A House committee approved a bill Wednesday that would reinstate a piece of the state’s former contribution to cities’ and towns’ shares of their employees’ pension costs.
The bill’s sponsor, Rep. Renny Cushing, said it would be a step to “restore the promise” that the state made decades ago to help pay for public employees’ retirements.
When the Legislature decided in 2011 to eliminate the state’s 25 percent share, the burden fell entirely on property taxpayers, which Cushing said amounted to “the largest single property tax increase in state history.”
The Hampton Democrat’s legislation, House Bill 413, would require the state government to pay roughly $40 million a year by contributing 15 percent of the employer’s share of pension costs. Historically, the state had contributed as much as 40 percent, beginning in 1967. It currently pays nothing, and the burden has led to skyrocketing payments to the retirement system from the state’s towns, cities and school districts.
“We broke the promise to property taxpayers,” Cushing said. “When the state imposed this large property tax increase in 2011, it almost broke the back of many municipalities.”
The effect of the state’s contribution being eliminated was a downshifting of $315 million to cities and towns over the past six years, he said.
“This is a clawback,” Cushing said. “In my heart of hearts, I believe we should reinstate the whole 35 percent. I see this as the first step.”
The Executive Departments and Administration committee decided in a 10-9 vote Wednesday that the bill should pass.
Two other bills that aimed to address a common complaint among cities and towns – that their shares of retirement costs are growing out of control – met more grim fates.
House Bill 369, which would have delayed the time period under which the retirement system plans to resolve its more than $4 billion unfunded liability, was retained in committee.
Retirement system spokesman Marty Karlon said extending the amortization period another 10 years to 2049 would have reduced employer rates through 2039, but left the payments hanging over municipalities’ heads for another decade.
House Bill 425 was unanimously shelved. It would have adopted a more optimistic rate of return for retirement system investments, which would mean employers have to contribute less money each year. But if the assumed rate “is set too high and then that isn’t met, it does kind of kick the can down the road,” said Barbara Reid, the government finance adviser for the New Hampshire Municipal Association. “We’re really talking about pay me now or pay me later.”
The intent of all three bills was to take some pressure off municipalities, which have been asked to pay increasing rates to ensure their employees’ retirements. Jim Donchess, the mayor of Nashua, testified that city budgeters are “just looking for relief in some form.”
“How you elect to do it – whether it’s the adjustment of the amortization period, whether it’s the rate of return, or whether it’s contributing some portion again of state funds into the pension system to help the municipalities with at least some of what was originally promised – any of those solutions would work from our point of view,” he said.
Donchess added: “You have the wisdom to decide. I’m just asking that you do something.”