Silly you if you thought concessions meant cuts

When Gov. Malloy announced that he would seek $2 billion in concessions from the state employee unions in the next budget cycle, a billion a year for two years, most people assumed that these concessions were to come out of the compensation state employees already were receiving. The unions themselves acted that way, quickly noting and often repeating that a billion a year divided by 45,000 state employees would amount to a sacrifice of $22,000 per employee. As union spokesman Larry Dorman said, “It’s not fair or realistic to expect middle-class people who happen to work for the state to each cut $22,000 a year from our family budgets.” With average state employee compensation, including benefits, at about $100,000, a 22 percent reduction in living standards sure seemed disproportionate, especially as municipal employees, more than three times as numerous and heavily subsidized by state financial aid, were not to be asked to give back anything at all. So the press also made much of the $22,000 figure.As it turns out, as demonstrated by the details of the concessions agreement between the unions and the Malloy administration, the administration wasn’t really negotiating for concessions at all as they are commonly understood. The agreement mainly curtails contemplated increases in compensation, reducing the contemplated increases by what is hoped to be $1.6 billion over two years. That is, the agreement doesn’t cut salaries; it merely freezes them for two years before bestowing 3 percent increases for three years. The agreement also tweaks medical insurance and pensions. Whether the agreement will bring total state employee costs in the next budget year below the current year’s costs is doubtful. This seems to depend entirely on whether the pension tweaking induces a thousand state employees to retire early, and such retirements will have no bearing on the current compensation of the remaining employees.Essentially, then, under the agreement state employees won’t lose anything in compensation they already receive. They will suffer no reduction in their standard of living. Only the rate of increase of their compensation will be curtailed.This is something. Otherwise state government would be on the hook for hundreds of millions of dollars more in increased compensation. The agreement’s changes are worth making. But estimates of much of the savings in the agreement are only informed speculation, and those savings come at a high price: a guarantee against layoffs. In the context of the tax increase just enacted by the governor and the General Assembly, the biggest in the state’s history, trumping the one imposed with the state income tax in 1991, the concessions agreement is almost insulting. While the governor has been prattling about “shared sacrifice,” the agreement contains nothing that private-sector workers, suffering mightily in hard times, would recognize as sacrifice. Indeed, having been given to understand that state employees would be made to give something back, private-sector workers now have a right to feel badly misled, even betrayed.With the taxpaying public’s real income having declined for years and with jobs so scarce in the state, would state government have suffered any significant staff departures if current compensation had been reduced by, say, 5 percent? Would municipal government have suffered any significant staff departures under a similar reduction in current compensation? Is this agreement with the state employee unions really the best that could have been accomplished on behalf of the public? That’s unlikely. As even some Democratic state legislators have acknowledged, private-sector employers lately have extracted far more significant concessions from their workers than state and municipal governments have.Since the agreement with the unions does not achieve the full savings assumed by the state budget, the budget will have to be rewritten. But since it already provided for a huge surplus, this should not be difficult. With the monster tax increase, a 2 percent spending increase and a big surplus built into the new budget, the Malloy administration expects to be able to proclaim next year that state government’s accounts have been squared, its operations have been preserved and it is healthy again — which is not necessarily to say that it will be any more effective.And, as always, the economic health of the people and the health of the ever-diminishing private economy and the efficacy of the government will remain something else. Chris Powell is managing editor of the Journal Inquirer in Manchester.