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Malloy's $1 Billion Demand: Impossible

Dan Haar

February 16, 2011

If you think $1 billion in savings from state employees in an $18 billion state budget is a reasonable goal, consider some basic, round-numbers arithmetic.

There are 50,000 state employees. If it costs the state $100,000 to pay each one, including salaries and benefits, that's $5 billion in all. So, $1 billion would be 20 percent of that.

Early signs show that Gov. Dannel P. Malloy is a solid manager, more of a listener than an ideologue, with a balanced, rational philosophy about making up the state's $3.7 billion shortfall. The tax increases announced Monday seem to spread the pain around evenly without making Connecticut's precious employers head for the Virginia hills.

But if Malloy thinks he can extract $2 billion in savings over the next two years from state employees, he'll need to pull out a trick of historic proportions. "Neutron" Jack Welch at General Electric and "Chainsaw" Al Dunlap at Scott Paper and Sunbeam, legendary corporate cost-cutters in the 1980s, never did anything quite like this, and they had iron-hand control.

Union concessions would have to be huge. We know that taxpayers' sentiment has turned against public-employee unions, as private-sector pay and especially benefits have fallen behind.

There is, indeed, an imbalance of pay and benefits between state and private-sector employees at work — in some job categories, but far from all. (Recent reports paint a mixed picture.) And we all know that state agencies haven't gone through the same sort of hyper-efficiency wringer that has come to be routine for the rest of us.

Here's the trouble with anti-state-union thinking: It's emotion-based, appealing to the angry taxpayer in all of us. Anyone who thinks there's $1 billion worth of legitimate savings in the state payroll this year, followed by another $1 billion next year, is nuts. Malloy himself isn't saying that.

It was the unions, especially a few such as SEIU that are heavy on state employees, that got Malloy elected. And, of course, both the state House and Senate have Democrat majorities with close ties to unions. So, politically, the idea of massive slashing of state employees won't fly.

But $1 billion in employee savings is not going to pass the test of logic, once the anger gives way to rational talk around a table. That's true even though layoffs will be part of the discussion.

The reason is that, in the short term, cuts are too hard to find in an enterprise that has to offer basic services. Pensions are one example. When former Gov. M. Jodi Rell offered her handout to state employees to walk away into retirement bliss, we had reports of youthful workers taking pensions of 84 percent of their pay. Outrageous. But, in fact, the problem has been partially fixed with two rounds of pension reforms.

"We're an easy target," said Steve Curran, a correction officer at the Newtown prison and corresponding secretary of Local 1565 of the Connecticut Corrections Employees Union, part of the American Federation of State, County and Municipal Employees Council 4.

Curran points out that although he and his colleagues are eligible for retirement at 50 percent of their pay after 20 years, their average lifespan is 57 years, and they pay 4.5 percent a year for that plan. Recent hires pay even more, and for all state workers, the famous lifetime health benefit after 10 years of service has been significantly diluted.

Sal Luciano, executive director of Council 4, said that $14 billion of the estimated $19 billion pension shortfall is attributed to the old retirement system that changed in 1982. Only 1,000 state employees remain at work who pre-date that reform, he said.

Luciano understands that some public sentiment is against his members and he understands that state workers need to offer more givebacks. But he's unapologetic about the overall pay-and-benefits picture.

Billionaire business executives such as publisher Mort Zuckerman have fomented anger at public employees, Luciano said, to cover up the true outrage: Workers, union and nonunion alike, are paid a smaller and smaller piece of the pie.

Malloy, when he talks about $2 billion in employee savings, could also be thinking about savings from state contractors such as outside providers of social services, but there's not much fat there, to say the least.

As the governor said Tuesday morning, everybody is going to be angry and upset. That includes taxpayers out for blood, and it includes Malloy himself, who won't find the savings he's looking for.