Trying to capitalize on the bipartisanship that led to a budget deal for 2010 last week, Republican Gov. M. Jodi Rell offered a new plan Monday – including an early retirement plan for state employes – to solve the state’s ongoing fiscal crisis for the next fiscal year.
In an unusual display of cooperation, Rell stepped outside of her Capitol office after the meeting and stood side-by-side with the top Democratic and Republican leaders to declare they will continue working together – after several vetoes and essentially a full year of sometimes-bitter clashes over financial issues.
When asked if she believes the two sides can reach a deal for the 2011 fiscal year before the legislative session ends May 5, Rell responded, “I’m always optimistic.”
Rell and the Democrats agreed not to discuss the plan in detail because it is still being reviewed by fiscal analysts in the coming days.
But insiders said the plan includes an early retirement proposal for state employees, which would save money in the short-term by prompting the departure of highly paid employees who would be replaced by lower-paid, new employees. Rell said the early retirement is “one of the things” that she has asked Democrats to consider in the plan.
“There are no taxes and no cuts to municipal aid,” Rell told reporters outside her suite of offices.
The plan also assumes that the state will receive about $356 million in federal stimulus funds to close a projected deficit of about $725 million for the fiscal year that starts in July. Another idea being discussed is deferring another payment of $100 million into the state employees’ pension, but some lawmakers say that is essentially a shell game because the money must eventually be paid and no one’s pension is being reduced. An initial $100 million was deferred for the current fiscal year, and another $100 million is being discussed for the next fiscal year. The legislature, however, would not be requeired
Republicans are also asking for $150 million in additional concessions from the state employee unions, but the unions have rejected that idea.
“Obviously, it is totally up to the unions,” said House Republican leader Larry Cafero of Norwalk. “It’s a unilateral thing.”
When asked if the Democrats would support additional union concessions, House Speaker Christopher Donovan – a major union supporter – said, “We’re looking at the governor’s proposal right now, and it’s not in there.”
Besides attempting to close the gap, Rell and lawmakers are trying to find the best way to borrow $1.3 billion to cover operating costs for the 2011 fiscal year. Under the law, they must find a way to “securitize” certain revenue streams to pay off those bonds. Despite a formal rejection by the Democratic-controlled legislature, Rell said Monday that she still supports legalizing the keno electronic gambling game and using about $60 million in keno revenues each year to pay off the bonds.
The Democrats have responded by saying they would use revenues from utility customers of the Connecticut Light & Power Co., which has ignited an intense campaign by CL&P with newspaper and radio advertisements that rip the proposal.
“This hidden tax will cost electric customers $180 million every year for the next 10 years,” says the advertisement by CL&P. “Customers of municipal electric providers would be exempt from paying; UI customers won’t pay until 2014. These funds would be used to float new revenue bonds designed to offset the state’s deficit – creating more debt to pay existing debt. Don’t let the state use your electric bill to pay for its own debt. Fight this hidden tax at www.NotMyBill.org”
“I have never liked that option from the beginning,” Rell said of the electric option. “I don’t think there’s a lot of support for that.”
No follow-up meetings are scheduled yet as the numbers will be crunched and analyzed in the coming days.
Donovan said that crafting a deal is possible because all sides are moving forward.
“We’ve been working together – the bunch we have here today. We know where each other are,” Donovan said. “The governor has put forward a proposal that we’re going to take a look at, building off the success of last week where we closed 2010. Our hope is that we continue that effort and close 2011.”
“There was a huge step forward when we closed the deficit for 2010,” said Senate President Pro Tem Donald Williams, the highest-ranking senator. “Everybody’s resolved to roll up our sleeves and tackle this fiscal problem. … I don’t think anybody expected us to close the 2010 deficit in a bipartisan way this session. We did that.”
“I’m more optimistic after the meeting that we can balance our 2011 budget – whether it’s May 5 or shortly thereafter,” said Senate Republican leader John McKinney of Southport. “I think the governor’s plan that she put forward is a pretty good one. There are some things in there I don’t like. Obviously, I don’t like the deferral of pension funds. But, by and large, I think her openness to an early retirement program for state employees – something that legislative Republicans offered about two years ago – helps us get to where we need to be, not just for 2011, but structurally for 2012 and 2013 as well.”
Both McKinney and Cafero said that there would be a much better chance for budget savings if Democratic leaders put more pressure on SEBAC for more concessions.
“Were the Democratic leadership to publicly say that SEBAC should come to the table and sit down with the governor … that would go a long way to getting them to the table,” McKinney said. “But the silence of the Democratic leadership gives a lot of strength to SEBAC’s current position.”
In April 2008, the Republicans unveiled a budget in which the cornerstone was an ERIP – rather than a simple retirement incentive plan that starts only at the age of 55.
“I predicted in April … that this thing would be in force by February 2009,” Cafero told Capitol Watch on Monday night. “I said to the governor, publicly and privately, that there’s a whole host of people who are out there with 25 years [of service] who are just shy of the age.”
Under the SEBAC agreement, those eligible must have a magic number of 75. For example, a person who is 54 years old with 21 years of service would reach the number of 75.
“We got calls and calls and calls when we came out with our plan” for early retirement, Cafero said. “We missed a whole group of people that we could now capture” at an earlier age.
The GOP plan would save about $65 million in the 2011 fiscal year – assuming 1,000 jobs at $65,000 each.
McKinney and Cafero had no advance notice Monday that Rell would support an early retirement plan.
“We need the flexibility to consolidate agencies,” Cafero said. “The only way you’re going to get flexibility” is to do an ERIP.