UPDATE 1-Connecticut unionized workers OK labor contract-Gov

Thu Aug 18, 2011 4:54pm EDT

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NEW YORK Aug 18 (Reuters) - Connecticut's unionized state workers ratified a new cost-cutting contract, accepting bigger penalties for retiring early and agreeing to help pay for healthcare, just four days before thousands of lay-offs would have taken effect, the governor said on Thursday.

"The real value of this agreement lies in the $21.5 billion it will save taxpayers over the next 20 years in the form of lower healthcare and retirement costs for state employees," Governor Dannel Malloy, a Democrat, said in a statement.

"When you negotiate in a respectful manner real fundamental change is possible," he said in a webcast news conference.

Malloy parted company with many of his governor peers by closing the state's big deficit with tax hikes, in addition to spending cuts.

Under the new contract, Connecticut public workers will have to work longer and be older to retire, wait 10 years instead of five to get retiree health benefits, and make a 3 percent contribution to a health care trust for a decade.

State employees hired after July 1 will not get longevity payments, will have to work 15 years to qualify for retiree health benefits and their pensions will be based on their last five years of service instead of the highest-earning three years.

Saying Connecticut's government still has too many layers, Malloy said there could be more agency consolidations.

Some lawmakers have doubted that the contract will succeed in closing a $1.6 billion budget gap. Some recalculations will be needed because the contract was approved later than expected, he said, adding: "We will spell out over time how we are reaching those savings."

In June, the 45,000-strong State Employees Bargaining Agent Coalition rejected the same labor contract. The 15-member group responded by relaxing its rules to make it easier for members to approve the accord. A union spokesman was not available to comment.

Malloy -- who had threatened even more draconian budget cuts if the contract was again spurned -- said Connecticut's politicians could never again put the state's finances in peril by approving overly generous pay and benefit packages, noting the state would follow the strict Generally Accepted Accounting Principles. (Reporting by Joan Gralla; Editing by Dan Grebler)

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