’08 budget may bring big battles

Rhode Island AFL-CIO Secretary-Treasurer George Nee has no idea what proposals are going to be included in the governor’s budget for fiscal 2008. But given the deficits projected for this year and next, he doesn’t expect this budget cycle to be a breeze for state employees.

The latest revenue estimates show a $105 million budget shortfall for fiscal 2007 and a potential gap in excess of $250 million for next year. Nee, whose organization includes most of the state’s public-sector unions, said that could mean his members could be targeted for cuts.

Though Nee said he believes the estimates are inflated, he noted that “any program, or anything that is funded with state revenue, is going to be under constant review, whether it is affecting state employees or it is affecting state programs that provide services to people.”

Gov. Donald L. Carcieri has proposed cuts to the state payroll and to state workers’ benefits before.

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Last year, with the state facing a $77 million shortfall for fiscal 2006 and another anticipated shortfall for this year, Carcieri proposed several cuts to state employee benefits, including switching to a performance-based pay scale, eliminating “statutory status,” reducing the amount of vacation time that can be carried over year to year, and ending the practice of paying employees for unused sick time when they leave state service.

The governor estimated that the changes could save the state nearly $38 million. In the budget it enacted, however, the R.I. General Assembly shrugged off most of Carcieri’s suggestions.

(Jeff Neal, a spokesman for the governor, said last week that he could not comment on whether Carcieri’s 2008 budget would include any measures affecting state workers. The budget is scheduled to be delivered to the General Assembly this Wednesday.)

The scrutiny given to public-sector employees makes sense to Gary S. Sasse, executive director of the Rhode Island Public Expenditure Council. After all, he noted, their salaries and benefits represent nearly a quarter of the state’s expenses.

While the number of full-time-equivalent employees (FTEs) budgeted by the state has declined in the last two decades – from nearly 18,000 in 1989 to slightly more than 16,000 in fiscal 2007 – Sasse said the costs associated with benefits have kept the budget rising. He said last week that he was unsure whether the governor would propose cuts, but it wouldn’t surprise him.

“It’s difficult to look at ways to address a $250 million budget shortfall and ignore 25 percent of the budget,” Sasse said. “It could be an issue. We’ll see in a couple of weeks what is in the governor’s budget.”

But Nee said that, although the AFL-CIO was pleased with the end result of last year’s budget cycle, he doesn’t want to see any proposals come out of the governor’s office that look like the cuts Carcieri proposed a year ago.

Those, Nee said, could have violated the state’s collective bargaining agreements with its employees by eliminating items contained in the contracts. In his view, those cuts also sought to create “harsh and unfriendly” working environments in hopes of getting employees to quit and thus reduce the size of the state’s payroll.

If the state wishes to save money, Nee said, it can go about it in a better way than by trying to drive out workers. “I think the proper approach is to sit down with the leaders of the unions of the state and engage in meaningful dialogue when there is a crisis,” Nee said. “Try to improve productivity and improve the morale, instead of essentially creating an atmosphere where we hope that people will quit and therefore achieve our savings.”

One issue affecting employees that could arise this year is pensions. Both Nee and Sasse said they don’t expect any significant pension reform this year, however, because of the vast changes made in the 2005 legislative session.

That year, the legislature and the governor worked on a reform package that required state workers and teachers to work longer before they could begin to receive their pensions.

Sasse called those changes “progress” and said they will save the state tens of millions of dollars. But he doesn’t anticipate further changes to gain momentum anytime soon.

“I don’t see it necessarily being short term,” Sasse said. “But we need to have a good discussion in this as to whether or not we should move from a defined-benefit to a defined-contribution scheme.”

Nee agreed that issue isn’t likely to pop up again this year. But he shared a less-favorable view than Sasse of the earlier changes. “Obviously, pension issues are always there,” Nee said. “But I think given the pretty harsh changes in the pension system that were made two years ago, it would be hard to imagine that there would be a serious effort to take any more from the state employees and the teachers.”