Gutsy Democrat needed to block bad labor deal

On Monday, the Connecticut Senate is scheduled to vote on a labor deal that’s the lynchpin of Gov. Dannel P. Malloy’s two-year budget proposal. Malloy, a Democrat, argues that no labor deal means no budget, and that means all hell will break loose financially.

Not so. The General Assembly can forge a budget without a new labor deal. Most state employees have been working without wage contracts for more than a year, including fiscal 2017, which had an adopted budget. And the employees’ omnibus benefits agreement (the so-called SEBAC agreement) runs for another five years.

Besides, Connecticut is headed inexorably into crisis. Better sooner than later. Problems left to fester never get better.

Unfortunately, the old warhorses in Connecticut’s Democratic Party and Big Labor want to dance one more round before the reckoning is had. They’re angling for a five-year wage deal with big back-loaded pay raises. And they want a five-year extension to 2027 of their overgenerous SEBAC agreement, so that it runs for a full decade.

They want a sweetheart deal that would put the biggest and fastest-growing expenditures in the state budget beyond the reach of elected officials for years to come. Why? Because they fear a GOP takeover of the governor’s mansion and the Statehouse in the next election cycle.

If the Senate approves the labor deal, a GOP takeover might be a pyrrhic victory. More to the point, it might not matter to the citizenry which party prevails. Why should Connecticut voters even bother going to the polls in 2018 or 2020 if the labor deal is approved. Whomever they might elect wouldn’t be able to do much about the budget.

With the current equal partisan split in the Senate, it will take at least one Democrat to vote down the deal — negotiated by a lame-duck governor in secret — to show that the General Assembly can act as something more than a rubber stamp.

What would the ramifications of a “no” vote be? Without a deal, the state would still get the wage freeze that the deal provides in its early years. Wages cannot go up without some contract providing for an increase. No contract, no increase. With the state facing a whopping $5.1 billion deficit, a no-increase policy is only prudent. Moreover, Malloy’s deal grants labor no-layoffs protection in exchange for the deal’s wage freeze. The next governor may very well need to institute layoffs.

On the benefits side, virtually all the modest savings in Malloy’s deal come from future hires, so the state can afford to wait and strike a deal somewhat later. Indeed, why did Malloy even enter negotiations, if labor’s benefits are completely protected for five more years? What leverage did he have?

Better to go without a new contract until 2019, when a newly elected governor and assembly members can make the decision on wage increases in 2020 and 2021 based upon conditions immediately beforehand and when the SEBAC deal will have only three years left and labor will feel pressure to make real concessions.

So, is a fiscal crisis inevitable in the Nutmeg State? Yes. Just look at the “fixed-cost drivers” in the “Resource Allocation Plan” under which Malloy has been running the state since July 1, when the fiscal year began without a budget. The plan assumes approval of the labor deal.

Nevertheless, those fixed costs, predominantly public employee compensation and debt service on the state’s massive borrowings, are increasing 9.2 percent in fiscal 2018 to claim 55 percent of planned spending. Meanwhile, revenue is forecast to shrink by $853 million.

That means that remaining spending must be cut drastically. In 2018, “non-fixed” spending, i.e. mainly for services to citizens, is shrinking $1.7 billion, or 17.3 percent.

This devastating dynamic intensifies immediately following the biennial budget, juiced by the proposed labor deal’s back-loaded wage increases. According to the governor’s own Three Year Budget Report issued in February, the state lapses back into ever deepening general fund deficits that cumulate to $1.5 billion in the three post-biennium years.

While the report incorporated the labor deal now up for a vote, it assumed $1.3 billion more revenue in fiscal 2020 than is now forecast in the state’s Consensus Revenue Estimate. Factoring in that massive revenue drop-off, the three-year post-biennium deficit balloons to $5.4 billion, meaning services for citizens will have to shrink even further.

Senators voting Monday should vote for the citizenry over Big Labor and exercise their constitutional obligation as a co-equal branch of government. Citizens should hope that at least one courageous Democrat breaks rank and votes for them – that is, votes “no.”

Red Jahncke is president of Townsend Group International, a business consultancy in Connecticut, and a freelance columnist who writes on public policy issues.

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