Most state retirement systems have suffered financial losses in the last few years.
And the New Hampshire Retirement System is no exception.
New Hampshire’s losses have to be made up by state and local taxpayers.
But the taxpayers may have escaped paying even greater sums, thanks to an idea that never caught on in the Granite State.
New Hampshire Public Radio’s David Darman has more.
The stock market’s reverses have been big news the last few years.
And now those losses are coming home to roost for state pension plans.
State and local governments must now contribute more to fund public employee pensions.
Eric Henry is executive director of the New Hampshire retirement system.
He says the system had to raise rates almost 40% in the current budget period for state and local governments.
258 its likely that contribution rates will rise again with the next budget biennium to recognize fiscal year 2002 where the plan had about a 6 percent loss, and the year 2003, where we had a 2 and a half percent positive income number. While we’re happy that number is positive, it is still far short of the nine percent the actuarial projections assume the plan will earn. 01 326
Currently, 47,000 public workers pay into the state retirement system.
Teachers, firefighters, police officers, and town employees make up the bulk of the members.
David Lang is president of the Professional Firefighters of New Hampshire.
He says market losses have no bearing on what workers pay into the system.
06 207 the employees contribution stays constant. In the case of a firefighter, a firefighter pays 9 and a half percent of salary, in the good times and in the bad times.
Because a pension plan promises to pay retirees, it needs the funds.
Some money comes from from contributions.
Some money comes from returns on investments.
When the investments earn more than 9 percent, the governments doesn’t have to contribute as much.
When returns are lower, governments pay more.
Local governments paid 15 million dollars more into the system this year than the year before.
These rising retirement costs are contributing to financial pressures squeezing cities and towns.
John Andrews is the executive director of the New Hampshire Municipal Association.
10 210 there’s no question but what these kind of costs, whether they’re retirement or health ins or utilities or fuel costs or heating oil for example, have a definite impact on the services that are provided to nh residents. It’s a fact of life. 10 228
New Hampshire taxpayers are on the hook for any rate hikes in the Retirement system.
But their burden pales in comparison to what New Jersey or West Virginia has to pay to bail out their systems.
Lawmakers in those states sold “Pension Obligation Bonds” to fund their retirement systems.
Shelby Chodos is a visiting lecturer in public finance at the John F. Kennedy School at Harvard University.
He explains that the money received from sale of bonds was used in place of taxes.
12 347 so what a state would do or a locality would do would be to borrow money in …the bond market, invest it in the stock market, make some assumptions about how much it was going to earn, and use those assumed earnings to reduce its immediate contributions to the pension fund. 12 410
This kind of accounting worked well for New Jersey, West Virginia, Oregon and several Midwestern states when stocks returned 20 percent a year.
But the debt incurred by selling the bonds now only adds to the stock market losses.
West Virginia has had to borrow 4 billion dollars to pay for the stock losses and the debt incurred for its retirement system.
New Jersey plans to raise 750 million dollars in taxes to bail out its system.
Eric Henry of the NH Retirement system says Wall Street brokers pitched the bond idea to him and other officials.
But he says the bonds were never seriously considered here.
02 305 nh to their credit has never discussed this to my knowledge. I think they’ve seen there’s no such thing as free money or easy income. …02 338
New Hampshire taxpayers can take comfort that the state never succumbed to the lure of pension obligation bonds.
Its a decision that clearly averted a potential multi-million dollar headache.
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