HARTFORD, Conn. (WTNH) — Governor Malloy has announced a major deal with the state labor unions that will affect state budgets for decades to come. Unfortunately, it will have a minimal impact on next year’s projected $1.5 billion deficit. It does not help much next year, but it should put future state budgets on a more predictable path.
“This is a long term play for stability that doesn’t mitigate the fact that we have to have a balanced budget,” said Malloy.
The Governor admitted Friday that what amounts to a refinancing of the state’s long term pension obligations will have very little impact on next year’s deficit. But by making more predictable payments to the fund that covers pensions for more than 30,000 retired state employees, the state avoids a catastrophic increase in those payments over the next decade and a half.
When the state budget director told state lawmakers last week that about half of next year’s budget deficit was for pension payments that could not be cut, he also told them that those payments would balloon catastrophically over the next fifteen years.
Without these changes, the state’s pension obligations will balloon up to nearly $7 billion in a single year, represented on this graph by the broken blue line. The changes announced Friday make the payments lower and more predictable over a longer period of about three decades, represented by the solid line.
Malloy notes that the state’s business community has been complaining loudly about addressing this pension obligation issue because they know it has been hanging over every state budget debate for the past few years.
House Republican Leader Themis Klarides (R-Derby) is praising the Governor for bringing the state labor unions to the table on this.
“Unfortunately it sees to be the same story but a different subject where we make a little bit of progress but nowhere near complete,” said Klarides.
Malloy says this is a step that will help Governors and legislatures long after he’s gone and once again took a harsh shot at previous Governors and legislatures.
“The can got kicked down the road. Not to find a solution, to avoid one,” said Malloy.
The legislature will get an opportunity to OK this deal when the new legislative session begins on January 4.