Towns and cities in Connecticut could save more than $33 million next fiscal year under an agreement, announced Wednesday by Comptroller Sean Scanlon, which would restructure a state-run pension plan for municipal workers.
Scanlon outlined the deal during a state Capitol press conference in Hartford, where it drew praise from labor officials as well as state and local policymakers on both sides of the aisle. If adopted by the legislature, the proposed changes would stem ballooning costs under the Connecticut Municipal Employees Retirement System, which serves employees of 107 of the state’s 169 municipalities.
Scanlon, whose office oversees the program, said the system was currently “broken.”
“For years, our cities and towns across Connecticut have been seeing astronomical increases to the pension costs that they have in their communities. Seventy-five percent increases in the last five years alone,” he said.
The deal is the product of negotiations initiated by the comptroller’s office between municipal executives and leaders of labor unions representing their workers. Scanlon estimated the changes could save towns $843 million over a 31-year period.
The savings stem in part from an agreement to change when cost-of-living adjustments are paid out and how they are calculated to reflect the impact of inflation and the performance of investments.
The plan removes an automatic 2.5% adjustment and ties COLA increases more directly to the rate of inflation with the expectation of saving money during years when inflation is low. The deal also includes incentives for retirement-eligible employees to continue working and re-amortizes the pension debt from 17 to 25 years.
Labor officials touted the agreement’s expected impact on the stability of municipal positions.
“Recruitment and retention is a huge problem right now for our municipalities,” Jody Barr, executive director of AFSCME Council 4, said. “Hiring them, retaining them. This sorta gives the stability of ‘I’ll have a pension down in the future and it’s stable.”
“A big advantage for labor in these negotiations is that with municipalities facing really difficult budget decisions, we shared their concern of their ability to fill vacancies,” Stuart Savelkoul, chief of staff for AFT Connecticut, said. “Without getting the costs of the pension under control, we worry about the continuation of having adequate staffing.”
For many municipalities, those pension costs were significant. For instance, Windsor Locks, a town with fewer than 13,000 residents, stands to save roughly $500,000 under the agreement, according to Paul Harrington, its first selectman. Harrington, a Republican, said town officials had already budgeted for the pension expenses.
“We can now take that out of our budget and potentially not cut that teacher that was potentially on the chopping block, that police officer, that firefighter,” Harrington said. “That is huge for a town like Windsor Locks.”
The deal requires approval from the state legislature in order to go into effect. During Wednesday’s press conference legislative leaders from both sides of the aisle and Gov. Ned Lamont lauded the agreement and called containing municipal pension costs a bipartisan priority.
Scanlon said that lawmakers had yet to settle on a bill to contain the proposal but was confident it would pass in the remaining weeks of the legislative session. He said the municipal pension plan was viewed for too long as an unfixable problem.
“It’s a new day in Connecticut. We’re no longer just going to accept the fact that these are insurmountable challenges.”
