3 Reasons State Unions Will Like Malloy’s Deal for ThemMay 25, 2017
Gov. Dan Malloy (D-Conn.) gets concessions that will help him balance his last two-year budget, but state employee unions get five to ten more years of a sweet deal.
Gov. Dan Malloy (D-Conn.) announced a tentative deal on Tuesday with the State Employees Bargaining Agent Coalition (SEBAC) – representing state employees – that extracts $1.5 billion in union concessions over two years but also keeps wage and health benefits in place for state employees through 2027.
Although Malloy touted the concessions he won from union leaders, there are at least three reasons state employee unions will like the deal Malloy made.
Malloy’s key concessions to unions are that “revised health and benefits are extended an additional 5 years, though June 30, 2027,” and wage agreements “are in effect through June 30, 2021.”
This translates to continued high costs for Connecticut taxpayers, with the extension of a deal that was negotiated by Gov. John Rowland (R-Conn.) almost 20 years ago, in 1997.
The Yankee Institute pointed out as much:
However, a five year contract extension will mean Connecticut will be saddled with the union deal, negotiated by Gov. John Rowland, for as long as most people have mortgages.
The extension of the contract could be a sticking point in the legislature because it will prevent future governors from renegotiating the terms of the 1997 agreement. Those terms include pensions and health benefits, two of the major factors driving the deficits.
TEMPORARY WAGE SACRIFICE
Malloy highlighted a two-year wage freeze for state employees, but after that there is a “one-time $2,000 bonus for some employees in the third year” and 3.5-percent raises in years four and five of the five-year deal.
It’s not as if Connecticut employees are working at poverty-level wages. The average state employee had a roughly-$60,500 salary in fiscal year (FY) 2015, with $19,595 in fringe benefits.
That average employee making $60,500 now will see, under this deal, his salary flat for two years, followed by a $2,000 bonus in the third year, a salary of $62,600 in the fourth year and of $64,800 in the fifth year.
HEALTH BENEFITS FAR BETTER THAN PRIVATE SECTOR
Malloy also highlighted that state employees and retirees will contribute more to their health care under the deal, but their contributions are still well below market average. New employees will pay 15 percent of the cost of their premiums, and existing employees will ramp up from 12 to 15 percent over three fiscal years.
How does that compare to the private sector? According to the Society for Human Resource Management, in 2014 the average employee with an employer-provided health plan paid around 34 percent of a group health plan premium.
In 2014, the average total annual cost per employee in the U.S. for group health plan premiums was $9,504, of which the average employer cost was $6,276 and the average employee contribution was $3,228, according to survey data from the 2014 United Benefit Advisors (UBA) Health Plan Survey of nearly 10,000 U.S. employers.
Clearly, state employees have it better on premium-sharing than the average private-sector employee.
Malloy’s deal makes incremental changes, but some question whether it’s enough to correct Connecticut’s long-term obligations to state employees and retirees.
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