A new analysis by the conservative Yankee Institute claims there is $1.4 to $2.5 billion in annual savings to be realized by offering state workers the kind of benefits packages commonly used in the private sector.
All told, the study released Thursday found that Connecticut state employees receive total pay and benefits from 25 to 46 percent higher than comparable private sector employees. While workers in both sectors received basically the same salaries, the study said state employees currently receive health coverage packages that are 30 percent more generous than in the private sector and pension packages that are five to 10 times more generous.
The findings are based on a comparison between the overall compensation packages of state employees and those of private sector workers with similar education, experience, and other earnings-related characteristics.
The average state worker earns a $70,970 salary each year plus annual benefits worth between $54,561 and $75,641, according to the study. The average private employee earns $71,112 per year with $29,371 in annual benefits.
The study analyzed data from the American Community Survey conducted by the U.S. Census, the Bureau of Labor Statistics National Compensation Survey, and actuarial valuations of state pension and health programs. It did not include municipal employees, public safety officers, or teachers.
According to Andrew G. Biggs, the American Enterprise Institute scholar who authored the report, the findings do not mean every state worker in Connecticut gets a better deal than he or she would get in the private sector.
“But the substantial size of the compensation premium found for state government employees indicates compensation policies — in particular, health benefits, and the retirement package of pensions and retiree health benefits — that are far out of sync with common practice in the private sector,” Biggs wrote.
The study criticized state pensions as “extremely generous” compared to the private sector.
“Put in simple terms, to equal both the level and the safety of benefits offered to Connecticut state government employees, a private sector worker with a 401(k) would need to save between 26 and 53 percent of his salary, invested in safe assets,” Biggs wrote.
The typical employer contribution in the private sector is 3 percent of wages, with 90 percent of employers contributing less than 6 percent of pay, according to the study.
For Larry Dorman, a spokesman for AFSCME Council 4, which is one of the largest state unions, the Yankee Institute is a “classic example of an organization that’s looking to pit working people against working people.”
Dorman said public policy is better served by looking at ways to raise up all workers. Studies like this one, he said, ignore the fact that good compensation and access to health care play a positive role in generating economic activity in the state.
“If we’re going to have a reasoned, rational analysis and solutions to the challenges facing our economy, we ought to look at ways of raising the bar for middle class workers instead of lowering the bar,” he said.
According to Dorman, the grossest inequality in pay exists in the gap between corporate leadership and the rank and file.
“The real problem in Connecticut isn’t that public sector workers have decent pay and benefits, because every worker should have decent pay and benefits. The problem in Connecticut is the average CEO pay in 2014 was $7,682,740 and the average worker’s pay was $49,201,” Dorman said, citing data compiled by the AFL-CIO.
Biggs, however, concluded that bringing state workers’ compensation in line with that of the private sector isn’t just a matter of budget sustainability — “but a matter of fairness for taxpayers who support public employees.”
It’s taxpayers who also will have to deal with what the study called “staggering” pension debt that began in 1997 when former Republican Gov. John G. Rowland and then former Republican Gov. M. Jodi Rell and union negotiators agreed not to contribute to state employee pensions at various times over that 20-year period.
The most recent pension report showed that as of 2014, the State Employees’ Retirement System was funded at 41.5 percent. That means the State Employees’ Retirement System has about $10.5 billion worth of assets, which is enough to cover 41.5 percent of the $21 billion in liabilities. Experts say an 80 percent funding level is considered healthy.
However, the chance that Democratic Gov. Dannel P. Malloy will be able to do anything about the health and pension package of state employees is contingent upon his decision to run for a third term, since those parts of the bargaining agreements aren’t included in the upcoming negotiations. Malloy and his administration will open salary negotiations with all state employees, except the state police, around January 2016. But when the state employees ratified a concession package back in 2011, the health and pension portion of the collective bargaining contracts was extended to 2022 — which would be the fourth year of the next full gubernatorial term.
In order to avoid layoffs in 2011, the State Employees Bargaining Agent Coalition agreed to reductions in wages, retirement, and health benefits. Then, in 2012, Malloy and the unions reached an agreement to increase funding to their pensions. Officials from the state Comptroller’s office said Thursday that the 2011 agreement with state employees lowered the cost of pensions for new state employees, but a majority of state employee pensions are closer to the average used by the Yankee Institute to compile their report.
The Yankee Institute study found there were some benefits in which private sector workers came out on top. Some private sector employees receive combined vacation, holiday, sick leave, and personal time equal to 12.3 percent of their annual salaries, while state workers receive such benefits equal to 10.1 percent of their annual salaries.