It is a genuine law of economics, because it is a central law of human nature: if you tax something, you get less of it. A necessary corollary: most taxes bring in less revenue than predicted because people modify their behavior to avoid the tax. Connecticut’s elected officials have been ...
Christmas in July? Concessions deal includes $104 million lump sum payment
Union members will receive $2,000 lump sum payments, which will count toward their pensions, next July as part of the concessions deal worked out between Gov. Dannel Malloy and union leaders.
In total, the nonpartisan Office of Fiscal Analysis estimates the one time payment to over 50,000 state workers will cost $104.9 million.
SEBAC represents approximately 40,000 state employees but the lump sum payments outlined in the concessions agreement will also be provided for non-union employees.
The lump sum payment will be pro-rated for part-time employees.
The concessions agreement includes a three-year wage freeze which will end in the summer of 2019 at the start of the new fiscal year. The first year without a raise already happened and the second year without one just started. The lump sum payment will come during the third year in which wages are supposed to be frozen.
A new fiscal year begins July 1, 2019, which will include a 3.5 percent wage increase for all union workers, followed by another 3.5 percent increase the following year. Besides the raises, union members will also receive their step increases in the last two years.
Union members will also have layoff protections through June 2021.
The concessions deal is expected to save the state $1.5 billion over the next two years to help balance the budget. However, Connecticut’s deficit is currently $5.1 billion, which leaves lawmakers scrambling for other options.
State employee union leaders have called for raising taxes on high-earning individuals and businesses.
Democratic leaders in the House have called for increasing the sales tax to 6.99 percent, although this change is only estimated to bring in another $800 million over two years.
A vote on whether to approve the concessions deal is expected in both the House and the Senate. Speaker of the House, Joe Aresimowicz, D-Berlin, has said that a vote could come as early as Monday. Aresimowicz is an employee of AFSCME, one of the biggest unions representing state employees.
If approved, lawmakers will have to tackle the budget-writing session in 2019 while facing lump sum payments, raises and layoff protections.
The state may face difficulty balancing the budget during those sessions as fixed costs such as pensions, retiree healthcare and debt service are projected to grow and income tax revenue continues to come in below expectations.
If the state faces another deficit, as both lawmakers and union leaders have predicted, there may be few options besides increasing taxes or cutting services.
The concessions agreement also calls for an extension of union member benefits through 2027. The benefits contract dictates pensions and other retirement benefits for state employees.
Republican leaders in both the House and Senate have called for rejecting the extension and reworking the benefits package through legislative action after the current SEBAC contract has expired.
However, if the contract extension is approved, lawmakers and governors for the next ten years will only be able to make changes to benefits if union leaders allow it.
A state employee pension fact sheet released by the Office of Fiscal Analysis on Monday showed that, despite efforts to fully fund Connecticut’s state employee retirement system, the funding ratio has dropped from 48 to 38 percent since 2011. Connecticut’s unfunded pension liabilities for state employees totaled $21.2 billion as ...