State pension costs on the rise

Friday, November 13, 2009

By KEVIN LANDRIGAN

Staff Writer

CONCORD – Property taxpayers will face increases in public pension costs due mainly to slumping investment returns for the New Hampshire Retirement System.

The increases would go into place for the two-year period starting July 1, 2011. They range from 11 percent higher to cover retired state employees to 31 percent to cover the costs of retired policemen. This doesn’t mean property owners will be paying 11 or 31 percent more on their total bill, though; rather the portion of the property tax that goes to the pension fund will increase by that amount.

The state’s consulting actuary presented the updated estimates to the Retirement System Board of Trustees on Tuesday. They will be finalized by next September but aren’t expected to change much according to Richard Ingram, the system’s executive director.

Last fall, experts estimated the rate increases would be in the range of 25 percent to 30 percent.

“These numbers are better than what was surmised a year ago,” Ingram said.

The stock market slump had caused the system’s assets to decline from a high of $6 billion to a low of $4.3 billion last June. Assets have since grown to about $5 billion.

Over the past year, the return on all investments dropped 18 percent; the average retirement system losses nationwide were 20 percent to 30 percent, according to Ingram.

“The system is positioned well for recovery and should be able to improve as the economy improves, as long as member and employer contributions are made as calculated and recommended,” said Ken Albert of Gabriel, Roeder Smith & Co., the system’s actuary.

Much of the increase also is driven by changes to the system’s methodology three years ago that were made to more accurately reflect future liabilities.

“We are now calling all our future obligations honestly, and there has been an ongoing cost related to that,” Ingram said.

There are 51,000 active employees who contribute toward the system that now supports 24,500 retirees.

The total payroll covered under the retirement system is $2.4 billion.

The state, county and municipal work force make up more than half of the active and retired members. Teachers (35 percent), police (8 percent) and fire (3 percent) make up the rest.

As a budget cost cutting move, the Legislature last spring cut its contribution toward the pensions of all other public employees. They cut the state’s traditional share of 35 percent to 30 percent this year and 25 percent in 2011.

State support will go back up to 35 percent in 2012 unless the Legislature takes further action.

Earlier this week, officials with the actuaries said the so-called spiking or big-ticket pension packages paid to public employees does not play a significant role in the rate-setting process.

Alberts noted that among the 24,500 retirees, only about 10 earn a pension in excess of $100,000. Ingram said the average public pension is less than $20,000 annually.

In 2007, the Legislature approved a change to make the host government employer pick up some of the cost of retirement packages that are well above the average cost.

Responding to opposition from city and town leaders, the Legislature acted to put off charging those increases locally for at least the next four years.

Most of the government employer contributions go to pay pension costs; a smaller percentage represents a medical subsidy that helps cover the health insurance costs for some retirees.