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posted Aug 6, 2011, 6:06 PM by Governor Wentworth   [ updated Aug 6, 2011, 6:10 PM ]

Pension vote gives taxpayers a reprieve

By TOM FAHEY
State House Bureau Chief
Published Aug 5, 2011 at 3:00 am (Updated Aug 4, 2011) 
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CONCORD — Local taxpayers will reap the full savings in public worker pension costs the Legislature meant to deliver, after a vote by the New Hampshire Retirement System board Thursday. 

The board voted 6-2 at a special meeting to push a steep rate increase off for two years, cutting $100 million from what would have flowed to NHRS. The move complies with a new state law that cut benefits for workers and raised their pension contributions, and cut costs of NHRS for the state and local employers.

The board’s action Thursday means that a steep rate increase that the previous board wanted to begin July 1 is reversed, and will not take effect until July 1, 2013. 

The change lessens the pension costs, but does not stop them from rising. Total employer pension contributions will increase this year by $28 million and next year by $22 million. It also means $100 million more will come from taxpayers starting in two years, instead of now.

The board vote Thursday was required by the reforms in House Bill 2. The bill directed the NHRS to reverse a vote by the previous board to start collecting higher pension contributions from employers this year.

NHRS, with $5 billion in assets, provides pensions to about 26,000 retired public workers and has 50,000 active employees, including police, firefighters, teachers and others.

The newly appointed NHRS board, put in place in a hurried Executive Council vote three weeks ago, brings an end to the days when union members hold the majority of board seats. Instead of eight of 14 seats, union members now hold four of 13 seats.

The previous board broke with standing practice when it voted in June to push the rate change into this year. 

Typically, the NHRS board hears from experts on where rates need to go, then votes to delay the increase for two years to give local communities time to plan. In this case, town and school budgets were set in March and would quickly have gone into deficit without the reversal of rates.

In two years, employers will have to make up the difference, according to David Kautsch, chief actuary of Gabriel Roeder Smith. The extra $100 million will add between three- and four-tenths of a percent to any rate increase in 2013, he said. 

Newly appointed NHRS board member Jack Wozmak opposed the rate reversal. He said during discussion that NHRS, “tries to implement policy independent of politics. HB 2 tries to undo that, get us through the short term and damn the long term.”

The reform dramatically lowers costs for state government, by more than $200 million, largely because it no longer covers any share of local employers’ costs. 

Two years ago, it began reducing its 35 percent share in two 5-percent increments.

The reform plan in House Bill 2 makes up much of the state aid cut by raising rates for workers, collecting from them about $110 million over the next two years.

Unions have challenged the changes the new law, as has the NHRS board, which said the rate change conflicts with its responsibility to protect the solvency of the pension fund. 

Speaker of the House William O’Brien said he was pleased with the NHRS action, saying it will save local taxpayers nearly $60 million next year. 

“Town officials looking at their budget for the remaining part this year ... should be pleased that our efforts to bring the employee pension plan under control are starting to pay off,” he said.

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