On concessions deal: Why the same powerless position?

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As Connecticut senators vote on a labor “concessions” deal, the irony is that even greater savings can be achieved without any deal at all.

Gov. Dannel Malloy claims to have extracted $715 million in wage savings over two years through a “wage freeze.” Yet, without any deal, he could achieve $770 million in wage savings. The simple truth is that wages can only be raised by contract. No contract, no raises.

Moreover, to get his wage freeze, Malloy agreed to a one-time $90 million payment to employees as well as a four-year no-layoffs guarantee. Given the state’s dire financial condition, the next governor may need to institute layoffs to achieve more savings.

No deal at all is required to institute a wage freeze.

Another $195 million in savings come from better management of retired employees’ health benefits. The state has changed health insurance providers, which hasn’t changed any benefits. Thus, it didn’t require the agreement of the unions.

No deal at all is required to achieve these savings.

Malloy claims another $75 million in “concessions” from attrition. Well, the governor doesn’t need Big Labor’s approval to reduce the workforce through attrition.

No deal at all is required to achieve these savings.

No deal is required to achieve over $1 billion of the $1.5 billion in labor savings which Malloy ascribes to the deal.

The remaining $500 million of savings do derive from the “concessions” deal. However, they are meager indeed in face of the state’s $5.1 billion budget deficit. Much more substantial concessions are called for.

Moreover, this half-billion in savings come predominantly from a new lower-cost pension plan to cover future employees. They are purely estimated savings that depend upon the pace of new hires. Over the next two years that pace will be slowed by Malloy’s own attrition plan. He can’t have it both ways. Either he’s isn’t replacing retiring employees in order to achieve $75 million in savings from attrition or he is replacing them with new hires at substantially lower pension cost.

The reality is that attrition generates immediate hard dollar savings, so the pace of new hires over the next two years will be modest, as will be the vaunted pension savings. The new lower-cost pension plan for new employees is a great idea, but it can wait two years until a new governor takes office.

Malloy’s “concessions” plan is worth less than one-third its advertised value. For a paltry amount, Malloy has sold out to Big Labor to whom he’s granted another five-year extension of the omnibus benefits agreement, the notoriously over-generous SEBAC agreement. The extension would put the largest and fastest growing elements of the state budget beyond the reach of governors and legislatures – beyond the reach of voters, essentially suspending the operation of representative democracy — for a decade. Shame on the governor. Shame on any senator who votes for the deal.

Repeated extensions of the SEBAC agreement is the way that Big Labor has succeeded in flimflamming Gov. Malloy. With SEBAC’s expiration always over the horizon, Labor feels absolutely no pressure to negotiate and concedes little.

If Malloy hadn’t extended the SEBAC agreement for five years in 2011, all health and retirement benefits would be negotiable right now, and union leaders would be rushing to the table. They aren’t. Malloy’s budget master, Ben Barnes, admitted as much recently saying to the Courant “There was no obligation for SEBAC to come to the table… It’s the best deal we can get.”

Why would Senators put the state back in the same powerless position?

Red Jahncke is President of the Townsend Group International, LLC.

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