“If we don’t succeed, I probably won’t be re-elected. If I’m not re-elected, you’re not gonna have somebody who does the kinds of things I do, who actually believes in government, and believes in unions at the same time.” — Gov. Dannel Malloy to union leaders on March 4.
Dannel Malloy is Connecticut’s first Democratic governor in twenty years, but he currently rests in no-man’s land. In February, he unveiled a budget which should have appealed to his base. He plans to increase spending by $1.5 billion over the next two years. He proposed the state’s largest tax increase in 20 years, a move which is expected to generate $1.5 billion. But the people who helped bring Malloy to office in an election decided by less than 6,000 votes out of 1.1 million cast are less than happy with the governor at the moment. That is because Malloy is also calling for $2 billion in concessions from the state’s 45,000 workers over the next two years and has issued thousands of layoff notices if his conditions are not met.
Connecticut is the second most indebted state in the nation, according to Forbes, and faces a $3.4 billion deficit, meaning the government does not have the money to cover 17 percent of its spending. On top of that, it is – by conservative estimates – more than $40 billion short of meeting pension obligations to the state’s 90,000 workers and retirees. The benefits afforded to employees are becoming some of the fastest growing costs to the government.
Malloy stated outright in his budget address that state workers enjoy “wage, health care, and pension benefit levels (that) are simply not sustainable.” He is not exaggerating. The average state employee earns $14,000 more than the average private sector worker in Connecticut, figures union leaders say are skewed by the higher education levels of public sector workers like university professors. The data disagrees. In an apples-to-apples comparison conducted by the Office of Legislative Research, low level employees like typists, clerks and secretaries make thousands more than their counterparts in the private sector, while high level employees like professors and lawyers make considerably less.
Malloy is looking to contain these costs by increasing employee contributions to health care, raising the state’s retirement age to 65 for new workers and arranging a two year wage-freeze, which alone would save the state $600 million. He warns of mass layoffs and cuts to the safety net if unions do not agree to the concessions. On Tuesday, he ordered the state to prepare for mass layoffs after failed weekend negotiations with labor leaders; 4,742 employees, almost 11 percent of the state’s workforce, could be shown the door if union leaders do not accede to his demands.
Malloy’s budget strategy came as a shock to labor leaders.
“We worked hard to get him elected and this is not what we expected,” said Sal Luciano, Executive Director of the politically powerful Connecticut chapter of the Association of Federal, State, County and Municipal Employees (AFSCME).
Malloy’s bid for the governor’s mansion would not have been possible without labor support, a point he has acknowledged on several occasions. In 2006, his candidacy foundered, partially because he was unable to attract union support after tense negotiations with city workers when he was mayor of Stamford, CT.
He did not make the same mistake in 2010, courting labor early in the campaign. The Service Employees International Union (SEIU), a political powerhouse for Democrats, spent $400,000 to help elect Malloy. AFSCME launched a “record breaking effort” for the campaign, according to Luciano. The union engaged in mass mailing efforts, set up door to door canvassing in neighborhoods across the state and held numerous rallies.
Malloy has made a habit of living up to the expectations of a labor friendly leader. He called Wisconsin Gov. Scott Walker’s attempt to curb collective bargaining rights “un-American” and branded New Jersey Gov. Chris Christie’s budget cuts unintellectual. He spent the August primary picketing with disgruntled nurses, and on April 10, he joined AFSCME in protesting a contract dispute at the Red Cross. Luciano said the governor received a “gracious” reception at the event.
Rather than taking on the unions in the style of Christie or Walker or New York’s Democratic governor Andrew Cuomo, Malloy is attempting to preserve union support, while asking them for larger cuts than those leaders he has branded “un-American.”
“Cuomo is asking workers to make up one-twentieth of his deficit and he’s demonizing these people,” Luciano said. “And here we have a governor who is asking for one-third of the deficit, but he keeps saying ‘you guys are great. He’s a smart guy; he knows that you respond better when your friends ask you for money than when your enemies ask for money.”
The tactic worked on the campaign trail where he portrayed Republican ambassador Tom Foley as a union buster. Malloy is depicting the battle for concessions as another do-or-die for state workers. If employees don’t sacrifice a little now, then his opponent in 2014 will do far worse, as he told union leaders on March 4.
His audience seems to agree. “If Tom Foley was the governor, we’d be on the menu,” AFL-CIO treasurer Lori J. Pelletier told the Connecticut Mirror. “With Dan Malloy elected governor, we’re at the table.”
Malloy may not be exaggerating about his re-election prospects. A Quinnipiac poll taken just after the budget address revealed 51 percent of Connecticut voters disapproved of his proposal with 66 percent complaining of too many taxes and 39 percent saying there were too few spending cuts.
Malloy is still maneuvering to control the message. He embarked on a townhall tour of the state, packing 17 meetings into March and April to make his case. He is trying to avoid the political fallout that torched former Republican governor and felon John Rowland when he laid off 3,000 employees in 2003. The public regarded him as a bully during the labor dispute and his approval rating fell almost 30 percent — even before corruption charges came to define his administration.
A common theme has emerged at the townhalls. Without union concessions, Malloy warns, he will be forced to institute “nasty and ugly” layoffs and “dire” service cuts. If the governor follows through with his layoff plan, the state will save $455 million with another $545 million in spending cuts. The ball is now in labor’s court as far as the public is concerned.
A majority of residents approve of Malloy’s concessions. The Quinnipiac poll found that 68 percent of people liked the idea of a public wage freeze and 53 percent approved of 3 furlough days for employees. But they are skeptical. While the tax increase could be set in stone, the concessions the governor speaks of are up in the air. Less than 20 percent of voters think the union will agree to cuts. Malloy thinks wagging the layoff stick could change the perception among workers and residents that he is the bad guy in the budget battle.
But could this governor, who walks picket lines and mocks Scott Walker, actually follow through on his threats? Malloy has acted in the affirmative throughout negotiations. He warned of layoffs in February. In April, he sent out notices on layoff procedures to management, indicating he is willing to pull the trigger if unions do not come to an agreement in the near future. Malloy said he wanted talks wrapped up by early May and immediately ordered notices drawn up after that deadline.
Some labor leaders appear to take the governor at his word. On March 16, the Administrative and Residual Employees Union polled members on 11 potential concessions, including wage freezes, the retirement age for new employees, health insurance increases and the elimination of automatic cost of living adjustment for retirees.
The question remains, why hasn’t Dannel Malloy stood down frothing masses in front of the state capitol? Despite his drastic cuts, Malloy has found himself addressing union protests — as he did in the state’s Wisconsin solidarity rally — rather than at the center of placards.
“The reason you’re not seeing outrage is because he is saying both concessions and savings are the way to save the state money,” Luciano said.
Luciano, himself, has a host of ideas he says will save millions: include workers from small businesses, non-profits and municipalities in the state worker’s health care pool to leverage lower costs from providers; give away chronic medication to stem expensive emergency room visits. It’s a grab bag of things that do not address Malloy’s concessions or express an interest in giving an inch.
Talks with labor leaders began in late February and both sides say the meetings remain amicable. Details of the discussions are murky thanks to a media embargo, but Malloy is certainly at a disadvantage both legally and politically. The 1997 collective bargaining agreement negotiated by Rowland lasts until 2017, meaning workers do not need to come to the table. Complicating the matter for Malloy is the fact that 9 of the state’s 13 public employee unions endorsed him in the election.
Like the governor, Luciano has a knack for veiled communications. Just ask him the difference between concessions and savings in budget talks.
“Concessions are bloody, that’s money out of our wallet; savings, that’s not money out of our wallets,” he said.
When this former social worker says bloody, he means it. He pauses to make sure every letter is spelled out. Luciano looks every bit the labor representative, recalling Danny DeVito’s union diehard in the film Hoffa. He appears at rallies in jeans and a sport coat, but dresses down when addressing the General Assembly, usually in a green union windbreaker.
He never uses the word “I,” and in interviews, he will never talk of union leadership. He uses “our members” as a surrogate when he toes the line of controversy. Asked whether the union could support Malloy if he follows through with concessions, he replied, “in politics there are consequences… Our members are not stupid — they see what’s happening.”
He has a goatee and a gruff voice with a hint of the Italian Bronx seeping through when he gets going; he speaks quickly when outlining numbers and in a frenzy when he tries to sneak something into a talking point.
When Sal Luciano pauses, though, it is no accident. He pauses when he exclaims incredulously that former Aetna CEO Ron Williams cashed in on $72 million in 2010. And he pauses when he says “bloody.” The flash of silence sends more of a message than Luciano allows himself during a media embargo.
Malloy need only look at Democrats in Massachusetts, the state that pioneered generous retirement benefits to state workers and now faces fiscal calamity as a result. A super majority Democratic House passed collective bargaining restrictions mirroring those of union-busting Scott Walker and subsequently faced off against hundreds of angry union members. Former allies make the worst foes.
Union members complained of scapegoating at all of Malloy’s townhalls. They generally push the critique that Malloy does not tax top earners enough. He raises the income tax for the top tier by 3 percent — to 6.7 percent — compared to a 10 percent increase on those earning more than $50,000 — to 5.5 percent. The governor has seemingly entertained the idea before pointing out that the rich have the ability to move, as well as pay.
Malloy modified his tune on April 14, when he announced an updated budget to the state, as a result of his townhall tour. He expanded the pool of high earners, raising taxes on those making $125,000 and over, while giving those making less than $100,000 a $300 tax credit.
Malloy seems to appreciate the public relations success that has come with a calm labor climate or perhaps the unions will be more willing to negotiate now that he is soaking the rich. Maybe he increased the taxes to appease the 48 percent of Connecticut voters who said his budget needed more upper tier taxes. Either way, it all hinges on the concessions.
If he does not get them, Malloy may discover that Connecticut does not want a governor who “actually believes in government, and believes in unions at the same time.” If he does, he may find that believing in unions isn’t enough; you have to stay away from their wallets, too.
Bill McMorris is managing editor at Old Dominion Watchdog and a 2010 Phillips Foundation fellow.