Gov. Malloy Concedes to Unions

May 23, 2011

Op-Ed as it appeared in the Hartford Courant on May 22, 2011

A Missed Opportunity to Make Long-Term Structural Changes to State Government

Imagine that the company you work for just came off one of its worst fiscal years and expects no improvements in the year ahead. Expenses are vastly outpacing revenues, major clients are leaving in record numbers and the surrounding economic climate is stagnant. Something needs to change.

Now imagine that your boss has scheduled a meeting with you to discuss the changes he plans to make to your compensation package to help respond to these challenges and ensure the company’s long-term economic viability.

You walk into the room nervous. You expect that your pay will be cut, or you may even lose your job. You’re deeply concerned, maybe even upset, but common sense tells you that changes need to be made to save the company and have any chance at a brighter future.

Then your boss walks in and offers you and every other employee of the company the following:

  1. 1. A four-year no-layoff guarantee. You will not lose your job for the next four years regardless of economic conditions, whether the company can afford you or whether your job is necessary.
  2. 2. You will receive no less than a 9.3 percent pay raise over the next five years.
  3. 3. If you’ve worked for us for 10 years, you will get bonus payments twice a year no matter how well you performed your job.
  4. 4. You will continue to be eligible for a pension after five or 10 years and have no increase in your pension contributions.
  5. 5. You will continue to be able to pad your pension by including overtime and other expenses into your base pay.
  6. 6. You will have a health care plan that is among the best in the country and pay no increase in your premiums.
  7. 7. You will continue to be eligible for those benefits in your retirement and you will not pay any additional money toward those benefits for the next two years.

What, not possible?

Well, that is precisely the deal Gov. Dannel P. Malloy agreed to with state employee unions. In the face of record deficits, business closings and an economy still in recovery, the governor increased state spending, levied a record tax increase and then enhanced and extended benefits for more than 50,000 state employees for the next 11 years. Only in government can such a labor agreement be considered “historic concessions” and “shared sacrifice.”

When Gov. Malloy presented his budget, he called for shared sacrifice during these difficult economic times and offered a budget framework that relied upon spending cuts, tax increases and concessions from state employees. He boldly called for $2 billion in savings and concessions from the state employees, noting, correctly, that “current wage, health care and pension benefit levels [for state employees] are simply not sustainable.” He was right. In order to achieve these savings, Gov. Malloy suggested the following: a wage freeze, furlough days, adjusting the retirement age, freezing longevity pay and moving state employees to a less costly health care plan.

Gov. Malloy didn’t deliver. While states across America and many of our municipalities have responded to the economic recession by making significant long-term structural changes to their employee retirement and benefit plans, Connecticut has missed a significant opportunity.

Gov. Malloy’s agreement also relies on at least $563.5 million in “savings” over the biennium that are imaginary and unachievable. These savings include:

  1. 1. $180 million by implementing “savings ideas proposed by employees.”
  2. 2. $90 million by “utilizing new technologies.”
  3. 3. $75 million in health care cost savings suggested by a “Health Care Cost Containment Committee” that now doesn’t exist.
  4. 4. $205 million in savings from a value-based health care plan where participants schedule routine physicals and annual exams in order to prevent future health care costs.

With respect to the value-based health care plan, this type of preventive care program was first proposed by Republicans in 2008 as a way to improve public health and lower health care costs across our state. Having co-authored the plan, I believe in its long-term savings potential, but I also believe that $200 million in savings over the next two years is unachievable. Indeed, this plan is likely to cost money in the first two years.

Our opportunity to make real structural reforms such as those recommended by the non-partisan Post Employment Benefits Commission is now, and Gov. Malloy missed it. As a result, the state will not be able to engage in these real and necessary structural reforms until 2022. Clearly, an opportunity lost.