Nashua Telegraph March 20, 2007

Unions unite to oppose retirement proposal

By KEVIN LANDRIGAN, Telegraph Staff
klandrigan@nashuatelegraph.com

Published: Tuesday, Mar. 20, 2007

CONCORD – A consensus plan to make the state retirement system more financially solvent met a brick wall of union opposition Monday.

More than 150 firefighters joined unionized police officers and state employees to oppose the proposal from a working group of stakeholders.

The group’s product came after months of secret meetings between a federal mediator and negotiators for government and labor organizations.

The aim is to shore up a system that is only 67 percent financed using an archaic methodology. Analysts warn it is destined to cause assets to fall further behind liabilities. Adopting the new method would translate to the current system funding only 50 percent of future liabilities.

“We agreed to do our best to sell the package knowing that some of the provisions would be unwelcome,” said Londonderry Town Manager David Caron on behalf of the New Hampshire Municipal Association.

Four unions took part in the talks, but by Monday morning only one, the National Education Association of New Hampshire, remained on board.

“This amendment protects the severance package of our members,” said NEA lobbyist Rick Trombly.

David Lang, president of the Professional Firefighters of New Hampshire, said his union would not take part in the talks.

He said a 2 percent cost of living guarantee in the plan is unconstitutional and it calls for breaking terms of negotiated labor contracts.

“It creates cost shifting. This is the employee’s checking account. It is the employee’s money,” Lang said.

The financial crunch facing the system got much worse in recent years when an under performing stock market caused income to fall well below an expected 8.5 percent profit on investments.

The rates state, local and county government taxpayers pay are already going up significantly July 1. The contribution employees make toward their pensions is set in state law and has remained the same for years.

The state pays 35 percent of the retirement benefit for local and county workers and 100 percent for its employees.

The total bill for state taxpayers will go up $57 million in the next two years according to Gov. John Lynch, who hasn’t taken any position on a legislative solution.

Union Leader Story, Tuesday March 20, 2007

Pension pain on the way in NH

By TOM FAHEY
State House Bureau Chief

CONCORD – Changes are coming for the New Hampshire Retirement System, but after a day of House subcommittee work, it wasn't clear how they will affect workers or taxpayers.

Rep. Anne-Marie Irwin, D-Peterborough, chairman of the Executive Departments and Administration Committee, said employees and employers will feel some pain.

"There's going to be shared impact in terms of shoring up this system," she said.

NHRS has more than $5 billion in assets, with 51,000 active members and 19,000 retirees, according to the plan's fiscal 2005 report. A change in accounting in the 1990s and investment losses early this decade have created a funding deficit that has accountants and plan members worried.

Under a proposal that a working group of school boards and local governments came up with, workers would see a 40 percent increase in their contributions to the fund, from 5 percent to 7 percent of pay for teachers and other employees, while police and firefighters would go from 9.3 percent to 13 percent of pay.

No action was taken on that plan yesterday.

The plan does not include a calculation of how hard schools and municipalities, and ultimately taxpayers, would be hit. The state would continue to pay 35 percent of local contributions into the fund.

Rep. Patricia McMahon, D-Sutton, said she expects to see changes in the reform legislation she has sponsored.

"It's a platform; something we can build on. It isn't cast in concrete," she said.

A preliminary hearing on her proposal drew well over 100 firefighters from around the state, as well as representatives from employer groups including schools and towns.

The municipal working group wants changes in the way cost-of-living adjustments are set, how the system handles health insurance subsidies, and limits on how high retirement pay can be.

Police and firefighters, in what they call a strategic alliance, oppose major changes to the system and say a few adjustments will firm up the NHRS finances.

"This is a $5 billion aircraft carrier. You want to make slow and strategic changes," said David Lang, president of the Professional Firefighters of New Hampshire.

NEA-New Hampshire's Rick Trombly said teachers, who were part of the municipal working group, had one priority: "a sound stable system without a reduction in benefits." Irwin said the committee will not rush into any changes.

"We're going to move carefully, thoughtfully. We're not going to do anything goofy," she said.

Both the governments group and the police-fire alliance agreed in a work session to end a practice begun in the 1990s, called open aggregate accounting, that essentially mortgaged employer contributions to keep them low, and has put the system on shaky financial grounds.

The subcommittee, which McMahon chairs, voted to adopt the "entry age normal cost" of figuring pension contributions so that NHRS would collect enough money to fund each worker's pension by the time they retire.

The current practice has left the system underfunded in terms of its long-term ability to meet its pension obligations. Payments by employers have been so low that the Legislature had to enact a minimum contribution for school districts.

Cost of living adjustments is another battleground. Municipalities want the law to set a fixed 2 percent COLA. Firefighters and police want a range of 1 to 5 percent to be set by the NHRS board each year.

One proposal to be dealt with would bar anyone from collecting more than 100 percent of their last year's pay in annual pension benefits.

The subcommittee also has to address the special accounts that cover the costs of health insurance subsidies. The working group and the alliance agree that no money should go toward the subsidies until the system's funding reaches 85 percent of long-term obligations.

But they differ on whether the special accounts for each employee group should be phased out. The alliance wants the accounts to stay in effect, while the schools and town governments want to move the assets into what they call a retirement stabilization account. That new account would fund COLAs and the insurance subsidy.

The subcommittee got word late yesterday that it has two extra weeks to finish its work, through a legislative maneuver that will attach the retirement changes to a bill with a later House deadline for action.