The Middletown Press (Middletown, CT)
Doing the math on rejecting state worker raises
The state House of Representatives made history Thursday and the Senate will do so Friday with some world-class grandstanding by Republicans over a contract calling for three years of raises and bonuses for some 46,000 state employees.
Outrageous! The taxpayers can’t afford this! Unfair, a contract negotiated in secret by an administration plying for union votes! Bonuses?? State workers are already way overpaid!
The question is, what’s the alternative to this $1.87 billion contract? I calculate that if the Senate were to kill the deal Friday — which won’t happen — taxpayers would need to kick in an extra $230 million over four years.
So the grandstanding we’re seeing is just that; a lot of noise from people who are honorably upset over pay raises for state workers, but are deceiving you the taxpayer if they claim Gov. Ned Lamont could have reached a better deal with the 35-union coalition. They know better.
The House approved the contracts in a party-line tally with one GOP member joining all Democrats who voted.
These votes are historic because until recently, state employee contracts could — and almost always did — take effect automatically after 30 days of inaction by the House and Senate. Wisely, lawmakers agreed in 2017 to require up-ordown votes in both chambers for state employee contracts.
That’s good and right for the sake of open government. Likewise, here’s an honest assessment: If a Republican governor had reached this contract with the State Employees Bargaining Agent Coalition, aka SEBAC, the GOP would throw a parade on the Capitol grounds.
Simply put, the state’s superb short-term fiscal condition under Lamont, combined with the rise of inflation, make it certain — 100 percent, positively certain — that the unions would win bigger raises if they were to go to arbitration than they will receive when these contracts gain approval.
Let’s follow the numbers.
Eliminating the $3,500 bonuses
The deal calls for raises of 2.5 percent a year for three years, starting last July 1, when the old contract expires. On top of that, anyone who was employed full-time by the state as of March 31, 2022, would receive a $2,500 bonus, and those still on the payroll in July will collect an additional bonus of $1,000.
That’s on top of so-called step increases for a majority of employees, averaging 2 percent a year to reward experience.
All told, over the life of the contract, with compounding, Republicans and anti-worker advocates are quick to point out that most state employees will see their pay leap by more than 15 percent.
Opponents are especially rankled over those bonuses of $3,500, all the more because even state employees who retire in April, May and June — as many will to avoid new pension cost-of-living rules that take effect July 1 — will be entitled to $2,500 handshakes and retroactive raises.
I agree with the opponents on that point, and wish Lamont had held back the bonuses for state workers staying on after July 1 as an incentive. But I’ve run the numbers for a typical employee, and the $2,500 would not make much difference in their decisions. Besides, we don’t know whether the bonuses bought Lamont some savings where it counts, in the raise percentages.
These bonuses amount to $155 million plus a few million more in benefits costs. So let’s assume lawmakers shoot down these contracts and we ditch the bonuses.
Inflation and surpluses
Immediately, the contracts would go to arbitration. There would be no point in negotiating again because the unions would not agree to a deal with lower raises.
Now we get into some game theory. Each side would submit its final offer and the arbitrator would have to pick one. Inflation in March was at 8.5 percent as measured by the consumer-price index. And guess what happened late Wednesday? State budget officials churned out a new prediction for a surplus this year: $3.95 billion.
That’s not just from the federal stimulus. And even if it is, that counts. Arbitrators, by law, look at the employer’s ability to pay and the economic environment.
An arbitrator awarded one state employee union 3 percent last year on top of step increases — when the state surplus was smaller, inflation was lower and we still held hope that prices would ease by mid-2022. So Lamont would have to offer at least 3 percent to have any chance of winning one of the years in arbitration. That’s even a bit low.
If the unions asked for 4 percent for four years, it’s a reasonable guess they’d win for half of the contract years.
Remember, the unions only agreed to 2.5 percent raises because of the bonuses, and for the benefit of a clean, fast result. They accepted zero raises and zero step increases in six of the last 12 years when the state was broke.
“We have always, in whatever circumstances we find ourselves in, fought hard to find agreements that are good for both sides, built on recognition of our common interest in public services and the people we serve,” Dan Livingston, chief SEBAC lawyer, told lawmakers Monday. “This agreement is a great example of a contract that is good for everyone.”
The $230 million calculation
Think Livingston is lying about a win-win? Go ahead, make his day. Reject the deals. We’d soon be looking at 3.5 percent raises, not 2.5 percent.
I calculated each year’s extra cost at 3.5 percent, including benefits, to compare the new total with the $1.87 billion.
Without the bonuses, we’re down to $1.71 billion in total costs. But the added 1 percentage point would add $385 million to the contract cost, for a total of $2.1 billion, a net extra cost of $230 million.
That extra pay would raise the base every year, forever — including the pension calculations.
I couldn’t run these numbers exactly because factors like changes in the benefits calculations require data and math skills that I don’t have. Also, the $1.87 billion cost figure from nonpartisan legislative analysts includes many millions covered by federal transfers and grants.
Still, the big picture is clear. Opponents can argue all they want that private sector employees aren’t seeing raises like this (debatable); that a (deeply flawed) 2016 study by the American Enterprise Institute, later updated, shows Connecticut state employees earn more than equivalent private sector workers; that Connecticut’s massive unfunded liabilities make the state weaker economically (true); that the state’s fortunes are propped up by federal pandemic spending (true); and that the proposed contract will add to our unfunded pension totals (false).
None of that matters. What matters is the reality that a vote to reject this contract is a vote to saddle taxpayers with hundreds of millions of dollars in higher costs.