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Malloy: No Early Retirements

by | Jan 20, 2011 5:56pm
() Comments | Commenting has expired
Posted to: Labor, State Budget

Christine Stuart photo

Gov. Dannel Malloy outside his Capitol office with U.S. Sen. Richard Blumenthal earlier this week

The previous two administrations offered them and there are quiet rumblings now that another early retirement package may be in the works, but Gov. Dannel Malloy said it’s not true.

“There will not be an early retirement proposal,” Malloy said Tuesday in an interview in his Capitol office. “The idea that there’s going to be an early retirement plan means people weren’t listening.“

He called early retirements—which are popular amongst some workers—destructive and costly for the state.

Early retirement packages such as the one offered by former Gov. M. Jodi 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, Malloy said.

The short term reduction in salaries of early retirements are offset by larger losses in pension savings and healthcare costs for retirees. 

The State Employees Bargaining Agent Coalition, which negotiates on behalf of all of the state’s labor unions, fought against Rell’s proposal in 2010 to save $65 million through another early retirement package. The union estimated that $65 million savings would be eaten up and end up costing the state $1.2 billion down the road.

SEBAC agreed to the 2009 retirement package which saw about 3,800 employees leave state service, but when it came to negotiating the 2010 proposal it wanted information Rell’s administration couldn’t provide.

When Rell’s administration was unable to calculate the pension liability for the 2009 retirees and estimates on how this early retirement package would impact the state’s workforce, Rell’s budget director walked away from the negotiating table before the union could even present him with their cost-saving proposals.

And even though they understand some of their membership would like to retire early, the unions are generally not fans of early retirement packages, either.

The unions, who submitted their cost-saving proposals to Malloy’s Budget Director Ben Barnes this week, are hopeful that under Malloy’s leadership their suggestions will be taken seriously.

“We are aware that they way you achieve savings and improve the long-term pension liability is not by offering an early retirement package,” said Barnes. “The way you achieve savings is by making people work longer, so they’re contributing more, not less to the pension system.”

Under changes to the SEBAC agreement of 1984 the retirement age was increased from 55 years to 62 years old.

Larry Dorman, spokesman for SEBAC, said Thursday that the coalition is focusing on providing the Malloy administration with good ideas, which create efficiencies and save the state money. And so far, the Malloy administration is taking labor’s ideas seriously, Dorman said.

And while asking state employees to work longer may sound like something the unions would oppose, it’s something they’ve offered in the past as a solution to the state’s unfunded pension liabilities.

One of the proposals SEBAC made during negotiations with the Rell administration was an incentive program for employees who voluntarily agree to delay their retirement. The unions sees the proposal as a win-win because the state gets to keep its senior employees, workers get a slightly increased pension, and overall pension costs and retiree health benefit costs to the state are reduced.

The union’s actuaries estimated it would save $80 million a year, but Rell’s administration dismissed the idea. Malloy’s administration may be more open to the idea, but it’s unclear how much of what the unions have presented in the past Malloy may be willing to support.

The SEBAC contract guaranteeing the more than 34,000 employees pension and health benefits doesn’t expire until 2017. Its wage concession package which also included some changes to employee pension and health benefit contributions and saved the state close to $700 million over the past two years, expires in July.

Any changes to that contract would have to be negotiated by Malloy and the unions and ratified by the unions’ members and the General Assembly. So far neither side has talked about opening up the contract.

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Comments

(12) Archived Comments

posted by: newview | January 21, 2011  9:21am

Well, this position by Gov. Malloy certainly does present a dilemma.  He understands that middle and upper management in State Agencies, etc are bloated, and he wants to reduce those numbers.  He understands that even given the management reductions, he will have to reach into rank and file to “downsize”.  He doesn’t want to layoff thereby putting folks on unemployment, and he doesn’t want to offer an early retirement to senior members who may want to leave state services. 

Faced with a 3.5B deficit, union concessions will help but not nearly create the numbers this administration is looking for.  Consolidating agencies while leaving the “bloat” of upper and mid/low managers, some of whom are also union members, creates just one more level of confusion to the overall goal.  IE…you can’t consolidate without removing first and expect to save anything!  Normal attrition,faced with this accumulating debt, amounts to a slow bleed.

This situation requires some very crafty considerations.  When they say “everything is on the table”, the subsequent reports indicate that there appears to be very few “real” money saving options when it comes to state employees. 

So, we want no layoffs, we want no early retirement, but we need to downsize, consolidate, minimize expenditures…hmmm…and who has this magic wand?

posted by: belltor | January 21, 2011  4:31pm

There are three pension Tiers.
Tier 1 is the oldest and most generous and is only about 50% funded. Most of the previous buyouts are all Tier 1 employees. They can retire at 55 with full pension. hence the funding issue.

The other two Tiers are 80% funded. Full retirement is at 62.  As a result if buyouts were to be offered to Tiers 2 and 2A, there would be savings both short and long term because their pensions pale in comparison to Tier 1. 
Union officials don’t like buyouts because they lose members dues.

Union officials are hypocrites when they say buyouts stress pension funding, when they have over many years agreed to allow the state to reduce or skip funding the pension as scheduled.

posted by: eastrivertype | January 21, 2011  5:37pm

Good for Dan Malloy.  He gets it.  The unbelievably prohibitive cost of state employee pensions is a crusher.  It will we interesting to see what he does 1) to deal with the unfunded liability there and 2) to control those costs going forward.  Nobody should be allowed to retire using the highest three years, and neither should they be able to start collecting before age 60.

posted by: ... | January 21, 2011  8:07pm

...

newview there is a possibility there you are either disregarding or not taking into consideration: demotions.

Demoting those managers that are under-performing into the regular staff of their office is probably the best thing to do. But don’t think there won’t be firing. Its already started and most of it is replacing people (so not technically adding to unemployment).

However I strongly reccommend anyone looking into the managers issue to listen to Donal DeFronzo’s committee hearing for his commissioner position. It may still be viewable on CTN’s website (or repeated on their channel).

He explains very well that the number is bloated partially because the title is to an extent ‘misused’. Many of these ‘managers’ do not hold many, if any of the duties or roles that a private sector manager has, and sometimes don’t even have a higher pay than their workers.

posted by: newview | January 22, 2011  6:31pm

As is evident from these wonderful posts, there are a number of factors that result in excessive and wasteful monies needlessly stripped from the annual budget.

It’s true that Unions despise losing members.. er ah..union dues.  They would not in good conscience immediately resort to an ERIP.  We should keep in mind, although, it wasn’t the unions or unionized state employees who bailed out on funding this retirement system…drop that one in the lap of the legislature… plain and simple!  It’s important to realize where to put your energies when it comes to truth of some matters.

It’s also true that pensions are out of control and should be amended contractually. Ensure that pensions are based on base pays with a 5-10% of overtime considerations.  This business of basing pensions on an unlimited overtime schedule is nonsense.  If one wishes to understand the dynamics of why the drain on the pensions system, this is one great example.  The other is that Connecticut cannot afford these exorbitant retirement caches to folks in the six-figure range.  I’m sorry, go work for the private sector if the retirement benefits of under 100K a year are not satisfactory.  We need to put limits on this business.  Of course, now, we start banging on the door of a good many in the stuffed shirt society, they don’t take kindly to that topic of discussion.  Tough!..go look elsewhere!

Jones..demotions..well..too little too late.  We’re looking at 3.5 BILLION!  If management is bloated, get rid of it!  Consolidating services with an already bloated management just doesn’t make any sense.  If services are reasonably meeting the needs of constituents, then there’s no need for “demotions” from bloated management ...to do what exactly?  Chest thumping?
Typically, the order is to shift this bloat into these “special projects” classification until retirement suits them.  I’d venture to say we will continue to see at least some of the same “remedy”...depending of course on one’s political proximity. 

Something has to give, whether it be from the top or lowest tiers of state employment.  A move needs to be made.  I understand that ERIPS are not particularly embraced, but neither is the unemployment line.  We are all paying for either/or. It’s one thing to say we need to downsize, another altogether to do it by default and not by plan.  I know Mr. Cafero and Mr. McKinney are chomping at the bit on this one, they’ve been pushing an ERIP for a couple years now. I say offer it to get rid of those managers and excess state employees rather than beat up on the younger workers trying to make a go in their lives.  The flip side of that is to inform these employees, both unionized and managerial, get out now, because if we don’t have the numbers, what is coming your way will in fact not be an advantageous situation.  That’s fair!  This session should be interesting…:)

posted by: hawkeye | January 23, 2011  12:12pm

The fact that our state budget is bloated to the hilt, is backed up by the fact that the State of Connecticut, has the highest per capita indebtedness in the United States.

We either trim that fat budget, or the state must go into bankruptcy.

It’s that simple.  “We did it to ourselves, and now we must now face the music!”

posted by: ... | January 23, 2011  2:49pm

...

I agree that reductions and reorganizations will be necessary and carried out as such. It is agreed upon that areas of our government are bloated.

It doesn’t seem like demotions are too late (but agree are little). But isn’t any reduction of our deficit a positive step if it can be carried out effectively?

I agree with you newview, and would rather see cuts/layoffs/salary reductions than demotions . But I presented that stance based off of your opinion that Gov. Malloy doesn’t want to raise unemployment through firing, but wants to reduce government spending in order to reduce our deficit.

The point of demotions would satisfy all requirements under your opinion of Malloy regarding his dilemma. However I would enjoy taking it a step further to what Sen. Toni Boucher has proposed: A 10% pay cut for all elected officials and state workers for a 2 year period, as well as a freeze in the cost of living adjustment for the same period of time.

I do not fully agree with cutting all state worker’s pay if reducing the workforce itself first suffices, but the legislature, executive branch, and Commissioners can afford a leaner salary that reflects our state’s financial issues.

posted by: OutOfOutrage | January 24, 2011  2:35pm

OutOfOutrage

Facts to consider.
CT’s debt is about 57-60B which breaks down nicely:
CT Retiree Pension = 16B
CT Retiree Healthcare = 24B
Bonded Projects = 17B

posted by: hawkeye | January 24, 2011  3:52pm

Matt W: What’s your point?

posted by: ... | January 24, 2011  4:15pm

...

Matt W.: Could you provide a link or source to those statistics? I’ve heard between 40-50 billion, but nothing over that.

posted by: OutOfOutrage | January 24, 2011  5:43pm

OutOfOutrage

Joness: The numbers came from a presentation by Dr. Edward Deak, Ph.D. He is an economist at Fairfield U who has written several papers on the CT and US economy.  He spoke at a retirement ceremony for Chris Dodd on Nov 9, 2010 at the Hartford Club. 

According to his presentation, the last accurate account of CT debt was done in 2008 and it was at 57.4B with the breakdown I provided above. However, he suggested that we can conservatively estimate that it is now closer to 60B if not more as we have only added to the debt since 2008.  I hope that helps.

posted by: ... | January 24, 2011  6:30pm

...

Greatly appreciated! I’ll have to take a look for a video or request his report.