NH-State Retirement Board plans raising teacher contributions 3+ per cent

Pensions secure for state workers

From Seacoastonline, 1/15/06

By Elizabeth Dinan

Verizon, Lockheed Martin, Motorola, IBM, Delta Airlines and other corporate giants are freezing promised pensions, those guaranteed checks paying workers from retirement to the grave.

By one estimate, 21 percent of all U.S. companies plan to freeze pensions at current levels, while 17 percent report plans to stop offering them altogether. Most are shifting retirement responsibility to their employees through 401(k)s.

But not for public employees in New Hampshire, where the state retirement board is planning to increase costs to state and municipal taxpayers for funding its workers’ pensions.

Today, there are 20,000 retired public workers drawing a pension through the state retirement board, 51,000 active members and a $4.7 billion trust fund.

Meanwhile, state and local contributions toward firefighter pensions are projected to increase from 22 percent of those firefighters’ salaries to 24.4 percent. The state retirement board plans to bump the bill to municipal and state taxpayers for teacher pensions from 5.7 percent of their pay to 8.9 percent. For police officers, the current local and state contribution of 14.9 percent is projected to increase to 18.2 percent.

Those increases would become effective July 1, 2007.

In Portsmouth, the cost of paying the city’s portion of public employees’ pensions is currently $2.2 million of the total $73 million city budget, according to City Manager John Bohenko. Next year, Portsmouth will pay $2.3 million for pensions, he said.

Costs for all New Hampshire cities and towns, as well as state contributions toward funding public employees’ pensions, is set and mandated by the Legislature and governor.

That means homeowners in Exeter, whose local taxes fund 14.3 percent of active firefighters’ pension payments and whose state taxes fund 7.7 percent of firefighters’ pensions, pay exactly the same percentage as property owners in every other city and town in the state.

But actual pension checks are larger than the contributions would suggest, explains New Hampshire Retirement System spokesman Kim France. State pensions are calculated using end-of-career earned averages from employees’ base and overtime pay.

Generally speaking, France said, police and fire personnel can expect a retirement check reflecting 50 percent of their end-of-career earnings after 20 years of service. For police officers, averages also include money earned from private road and other details.

For public employees excluding police and fire and including teachers, 30 years on the job is required for a 50 percent pension, France said.

"It has nothing to do with what they contributed," she said. "It’s a formula based on salary and service, not contributions."

And, she says, it’s a benefit defined by state statute, therefore requiring legislative and gubernatorial approval for any change.

But the state retirement board can increase the amounts it bills state and local taxpayers, without similar legislative approval, France said.

And that’s the plan for 2007, with several elected officials polled by the Herald Sunday reporting no plans to echo private-sector pension freezes.

Freshman Sen. Maggie Wood Hassan, D-Exeter, said she hasn’t seen the numbers for state and local pension contributions.

"It hasn’t come up on our radar screen," she said. "But I think we have to take a look at the fact that public employees often do not earn as much as they would in the private sector with comparable responsibility. So we have to take a look at the role of pensions in the overall package and the value of a pension in retaining employees."

According to a current help-wanted ad for a new Portsmouth police officer, starting pay for a patrolman is $37,281 with a long list of accompanying benefits.

Wood Hassan said she’d also want to learn what promises were made to public employees to ensure the Legislature "keeps its word."

Sen. Martha Fuller Clark, D-Portsmouth, said she hasn’t heard the matter discussed, adding, "I think there is great concern for individuals losing pensions."

"Then, does that mean they fall back on state aid?" she asked.

Fuller Clark said she has a bill pending that asks the Legislature to examine health-care benefits for public employees and that pensions may be addressed during those discussions.

With the projected pension increases scheduled to take effect July 1, 2007, the senator said the subject would likely come up during next year’s budget process.

U.S. Sen. Judd Gregg said for states with retirement systems in poor shape, the outcome could be tax increases and reductions in government services to pay for the promises made to retiring public employees.

"Although states are unlike IBM (which) has to compete in the private marketplace, their retirement systems still have to absorb the risk of volatility in the financial marketplace as they promise their employees a future defined benefit," Gregg said. "The Congress needs to clarify the legitimacy of innovative approaches to retirement benefits such as cash balance and hybrid plans to ensure that private employers - and the public agencies that model plans after their innovative approaches - are able to continue to hire and retain quality employees and deliver on retirement promises made."

Gov. John Lynch spokesman Pamela Walsh said problems facing the retirement system are an aging work force and poor returns on investments over the past several years.

"Gov. Lynch wants to make sure we have a healthy retirement system, which is why he brought on a new (NHRS) board chairman," Walsh said. "The governor will work with them to do as much as we can to keep it healthy."