Lawmakers should assess existing compensation before voting on increases
In early March, Connecticut Governor Lamont offered to give state employees large pay raises and bonuses over three years. But before moving forward, policymakers should consider whether pay rises for civil servants are warranted.
A recent study authored by one of us reveals that the average Connecticut state employee already receives a total salary and benefits approximately one-third higher than those received by comparable private sector workers in Connecticut. . This 33% bonus is the fifth highest compensation bonus among the 50 US states. Lamont’s proposal would likely widen this gap.
According to documents from the state employees union, Lamont is proposing to give all unionized state employees three annual base salary increases of 2.5% and, for about two-thirds of employees, “ annual step increases » of 2.0%. Salary and step increases are retroactive to July 1, 2021. In addition to these increases, each employee will receive bonuses of $2,500 next May and $1,000 in July. Premiums are pensionable.
It is important for the government to attract and retain quality employees, but are these proposed wage increases necessary, fair, effective and sustainable?
The new State Government Employee Compensation Study, authored by Andrew Biggs, examines the salaries and benefits of state government employees in all 50 states, in every state by comparing their compensation to that of private sector workers with levels of education, experience and other similar characteristics. .
Using the same methodology across all 50 states sets a level playing field and produces real comparative results across states. Additionally, comparing state and private workers in the same state eliminates the need for any cost-of-living adjustments.
Using salary and benefits data from 2017 to 2019, the most recent full figures available by state, the study finds Connecticut state government employees receive 5.6 % to those paid to comparable workers in the private sector. Thirty-six states pay their state employees wages even lower than their comparable private sector employees. Additionally, Connecticut’s gap predated its state workers’ big wage hike in 2020, which would have narrowed its gap.
Government employees may not seem overpaid. But wages are only part of the story.
The study also reveals that employee benefits are significantly higher in state government than in the private sector. Connecticut state employees accrue retirement benefits that are approximately six times more generous than the employer contribution to 401(k) plans that predominate in the private sector.
Connecticut’s Retiree Health Program for state employees is by far the most generous in the country. According to state accounting filings, future benefits for current Connecticut state employees are worth an additional $16,000 for each year worked. Retiree health coverage is almost extinct for private sector workers.
Overall, total benefits for Connecticut state government employees are more than three times higher than for similar workers in the private sector, more than offsetting slightly lower salaries in the state government. State.
Connecticut is different from other states with the highest pay for state employees. Retirement benefits for state employees are seriously underfunded. The major state employee pension plans in Connecticut and Illinois are only 39% funded. Among the other eight of the ten highest-paying states, public pension funding ranges from 64% to 100% and averages 80%.
Retiree health care benefits in all states are severely underfunded or non-existent. With the most generous retiree health care benefits in the nation, Connecticut’s underfunded liability is enormous.
Connecticut’s SERS Pension Plan and the state’s Retiree Health Plan had unfunded liabilities of approximately $24 billion, or $48 billion combined, in their latest actuarial valuation reports, as cited in the study.
The proposed wage increases would further strain the state pension fund. The higher the salary when a worker retires, the higher the retirement benefit to which he is entitled.
The General Assembly should first consider whether the pre-existing bonus of 33% is fair, before possibly increasing it. Second, is paying such a high premium good management? What company would knowingly pay 33% above market for its labor? Finally, is the premium payment sustainable? The study calculates the overall cost of the premium at $2 billion per year.
We are also concerned about the process. Governor Lamont did not release any official information on the proposed agreement until Friday evening, saying in early March that “…details of the agreement will be provided upon ratification. [by union members]…” Only union members received information in March – which was released to the public, as quoted above.
While SEBAC completed ratification Friday, that will leave lawmakers little time to assess the details of the 1,732-page tentative agreement released Friday. The current session of the General Assembly ends on May 5. In Congress, proposed legislation is sent to the Congressional Budget Office for a thorough cost analysis before it is passed by Congress. Will there be time or provision for the equivalent of the proposed deal?
We delivered a hard copy of Dr. Biggs’ study, including a foreword on Connecticut by Red Jahncke of the Connecticut-based Townsend Group, to each member of the General Assembly. We invited them to a briefing and Q&A session via a Zoom call. Many accepted the invitation and participated in a discussion that lasted over an hour.
We urge state legislators to take the time to assess the details of existing compensation and benefit plans and proposed salary increases, to hold public hearings, and to seek independent expert assessments of the proposed agreement. Only then should they vote to approve or reject the proposed deal.
Red Jahncke is president of The Townsend Group Intl., based in Connecticut. Andrew G. Biggs is a Senior Fellow at the American Enterprise Institute, where he studies Social Security reform, state and local government pensions, and public sector wages and benefits.