Malloy, Union Concession Deal Could Save Taxpayers $20 Billion Over 20 Years

HARTFORD, CT — Gov. Dannel Malloy and the leadership for state employee unions have agreed to a framework for union concessions. The plan is expected to save $710 million in fiscal year 2018 and $850 million in fiscal year 2019.

Savings will add up to $10 billion over the next decade and $20 billion over the next 20 years, Malloy said. Unions still have to vote on accepting the changes. Malloy pursued the concession deal as a way to mitigate some of the nearly $5 billion budget deficit predicted for the next two fiscal years.

“This framework will surely create more affordable and more sustainable labor costs in a way that generates structural, long-term savings of over $20 billion over the course of the next two decades,” Malloy said. “I thank all state employees for their continued hard work they put in each and every day serving the people of Connecticut.”

In exchange for the concessions, the health and benefits of the contract will be extended through June 30, 2027. The agreement was set to expire in 2022. It also guarantees no layoffs through June 30, 2020. (Get Patch's Daily Newsletter and Real Time News Alerts. Or, if you have an iPhone, download the free Patch app.)

Among the changes:

• Wage and increment freezes in three fiscal years that will permanently reduce the cost of projected pensions by more than 10 percent
• Increasing employee pension contributions by two percent of pay
• Redesigning the health insurance plan
• Increasing the employee share of health care premiums by three percent
• Increasing the cost of co-pays on prescription drugs and implementation of a standard drug formulary
• Creating a new Tier IV “hybrid” pension/retirement plan that combines a traditional defined benefit plan with a 401(k)-style defined contribution plan
• Providing job security protections through June 30, 2020

House Republican Leader Themis Klarides today said the proposed agreement doesn’t go far enough to reign in state spending.

“Committing taxpayers, future governors and the next five legislatures to paying for fringe benefits that are unseen anywhere else but in state government – and a pension system that is collapsing around us as we speak – is unfathomable, ’’ Klarides said. “After months of negotiations, this proposed deal falls short of where we need to be.”

Republicans have pushed on requiring legislative approval for all union contracts. They have also put forth some proposals including shrinking the state workforce through attrition, a pure 401k-style plan for all new hires and adding deductibles to the state employee healthcare plans.

Klarides also noted that Malloy has been critical of former Gov. John Rowland’s 20-year benefits deal made in 1997.

“Now, if this deal goes through as structured, Gov. Malloy will have extended the fringe benefit plans out for a decade beyond the original expiration date and beyond what we can afford,’’ she said.

The new Tier IV hybrid pension/401k-style plan will cap overtime calculations at 60 percent. The employee contribution will be five percent, but could go up to seven percent if the return on investments is less than 6.9 percent.

The state will match one percent of pay for the 401k-style portion of the plan and employees must contribute at least one percent of pay.

ER copays for current unionized state employees would increase to $250 from the current $35. Generic drugs will increase to $10 and the cheapest drugs will remain at $5.

New employees will start at 15 percent for premium cost sharing and current employees will increase one percent per year for three years until they are up to 15 percent.

All current retirees older than 65 will be moved to a Medicare Advantage Plan, which will save $77 million in fiscal year 2018 and $141 million in fiscal year 2019.

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