Lamont’s First Meeting With Labor Focuses On Unfunded Pension Liabilities
HARTFORD, CT — Labor leaders from across the state made their way to the governor’s residence in Hartford for their first discussion with Democratic Gov. Ned Lamont Tuesday.
Lamont, who won the race by more than 43,000 votes and the backing of Connecticut’s labor unions, was vague in his speech on Jan. 9 about whether he will ask the unions to re-open the State Employees Bargaining Agent Coalition contract, which doesn’t expire until 2027.
“I am a strong believer in labor, and now is the time to show that collective bargaining works in tough times, as well as good times,” Lamont said during his first speech as governor. “As our liabilities continue to grow faster than our assets, together we have to make the changes necessary to ensure that retirement security is a reality for our younger, as well as our older, state employees, and do that without breaking the bank.”
Lamont’s budget proposal isn’t due until mid-February and his office is not offering to help parse his words.
At an evening press conference Tuesday, Lamont said he’s meeting with business leaders, legislators, and labor leaders.
“I’m meeting with all the different players I need to help solve this fiscal crisis,” Lamont said.
Lamont said all he did Tuesday was “lay out from an actuarial point of view where we are as a state when it comes to pension and healthcare liabilities.”
Labor leaders did not make themselves available for comment following the Tuesday meeting and have also been cautious about how they characterize what Lamont says.
Jody Barr, executive director of AFSCME Council 4, which represents more than 15,000 state employees, insisted on Jan. 9 that Lamont has not asked them to open the contract. Barr said the governor has invited labor to be part of the process.
Barr said his members have participated in the transition and are offering up ideas on how to improve state government. He said they will be at the table, but that it won’t a table where they negotiate more concessions.
“We’re all hopeful he’s going to bridge this fiscal thing,” Barr said. “It gives us hope we can get through it.”
Former Democratic Gov. Dannel P. Malloy, who also won his 2010 election with the support of labor, asked the unions for $2 billion in concessions immediately after taking office in order to help close a $3.2 billion budget deficit. A bitter battle ensued, but they eventually were able to ratify a concession package in 2011, and another in 2017, which included a four-year no-layoff clause, a three-year wage freeze, three furlough days, and a 3.5 percent pay increase in the final two years. In addition the 2017 deal increases employee contributions to their health and pension benefits and it extends that portion of the deal another five years until 2027.
The unions feel like they’ve given enough over the past decade.
However, the states failure to fund the pensions over the years is eating up a bigger portion of Connecticut’s fixed budget costs.
But should the current generation of union workers and taxpayers be responsible for past failures to fund the pensions?
A commission is studying ways to prop up the state’s unfunded pension liabilities with funds from the Connecticut Lottery or by pooling state-owned property into a trust fund, but those solutions have not been widely tested and will likely require more study.
The more immediate problem is the Teacher’s Retirement System.
The annual contribution to the Teachers Retirement System is about $1.3 billion, but it could top $6.2 billion by 2032 because of years of underfunding. Connecticut didn’t start setting aside money to pay for teacher retirements until around 1982 — decades after the program was first created.
The pension fund, according to the last valuation, has enough assets to cover 56 percent of its long-term obligations.
Another complication is that in 2008, Connecticut borrowed $2 billion to shore up the fund. That bond is expected to be paid off by 2033. When that borrowing was approved Connecticut pledged in a bond covenant to contribute the full annual payment to the fund for 25 years, and only in extreme circumstances would Connecticut be allowed to skip the payment.
There’s no consensus yet on how to handle the issue.