Editorial: State’s views on pension cases correct
In 2011, to help balance its budget, the Legislature stopped paying the state’s 35 percent share of public employee retirement costs. As a sop to municipalities and school districts and to help push the grossly underfunded retirement system gently toward solvency, it also increased the employees’ share of retirement contribution costs from 5 percent to 7 percent. The change, a $1.1 million hit to Concord taxpayers, amounted to 2 percent of the city’s tax rate. It also meant that almost every city and town has had to make do with fewer employees.
Last week, the New Hampshire Supreme Court heard arguments in two cases that, depending on their outcome, could make the situation worse. In one, four unions representing public employees sued, contending that the increase in the employee contribution rate was an unconstitutional change in a contractual relationship that, from their point of view, began either on the day a public employee became full-time or once he or she had completed a probationary period.
The state, of course, disagrees. The contract between public employer and employee guarantees that the promised benefit, the pension payment received upon retirement, will be received. It does not, the state’s attorney argued, guarantee that during the 20- or 30-year length of employment the price the employee pays to receive that benefit can never be changed. The state’s position, we believe, is the correct one.
The size of the refund owed public employees, should the unions’ position prevail, depends on how the high court defines a vested employee. If the court settles on 10 years, the retirement system would see a $25 million decrease in annual employee contributions to the fund and the need to make about $75 million in refunds, system spokesman Marty Karlon told Portsmouth Herald reporter Elizabeth Dinan. If it determines that employees are vested on day one, those losses would roughly double. Public sector employers, to make the retirement fund whole, would see their contribution costs increase by a like amount.
The other case concerned four retired public employees who, while collecting their pensions, sued to overturn a 2012 law that requires suspending pension payments to retirement system members who work more than 32 hours per week for a public sector employer. The pensioners, who claim that the law unfairly infringes on their ability to earn income and support their families, believe the requirement only prohibits them from working more than 32 hours per week for a single public sector employer and not, say, 48 hours split among four or five public employers, as a certified police officer who fills in wherever needed might do.
The state contends that the law’s intent was to improve the shaky financial position of the underfunded retirement system. Allowing retired public employees to “double dip” by working full time in positions that would normally require an employee to pay into the retirement fund saves municipalities money, but it weakens the retirement system and makes every member’s position financially more precarious.
Both cases could turn on legal points with which we may or may not agree or, for that matter, even recognize. But again, logic says the state’s position is again the right one. The Legislature, in conjunction with the trustees of the retirement system, have made several attempts at instituting changes to reduce the fund’s shortfall. Few public employers have complied with a law, effective in January, that requires them to notify the retirement system when retirees double dip. Once they do, and once the court rules, more changes to the retirement system will have to be made. If defined benefit pensions, which have all but vanished from the private sector, are to survive, they will have to make paying for public employee pensions more palatable for taxpayers whose own retirements are pensionless.