Lamont seeks pension givebacks; wants cities and towns to share costs

Gov. Ned Lamont will seek concessions that could reduce pension benefits to future retired state employees by more than $130 million per year — a move that was immediately met with resistance Tuesday from union officials.

The governor also announced Tuesday he would revive a controversial proposal to share a portion of those costs with cities and towns — albeit a smaller share than his predecessor, Gov. Dannel P. Malloy, initially sought in 2017. And Lamont also offered a few more details of his plans to broaden the sales tax base.

Lamont’s first budget, which he will propose to legislators Wednesday, would reduce the cost-of-living increases awarded to future retired state employees, but only if returns on pension investments under-perform. The state assumes an average return on pension investments of 6.9 percent and COLA adjustments would be capped at 1 percent if returns fall short of expectations.

This could save as much as $131 million next fiscal year and $143 million in 2020-21.

“While I love history and tradition, there is no reason to continue with bad or outdated policies that are no longer working for the people of this state,” Lamont said Tuesday. “Taxpayers are tired of hearing this year after year, and rightfully so. This is the ‘Land of Steady Habits,’ but we can’t continue along the same path and expect that things will fix themselves. Our state needs to make real, substantive structural changes to facilitate a sustainable financial future. As the economy and peoples’ habits change, we need to demonstrate that Connecticut’s state government can keep pace.”

But Lamont cannot impose these changes without the agreement of state employee unions. Lamont reassured those unions repeatedly on the campaign trail last fall that he would seek “win-win” scenarios and “reforms” that reduced costs while benefitting both labor and state government.

For example, Lamont often suggested he would explore changes to how the state purchased medications to see if costs could be reduced without reducing the quality of employee health plans.

Lamont did announce Tuesday that his budget calls for state government to negotiate new health care price limits with hospitals, clinics and other health care providers to negotiate new price limits for various services. The governor’s budget also proposes expanding the state employee health enhancement plan and other wellness programs. The goal is to save $50 million from these initiatives in the first year of the governor’s new budget, and $135 million in the second.

The State Employees Bargaining Agent Coalition’s response Tuesday was swift and clear.

“To be clear: we will not be part of asking for still more sacrifices from state employees, who have already given so much for the people they serve,” the coalition wrote. “We will, however, continue working with the Lamont Administration and the General Assembly on “win-win” solutions for achieving efficiency and that will benefit everyone. Additionally, we will continue fighting for a fair budget that empowers all to thrive together here in Connecticut.”

Lamont’s proposal would mark the fourth time in the past decade that state employee unions have been asked to provide wage or benefit givebacks to help avert deficits.

Unions granted a wage freeze and health and pension concessions in 2009 to Gov. M. Jodi Rell and in 2011 and 2017 to Malloy.

Lamont also is trying to avert significant potential deficits. Based on projections from nonpartisan analysts, and a revised revenue forecast issued Jan. 15, state finances — unless adjusted — are on pace to run $1.5 billion in deficit in the 2019-20 fiscal year. The potential gap grows to $2 billion in 2020-21.

But Lamont doesn’t have the same leverage that Rell and Malloy had to induce worker givebacks.

The 2017 concessions deal exempted many unionized workers from layoffs for four fiscal years, running through June 30, 2021.

The only exceptions are state police troopers — who declined to accept a wage freeze as part of the 2017 deal — and workers hired after July 1, 2017, when the concessions agreement took effect.