Actuarial estimates and other documents obtained in a Freedom of Information Act request show how the state will save $1 billion by implementing a union concession agreement negotiated by Gov. Dannel Malloy’s administration.
However, the documents do not include support for the $1.6 billion total claimed by the administration.
The Office of Policy and Management did not respond to requests for comment before publication.
To arrive at the $1 billion total, documents were taken at face value as long as they could be matched with a category of savings reported by the Malloy administration.
Internal documents from OPM confirm the value of the freezing wages is $448.4 million over two years.
A May 12 memo from the actuarial firm Milliman supports $290.5 million in healthcare savings over two years, short of the $391.3 million claimed by the administration.
Correspondence with actuarial firm Cavanaugh Macdonald confirms $279.8 million in pension savings over two years, $200 million less than the administration’s estimate of $485.2 million.
Additionally, it is unclear whether the pension savings can be counted simply by adding them all up. Each change has the potential to reduce the value of the other changes.
For example, a wage freeze reduces the value of future benefits – and therefore the value of future savings.
Senate Minority Leader John McKinney, R-Fairfield, said he believes about $600 million of the concession package is “questionable” or “not achievable.”
McKinney said the budget is not balanced even if all of concession savings are real.
“I don’t think our budget is balanced because we don’t have $1.6 billion in savings ratified by the unions,” he said.
“I think it leaves us in dire straits financially,” McKinney said. “I don’t believe the Governor’s going to concede that fact.”
The Office of Fiscal Analysis, the General Assembly’s budget agency, has also been critical of the estimated value of the concession package.
The largest items without documentation include:
- $180 million in savings based on employee suggestions
- $130 million over two years because of an increased number of retirees
- $90 million in savings from new technology
- $75 million over two years for savings identified in the future by the healthcare cost containment committee
McKinney said Malloy is counting on the surplus built into the budget to make up for concession shortfalls, but that creates a new set of problems.
“It would have significant spending cap implications,” he said.
More than half of the documented savings ($611.9 million) comes in the second year, with $406.8 expected next year. If the savings not accounted for in the documents don’t materialize, the Malloy administration could face additional cuts to avoid striking the spending cap.
For fiscal year 2012, the budget is within $9 million of the spending cap.