Next budget, just try sticking to real savings

Return to the summer of 2011. That was the summer Gov. Dannel P. Malloy reached a concession deal with union leaders - wage freezes, changes in health coverage and pensions.

The governor won union ratification of the deal after threatening thousands of layoffs. The Malloy administration had a number in mind - $1.6 billion in savings over two years - which when combined with record tax increases would produce a balanced budget, at least in theory.

In return for a two-year wage freeze and other concessions, the unions won guarantees of no layoffs for any union members over the course of the deal (for anyone employed at that time) and promised pay raises of 3 percent annually for the following three years, starting in the fiscal year beginning this coming July 1.

The administration had found its $1.6 billion, sort of. The nonpartisan Office of Fiscal Analysis was only able to verify about half the amount as hard, verifiable cuts, while much of the other half was highly speculative and often impossible to fairly evaluate. The deal, for example, pressed employees and retirees to join the value-based health and dental care plan, requiring regular physicals and more health screenings, or face fines and higher deductibles.

The administration estimated $205 million in savings over two years from the change in health coverage, the theory being that health problems would be caught sooner before they became more expensive to deal with. But the OFA was highly skeptical. While such plans may over the long haul reduce health care costs, in the short term the OFA pointed to the likelihood of increased utilization of care. And indeed that appears to be what happened, costing more money, not saving it.

Also getting much attention was the administration's expectation of $180 million in savings over two years by "implementing savings ideas proposed by employees to reduce costs in agencies through reduced procurement costs, more efficient agency operations and other initiatives."

Another $90 million was to be saved from "Technology Initiatives ... utilizing new technologies and reduced licensing procurement and consulting costs."

The OFA's take on the rosy savings projections was this: "Achievability of savings cannot be determined; information as to how savings were estimated has not been provided." That is polite accounting language for "the numbers were pulled out of thin air."

An indeed, try as might I could not find evidence of savings due to employee ideas that flowed from the deal with the unions. The committee formed to look at technology innovations met only four times between October 2011 and December 2011, and not since. A Labor Mangement Committee, given the job of finding savings, met five times, and only twice in the last seven months.

An administration spokesman did point to the September 2012 report: "Changing How Connecticut State Government Does Business," which outlines various initiatives taken to improve government efficiency and cut costs. These included improved and quicker service at the Department of Motor Vehicles and better use of computer filing; more aggressive collection of overdue taxes; faster permitting by the state Department of Energy and Environmental Protection; and reduced use of congregate care by the Department of Children and Families.

None of this, however, appears to have flowed out of the process that was sold as part of the concession deal - employees coming up with great ideas to save a lot of money.

The bottom line, of course, is that whatever savings were achieved they were not enough. The legislature recently filled a $365 million projected deficit in the current budget, and may well have to find more cost reductions. The fiscal year beginning July 1 has a projected deficit above $1 billion, about 5 percent of state spending. Early next month Malloy will release his budget proposal to address that shortfall. The only fiscal year completed during the Malloy administration - 2011-2012 - saw a 5.5 percent increase in spending over the prior year.

In preparing for the two-year budget cycle, the governor and the legislature should seriously consider sticking to hard savings numbers that can be calculated and counted on. For if the administration chooses again to project savings the veracity of which, in the words of the OFA, "cannot be determined," it could come back to bite the governor in 2014 - an election year.

Paul Choiniere is the editorial page editor.

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