An agreement on modifications to state employee benefits could save taxpayers more than $637 million over the next two years, according to Gov. Rell.

This week she announced that negotiations with state employee labor unions had produced changes to benefits, wage freezes and furloughs, and an increase in state employees' share of health care costs. Under the agreement, there will be no layoffs through June 30, 2011, for permanent state employees hired before July 1, 2009. But the governor may restructure agencies and eliminate positions, provided that affected employees can transfer elsewhere in state government.

Wages for state employees will be frozen for one year; share of health care costs will increase by $350 a year, and they will pay more for prescription drug co-pays. In addition, they will have to take seven unpaid furlough days--one before June 30, 2009, and three in each of the next two fiscal years. State employees' share of health care costs will increase by $350 a year, and they will pay more for prescription drug co-pays.

An early retirement incentive program, which is expected to achieve $205 million in savings, will also be created.

Members of the labor unions now have to vote to ratify the agreement.