When is never enough, never enough?
For better or worse, New Hampshire taxpayers are about to find out.
The issue is the proposed elimination of pension reforms adopted in 2011, which provided stability to the New Hampshire Retirement System and protected property taxpayers from substantially rising costs.
Both the New Hampshire House and Senate have proposed in the 2025 budget to undo these reforms and dramatically increase taxpayer-funded retirement benefits for a specific group of 1,526 public employees. The 10-year cost increase of this pension hike has grown from $275 million to an incredulous $340 million. And that’s on top of $69 million that has previously been appropriated in 2022 and 2024 for these same employees, bringing the total cost to $409 million. To put this all in perspective, the average benefit increase per employee is a staggering $268,000.
These immense costs have not been highlighted until recently. Now, a committee of conference of House and Senate members has the opportunity to fully vet whether this specific group of 1,526 employees should receive such an extraordinary increase in their pensions.
The committee of conference can also debate why these 1,526 employees should receive this benefit when all other public employees receive no benefit increase at all.
The committee of conference can also examine the return of pension spiking (inflating a pension through accumulating sick and vacation time) for 1,526 employees and why that will be a huge incentive for employees to increase their pension and promptly retire.
Lastly, the committee of conference will have to confront the fact that the unprecedented increased funding for these 1,526 employee pensions will force other cuts in programs that New Hampshire citizens depend upon.
Is there an alternative that better protects taxpayers while being more realistic in terms of enhancing pension benefits?
Senate Finance Committee Chair Jim Gray proposed an amendment that the Committee of Conference should consider.
Gray’s amendment reduces the overall cost by $185 million.
Gray’s amendment ensures local property taxpayers are not stuck with any of the costs.
Gray’s amendment also phases in benefit increases, which lowers the total cost while also making future state costs manageable. This is critical in order to protect property taxpayers from the state’s downshifting of ongoing costs. Downshifting to property taxpayers is an unfortunate, but likely scenario given the huge costs of the Youth Development Center litigation involving sexual and physical abuse of minors who were in State custody previously.
Gray proposes that beneficiaries pay a small contribution toward their benefit increase, so they share in the cost of this benefit increase with taxpayers, which is more than fair, given that there has been no increase to employees’ contributions for pension benefits since 2011.
Most importantly, Gray’s amendment provides for an increased retention benefit for people hired after the 2011 retirement reforms were enacted, including future hires, making this an actual recruitment and retention incentive.
The current proposal in the budget does not enhance employee retention. Instead, it allows employees to spike their pensions and retire. Gray’s amendment appropriately addresses this flaw.
Gray’s amendment, costing $155 million over eight years, is clearly expensive. But there is a further way to appropriately reduce these costs.
When reforms to pensions were approved by the legislature in 2011, they applied to people hired on or before January 1, 2012. Suddenly, without discussion or justification, the current pension proposal in the budget now enhances benefits for employees hired on or before September 1, 2013.
A significant number of employees who had not been hired on the effective date of the 2011 legislation will inexplicably receive this extraordinary benefit. The committee of conference should move the date back to January 1, 2012, and further ask why the date was changed and who the individuals receiving this benefit are.
I was the sponsor of the 2011 pension reform legislation. It’s critical to recall that at the time that pension costs, largely borne by property taxpayers, were rising significantly and the long-term viability of the New Hampshire Retirement System was in question.
Here is just a small sampling of quotes from the editorial pages of leading New Hampshire newspapers supporting pension reform at that time.
“But the reforms are fair given the diminishment or disappearance of employer-provided pensions in the private sector, and necessary to protect taxpayers.” Concord Monitor June 9, 2011.
“The result is a bill that would be strong medicine for all, but is fair, addresses the pension shortfall over time, and respects the hard work put in by the vast majority of pension candidates.” Portsmouth Herald, May 7, 2011.
“Pension Reform: Sensible Changes are Close. They provide necessary, overdue changes that don’t ravage union benefits, but simply make them affordable.” Union Leader, April 6, 2011.
“Retirement Bill a Good Compromise. Bradley’s work and that of the committee have been respectfully balanced and in keeping with the goals of responsible governance.” Foster’s Sunday Citizen, March 13, 2011.
Elected officials in Concord should think long and hard about undoing those 2011 reforms which protected taxpayers and stabilized the Retirement System. The cost of undoing these reforms is more than excessive: $340 million over the next 10 years on top of $69 million previously appropriated for 1,526 employees. The 1,526 employees would receive a huge benefit increase while all other public employees receive nothing. And with pension spiking returning, it’s likely employees will retire rather than stay on the job. This is the cost of undoing the 2011 reforms.
The Gray amendment with the 2012 date change provides a rational alternative that is more affordable for taxpayers, provides an actual retention incentive and still is an incredibly significant benefit enhancement for the 1,526 employees.
Compromise is essential if there is to be an outcome everyone can accept.
