Some public sector union abuses are not only alive and well, but more egregious than ever.
In Connecticut, state employees are retiring with pension benefits higher than their last salary. How? It's a classic scheme known as "spiking."
Tens of thousands of Connecticut state employees enjoy the unlimited right to spike overtime — that is, to work enormous hours of overtime just before retirement for the sole purpose of boosting the pensions calculation, which includes overtime pay in immediate pre-retirement years.
And that’s not all. Under Connecticut Gov. Ned Lamont (D), unionized state employees have enjoyed six consecutive annual pay raises, compounding to a whopping 33 percent. It is no coincidence that state employee wages have climbed the rankings to second place among the states. Nationally, private sector pay has increased only 23 percent over this span. Recently, Lamont promised his union allies “every year I’m here, you’re going to get a raise.”
Perhaps we should not be surprised, since Connecticut’s public sector is the second-most-heavily unionized of the states.
In general, states have been eliminating or gradually phasing out overtime-spiking. In the most unionized public sector state, neighboring New York, former governors David Patterson (D) and Andrew Cuomo (D) instituted moderate limits on the inclusion of overtime in pension calculations beginning in 2010. Former Governor Jerry Brown (D) eliminated pension-spiking in California in 2012.
In Connecticut, Lamont’s predecessor, Gov. Dannel Malloy (D), ended spiking for workers hired after 2017. Yet there are 28,000 pre-2017 hires still on the payroll.
My organization conducted a study of of overtime spiking in Connecticut’s Department of Correction for the Nutmeg Research Initiative and the Yankee Institute. In each of the last five fiscal years, we identified the ten workers with the highest overtime pay. Eleven have retired. Their pensions averaged a stunning 138 percent of their last salary.
These workers retired almost immediately upon reaching retirement eligibility at 20 years of service. And why wouldn’t they, if retirement brings an immediate 38 percent raise? Why work six more years to accumulate “only” 33 percent?
The starting pension of one worker was $153,000. For comparison, the maximum Social Security benefit for those retiring at age 67 is $48,000. But this worker is likely forty-something and will spend decades making money at other jobs alongside her robust monthly pension. In her last full year on the job, this worker earned 80 percent more overtime pay than she earned in straight-time wages.
Under what kind of management — or mismanagement — could this take place?
In 2020, Lamont hired Boston Consulting Group to study state agency staffing and administration. The group reported that rampant absenteeism was leading to widespread overtime and that the absenteeism was not just incidental or accidental. Their report not only implied strongly that employees were gaming the system, but also laid out various ways they could game it.
There is a simple solution: Allocate overtime evenly among younger and older workers.
With statewide overtime up from $312 million four years ago to $378 million last year, clearly, the Lamont administration has not improved its workforce management nor achieved reforms in the last contract negotiations in 2022. Yet, negotiations are underway again, because the current wage contract expires at the month’s end.
State Sen. Rob Sampson (R) introduced legislation to eliminate overtime from pension calculations. It died without a vote. He plans to reintroduce it next session, but its prospects are slim and none with Lamont in office and union-friendly Democrats holding supermajorities in both houses of the legislature.
Republicans have also proposed another fix — namely a two-year wage freeze. This would moderate the fast-paced trend of wage increases, while also controlling rapidly rising pension costs, since pensions are based on wages. Indirectly, this would somewhat moderate overtime spiking.
A wage freeze is not unthinkable. Lamont’s predecessor, Democrat Malloy, imposed three annual wage freezes.
Present circumstances would recommend a freeze. Lamont and Democrat legislators cut raises out of the just-adopted budget for fiscal 2026, because spending is barely within constitutional budget limits. Two months ago, Lamont himself imposed a hiring freeze for the remainder of this fiscal year, to keep this year’s budget in balance through June 30. But a few weeks ago, he threw in the towel on this year’s fiscal challenge and declared a fiscal emergency so that he can legally spend above the cap.
The fundamental problem is that the state is paying unionized state employees top dollar despite being in the worst financial condition of all 50 states. This is unsustainable. This basic problem afflicts other blue states; unaffordable pay for public sector union workers is unsustainable.
Today, Connecticut Democrats are on the back foot. Republicans in the state should press the case for a freeze. Malloy faced down the unions, why can’t Lamont? Why can’t he finally take Boston Consulting Group's guidance and actually manage the workforce and clamp down on overtime spiking?
Red Jahncke is president of the Townsend Group.
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