Connecticut state employees enjoy an amazingly lucrative gravy train. They may think the drama in Washington, DC will deflect attention from their extraordinarily cushy existence in Hartford and hide the additional gravy likely to flow from “contract negotiations” between union bosses (SEBAC) and union-friendly Governor Ned Lamont.
Yet, revelations about their compensation and cushy jobs keep cropping up.
In a study just released by Nutmeg Research Initiative, Connecticut state employees are tied with California for the most generous health care benefits in retirement (also known as OPEBs, meaning “Other Post-Employment Benefits). The study was conducted by Dr. Andrew Biggs, one of the nation’s foremost retirement benefits experts; the Townsend Group, which I head, oversaw the study on behalf of Nutmeg.
Dr. Biggs found that, each year, active state employees in California and Connecticut accrue future retirement health care benefits equal to an additional 28% of their current wages. In Connecticut, that translates into the equivalent of $26,846 in additional wages. That’s not the total value of their future retiree health benefits; that’s just the amount of future benefits they become entitled to each year that they work.
Dr. Biggs converted information from the different OPEB reports of the 50 states to an apples-to-apples basis. This process was necessary because Connecticut’s OPEB report employs “creative accounting,” which “renders financial comparisons to other states meaningless” and provides a “misleadingly optimistic view of the state government’s long-term finances,” as Dr. Biggs recounts. More below.
Yet, this assessment follows a recent study by Georgetown University finding that the health care benefits that active Connecticut employees enjoy while on the job are tied once again with California for generosity, with Connecticut employees paying just 2% of their medical bills. On the job and in retirement, state employees enjoy incredible health care benefits.
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The public is already well aware that Lamont has rewarded his public sector union allies with six consecutive annual wage increases compounding to a stunning number – 33% – that is impossible to forget.
So, it is not surprising that GOP leaders in Hartford are calling for a two-year wage freeze in the new contract. Lest you think that Republicans are skinflints, the last governor to impose a wage freeze on state employees was Lamont’s predecessor Democrat Dannel Maloy.
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The drumbeat continues as the public finds out that state employees are required to spend only one day a week in the office.
Stories about 33% and the pajama game just won’t go away. The latest ranking of state employee wages finds Connecticut with the second highest wages of the 50 states. The ranking is based on two-year old data; thereafter, Connecticut wages jumped another 9.2%.
These stories keep coming because they are just variations on the central theme of unconscionably overgenerous compensation.
Then, there’s Lamont’s claim that he is engineering a “Connecticut Comeback,” which is tripped up by the latest financial ranking placing the state dead last – 50th out of 50.
Somehow, Ned doesn’t understand that $10.2 billion in annual state employee compensation expense is the primary driver of the state’s fiscal fortunes, making any claim of fiscal discipline pure fiction when wages ($5.8 billion in 2024) rise 33%. Even slight percentage increases generate huge increases in dollar costs.
I could go on. Yet, we should return to Dr. Biggs’ study. From FY 2022 to FY 2023, Connecticut’s OPEB Expense plummeted from $1.44 billion to just $208 million, a stunning 83% drop. How so?
What happened in simple terms is that the discount rate used to calculate the present value of future OPEB obligations spiked up as interest rates in the economy increased sharply and, consequently, the present value of long-term obligations plummeted. OPEB accounting requires that the positive impact for all future years be recognized over only five years. OK.
Yet, the next year, Biden’s Inflation Reduction Act included provisions delivering valuable new benefits to employees nationwide and correspondingly costly new obligations for employers, especially states paying ginormous OPEB benefits to employees. The actuaries said the IRA increased Connecticut’s OPEB costs $5.9 billion. OK.
Yet, offsetting the negative impact of the IRA provisions was a $5.8 billion change in Connecticut’s OPEB accounting methodology that Dr. Biggs describes politely as “non-standard” and “creative,” generating “misleadingly optimistic” results.
Dr. Biggs criticizes Connecticut further for inadequate disclosure of the specifics of this accounting methodology and the results obtained thereby.
Apparently, OPEB benefits for Connecticut state employees are so generous and so costly to the state that the Lamont Administration has resorted to “creative accounting” and non-transparency to camouflage things.
Undoubtedly there are other shoes to drop. It is virtually impossible to maintain the fiction of a “Comeback” and “pension progress” and “fiscal discipline” when an organization with the worst financials among its peers persists in paying the highest labor rates in the group. Most businesses attempting such ju jitsu go bankrupt.
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.