$1.5 Billion in Savings

July 27, 2017

A huge piece of the budget puzzle is in place. The House approved a $1.2 billion state employee concession plan that will save $24 billion over the life of the agreement. Unfortunately, we cannot negotiate the past contracts that have tied our hands with a huge deficit. These old contracts, negotiated and unfunded over the last administrations, have pushed us to be responsible for the unfunded debt that we now have to fund.

The plan produces significant immediate savings in healthcare and gradually shifts costs onto employees and retirees into the future. Changes to the benefit plans will save $136 million in the first two years and well over $200 million per year into the late 2020s and early 2030s.

This is an historic agreement that prioritizes structural, verifiable reductions to long-term pension and benefit costs, while also achieving significant savings in the coming biennium. This groundbreaking agreement substantially reduces the unfunded liability for both the state employee retirement system and our retiree health benefits trust fund.

Although there were several components to this agreement that I found not perfect, I did support it. I would have preferred future wage increases to depend on the fiscal state of the state at the time, and to clarify the no lay off language, it does not preclude a department to down-size, combine, etc. The employee would be offered a lateral move which they can reject and take the layoff. We are already experiencing the effects of recent layoffs which are already negatively affecting certain departments such as DMV, DEEP and Unemployment to name a few. Services have been reduced resulting in decreased service and long wait times, as we've recently experienced with the temporary closing of DMV's satellite offices in Derby and Milford.

A wage freeze with no increases for the next three years, three furlough days in 2018, and delay of a longevity payment will result in budgetary savings of $385.2 million in FY 2019. Also eliminated from future contracts is basing retirement benefits on the three years of highest earnings - that will result in huge cost savings.

Employee pension contributions increase by 2% of pay by 2019 and a new Tier IV hybrid pension/defined contribution retirement plan for new state employees will be introduced that will further decrease the state’s share of pension contributions through FY 2047 - for a total savings to the state of more than $11.7 billion. The agreement and pension reforms put us on a path to erase our state’s unfunded retirement liabilities.

Republicans have built their budget proposals on these savings and then double down and say we should push for more. To push for more would result in a much longer delay in trying to reach a budget agreement. We cannot delay a budget agreement. The Governor is holding us hostage by demanding a mini budget which would allow him to withhold ESC funding from our cities which would put our cities into financial ruin. He is also rejecting every proposal that we are putting in front of him, making this process more difficult.

Furthermore, our state workforce is down by 21% since 2008 so we have been consistently cutting down the number over the years. We have asked much of our remaining dedicated employees and they have met the request and done their part.

It is now up to us to ensure all of these structural changes contribute to solving the current deficit, and put Connecticut on a path to long-term fiscal stability.