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Senate Approves Tax Bill, 20-16

GOP Says Savings Can't Be Verified

Christopher Keating

June 08, 2011

Republicans are ripping the Malloy administration for undocumented savings projections in the $1.6 billion concession deal with the state employee unions, saying that even financial experts at the Capitol cannot verify the numbers.

The legislature's nonpartisan fiscal office has been unable to verify the numbers in multiple cases for savings on health care and pensions. The savings are crucial because the money is needed to balance the state budget over the next two years.

Overall, Republicans say that at least $600 million of the $1.6 billion in projected savings are nebulous numbers, including a projected $180 million in savings ideas from state employees over two years. Those ideas have not been spelled out in detail.

But the Malloy administration stands by its numbers and released documents that provided the assumptions that were used for various estimates.

The union debate was part of an overall tax-implementation bill that was approved by the state Senate, 20-16, about 9:15 p.m. Tuesday on a mostly party-line vote. All 14 Republicans voted against the bill, and they were joined by Democrats Joan Hartley of Waterbury and Gayle Slossberg of Milford.

During the earlier debate on the issue, Sen. Eileen Daily, D-Westbrook, co-chairwoman of the tax-writing committee, said she, too, had been unable to verify the savings projected by the Malloy administration.

Sen. Andrew Roraback, R-Goshen, said he was stunned that the knowledgeable and respected analysts at the legislature's fiscal office said in a memo that they lack the information to document Malloy's proposed savings of $205 million in health care.

"That's scary," Roraback said. "We're not talking about 50 cents. We're talking about $200 million in assumed savings when there is no backup. That's a polite way of saying, 'We're the professional office, and we don't have a clue.' "

Roraback then asked Daily during the Senate debate if she had any separate information that would back up the numbers.

"No, I wouldn't claim to know anything more than OFA does," Daily said, referring to the fiscal office.

"If the Office of Fiscal Analysis doesn't know, how can anyone know?" Roraback asked in response. "It seems to me that this is no laughing matter. I think we have a responsibility to not act on having no information. Never in my 17 years of this proud institution have I been called to act on the basis of no information. ... Savings that nobody knows nothing about aren't savings. ... It's not that we have bad information. We have no information."

The projections, for example, assume that there will be a 10 percent reduction in claims costs because of a value-based health plan that would promote wellness among state employees by requiring age-appropriate tests, such as colonoscopies for people over 50 years old.

State employees would be encouraged to sign up for the value-based health plan, which is designed to improve their health. The savings could range from $58 million to $97 million in the first year, depending on the number of employees who sign up, according to the Malloy administration. The numbers cover active employees only and do not include possible savings from retired state employees. The savings could jump the next year from $99 million to $108 million, the administration said.

Roy Occhiogrosso, a senior adviser to Malloy, said that the administration and the unions are both confident of the numbers.

"The administration is very comfortable that the $1.6 billion will be achieved if the state employee unions ratify the agreement," he said. "The administration has provided every piece of information that OFA has asked for, that it was able to provide, and is pledged to live up to that dollar figure. There is still information that they asked for that is in the works.

The administration released more than 30 pages of memos, e-mails, calculations, and projections by its consultants. Various documents by a consulting firm, Windsor-based Milliman Inc., were marked "confidential - do not distribute."

Milliman mentioned some caveats at the end of a five-page memo to Linda Yelmini, the chief labor officer in the governor's budget office.

"Changes in estimated costs will change as details of the actual programs and the timing of their implementation are known," said the memo, written by William J. Thompson, a consulting actuary. "Differences between our projections and actual amounts depend on the extent to which future experience conforms to the assumptions made for this analysis. It is certain that actual experience will not conform exactly to the assumptions used in this analysis."

Republicans also complained on the Senate floor Tuesday that the Democratic-written bill says that the legislature does not need to vote on the savings and concession deal. Roraback asked several times why lawmakers changed their minds and are now opposed to a vote.

"My recollection is that was an unanswered question and now is the answer," Daily said, noting that the legislature has rarely voted on union contracts in recent years.

Some Capitol officials say they believe the savings assumptions are aggressive, while the Malloy administration stands by the numbers. The state may not know who is correct for a year or two.

The debate on the union deal Tuesday was part of the discussion on a massive, 277-page omnibus tax bill that postpones fare increases on the Metro-North Commuter Railroad and erases the state's need to borrow for operating expenses in the current fiscal year.

The 175-section implementation bill caps the cigar tax, eliminates the cabaret tax, and reduces expenses at the huge campus of the Southbury Training School because of an expected decrease in the use of natural gas. The bill also reduces funds set aside for medical care because of a reduction in the number of prison inmates, and it states that the popular Dial-A-Ride service and non-emergency medical services are not subject to the livery tax.