Connecticut’s public sector is the most heavily unionized of the 50 states. Under Governor Ned Lamont, public unions have secured state employees six consecutive annual pay raises, cumulating to a stunning 33% compound increase, making them the second highest paid in the 50 states.
Their health care benefits are the most robust by far, according to studies in 2021 and 2023. Their pensions ranked in the top quartile of states in the 2021 study.
But how does the state employee union (SEBAC) maintain its unique power and protect such lavish and unaffordable compensation in a state that is in the worst financial condition of the 50 states?
First, by keeping their Democrat allies in power. Democrats have controlled both houses of the legislature every year this century — they gained supermajorities in last month’s election. Second, by keeping their contracts beyond the reach of any real public scrutiny and accountability.
SEBAC contracts are comprised first of a wage contract, which typically runs four years. The second part, the pension and health care benefit side of the contract, was extended to an unprecedented 20-year term in 1997 and, twice since, has been extended for an additional five years, allowing legislators only two opportunities this century to review its terms.
The good news is that, like Halley’s Comet’s rare visits to the inner solar system, the benefit contract is coming back under review in the legislative session beginning this January, as is the wage contract.
The upcoming session will be a real challenge for Democrats and their union allies, due to a three-way battle over spending that is unfolding between different factions of the Democrat party. Amidst the battle, it will be impossible for the huge expense of state employee compensation (now about $10 billion a year) to go unnoticed.
Progressive Democrats want to loosen, if not abandon, a regime of fiscal restraints adopted in 2017 (the so-called “fiscal guardrails”) in order to increase spending, most particularly to increase payments to non-profits in the social services sector.
State social workers earn far more than social workers in the non-profits which provide many services on behalf of the state. According to the CEO of the CT Non-Profit Alliance, non-profits “have been stretched thin by 15 years of underfunding” to the tune of “$460 million,” an amount equal to more than 7.5% of the $6 billion in annual salaries for all state employees.
The high-profile advocacy about the pay disparity can only highlight the lucrative pay of state employees at just the wrong time.
The second faction is led by Governor Ned Lamont. Despite overseeing the stunning 33% recent wage increase for unionized state employees (more than a $1 billion increase from an annual total of $3.4 billion in 2018 to $4.5 billion in 2024), Lamont is viewed erroneously as a “moderate” Democrat and a fiscal conservative.
He has claimed credit for significant “progress on pensions,” even though the “progress” has been insignificant. The scant “progress” is a function of the “fiscal guardrails” adopted two years before he took office. Yet he has claimed the guardrails as his own.
Despite $6 billion in special deposits into the pension fund courtesy of the guardrails, there has been only a $11 billion increase in pension fund assets, which has been almost completely offset by a $9 billion increase in estimated future pension liabilities. Pensions are based on wages. When wages increase 33%, pension liabilities increase in tandem.
The third faction comes in the form of the Christmas-past-like apparition of Lamont’s predecessor, Democrat Dannel Malloy, who took very real and tough actions to impose fiscal discipline. Malloy imposed three wage freezes, which is the only real way to make progress on pensions. In addition, Malloy imposed significant benefit reductions upon the unionized state employees. To say that Lamont suffers by comparison is an understatement.
Malloy acted in face of Connecticut’s dismal fiscal condition — which remains the worst in the nation today. Bonded debt is now about $8,000 per capita, the highest in the nation, the pension fund remains the 3rd-worst state fund in the latest ranking (2023) and the state’s most-generous-in-the-nation retiree health care benefits remain severely underfunded.
Connecticut Democrats face internecine warfare. Will the progressive wing bust the “guardrails” and ramp up spending; will Lamont’s wing of faux fiscal conservatism prevail, protecting lucrative union compensation that will assure him union support for a possible third term; or will Malloy’s legacy arise to expose the hollowness of both wings of today’s Democrat party?
Republicans have a real chance to achieve reforms. Despite being outnumbered by the Democrat supermajorities in the legislature, Republicans appear to be ready to expose and exploit the Democrats’ three-way divide and mount a fight, led by state senate Republican leader Stephen Harding, who has called for a two-year wage freeze.
Red Jahncke is a nationally recognized columnist, who writes about politics and policy. His columns appear in numerous national publications, such as The Wall Street Journal, Bloomberg, USA Today, The Hill, Issues & Insights and National Review as well as many Connecticut newspapers.