Lamont just imposed a de facto wage freeze on CT state employees, but he didn't announce it publicly. Why?
The Red Line
Gov. Lamont is about to submit a new state employee contract to the General Assembly for legislators’ approval. The current wage agreement expires in less than three months.
Yet, with union-friendly Democrats holding supermajorities in both the Senate and the House, approval is a virtual certainty, why waste time on this? Because even free-spending Democrats may not want to go on record approving the largesse that Lamont has ladled out to unionized state employees and seems poised to ladle out again. Herein lies the suspense in this story.
Governor Lamont gave an interview to CT Examiner last Tuesday, in which he was asked: “After annual pay raises for state employees amounting to 33 percent since 2019, would you consider a wage freeze similar to one put in place by your predecessor, Dannel Malloy…” His answers were glib and uninformed.
Number One: His first response was to say, “I have a hard time hiring.”
No. He has had no difficulty whatsoever. 18 months ago in December 2023, Dan Haar of Hearst Media wrote an article entitled “CT state hiring is up sharply.”Haar stated:
“So, in just one year, Connecticut agencies hired a net new 2,000 workers.”
Haar reported that the executive workforce reached 26,600 full-time employees, about equal to its pre-pandemic level. That’s an 8.1% expansion in just twelve months.
Related Content: Trouble Hiring CT State Employees? Really?
Number Two:
Governor Lamont rolled out a stealth hiring freeze last week. There was no press release. Lamont’s office declined to comment.
Lamont has been on a hiring binge. The unionized workforce has swelled by about 5% over the last two full fiscal years, according to figures in the latest pension fund valuation report as of June 30, 2024.
On top of that, of course, unionized state employees have received a 33% pay raise, That’s a double whammy.
The total payroll cost for unionized state employees has ballooned $700 million from $3.8 billion in fiscal 2022 to $4.5 billion in FY2024, or 18% in just two years? That would be an embarrassment to anyone claiming to be a fiscal moderate. Thus, Lamont’s silence.
Overgenerous Connecticut state employee compensation is attracting increasing attention. After a 33% wage increase under Governor Lamont, Republicans led by Senate minority leader Stephen Harding are calling for a two-year wage freeze.
The GOP is not stopping there. Senator Rob Sampson has proposed a bill eliminating overtime from the calculation of state employee pensions, thereby preventing “overtime spiking,” a pension abuse examined in a just-released Yankee Institute study conducted by The Townsend Group which I head. Representative Tom O’Dea has entered a bill capping pensions at $150,000 per year; many overgenerous pensions result from OT spiking.
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).
Lee Elci: All right. What are you focusing on again today?
Red Jahncke: Well, I think it's noteworthy that last week, the news media—not the commentary segment, such as yours and mine, right?—the news media asked Ned Lamont about unfair wage increases for state employees. So we have punched through. We are in the news cycle. Ned can no longer ignore this issue, which has always been his preferred approach.
Lee Elci: So, and he's hiding away right now. He's MIA.
Red Jahncke: Isn't he? Yes, he is. He's M.I.A. We are not. Down here in lower Fairfield County, I understand the Greenwich RTC discussed this very issue in its meeting last night. I was invited to Kent, Connecticut, over the weekend to speak about it to the Kent RTC at their Lincoln Dinner. You had Ben Proto on Monday. Ben tells me he discussed it with you. We're beginning to raise the consciousness of the public.
Lee Elci: All right welcome! Every Wednesday, we bring on Red Jahncke.
You ready to rock and roll today.
Red Jahncke: I'm ready to rock and roll.
Lee Elci: All right. So, Governor Lamont once called Connecticut's Fiscal Guardrail “sacrosanct.” How significant is his decision to modify the Volatility Cap! And do you think this sets a dangerous precedent.
Red Jahncke: Yes, I do. There are a couple of income tax revenue streams that are capped at a certain level, above which all revenue is redirected into the state employee pension fund. He has raised the cap. So, $300 million less is going to go into the pensions. That's the 1st violation of the fiscal guardrails.
The budget normally takes the surplus from the prior year and transfers it into the next year's budget. That's about $300 million. If he let the $300 million into the budget, plus the $300M extra from raising the level of Volatility Cap, that $600M would send spending over the Spending Cap.
So what's he doing with that year-end surplus from last year that should go into this year’s [budget]. He's intercepting it and creating an off-budget spending program. That's violation number 2.
That's just a violation of good budget practice. If you're going to have a budget, you should have everything in it. What's the point of having discipline within the budget, if every time you want to spend more money, you just go off-budget?
Governor Lamont is violating the fiscal guardrails, converting them from a regime of budgetary discipline into a slush fund to pay Connecticut state employees higher wages than in 48 other states and, secondarily, to fund a few priorities of progressive Democrats.
The best way to defend Connecticut’s fiscal guardrails is to freeze state employee wages that are 33% higher today after six consecutive annual pay increases under Governor Lamont.
The guardrails are under attack by Democrats who want to increase spending. They want to lay their hands on the $6 billion in income tax revenue that the guardrails have diverted from spending and channeled into the state employee retirement fund (SERF) over the last six years.
Yet, cumulative annual dollar increases in state employee wages over the last six years total an aggregate of about $3 billion, according to data in the latest report of SERF’s actuary. In addition, since pensions are based on wages, SERF pension liabilities have increased $9 billion over those six years. That’s $12 billion that has been, or will be, spent on increased pay and benefits for state employees that could have been spent on the Democrats’ priorities.
In the simplest terms, had wage increases been limited to half the actual level, the aggregate wage increase would have been about $1.5 billion and, logically, the increase in pension liabilities only about $4.5 billion, freeing up $6 billion within the guardrails for the additional spending desired by Democrats.