CT employee raises could hinder aid for higher education

Lawmakers are expected to approve raises next month for most state employees, despite a tight budget and pleas for significant funding boosts for several core programs.

But higher education officials, whose institutions fund thousands of jobs with tuition, say the raises could complicate their already uphill climb to close deficits and preserve programs.

Meanwhile, faculty unions say students already have paid a steep price in recent years with rising fees and programmatic cuts, adding that state government’s coffers are sufficiently flush to cover both reasonable wages and sound academic programs.

“Obviously we are working with a limited amount of money in our budget,” said Rep. Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee. “Right now, we aren’t so sure” what will get funded.

Walker, whose panel must recommend adjustments by April 5 to the preliminary $26 billion budget for the 2024-25 fiscal year, is weighing major requests for funding for childcare, other social services, Medicaid and other health care initiatives, and workforce development — along with higher ed.

“It’s like a continuous number of things we have to look at,” she added. 

Walker said she hasn’t received cost projections for the tentative wage agreement Gov. Ned Lamont and state employee unions announced March 6.

All employees would get the general 2.5% increase on July 1. A step hike, which is available to all but the most senior workers, would be applied midway through next fiscal year, on Jan. 1.

And while no cost projection has been released recently, there is an older estimate.

The tentative deal announced March 6 completes the final year of a four-year contract ratified in 2022. That contract set wages through this fiscal year and said compensation for 2024-25 would be resolved this spring. Nonpartisan analysts estimated in 2022 that if a 2.5% general wage increase and step increases were provided in 2024-25, it would cost $173.8 million.

Leaders of the Democratic majority also say they want to add another $300 million to $400 million to next fiscal year’s bottom line to bolster core programs.

Plenty of cash, no room to spend it

At first glance, those bills pose no problems. 

The preliminary $26 billion budget legislators adopted last June for 2024-25 has a built-in surplus of nearly $300 million, and a program that forces the state to save a portion of volatile income and business tax receipts is projected to collect another $450 million.

But those volatile dollars must be used to increase state budget reserves or to pay down pension debt.

And the spending cap system that keeps expenditure growth in line with household income and inflation already has the next budget $30 million over its limit.

Lawmakers have found ways to work around the spending cap in recent years, but those options are drying up.

About $2.8 billion in federal pandemic relief grants awarded in 2021, which don’t count against the cap, largely have been exhausted. 

Legislators also transferred hundreds of millions of surplus dollars in recent years from one budget year into the next. And because those “carry-forward” dollars technically were appropriated in a prior fiscal year, they don’t count against future cap calculations when they are spent.

But this year’s operating surplus — excluding any volatile tax receipts that must be saved — is a modest $109 million, according to Lamont’s budget office.

Higher ed units fund employees differently than state agencies do

Despite those restrictions, the proposed raises don’t create challenges for most state agencies. Legislators anticipated most of those costs and built them into the preliminary 2024-25 budget.

But when it comes to higher education, things get complicated.

A step increase typically boosts a state employee’s pay by about 2 percentage points, though for some it is larger. Combine that with a 2.5% general wage increase, and that’s a total raise of about 4.5% for many workers.

But the preliminary 2024-25 budget includes just a 4% increase in the block grant for the Board of Regents for Higher Education system, which oversees regional four-year universities, 12 community colleges and the online Charter Oak State College.

The University of Connecticut gets a 2.2% bump for its Farmington-based health center and just a 1.6% increase for its main campus in Storrs and its satellite campuses.

And Lamont proposed no added funding for UConn when he offered his budget adjustments in February, while the Board of Regents was elevated slightly to a 4.1% increase.

Presumably, the legislature still could add more funds for higher ed before the session ends May 8.

But traditionally, this hasn’t always been the case, even though state law says: “the legislature shall appropriate whatever funds are required to comply with a collective bargaining agreement” once it has been approved.

Why not at least a 4.5% funding increase for each higher education system?

Unlike traditional state agencies, higher ed systems pay for only a portion of their operating costs with block grants from the state budget.

According to the Board of Regents’ system, about 40% of community college operations, including staffing, are paid for with tuition, fees and other revenues that don’t include the state block grant. For the regional state universities, it’s about 60%. Collectively, the system employs more than 14,000 full- and part-time workers.

UConn, with about 10,000 total staff, relies even more on revenue outside of the state budget. About 81% of its operating costs and about 70% of its payroll expenses are paid for through sources other than its block grants.

But nearly all higher ed employees — those paid out of the state budget and those paid with alternative revenues — get the raise Lamont and union leaders negotiated.

“The university supports our workforce being paid fairly and competitively,” UConn spokeswoman Stephanie Reitz said. “Our request is that the state fund the full cost of any pay increases it negotiates, as it does for nearly every other state agency, rather than passing most of these costs on to the university and, by extension, our students.”

Universities exploring cuts to close deficits

Democratic legislative leaders also have been supportive of the raises, citing the economic climate, although GOP leaders have questioned their affordability. The average national inflation rate topped 4% in 2021 and 2023 and reached 8% in 2022. 

Lamont hasn’t released a specific funding plan to date. And while budget spokesman Chris Collibee didn’t state precisely how raises for higher ed employees funded outside the state budget would be handled, he noted there are multiple ways to help colleges and universities. Besides the block grant, the state also could assign funds from another reserve salary account to help higher ed units to cover the raises.

But colleges and universities are facing bigger financial challenges than wages in the next budget cycle. And even if the governor and legislature cover raises for all higher education employees, will that prompt them — higher ed officials ask — to limit help with even larger problems?

Legislators have used hundreds of millions of dollars from temporary sources — pandemic relief grants and budget surpluses — to prop up higher education budgets since 2021. As those sources dry up, colleges and universities are projecting deficits.

The Board of Regents is trying to whittle a $140 million gap next fiscal year down to $47.6 million with a tuition increase, a retirement incentive program and other spending cuts. The plan was to ask the governor and legislature to cover the rest. Now, including the cost of raises for staff normally funded outside the state budget, the gap approaches $63 million. 

Terrence Cheng, chancellor of the system, said this situation “will result in even more painful cuts and reductions if CSCU (Connecticut State Colleges and Universities) does not receive the funding it needs to support its students. Our budget continues to be balanced using one-time funds — a practice that goes back decades and pre-dates the creation of our current state college and university system. We need predictable, sustainable, and appropriate levels of funding so we can continue to invest in our students’ futures and provide a high-quality and affordable education.” 

Similarly, UConn had been projecting a $70 million deficit for Storrs and its satellite campuses. With the proposed raises, that shortfall grows to $96.4 million. And the projected gap at the health center jumps from $33.3 million to $62.2 million.

The state’s flagship university also is asking the governor and legislature to close most of these deficits, though UConn is trying to handle about $39 million of these problems through revenue enhancement and cost savings.

UConn tuition increased last fall, and its Board of Trustees in December approved a 2.75% increase in December in dining and housing fees at Storrs.

The university also recently raised concerns from faculty and students by setting goals of trimming costs by about 3% annually over the next five years.

But Reka Wrynn, UConn’s associate vice president for budget planning, said the university’s goal is to safeguard programs as much as possible while still encouraging legislators to invest in higher education.

Though some programs could be cut, the university also would look for opportunities to expand enrollment and thereby increase tuition revenue, she said. Officials also are exploring other revenue-raising options through philanthropy and business partnerships, Wrynn said, adding UConn also may need to tap its fiscal reserves to get through the next few cycles.

“It’s all in the planning stages,” she said, adding that administrators won’t ask the trustees to approve any plan before June — presumably after legislators vote in May to finalize the next state budget.

So can higher education officials expect full state funding for all employees’ raises, as well as help with their other issues?

Rep. Gregg Haddad, D-Mansfield, co-chair of the Higher Education and Employment Advancement Committee, is hopeful. The law mandating full funding of raises is designed to shield other programs from being punished because of them, he said.  

But those closer to the budget debate offer no guarantees.

Sen. Cathy Osten, D-Sprague, the other co-chairwoman of the Appropriations Committee, said the needs across all state government were already too great to solve under existing budget constraints before the raises were approved.

“Higher ed is not the only issue that we have,” she said. “We can’t just continue to fund the same groups again and again.”

Collibee also offered no promises about overall funding for public colleges and universities. 

“Any additional state funds that the General Assembly provides in any [fiscal year] 25 budget adjustment will need to be consistent with a balanced budget that complies with all statutory and constitutional caps,” he said.

Labor: CT has plenty of resources to fund higher ed and employee raises

But others say there’s no reason to consider any cuts, especially in a system that has suffered from years of underfunding.

“I think we feel explicitly, on behalf of our faculty and staff, that the current deficit should not be borne out on the backs of our students by increased tuition,” said Seth Freeman, president of Local 1973 of the Connecticut Congress of Community Colleges. “We further believe that it shouldn’t be borne out on the backs of the workforce. … We believe that both of those efforts — either raising tuition on students or frankly refusing to fund wage increases — is divisive and counterproductive.”

“We’re hopeful that our legislators will recognize that this is critical for our state and critical for our current students and future students,” Freeman said. 

Louise Williams, president of the American Association of University Professors chapter for the state university system, said, “For years, [faculty] members have been asked to do more with less, and we have earned this raise. The system also relies heavily on contingent faculty who are paid near poverty-level wages.”

Labor leaders have argued in recent years that the spending cap and other “fiscal guardrails” are forcing the state to save a disproportionate share of its revenues, prioritizing huge, supplemental payments against pension debt at the expense of core programs such as education, health care and human services.

Melanie Newport, a history professor at UConn, says the state budget debate reflects problems that go back decades as annual higher education block grants failed to keep pace with inflation, gradually shifting more costs onto students and their families.

“We have a choice,” Newport said. “We can either be a … party school in the woods with a good basketball team, or we can be a world-class research institution.” 

Brendan Kane, another history professor at UConn, said the university’s graduate programs already have received lean funding for two decades and can’t absorb more cuts.

“We once had a rigorous graduate program that drew people from across the world and [the] U.S.,” he said. “Now, we barely have anything left.”