of approval from both chambers.
- Or it can be rejected by a negative vote from either chamber.
House and Senate leaders have said they expect the deal to be brought up for a vote before their respective members on Feb. 1.
But several Republican lawmakers who endorsed the deal, as well as a few Democrats, also encouraged Gov. Dannel P. Malloy’s administration to secure more traditional concessions from unions — such as higher worker contributions toward pensions, and reduced benefits. These changes, they said, would complement a deal that, while mitigating costs to taxpayers over the next 15 years, still would shift $14 billion to $21 billion in costs onto future taxpayers after 2032.
“Absent a holistic approach, I’m not sure we move the state forward with this deal,” said Senate Republican President Pro Tem Len Fasano of North Haven, adding he might oppose the deal on the Senate floor if traditional concessions are not forthcoming.
In recent years, House and Senate Republicans have recommended some new restrictions on the pension program, including:
- Removing overtime earnings from pension calculations.
- And requiring all workers to contribute 4 percent of their pay toward this benefit. Most state employees currently give 2 percent while some contribute nothing. The national average contribution for state employees is nearly 7 percent.
Rep. Melissa Ziobron of East Haddam, ranking GOP representative on the committee, said she could not endorse the plan even in committee without some new sacrifices from today’s state employees.
“I am very concerned about real structural reform in our pension programs,” she said. “I don’t know if I can take that real leap of faith.”
But Malloy administration officials, who negotiated the deal with state union leaders, urged lawmakers to lock this agreement down first, and then worry about more concessions.
Between 1939 and 2011, the state employees pension system has been shortchanged by inadequate state contributions. Analysts now say the cost of compensating for that shortfall will push an annual contribution that now stands at $1.56 billion per year well beyond $6.5 billion by 2032.
Under the deal, the state still would pay hefty pension bills for the next 16 years, with annual costs rising from $1.6 billion to $2.2 billion over that period. But pension expenses that were supposed to drop as low as $300 million per year after 2032 would hover close to $1.7 billion in the 2030s and 2040s.
And while the plan does not affect benefit levels for current or future retirees, nor does it change workers’ pension contributions, Lisa Grasso Egan, the governor’s chief labor negotiator, warned there is risk in pursuing such concessions as part of this realignment agreement.
Because such givebacks were not part of the deal, union leaders were able to ratify it on their own. But if more traditional concessions are involved, the whole agreement couldn’t be ratified without a vote of all rank-and-file workers — and such a referendum might fail.
“We saw this as an opportunity to solve a funding problem,” Grasso Egan said. “This is something that is worthwhile for the state.”
Ben Barnes, Malloy’s budget director, added that the administration remains in negotiations with unions. Analysts say state finances, unless adjusted, will run $1.4 billion in deficit next fiscal year, and Barnes has said concessions are key if officials hope to minimize painful cuts to key priorities such as education, health care and municipal grants.
But labor leaders point out that workers granted more traditional concessions in 2009 and 2011 and that the solution to further budget woes should be to raise taxes on wealthy households and corporations.
“Why do we need this agreement? It’s got nothing to do with the current pension plan,” said Hartford attorney Dan Livingston, chief negotiator for the state employee unions.
Livingston said the pension benefits available to workers now are modest and competitive with those offered in other states. The surging pension costs are “about a problem on an old debt created many years ago,” he said.
Several Democrats on the Appropriations Committee said it is better to lock the restructuring deal down now and worry about other pension reforms later.
“Today’s proposal is a reasonable approach to deal with this issue,” said Sen. Terry Gerratana, D-New Britain, who added Connecticut has “one of the top qualities of life here in the United States” and this deal helps to protect that.
Sen. Joan Hartley, D-Waterbury, who also voted for the deal in committee, said she considers this “the actual beginning of the solution” but added it’s important for the Malloy administration to continue to pursue further labor savings.
The deal also earned some endorsements this week from groups outside of Connecticut.
S&P Global Ratings, a major Wall Street credit-rating agency formerly known as Standard & Poor’s, issued a statement saying it “has a mildly positive credit impact on the state.”
Another Wall Street rating agency, Moody’s Investors Service, endorsed the deal earlier this winter.
Also Tuesday, the Pew Charitable Trusts — a nationally recognized public policy group that has published considerable analysis on states’ unfunded liabilities tied to retirement benefits — praised the deal. Pew director Greg Mennis submitted testimony calling it “a positive step forward to improve the fiscal health of the State Employees Retirement System, and to make pension costs more predictable for taxpayers over time.”
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