Republicans tried Wednesday to scuttle a deal Gov. Dannel P. Malloy struck with state employee unions to avoid spiking pension costs, prompting the governor to warn that the GOP would own the potential dire fiscal consequences.
But the House voted 76 to 72 to ratify the deal on a nearly party-line vote, while the Senate followed suit in more dramatic fashion – with a tie-breaking vote by Lt. Gov. Nancy Wyman.
Sen. Len Fasano of North Haven, the Republican leader, appeared to have a one-vote advantage before debate, because of the absence of Sen. Beth Bye, D-West Hartford, who is dealing with her wife’s serious illness. But Bye arrived in time for the vote.
“I assume he intends to kill the deal,” Malloy had said of Fasano before debate began. “That’s my assumption. So, you know, in war, you break it you own it. He’s about to own it.”
Fasano and House Minority Leader Themis Klarides, R-Derby, acknowledged that the deal was necessary to avoid crushing balloon payments to the state pension fund, a consequence of Malloy’s predecessors’ deferring payments on a deal struck in 1991 to address the unfunded pension liability.
But they complained that Malloy also should have negotiated pension concessions, such as greater employee contributions or reduced benefits for future retirees. Malloy said those talks are ongoing and were no reason to delay ratification of the deal.
Malloy: ‘If they reject it, it is pure politics’
“Everyone has previously agreed that it needed to be done. Republicans have previously voted for this plan,” Malloy said, a reference to a committee vote. “If they reject it, it is pure politics.”
That plan would mitigate a spike in required contributions to the state employees’ pension system between now and 2032. Some estimates have the annual payment, which currently stands at just under $1.6 billion, more than quadrupling to $6.6 billion over the coming 15 years.
The deal Malloy struck with unions tries to keep annual costs from growing beyond $2.3 billion per year by shifting an estimated $14 billion to $21 billion in costs onto taxpayers between 2033 and 2047.
Klarides said that some degree of refinancing “is a reasonable part of this process,” but must be accompanied by reforms that would reduce long-term pension costs, such as benefit reductions or larger worker contributions into the fund.
“Unless we make changes along the way that will change the problems that we’re in, just pushing this down the road, paying less than we’re paying now … is actually hurting the people we want to help,” she said.
Fasano, who has raised similar arguments, rejected the governor’s assertion that pursuing those reforms now threatens the restructuring deal.
GOP: Deal is unfair without worker concessions
But the GOP action, if successful, would have been a gamble.
By opening the deal beyond the refinancing issue, it would be subject to a vote by state employees, who initially rejected concessions Malloy negotiated with their leaders in 2011. The leaders of the State Employees Bargaining Agent Coalition are empowered to accept the refinancing without a membership vote.
Fasano said the risk was minimal.
“If we say, hey look, we’ve got a holistic approach to this problem, it makes sense for everybody,” Fasano said, predicting workers would embrace a plan that reduces the likelihood of future demands from state officials for more traditional worker concessions, such as wage and benefit reductions.
Without a contrary legislative vote by the end of business Friday, the deal would automatically be deemed as accepted by the state.
The business community has warily viewed the balloon payments as so destabilizing to the state’s finances that they could discourage businesses from investing in Connecticut, a state already under fiscal duress.
Malloy noted some businesses, primarily through the Connecticut Business and Industry Association, ran ads helping the GOP pick up seats in both chambers.
“I will spend every day reminding the business community when I get calls about this that in many cases it was candidates they decided to support in this election that’s going to do this kind of damage to the state of Connecticut, and from now on, any job that leaves or any job that fails to come to the state, I will remind Republicans they own it,” Malloy said. “You break it, you own it. I’m trying to fix it. They don’t want me to.”
Senate President Pro Tem Martin M. Looney, D-New Haven, chastised Republicans for putting state government at risk of “a catastrophic balloon payment” into the state employee pension fund in the coming years.
“This is really the first chance the Republicans have had to govern and they’ve failed,” said Senate Majority Leader Bob Duff, D-Norwalk. “They’ve had a chance to come together in a bipartisan way to help the state’s finances [with] some pension stability, and they want to run the state off a fiscal cliff.”
Labor leaders also attacked the Republicans, noting that the Connecticut Business and Industry Association, major labor unions, and two Wall Street credit rating agencies joined the governor and Democratic caucuses in supporting the deal.
Salvatore Luciano, executive director of the Council 4 of the American Federation of State, County and Municipal Employees, said Republicans’ willingness to jeopardize a deal with this support made no sense.
“I can’t believe that they would want to do that,” he said.
“It’s erratic,“ said Lori Pelletier, president of the Connecticut AFL-CIO. “It’s similar to what is going on in D.C. It’s shooting from the hip.”
Legislative debates split along partisan lines
The House and Senate both began debating the restructuring plan early Wednesday afternoon, and quickly split along partisan lines.
The final House vote was partisan, with two exceptions: Rep. Pat Boyd, D-Pomfret, a freshman who describes himself as an “independent Democrat,” voted with Republicans in opposition; Rep. Gary Byron, R-Newington, voted with Democrats for passage.
Wyman broke a 17-17 tie in Senate, where there are two vacancies.
Democratic lawmakers argued the restructuring, though unfortunate, was necessary to deal with decades of insufficient saving for worker benefits dating back to 1939 — a problem created by governors and legislatures from both parties.
“What we are doing is what many people have done when they have gotten a balloon mortgage payment,” said Rep. Toni E. Walker, D-New Haven, House chair of the Appropriations Committee, who said the alternative is to watch Connecticut cut deeply into health care, education, social services and other core priorities.
“Yes, it is going to cost us more money,” said Rep. Daniel Rovero, D-Killingly. “Yes, maybe we shouldn’t do it in the long run, but we cannot afford not to do it at this time.”
Sen. Cathy Osten of Sprague, the Senate Democratic chair of the Appropriations Committee, said her support for the deal doesn’t change her desire to see more traditional wage and benefit concessions from state workers.
But Osten said the governor is correct that tying the restructuring deal to more traditional concessions is too risky, and could leave Connecticut with no flexibility to deal with spiking pension costs.
“The bird in the hand is better,” Osten said. “This is not about philosophy. We need to stabilize our cash flow, and we need to do it today. There still needs to be pension reform. There has to be.”
Malloy and union leaders both have said they remain in negotiations, though neither has disclosed details of those talks.
But Republican lawmakers countered that restructuring pension payments ultimately increases costs. Contributing less between now and 2032 means there will be fewer pension dollars to invest, and therefore less in investment earnings to bolster the fund.
The plan not only shifts cost onto the future, it increases them, the GOP argued, adding it is unfair to do so while gambling that ongoing negotiations might yield further concessions.
“The problem is our children are going to be paying for that,” said Rep. Vincent J. Candelora, R-North Branford. “And we’ve missed an opportunity to sit down with the unions and address that.”
“By kicking the can, is that the way we take care of our people?” said Rep. Prasad Srinivasan, R-Glastonbury. “Is there no other way?”
We have not kicked the can down the road,” said House Majority Leader Matt Ritter, D-Hartford. “The can got kicked on us. … We’re the ones who inherited it.”
“Faith means trust,” said Rep. Melissa Ziobron of East Haddam, ranking GOP representative on the Appropriations Committee, adding that state employees should contribute more toward their pensions. “It shocks my constituents when they hear some of them pay zero.”
“We’ve effectively failed,” said Sen. L. Scott Frantz of Greenwich, Republican Senate chair of the tax-writing Finance, Revenue and Bonding Committee. “We haven’t kept our fiscal house in order.”
“Today, the legislature took an important step in stabilizing Connecticut’s finances and setting the state on a more predictable path forward,” state Comptroller Kevin P. Lembo said after the votes. “I’m grateful for the senators and representatives that understood the urgency and need of this agreement.”
Lembo, a Democrat whose pension restructuring plan offered nearly one year ago formed the basis for several portions of the deal ratified Wednesday, also called the GOP opposition “a slap in the face of Connecticut’s taxpayers and business community that have been begging for more predictability and stability in state finances, and have long urged state government to show true leadership in taming our unfunded pension liability.”