NEW YORK (Reuters) - Connecticut's public employee unions have rejected an offer by Governor Dannel Malloy for a cost-cutting labor accord that would not involve any layoffs, meaning that a $1.6 billion gap in the two-year budget will have to be filled another way.
Malloy, a Democrat, had tried to find a middle ground by balancing harsh budget cuts with union concessions. Colleen Flanagan, his spokeswoman, said by email that the governor had recalled the legislature for Thursday to take up the budget shortfall.
Malloy said he was moving "full steam ahead" with plans to lay off as many as 7,500 state employees, the Hartford Courant reported on Friday.
With state budgets around the nation still squeezed by the damage done to revenues during the recession, governors and mayors are weighing various ways to cut costs while avoiding raising taxes in the face of public opposition.
The rejection by Connecticut's public employee unions was a major defeat for Malloy, whose income tax increase for wealthy residents put him at odds with the anti-tax hike stands adopted by his neighbors, New Jersey Republican Governor Chris Christie and New York Democratic Governor Andrew Cuomo.
New Jersey's Democratic-led legislature gave final approval on Thursday to Christie's plan to force state workers to pay more for benefits. Cuomo is still waiting to see if New York public employees accept his plan to avert thousands of layoffs by accepting a two-year wage freeze, nine unpaid furlough days and higher health care premiums.
The Connecticut labor accord had to win approval from 80 percent of some 45,000 union members, and it could be rejected by only one union in the 15-member coalition, according to Matt O'Connor, a spokesman for the State Employees Bargaining Agent Coalition on Friday.
The deal, which would have frozen wages for two years and required workers to pay more for benefits, was rejected by two unions. Around 60 percent of union members voted to accept it, O'Connor said.
"There's been a concerted and very deliberate attempt to derail the agreement by outside forces," he said. "In the legislature, Republicans have been very critical of the agreement, he said, along with some conservative radio talk shows and some non-union managers.
(Reporting by Joan Gralla; Editing by Leslie Adler)