Five-Year Union Deal Calls for Job Security, Wage Freezes, Cost Savings, 401(k)

State employees would receive no general wage increases for three years and pay more for their pensions and health care benefits under a tentative deal with Gov. Dannel P. Malloy that would save the state more than $1.5 billion over the next two years, officials said Monday.

A 14-page draft summary, obtained by The Courant, says the first two years of the five-year deal would include a hard freeze with no wage or so-called step increases. That would also include three furlough days in each of the first two years.

In the third year, there would be a one-time payment instead of any wage increases, according to the draft summary. State employees would then receive pay increases of 3.5 percent in each of the fourth and fifth years.

The deal calls for no “mass layoffs” and extends the current benefits agreement for the State Employee Bargaining Agent Coalition, known as SEBAC, by five years until 2027.

Union leaders are preparing for a formal vote by the SEBAC unions that would pave the way for a separate vote by rank-and-file members on the contract. The two sides are trying to reach a concessions deal to help balance the budget that has a projected deficit of more than $2 billion in the fiscal year that starts on July 1.

In a sharp change from the past, the co-pay for visits to the hospital emergency room would be $250, up from the current $35.

Under the latest deal, the prescription drug co-pays for state employees would increase to $10 for most generic drugs, up from the current $5.

“The cheapest drugs will remain $5,” the summary says.

The tentative agreement also calls for a new Tier 4 for state employees that would provide a combination of a traditional pension and a 401(k)-style plan for the first time for new state employees. Only 60 percent of an employee’s overtime would be factored into the pension, rather than the current 100 percent. Republicans and conservative Democrats have been calling for years for a 401(k) plan, saying that state employee pensions are currently bloated and allow some retirees to receive more than $100,000 per year in pensions. The current system of pensions has commonly been blamed, in part, for the state’s fiscal situation.

New state employees would pay for 15 percent of their insurance premiums, up from the current 12 percent. By the 2022 fiscal year, the average contribution for state employees would be 15 percent.

The summary says the deal “comprehensively redesigns health care benefits for active employees and pre-65 retirees” that includes conversion to a prescription formulary for the first time in an effort to restrain the rising cost of prescription drugs.

While no actuarial analysis is expected for at least two weeks, the Malloy administration says the deal would save more than $1.5 billion combined over the next two years. The includes $712 million in the first year.

The Malloy administration is describing the deal as “an historic agreement” with significant savings in the next two years and beyond.

“The agreement includes three zeros and is the first time in SEBAC history that more than two consecutive zeros have been negotiated,” the summary says. “An average increase of less than 1.5 percent per year, less than inflation.”

The wage freezes in the agreement “drastically and immediately impact the cost of pensions,” the summary says.

More Savings

At a time when Malloy is seeking $700 million in savings in the first year, Senate Republicans say it is logical to expect more givebacks as the budget deficit has exploded to more than $2 billion in the next fiscal year. They say the givebacks should be proportionate to the size of the problem, and the lower total of givebacks is not enough. Some lawmakers also are concerned that the deal would extend to 2027, saying that Malloy criticized former Gov. John G. Rowland for agreeing to a 20-year deal in 1997.

“We have to be very, very concerned about extending the contract,” said Sen. Joe Markley, a Southington Republican who is serving his fourth straight term in the legislature. “We’ve been behind the curve on our response to the situation since Malloy and I arrived here in 2011.”

Senate Republican Leader Len Fasano of North Haven said the unions should provide an additional $258 million beyond Malloy’s $700 million concession target. In addition, Senate Republicans want the unions to provide an additional $405 million beyond Malloy’s $892 million in the second year.

“Originally, they were giving 43 percent of the then-amount of the deficit,” Fasano said recently. “The deficit has gone up. We think they should keep to that 43 percent. … We are asking them to step up a little stronger, given the fact that our budget is a little bit more in trouble.”

After being briefed Monday by Malloy budget director Ben Barnes and chief of staff Brian Durand, Fasano said it was still too early to weigh in on the proposal because many of the details are still unknown. He is waiting for an actuarial review and further details on the numbers.

But Kathleen Sanner, president of the University of Connecticut Professional Employees Association, questioned any additional givebacks being sought by Republicans.

“Demanding even more from middle-class families shows just how out of touch these politicians are,” said Sanner, a registered nurse at the UConn student health services department. “They don’t even realize how state employees are already producing significant taxpayer cost savings. Worse, they don’t understand the long-term harm of taking dollars directly out of local economies.”

Union members are also concerned about Malloy’s plan to shift $400 million in annual costs to cities and towns to pay for a one-third portion of local teachers’ pensions.

“Saddling local communities with unexpected costs is both penny-wise and pound-foolish,” said Patti Fusco, AFT Connecticut’s jurisdictional vice president for pre-kindergarten through 12th-grade educators. “Whatever short-term savings it may produce for the state budget will be lost by the cuts to local services like public health and safety. Then there’s the teacher shortage it threatens to cause for towns across Connecticut.”

House Republican Leader Themis Klarides of Derby said the changes are “reasonable” and “a good first step,” but they don’t go far enough when compared with the dire state of Connecticut’s finances.

“They are just a starting point,” Klarides said. “And when you couple those with a five-year extension … you are now binding the taxpayers of Connecticut, two future governors and the next five legislatures.”

Larry Dorman, a spokesman for AFSCME Council 4, criticized Klarides.

“State unions are currently in discussions with the administration to find mutually agreeable solutions that will help close the budget deficit and protect the vital services our members provide to the public,” he said. “Meanwhile, Rep. Klarides and her caucus’ proposals to balance the budget on the backs of working people and silence public employees’ voices aren’t solutions; they’re just failed austerity policies we’ve seen body slam the economies of states like Wisconsin and Kansas.”

Courant staff writer Daniela Altimari contributed to this story.