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Report: State Using Retiree Benefits To Pay The Bills

by Christine Stuart | Jun 22, 2012 1:26pm
(10) Comments | Commenting has expired
Posted to: Labor, Legal, State Budget

Christine Stuart photo

Rep. Vincent Candelora, R-North Branford

(Updated 3:04 p.m.) A meeting of the Finance, Revenue, and Bonding Committee Friday provided lawmakers with a forum to discuss the state’s current fiscal outlook, taxes, and economic policies. During the meeting lawmakers on both sides of the aisle expressed concern about the state’s common cash pool, but were unaware of an Office of Fiscal Analysis report requested by House Minority Lawrence Cafero that showed about $49.6 million bookmarked for state employee health benefits was being used to pay the bills.

The report by Holly Williams of the Office of Fiscal Analysis said both the State Employee Bargaining Agent Coalition agreements of 2009 and 2011 require both employees and the state to make contributions to the “other post employment benefit,” also known as the OPEB fund, which pays retiree health benefits. Those funds, according to the report, are currently part of the state’s common cash pool, which is used to pay the state’s bills. The story on the report was first broken by the CT Mirror.

A revised 2011 SEBAC agreement establishes an irrevocable trust for the fund. But the money, according to state Treasurer Denise Nappier, is still in the common cash pool.

However, the chief SEBAC negotiator is not as concerned as Republican lawmakers are about the situation, since he doesn’t believe it violates the agreement.

“The OFA response to Rep. Cafero’s inquiry confirms that the revised 2011 SEBAC agreement is accomplishing its goal of providing significant savings to Connecticut taxpayers while protecting reasonable health and pension benefits negotiated by state employee unions on behalf of middle class public service workers,” Daniel Livingston, the chief negotiator for SEBAC, said Friday. “The Malloy administration has assured us they have been, and will continue, complying with the retiree aspects of the 2011 SEBAC agreement, including the OPEB trust fund, and we will continue to monitor the situation.”

If the funds are in the common cash pool they are earning about 0.10 percent, as opposed to the 5.7 percent they would be earning if they were in a longer-term investment account.

“Estimates used to calculate the fund’s assets are contingent on the funds being invested using, in part, a long-term investment strategy,“ Williams states in her report. “Investment options are being discussed which would involve removing the funds from the Treasurer’s common cash pool and placing them in an irrevocable trust as required by the Revised 2011 SEBAC Agreement.”

“To date, OPEB fund cash balances have fluctuated and have been relatively small, making long-term investments impractical,” Nappier said in a statement Friday. “If the state ceases to use the assets of this Trust to cover current OPEB benefits, or when contributions materially outpace payment of benefits, my office will be prepared to employ a long-term investment strategy. Until then, any fund assets will continue to be maintained in the common cash pool with any positive balances earning interest at the common cash pool rate.”

At the moment the fund isn’t $49.6 million, it’s actually running a deficit of $13.6 million, “which means that retiree health expenses have exceeded appropriations and employee contributions as of this particular point in time,” Nappier said.

Rep. Vincent Candelora, R-North Branford, said it’s a “grave concern” if that money is in the common cash pool and not a trust.

“I don’t know how you would be getting return on money that isn’t there,” he said.

Candelora, who has been sounding alarm bells about the balance in the common cash pool for at least a year now, said that when you have a “negative checkbook balance” you have to ask the question “where the heck is that money?”

Last month, the cash pool balance stood at $121 million, when last year at around the same time it stood at $895 million, according to state Treasurer Denise Nappier.

The dip in the state’s cash pool also has Democrats concerned.

Sen. Eileen Daily, D-Westbrook, said she’s concerned the state has less cash than it had this time last year.

“We’ll continue to watch the situation carefully,” Daily said Friday.

The challenge will be the next budget, which Rep. Sean Williams, R-Watertown, predicted will run a deficit.

The savings the state expected to realize from the SEBAC agreement have not come to fruition and the fact that “we’re spending more money as a state,” doesn’t bode well for the future, Williams said.

“We are not in a better position than we were several months ago,” Williams said. “We may be asked again to vote on tax increases.”

Candelora predicted the state will have to borrow money to cover operating expenses sooner rather than later, but Nappier dismissed that assertion earlier this month.

“While the need for external funding sources is possible, it is not probable at this point,” Nappier said in a June 6 statement. “We are not currently planning to request authority for any short-term cash flow borrowing.”

Nappier laid out several options for lawmakers in her letter, but warned that it hasn’t gotten to that point just yet.

“This decline could trigger periods of cash flow pressure, which would require more extensive transfers to the common cash pool and possibly the need for external funding sources (e.g., short-term options include temporary notes, or a line of credit, longer-term options include issuance of bonds to more rapidly fund the GAAP deficit),” Nappier wrote.

Nappier warned that the situation is dependent upon changes in revenue and expenditures over the last few weeks of the fiscal year.

The Finance, Revenue, and Bonding Committee revised their revenues estimates downward in many categories Friday when they adopted the 2013 revenue estimates.

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posted by: JAM | June 22, 2012  4:59pm

When you operate on a “cash” basis and have negative cash flow, the problems are serious. This appears to be more than timing issues.
And yet Malloy and the Legislative Leadership are sitting on their hands doing nothing.

posted by: perturbed | June 22, 2012  8:25pm


Christine, I hope you’re finally starting to realize just how dishonest the union bosses in Connecticut really are. I remember chastising you once for pointing us all to the SEBAC website for for more information on the (then proposed) SEBAC 2011 agreement, seemingly endorsing its accuracy, as if SEBAC was some “impartial arbiter of the truth.” Well, if you didn’t believe the opponents the SEBAC 2011 agreement before, I sure hope you believe us now: SEBAC and our national union bosses are dishonest thugs.

It’s becoming more and more difficult to reconcile SEBAC’s positions with reality. This is a classic example.

Since I just so happen to have a copy of the “final” (that is until “Attachment H” was added after our vote) SEBAC 2011 agreement lying around (losing 20% of a long-promised pension tends to grab people’s attention), I’ll share a key passage:

The Revised SEBAC 2011 Agreement (as ratified) said:

The trust fund shall not be used to pay the retiree health care costs of any employee already retired prior to the effective date of this agreement. The obligation to use the funds solely to pay the retiree healthcare costs of individuals contributing to the funds (or to return the funds to individuals contributing but not qualifying for retiree health care) shall be permanent and irrevocable, notwithstanding the expiration date of this agreement. The Trust Fund shall be administered by the State Treasurer.

Just for some further context, note the sentence in bold. That sentence, not included in the original tentative agreement, was one of only a handful of true “clarifications” added by SEBAC after the first agreement was rejected by the rank-and-file. SEBAC inserted the new language in response to widespread suspicion that the new 3% that all employees would be paying into the trust fund would be raided in any number of ways.

OK, so now, not only does it turn out to be true that the state is using the trust fund as part of a co-mingled “Treasurer’s common cash pool” to fund current OPEB benefits—in clear violation of the SEBAC 2011 agreement—but it’s also true that SEBAC (this time through Livingston) and Malloy (through Barnes) continue a well-established pattern of dishonesty.

First, on the use of the fund, the OFA wrote:

The Revised 2011 SEBAC Agreement, Section 2, establishes an OPEB irrevocable trust administered by the State Treasurer. Funds contributed to date (see Table 3) are currently held in the Treasurer’s common cash pool, which is invested in a short term investment fund (STIF). The yield on the STIF as of May 22, 2012 was 0.10%.

[NOTE: Table 3 identifies $49.6M contributed to date, over half of which was contributed by working state employees.]

And Christine Stuart wrote:

At the moment the fund isn’t $49.6 million, it’s actually running a deficit of $13.6 million…

Yet the Mirror reports this:

But Barnes added that he thinks the state is in full compliance with that agreement now, adding that while the funds may not be earning a major return right now, they are segregated and protected.

How they be segregated and protected if they’re GONE?!?

And Livingston writes this:

“The Malloy administration has assured us they have been, and will continue, complying with the retiree aspects of the 2011 SEBAC agreement, including the OPEB trust fund, and we will continue to monitor the situation.”

I hope all the rank-and-file state employees are paying attention. We’ll be getting a vote soon on our choice of unions, and people need to see just how corrupt and deceitful SEBAC and the huge national union bosses really are. They’ll soon be pulling out all the stops again, pushing their special brand of fear, lies, and intimidation to keep their cash cows from stampeding away.

Don’t fall for their lies again! They aren’t working for us anymore, they’re using us.


posted by: perturbed | June 22, 2012  8:30pm


Oh, and by the way, it should now be crystal clear exactly why Tier I state retiree SteveHC—who now goes by the name of “NOW What?”—was so insistent that current state employees ratify the SEBAC 2011 agreement last summer.

“Follow the money.” (Turns out some of it actually leads to SteveHC/NOW What?!)


posted by: johnnyb | June 23, 2012  12:39am

First of all idiot lawmakers there can be no more raising of taxes! Put the money into a dedicated account for future employee health care expenses and then start cutting spending. This is complete BS. Hey Don Williams, when are you going to get off your dead butt and start making some tough decisions? Cut the spending, stop the hiring, consolidate and down size this fiasco. Wait till you have to come up with the money to run your busway. The legislators should all resign due to embarassment for how poorly they are handling the people’s money.

posted by: RJEastHartford | June 23, 2012  11:17am

Perturbed, an obvious union member jumping on the national trend with both feet! Bonded money? Cut Spending?
Change the Law?  Adjust your plans for employment and hopefully future retirement

posted by: Noteworthy | June 23, 2012  12:56pm

The stupidity of this is compounded only by the ignorance associated with claiming there is any return at all on a fund that has a negative balance in it.  I think I’ll use that with my bank on the next business day. I’ll tell them I really have a million dollars in my savings account and therefore am do a lot of interest. Think they’ll buy that?

posted by: GoatBoyPHD | June 23, 2012  5:53pm


Favorite quote: “The savings the state expected to realize from the SEBAC agreement have not come to fruition.”

Here’s some budget tips: school vouchers; end the pension spiking and haz duty pensions inclduing adminsitrative and political spikes; cap all government pensions at the median income and then convert to 401k matchng above that; allow opt out of dues;  Cap all government salaries at $125,000 with all exceptions approved by popular vote.

Get the unions out of the organizational charts and job deescriptions and promotional structure.

Improve govenrmetn bidding by favoring state sources and establishing an easy to win bid program designed to stop the government RFP process that specs out an elephant when ordering a simple mouse.

posted by: perturbed | June 24, 2012  10:32pm


@RJEastHartford—I’m not sure what national trend you refer to. I certainly am PO’d at my union for selling us out. For that, I hope to vote soon to de-certify my union and choose a new one. I also hope several other bargaining units do the same thing. That way, the unbridled power of the current Connecticut state union bosses that run SEBAC can be diluted to some degree. Each bargaining unit that leaves its current union will create its own new seat at the SEBAC bargaining table. With enough new SEBAC votes, SOBs like Livingston, Rinker, Luciano, etc., will have a tougher time running rough-shod over the rank-and-file for their own ends.

It’s not an ideal plan, and it only partially weakens the absolute power the union bosses currently hold. But it’s better than nothing, and it’s the only shot we’ve got.

Soon the Labor Board will allow us to vote, and we must vote to switch unions.

As for retirement, well yeah, Livingston, Rinker, Luciano, Peterson, Krysz, and all the rest of the conniving backstabbers made sure we’ll all be adjusting our plans. That damage is already done. Besides being responsible for the abomination they call SEBAC 2011, they were also complicit in the pension underfunding at several points in time. And now, just like before, the SEBAC/Malloy team seem to be speaking with one voice—a voice against the best interests of state employees! They no longer deserve our union dues.

So RJEastHartford, is this a national trend, for the rank-and-file to have their own unions betray them?

(Funny thing is, these very same unions seem to work a little harder to keep their municipal/private worker members happy. They’re still trying to grow that part of their base. On the other hand, they know they won’t be getting any more state worker members anytime soon, so why waste any energy or political capital on us? We’re just good for paying a disproportionate amount of dues—it helps keep the muni/private dues lower. It’s all about dollars and numbers with these underhanded thugs.)


posted by: RJEastHartford | June 25, 2012  10:12pm

Trend? Coy? No need to pay dues at all!
You can bargain for your work rules.
No need to be bitter, these changes and others like them will save us all money
While lowering taxes.  Will cut short a lot of your fellow member’s careers, retirement etc. Municipal Workers? 401k plans, I.e Wethersfield and East Hartford among others. Thank you.
I thlnk Scott Walker was perturbed.

posted by: perturbed | June 26, 2012  7:49pm


OK, RJ, sorry I didn’t catch your humor.

You’re no doubt aware the circumstances in Connecticut and Wisconsin could hardly be more dissimilar.

And as it turns out, ironically, that’s bad for both of our interests, yours and mine.