SEBAC Pay Increases to Cost $34 Million More than Originally Reported

Pay increases for state employees outlined in the 2017 SEBAC agreement were projected to cost $353 million annually by the Office of Fiscal Analysis, but emails between former State Senator Len Suzio, R-Meriden, and OFA analyst Don Chaffee show the ongoing cost may be higher.

According to the 2017 email exchange, the general wage increase and step increases add an additional $34 million in annualized costs to Connecticut, driving the total cost to $387.8 million by 2022.

This is because the OFA’s original analysis only calculated the impact of the wage increase on the 2020 and 2021 budget and did not include the annualized cost of the wage increases in 2022 and beyond.

The first general wage increase will take effect this July, which marks the beginning of Connecticut’s 2020 fiscal year.

In the back and forth exchange, Suzio gave a rough estimate of $400 million for the annual cost of the SEBAC raises and step increases.

Chaffee wrote that “the annualized amount after FY 21 would add an additional $34 million to the $353.8 million or $387.8 million, so your $400 million was right in the ballpark.”

The 2017 SEBAC agreement offered a one-time, lump sum bonus of $2,000, two 3.5 percent general wage increases combined with two step increases for unionized state employees and extended Connecticut’s union benefits contract until 2027.

In exchange, employees must contribute more toward their pensions and health care costs, were forced to take furlough days and new employees were entered into a new retirement system known as Tier IV.

The general wage increases combined with the step increases bumped employee pay roughly 11 percent, but in some cases, compensation will increase by over 16 percent.

For instance, Criminal Justice Inspectors in group 31 who were at step 8 of Connecticut’s pay schedule in January 2019 were receiving $103,415 per year. 

The 3.5 percent general wage increases which occur in July of 2019 and 2020, combined with the step increases which occur in January 2020 and 2021 will have that same group of employees earning $120,417 — a 16.44 percent increase.

Pay increases for other groups within the Division of Criminal Justice would see total wage increases ranging from 13.8 to 16.5 percent over the same time period.

The pay increases outlined in the 2017 SEBAC agreement were coupled with a no-layoff provision for unionized workers until 2020 at a time when Connecticut faces ongoing budget deficits.

Gov. Ned Lamont has not yet signed a $43 billion budget for the next biennium, which closes a $1.5 billion deficit through a combination of expanding the state’s sales tax to new services, retaining taxes set to expire, maintaining the state hospital tax and diverting vehicle sales tax revenue from the Special Transportation Fund.

The budget also includes an estimated $450 million in savings from administrative changes to state employee health care services and a restructuring of the state employee pension debt.

Republican Senate Leader Len Fasano has questioned these savings in the budget because there is no agreement yet between the Lamont administration and SEBAC to alter pension debt payments.

Lamont said his administration has begun negotiating with SEBAC to gain their approval for the pension changes which amount to $172 million.

Connecticut’s tax revenue increased this past year due to higher-than-expected economic activity which decreased the expected budget deficit, but projections by the OFA say the next biennium could face a much larger deficit. 

The most recent available projections place Connecticut’s next biennial budget deficit at $2.29 billion, with another deficit of $1.2 billion in 2024.