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Opinion: Real structural changes, real savings for taxpayers

State Sen. Bob Duff.

Real Structural Changes, Billions of Dollars in Savings for Taxpayers

The Senate is set to vote on Monday on significant contractual concessions and structural changes–the types of structural changes many of us have long sought–to our state employee labor agreements. This agreement is the latest step toward making government more affordable and more efficient for taxpayers, and this agreement represents the most critical piece of the budget equation–eliminating 30 percent of the projected deficit.

 

$24 Billion in Savings

An outside independent analysis confirmed that the new SEBAC agreement makes important long-term changes to our state employee pension and benefit programs resulting in significant savings for taxpayers–roughly $24 billion over the next 20 years. The independent analysis found the plan produces cumulative savings of $1.569 billion over fiscal years 2017 and 2018 and nearly $5 billion in the first five years

In recent years, we’ve taken significant steps to reduce the size of government and fund our long-term pension obligations for our current workforce. Over the last ten years state government has shrunk its bargaining unit workforce by nearly 15 percent (52,193 to 44,130). Additionally, it has reduced the number of managers in classified service over the last ten years by 33 percent (2,348 to 1,559)

A New 401k-hybrid Retirement System for New State Workers

The agreement completely restructures our pension system for the future, while respecting the promises made in the past. The agreement takes advantage of our demographic reality. It is estimated that at least a quarter of our workforce is likely going to retire before the existing SEBAC agreement ends. This deal allows the state to change the benefits structure five years sooner, meaning there will be more than 10,000 employees enrolled in the new Tier IV pension plan prior to the termination of the current SEBAC agreement on July 1, 2022. Without a new SEBAC agreement, these new employees will be enrolled in the current Tier III pension plan. This attrition will save the state almost $77 million in the first two years, with the savings increasing to $97 million annually by 2037.

 

Additional Savings and Structural Changes:

The proposed pension changes will save the state $210 million in FY18 and $238 million in FY19. Over the course of the deal, the Actuarial Determined Employer Contribution could decline by $400 to $500 million per year, creating a new peak of about $2.2 billion, but with an average of $1.8 billion.

The agreement modernizes health benefit plans to reflect the best thinking about how to keep employees healthy at the lowest cost. These proposed health benefit changes will save $136 million in the first two years, but both the premium cost sharing and formulary changes ratchet up those savings to well over $100 million per year into the late 2020s and early 2030s.

This proposal makes major changes to the retiree health benefits program, producing significant immediate savings and gradually shifting costs onto employees and retirees into the future. These savings quickly eclipse $200 million per year in the 2020s as retirees move to the Medicare Advantage program. Additionally, the agreement provides for wage freezes that save $716.4 million over the biennium and nearly $500 million per year thereafter.

13 comments

Josh Ornstein July 30, 2017 at 6:27 am

Reading both this and the Lavielle/Wilms piece and Yankee institute piece leads me to conclude this is less than truthful.

Sue Haynie July 30, 2017 at 6:46 am

Bob Duff is in the pocket of the Unions and they’ve sent him to work. It’s an insult to read this editorial and see Duff talk of the benefits to the ‘taxpayers’ as if Connecticut’s middle class, over-burdened ‘taxpayers’ were really the beneficiaries of this Union give-away. Duff is always there for the Unions. Duff is out to lunch when it comes to Norwalk and Norwalk taxpayers.

Sue Haynie July 30, 2017 at 6:56 am

Duff is part of the majority leadership. This from Gail Lavielle: “All day we were told by majority leadership that this labor agreement was the only option for the state, despite the fact that House Republicans have been asking for a vote on our balanced, no tax-increase budget since April,” said Rep. Lavielle. “This is not fair to the people of Connecticut, who deserve fair and open consideration of every viable budget option.” Why not open this option up for debate Duff?

Bryan Meek July 30, 2017 at 8:00 am

So Bob is going to vote against his district’s best interests again. Or can he explain what services we are getting from the state in return? Shutting down STAR? Undercutting the school system? Working against our new school plans while supporting more and more affordable housing and sanctuary policies that are stressing our already overpopulated, underfunded schools over the edge of capacity? How do the state union concessions, where they get job security and raises help this?

Mike Barbis July 30, 2017 at 8:25 am

This is definitely progress. Thank you for working on this. But, correct me if I am wrong, this agreeement reduces what we were set to spend but I don’t think cuts the absolute amount of spending, right?

Is over time compensation still figuring into the pension calculation? And aren’t the “no layoff” clauses limiting our options going into the future?

Isabelle Hargrove July 30, 2017 at 11:09 am

This Op-ed is terribly disingenuous, not surprisingly from Senator Duff.

Readers should ask themselves what the unions got in exchange for all these “wonderful” concessions. What is the backend of this deal? For all the millions saved, which is a fraction of the billions CT needs, how much will be spent on concessions that will tie our hands for 10 years? What will happen when the next recession hits?

The answers to these questions are unfortunately terrifying and that’s why Senator Duff, great magician he is, does want to address them. Voters beware…

For example, CBIA represents 10,000 CT businesses and this is what they wrote:

“The five-year extension of state employee workers’ contracts is of deep concern to members of the Connecticut Business and Industry Association, according to CBIA CEO Joe Brennan.
Extending the labor pact from 2022 to 2027 not only would tie government’s hands going forward, but would lock in pension and health benefits costs “that may not be sustainable” over the long term, Brennan said Tuesday.”

Rick July 30, 2017 at 11:11 am

Woke up this morning and found we were served red herring for breakfast. Thanks Bob,beats the pearl necklace your usually trying to give away.

DB July 30, 2017 at 2:11 pm

FYI – The Yankee Institute is a right wing think tank in Hartford. Can someone provide an actual unbiased assessment of the contractual concessions? When I see something like this or the Drudge report cited as a reference my bs alarm goes off. I think many people forget what they learned in high school and/or college about using reliable sources.

Bryan Meek July 31, 2017 at 11:29 am

@DB. Would it matter to you if it were a left leaning source? I somehow doubt it based on your assertion here. Even though Yankee Institute has been right all along for the past six years about the disasterous policies implemented by Malloy. The phony revenue forecasts, the phantom givebacks from the unions that turn out to be more goodies we can’t afford, the first five program that cost more than its benefits, I could go on. You still give the benefit of the doubt to the same folks who have been lying through their teeth for six years even though all the evidence points to their policies flushing the state’s financial health down the drain. Incredible.

Isabelle Hargrove July 31, 2017 at 1:22 pm

Here is the opinion of the Hartford Business Journal to add to the chorus…

“But while the Democratic governor and his strong base of union supporters celebrate their short-term victory, the deal is a bad one for the state long term.
Not only does it prolong generous healthcare and other benefit contracts (which were set to expire in 2022 but would be extended to 2027) it also guarantees 3.5 percent wage hikes in 2020 and 2021.
No evidence exists that Connecticut will be in a position to guarantee pay increases four or five years from now. In fact, our fiscal crisis is far from over…”

http://www.hartfordbusiness.com/article/20170724/PRINTEDITION/307209908

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