Conn. Retirement Incentive Program: It Doesn’t ‘Save’ Money, Malloy Hates It

First, they had their sights set on the state’s program that provides for public financing of campaigns. That lasted a day or two. Now, legislators and negotiators from Gov. Dannel Malloy’s office are hashing out whether a retirement incentive program (RIP) will be part of the solution to the mess that is the state budget The RIP idea likely won’t survive—it doesn’t traditionally save money except on paper and besides, the governor hates it.

After the Democrats’ trial balloon of eliminating the Citizens Election Program fizzled—more like shot out of the sky by a Predator drone—Democrats turned their attention to other ideas for closing the current budget deficit of anywhere from $118 million to $330 million depending on who you ask. Republicans and Senate Democrats have the RIP as part of their plans. House Democrats don’t. It seems increasingly unlikely the RIP will part of the finished product assuming there is one.

No-savings-no-fault-reform

Going all the way back to 2011 when Malloy first took office, he hasn’t made any secret about his disdain for RIPs. The version currently being kicked around the negotiation table is supposed to save $79 million.

Malloy’s budget director Ben Barnes told The Hanging Shad Monday that nothing’s changed. “He [Malloy] has been pretty clear about it. We’re at the negotiating table right now so I’m not going to say what we will or won’t accept. Negotiating is by its nature give and take, compromise. But since 2011 we’ve been pretty consistent,”

Besides the fact that two of the four sides negotiating (House Dems, Malloy against; Republicans, Senate Dems in favor), there is the pesky fact that RIPs don’t save money other than in the very immediate sense.

Consider:
• When state workers take a retirement incentive offer, they immediately start collecting their pensions. Connecticut’s pension obligations are woefully underfunded as it is. A RIP makes a bad situation worse.
• State workers are allowed to accrue sick time and vacation time which are paid out when the employee leaves state service. A whole group of senior employees all retiring at once with the maximum accrued time is a huge expense.
• The idea of a RIP is to replace senior, higher-paid employees with less expensive, younger ones. In theory, that works. In practice, some of the workers retiring have a level of institutional knowledge or skills that are not easily replaced. In those cases, transitional employees work on 120-day contracts. Many times, it’s the just-retired state worker who cashed out their vacation and sick time, and is now collecting their pension who is hired for the transitional contract. One 120-day contract can turn into several.

If the above is not factored into the RIP “savings” then sure, it saves $79 million. When it is factored in, not so much. The savings are less and the pension system is further burdened.

Unfortunately (and The Shad was in the room for several budget negotiations), legislators only care about the number they can put down on paper for budget purposes and not the reality of the situations. “We’ll worry about it later” could be the state motto.

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