Gov Malloy And Labor’s Day Of Reckoning

When Governor Dannel P. Malloy delivers his first budget to the Legislature next week, lawmakers, lobbyists, and labor unions will be poring over the numbers to calculate where they need to position themselves in the coming budget battles in Hartford. The one big number everyone already knows is $3.7 billion, which is the size of the state’s structural budget deficit. We expect in his budget message to lawmakers the new governor will point out the obvious: When you’re in a hole this deep, first, stop digging.

The conventional political calculus suggests that this may be easier said than done. Organized labor played a key role in Gov Malloy’s narrow win over Republican Dan Foley last November, and normally such critical and successful support should bode well for state employee unions. But last week, the governor described the current compensation packages of state employees as “unsustainable.” Economists agree. The Connecticut Mirror last week interviewed Northeastern University economist Barry Bluestone, described as a “longtime friend of labor,” who has observed that the cost of state and local public services has increased by 41 percent between 2000 and 2008, while the cost of private services rose 27 percent over the same period. In a commentary published in the Boston Globe in 2009, Mr Bluestone warned union leaders that their day of reckoning is “fast approaching.” Now, just over a year later, it may have arrived.

One encouraging sign, however, is the political calculus has apparently changed. The new Democratic governor, who during the campaign walked the picket line outside a nursing home in Hartford with the Service Employees International Union, seems to be foreswearing the kinds of gimmicks employed by his Republican predecessor, who negotiated a “concession” deal with state unions that consisted largely of deferring payments to the already grossly underfunded state employees pension funds and increasing pension benefits for state workers who agreed to retire early, thereby further depriving those same pension fund of years of much-needed contributions.

Whether the new governor can awaken his union supporters to their day of reckoning will be a key test of his budget plan. With a $3.7 billion hole to fill, we have to accept that new taxes and fees, state agency consolidations, and program cuts will be on the table in budget deliberations. Still, state employee wages and benefits account for nearly a third of the current $19.01 billion state budget. Unless the governor and his Democratic majorities in the Legislature can come up with some significant near-term savings in union contracts to slow the rate of year-in, year-out public service cost increases, the nonpublic part of Connecticut’s body politic will quickly write off this administration and its legislative partners — in red ink. Unfortunately, the financial stakes for Connecticut as a debtor state are already too high to even consider failure on this issue.