Christine Stuart photo
Senate President Martin Looney (Christine Stuart photo)

The Senate Democratic caucus released its own budget proposal Thursday, exposing a divide between it and their colleagues in the House Democratic caucus.

The plan released by Senate Democrats seeks to close a $350 million budget shortfall by agreeing to offer a retirement incentive to state employees already at retirement age.

Like the Republican proposal, released last week, the Senate Democrats felt a retirement incentive program was prudent.

Senate President Martin Looney, D-New Haven, said the retirement incentive had been part of the joint Democratic package until last weekend, when it learned some House members had some objections.

In an interview in his office Thursday, Looney said there are 5,000 state workers eligible for the retirement incentive, and about 1,800 are expected to take the package, which would tack an additional three years onto their pension. Looney reasoned that their jobs would be refilled with employees at lower salaries who would qualify for the new tier of pension benefits.

Looney said the retirees will add to the state’s unfunded pension liability, but the new employees will be contributing to the state’s income tax revenue.

Both the House and Gov. Dannel P. Malloy have expressed concern about what impact the retirement incentive would have on the state’s unfunded pension liability.

“Every economic expert knows that a retirement incentive program, despite some short-term savings, can wreak havoc on long-term fiscal health, as was reiterated by the recent Boston College study on pension liabilities, and that’s why House Democrats have opposed retirement incentive plans as part of this deficit mitigation proposal,” House Speaker Brendan Sharkey, D-Hamden, and Majority Leader Joe Aresimowicz said in a statement. “Should we find it necessary to consider a retirement incentive plan, we must also ensure that it is carefully crafted to make long-term structural reforms to ensure that our pensions and budgets are sustainable going forward.”

Devon Puglia, Malloy’s spokesman, reiterated the governor’s previous statement about budget negotiations.

“We are going to be reviewing it closely and circling the areas where there is overlapping agreement,” Puglia said. “We look forward to productive discussions going forward.”

Senate Minority Leader Len Fasano, R-North Haven, thanked the Senate Democrats for their willingness to consider a Republican idea.

“As Republicans have made very clear, we cannot only address the deficit in the current year,” Fasano said. “We must adopt a proposal that solves the 2017 deficit as well. And we must work together to substantially mitigate future shortfalls in 2018 and 2019 and implement long-term structural changes to the state budget.”

House Minority Leader Themis Klarides, R-Derby, called the Senate Democratic plan “a welcome departure from their past practices.”

Klarides added that “it mirrors many of the elements in the Republican plan.”

She said like the Republican plan, it maintains the Rainy Day Fund and offers a retirement incentive.

“It begins to address long-term structural deficit issues beyond our current problems that threaten the sustainability of our core government functions, issues that Republicans have insisted must be on the table,” Klarides said. “We look forward to seeing the details.’’

The House Democratic caucus is expected to meet Friday and may make some changes to its proposal.

The Senate Democratic plan released Thursday also restored $11.7 million in funding for the state’s landmark “Clean Elections” public campaign financing system and restored $35 million to the Rainy Day Fund.