Agreement Anticipates 1,000 Retirements
(Updated 4:03 p.m.) Mark Ojakian, the deputy secretary of the Office of Policy and Management, said the tentative labor agreement he negotiated with the State Employees Bargaining Agent Coalition assumes about 1,000 employees will retire early and save the state $65 million a year.
Gov. Dannel P. Malloy was adamant he was not going to offer an early retirement package to state employees knowing the impact it would have on the state’s unfunded pension liability, but the agreement awaiting ratification by the unions does offer an incentive to get out of state service before Sept. 1.
“When you retire early right now there’s a 3 percent reduction in your benefits. We changed that to 6 percent,” Ojakian said.
He said they offered up Sept. 1 as the deadline to make a retirement decision because they wanted to give employees some time to think about what implications the change in benefits will have on their future. The 1,000 employees expected to take retirement won’t be replaced which is where the $65 million in savings comes from. Over two years it’s 2,000 employees, which is still less than the more than 3,500 that took the early retirement incentive in 2009.
SEBAC, which negotiates on behalf of all of the state’s labor unions, fought against former Gov. M. Jodi Rell’s early retirement proposal in 2010 to save $65 million. The union estimated that $65 million savings would be eaten up and end up costing the state $1.2 billion down the road.
Roy Occhiogrosso, Malloy’s senior communications adviser, said these changes are not considered an early retirement because they’re not offering a cash benefit to employees to retire. He said this increase in penalty from three to six percent is “not even close to that.”
The Malloy administration maintained that early retirement packages such as the one offered by Rell in 2009 and the four others offered in 2003, 1997, 1992, and 1989 are fiscal gimmicks, which won’t help the state in the long run.
With most early retirement packages the short term reduction in salaries of early retirements are offset by larger losses in pension savings and healthcare costs for retirees.
Occhiogrosso said that’s not the case when all the other proposed changes in the SEBAC agreement are considered, such the change which requires all employees to contribute three percent to retiree health care benefits. That change is expected to help reduce the $20 billion unfunded liability in that account.
House Minority Leader Lawrence Cafero, R-Norwalk, said this may not be a typical early retirement package because it doesn’t offer incentives to exit state service, but it seems to run contrary to what Malloy has said in the past.
Cafero said the entire agreement is smoke and mirrors. Cafero laughed at the notion that an “employee suggestion box” will save the state $90 million a year and finds it hard to believe making employees healthier will save $205 million over two years. He said the agreement is full of “false assumptions and gimmicks.”
“It makes you scratch your head on so many levels,” Cafero said.
“It makes you scratch your head on so many levels,” Cafero said. “He makes Jodi Rell look like Donald Trump.”
Cafero said he was talking about Trump’s well-known negotiating abilities.
But union leadership believes it’s a fair agreement. There are always employees that are counting on a retirement incentive program and may be looking forward to one, but “we don’t believe people are going to be frightened out by this package,” Daniel Livingston, SEBAC’s chief negotiator said Tuesday afternoon.
“We think in the long run this package is good for state workers and good for the taxpayers,” Livingston said. “There are lots of people who are going to stay and provide people services that they need.”
He said the union is encouraging people to stay and whether they do or not depends on their expectations and their own personal situations. Some have said the guaranteed 2 percent cost of living increase which comes with retiring before Sept. 1 may also be an incentive for some employees to leave.
Livingston said the unions did not come up with the numbers and those estimates were handled by the Malloy administration. “We trust their numbers,” he said.
“I think the state employees have given back a significant amount in this agreement. Is it everything that we had hoped for, No. Is it a fair compromise? Absolutely,” Ojakian said.