Report: State workers’ raises would cost almost $1.9 billion over four years
It would cost Connecticut nearly $1.9 billion over four years to cover the raises, bonuses and related costs Gov. Ned Lamont negotiated for about 46,000 state employees, nonpartisan legislative analysts reported Thursday.
The package, which would force Connecticut to draw almost $300 million from its reserves, is expected to come under heavy fire Monday from Republican lawmakers.
GOP leaders noted the $407 million in raises and bonuses the Democratic governor would channel annually to state workers far exceeds the tax relief he proposed for all Connecticut residents.
The legislature’s nonpartisan Office of Fiscal Analysis projected Thursday that the contracts Lamont struck with more than 30 state employee bargaining units would cost $1.87 billion, spread across this fiscal year and each of the next three.
The agreement does allow the unions to reopen wage negotiations before the fourth fiscal year begins on July 1, 2024.
That $1.87 billion estimate includes:
• $1.47 billion for a 2.5% general wage increase in all four years, and also to provide an annual step increase for all but the most senior workers. Lamont acknowledged in a press conference earlier this month that the step hike likely would add at least 2 percentage points on top of the general wage hike.
• $155 million for $2,500 bonuses in mid-May and $1,000 bonuses in mid-July. The full amounts would be paid to roughly 43,000 full-time employees while part-timers would receive prorated bonuses.
• $240 million to cover additional related costs, such as contributions to the state employee pension fund and Social Security and unemployment taxes.
Lamont acknowledged last week that the raises and bonuses combined could boost workers’ pay, on average, about 7% this year, which is higher than normal. But he defended the agreement during a press conference last week, calling it vital to the state’s ability to recruit talent and preserve services amid high inflation.
“I want a salary structure that allows me to recruit … the best and brightest,” Lamont said. “That’s not always easy.”
“We are in fierce competition for talent” with both the private sector and other states, Lamont’s communications director, Max Reiss, added Thursday.
Lamont, who took office in January 2019, inherited an Executive Branch workforce that already was down 10% from 2010 levels.
Couple that with two years of a coronavirus pandemic and inflation that topped 7% in 2021, and keeping state workers has become challenging, he said.
Further complicating matters, veteran state employees are retiring in larger numbers this year as they try to get out the door before July 1 when more stringent retirement benefit provisions — negotiated during a 2017 union concessions deal — take effect.
The state had 2,056 workers retire two years ago and 2,656 in 2021.
More than 3,400 state employees have either retired or filed their written intentions to do so between January and March 31 alone, and that total is expected to grow considerably in the coming months.
But the agreement does allow workers to accept 70% of the pledged bonuses — specifically, the $2,500 paid out in mid-May — if they leave the job before July 1, and still receive more generous retirement benefits.
“We feel that this agreement is a recognition of our state workers for their remarkable work, especially during the pandemic,” Reiss said.
But Republican legislators say Lamont simply is using Connecticut’s massive budget reserves to buy votes from a key part of his labor base as he seeks re-election this year.
Both Rep. Vincent J. Candelora of North Branford and Sen. Kevin Kelly of Stratford, top Republicans in the House and Senate noted that the extra compensation Lamont negotiated for 46,000 state employees easily exceeds what he’s proposed for Connecticut’s 1.4 million households.
According to the nonpartisan analysts’ fiscal note, the annual cost of raises and bonuses alone averages $407 million over four years.
The governor proposed a tax relief plan that would save households about $336 million next fiscal year, with most of the aid tied to income and property taxes.
“It begs the question, who works for whom?” said Kelly, the Senate Minority Leader. “I thought we worked for the people of Connecticut. … The people of Connecticut need help.”
The U.S. Bureau of Labor Statistics reported a consumer price index increase of 8.5% for March, its highest level in four decades.
“That is crushing family budgets,” Kelly said.
“It is disproportionate and just incomprehensible to me,” Candelora said.
Lamont has said Connecticut is limited in the tax relief it can provide next fiscal year because of restrictions Congress has placed on states that accept federal pandemic relief. State government here has accepted about $3 billion through the American Rescue Plan Act.
But more than a dozen Republican-led states are challenging those restrictions in federal court, and GOP lawmakers here urged Lamont last week to take President Joe Biden’s administration to court.
The prospects of a Democratic governor suing a Democratic president’s administration are slim, but Candelora said, “We have an obligation to have this conversation for the residents of the state of Connecticut.”
Unions have defended the deal, noting that their members not only worked hard during the pandemic but provided concessions deals that helped close state budget deficits for more than a decade.
Packages granted in 2009, 2011 and 2017 included several years of wage freezes and limits on health care and retirement benefits in exchange for protection from layoffs.
The State Employees Bargaining Agent Coalition, which includes most major unions within state government excluding the unit for state police, announced April 1 that all units had ratified the tentative contracts.
But the Democrat-controlled General Assembly still must consider the package of agreements.
The budget-writing Appropriations Committee will get first crack at it with a virtual public hearing set for 10 a.m. Monday, online.
“This is a bad deal for Connecticut taxpayers, and state lawmakers should reject it, Carol Platt Liebau, president of the Yankee Institute for Public Policy, said.
The conservative policy group based in Hartford is urging lawmakers to bar the awarding of any lump-sum payments before July 1.