NEW YORK, July 31 (Reuters) - Connecticut lawmakers narrowly approved a new labor contract with public employees on Monday that is expected to save the state at least $1.2 billion - largely through pension concessions - and could clear the way for lawmakers to agree on a past due budget.
The total savings are combined over five years, from fiscal 2017 through 2021, according to a report from the legislature's office of fiscal analysis on Monday.
The house approved the deal last week. On Monday evening Lieutenant Governor Nancy Wyman, a Democrat who acts as president of the Connecticut Senate, broke a tie so the measure could pass 19 to 18.
The state missed its July 1 deadline to pass a biennial budget for the current and next fiscal year, leading Governor Dannel Malloy, a Democrat, to take over state spending and slash costs.
The labor pact is "a key piece toward adopting a budget for our state," Malloy said in a statement after the vote. "I am urging legislative leaders on both sides of the aisle to work with our administration on finding a solution on this as possible so that the most vulnerable populations do not suffer long-term consequences."
Pension and healthcare provisions were also extended until 2027 in the deal, which Malloy said would ultimately save $24 billion over 20 years.
Labor costs have been one sticking point in budget talks as lawmakers differed with each other and Malloy over how to close a $5.1 billion shortfall over two years.
Through the State Employee Bargaining Agent Coalition (SEBAC), which covers about 42,000 members in 15 different unions, public employees ratified the deal on July 17. They negotiated with Malloy, who said the agreement would shave $1.6 billion off of the current deficit.
This fiscal year alone contains the biggest savings of any other year at $371.8 million, the legislative analysis said.
The largest concessions come from changes to public pensions and retiree healthcare. Employees will contribute more towards their pensions, and annual cost of living adjustments will be tied to the consumer price index.
Wages will also be frozen for the three years ending fiscal 2019 but will be raised 3.5 percent in each of the following two years.
Republican critics said that concessions did not go far enough, that taxes would have to rise to pay for it and that the deal squandered an opportunity for a broader restructuring of public pensions and benefits. (Reporting by Hilary Russ; Editing by Daniel Bases and Bill Rigby)