Concerns about public sector union abuses are not just ongoing; they seem to be intensifying.
In Connecticut, state employees are retiring with pension benefits that can exceed their final salaries. This phenomenon is attributed to a tactic known as “spikes.”
Tens of thousands of workers in the state have unlimited access to overtime, often working excessive hours right before they retire solely to enhance their pension calculations.
Moreover, under Governor Ned Lamont, unionized state employees have seen six consecutive years of salary increases, amounting to as much as 33%. It’s not surprising that the wages of state employees have climbed to the second-highest in the state. In contrast, private sector salaries nationwide have risen just 23% during the same period. Recently, Lamont assured union membersthat raises would continue as long as he is governor.
Connecticut’s public sector remains a significant force statewide.
In general, many states are beginning to limit or phase out overtime spiking. For instance, neighboring New York, under former governors David Paterson and Andrew Cuomo, implemented moderate restrictions on overtime inclusion in pension calculations starting in 2010. Similarly, former Governor Jerry Brown ended pension spiking in California back in 2012.
In Connecticut, Governor Lamont’s predecessor, Dannel Malloy, halted spikes for employees hired after 2017.
According to my organization’s research on overtime spikes for the Nutmeg Research Initiative and Yankee Institute, for the past five fiscal years, we identified the top ten workers in terms of overtime pay. Eleven of those individuals retired, with an average pension reaching an impressive 138% of their final salary.
These individuals often retired as soon as they were eligible after 20 years of service. If retiring brings an immediate 38% salary boost, who wouldn’t take advantage of it? Why work another six years just to earn a mere 33%?
One retiree started with a pension of $153,000. To put that into perspective, the maximum Social Security benefits for a 67-year-old are around $48,000. That individual, likely still in their 40s, stands to earn a significant sum from other jobs over the years, on top of a generous monthly pension. In their final working year, they made 80% more in overtime than their direct hours.
What sort of management issues are contributing to this situation?
In 2020, Lamont brought in the Boston Consulting Group to review staffing and management within state agencies.Their report indicated that widespread absenteeism leads to excessive overtime and suggested that employees might be exploiting the system, providing various ways in which they could underperform yet benefit.
A straightforward solution would be to distribute overtime evenly among younger and older workers.
As overtime costs have soared, increasing from $312 million four years ago to $378 million last year, it seems clear that the Lamont administration has failed to improve workforce management. Reforms did not come to fruition during the last contract negotiations in 2022, and those discussions are now starting again as the current contract ends.
State Senator Rob Sampson (R) attempted to introduce legislation to exclude overtime from pension calculations, but it did not get a vote. He plans to reintroduce it next session, but the prospects seem slim with Lamont in office and pro-union Democrats holding a supermajority.
Republicans are also suggesting a two-year wage freeze, which could slow the rapid increase in wages—pensions are calculated from these wages—while also addressing the rising pension costs. This would indirectly help moderate the overtime spike.
However, a wage freeze might be challenging. Lamont’s predecessor, Democrat Malloy, already imposed three wage freezes over his tenure.
Perhaps it’s time to re-evaluate the current situation. Lamont and the Democrats have reduced salary increases in the proposed 2026 budget, constrained by constitutional budget limits. Two months ago, Lamont implemented a hiring freeze for the remainder of the year, maintaining the current budget until June 30th. Additionally, a financial emergency has been declared so he can spend beyond the established limits.
The core issue lies with the state’s financial obligations. Connecticut is in one of the worst financial positions of any state in the country, a situation that is not sustainable. This fundamental problem is also affecting other blue states, as high costs for public sector union workers are becoming untenable.
Currently, Connecticut Democrats are at odds with this situation. State Republicans should push for wage freezes. If Malloy could challenge the union, why can’t Lamont? Why not follow the guidance from the Boston Consulting Group, effectively manage the workforce, and address the issue of overtime spikes?
