The previous two administrations offered them and there are quiet rumblings now that another early retirement package may be in the works, but Gov. Dannel Malloy said it’s not true.
“There will not be an early retirement proposal,” Malloy said Tuesday in an interview in his Capitol office. “The idea that there’s going to be an early retirement plan means people weren’t listening.“
He called early retirements—which are popular amongst some workers—destructive and costly for the state.
Early retirement packages such as the one offered by former Gov. M. Jodi Rell in 2009 and the four others offered in 2003, 1997, 1992, and 1989 are fiscal gimmicks, which won’t help the state in the long run, Malloy said.
The short term reduction in salaries of early retirements are offset by larger losses in pension savings and healthcare costs for retirees.
The State Employees Bargaining Agent Coalition, which negotiates on behalf of all of the state’s labor unions, fought against Rell’s proposal in 2010 to save $65 million through another early retirement package. The union estimated that $65 million savings would be eaten up and end up costing the state $1.2 billion down the road.
SEBAC agreed to the 2009 retirement package which saw about 3,800 employees leave state service, but when it came to negotiating the 2010 proposal it wanted information Rell’s administration couldn’t provide.
When Rell’s administration was unable to calculate the pension liability for the 2009 retirees and estimates on how this early retirement package would impact the state’s workforce, Rell’s budget director walked away from the negotiating table before the union could even present him with their cost-saving proposals.
And even though they understand some of their membership would like to retire early, the unions are generally not fans of early retirement packages, either.
The unions, who submitted their cost-saving proposals to Malloy’s Budget Director Ben Barnes this week, are hopeful that under Malloy’s leadership their suggestions will be taken seriously.
“We are aware that they way you achieve savings and improve the long-term pension liability is not by offering an early retirement package,” said Barnes. “The way you achieve savings is by making people work longer, so they’re contributing more, not less to the pension system.”
Under changes to the SEBAC agreement of 1984 the retirement age was increased from 55 years to 62 years old.
Larry Dorman, spokesman for SEBAC, said Thursday that the coalition is focusing on providing the Malloy administration with good ideas, which create efficiencies and save the state money. And so far, the Malloy administration is taking labor’s ideas seriously, Dorman said.
And while asking state employees to work longer may sound like something the unions would oppose, it’s something they’ve offered in the past as a solution to the state’s unfunded pension liabilities.
One of the proposals SEBAC made during negotiations with the Rell administration was an incentive program for employees who voluntarily agree to delay their retirement. The unions sees the proposal as a win-win because the state gets to keep its senior employees, workers get a slightly increased pension, and overall pension costs and retiree health benefit costs to the state are reduced.
The union’s actuaries estimated it would save $80 million a year, but Rell’s administration dismissed the idea. Malloy’s administration may be more open to the idea, but it’s unclear how much of what the unions have presented in the past Malloy may be willing to support.
The SEBAC contract guaranteeing the more than 34,000 employees pension and health benefits doesn’t expire until 2017. Its wage concession package which also included some changes to employee pension and health benefit contributions and saved the state close to $700 million over the past two years, expires in July.
Any changes to that contract would have to be negotiated by Malloy and the unions and ratified by the unions’ members and the General Assembly. So far neither side has talked about opening up the contract.