Governor Lamont’s tentative agreement with the Connecticut state unions (the State Employees Bargaining Alliance Coalition, SEBAC) exacerbates the distortions introduced by his predecessor in the natural process of state workforce renewal. To prevent a wave of retirements in the next three months, Lamont is offering huge raises and bonuses to encourage employees to stay on the job.
Ironically, Lamont’s own meddling in combating a pension wave caused by his predecessor’s meddling would unleash a much larger and more costly wave in less than two and a half years.
In 2017, former Gov. Dannel Malloy created the current retirement dynamic. Malloy negotiated a contract with no pay rises for two years, followed by two years of a whopping 5.5% pay rise. This forced staff to stay close by. Now the employees have collected this money.
Why should they stay now? That’s not the only problem Lamont faces.
Not only did Malloy reload the goodies, but he also delivered a powerful kick in the butt to prod the staff into retirement. Employees who do not retire by next June 30 will have to wait 30 months for the first inflation increase in their pension benefits, compared to the usual 12-month waiting period. Heard anything about inflation lately? They also have to pay twice as much for their health insurance.
One wonders why Malloy did this, aside from a narcissistic desire to retire in glory by kicking the can out into the street — the “can” are reforms to outsize pay for state employees (fifth-highest in the 50 states, according to the latest Study). — Reforms like the COLA “vacation” and increased health insurance premiums, reforms that make governors unpopular.
Lamont does not even have this justification. Lamont’s “Can” will land squarely in the middle of his second term if he wins re-election in November. what is he thinking
While Malloy kicked the proverbial can, Lamont tries to boot a barrel. Lamont’s three annual pay increases of approximately 4.5% (2.5% pay and 2.0% “incremental” increases), beginning nine months ago retrospectively, will fully accrue to employees’ pensionable pay bases through June 30, 2024. Wages will be about 14% higher compounding those increases – and that’s ignoring the “pensionable” cash bonuses in the business.
why stay How much better can it get?
Now we come to the human element. Many government officials who have been bribed by Malloy to stay in office for five years, and then by Lamont for two or three years, will be quite old.
At some point you just want to enjoy a peaceful retirement before you die. Financial incentives are becoming less tempting.
And that’s not all. Not only will the wage base be more than 14% higher in less than three years, but the number of pensionable government employees will grow dramatically. There are currently about 8,000 contract workers who were identified as eligible for pensions in a consultant study commissioned by Lamont and presented to him a year ago.
The Boston Consulting Group (BCG) was tasked with finding efficiencies in the government workforce and ways to automate government services to reduce the number of employees who are about to retire and need to be replaced.
In less than three years, up to 3,000 or 40% more government agency workers in Tier II and Tier IIA will be 55 or older and at least eligible for early retirement, according to the latest actuarial report on the State Pension Fund (SERS), which covers all government employees. Note: Up to 5,000 of all government employees at these levels will turn 55, including government employees in non-agency jobs also covered by SERS.
Over the past year, many observers have wondered what Lamont might have done with BCG’s recommendations. Apparently very little, otherwise he wouldn’t be offering such lavish bribes to keep the employees on the job. He should have hired their successors and maintained a process of natural renewal of the workforce.
Better to face today’s pension wave than one in just two to three years, which would be 60% more expensive based on 14% higher wages and a 40% larger cohort of retirees. Lamont’s delay comes at a huge cost.
The General Assembly should reject Lamont’s preliminary agreement with SEBAC.
Red Jahncke is President of The Townsend Group Intl, LLC based in Connecticut. He is a regular contributor.