Gilford selectmen call on state to restore 35 percent retirement system funding


GILFORD — Selectmen have called on the state of New Hampshire to provide property tax relief for local communities by restoring funding it eliminated in 2013 for retirement system costs for local police, firefighters and teachers.
The proposal is being made in a letter to state officials and candidates for the state legislature which selectmen approved following a discussion at Wednesday night's meeting. The letter maintains that over the last six years local property taxes have increased by $315 million statewide due to state's downshifting of retirement system costs to local communities.
The letter, prepared by Town Administrator Scott Dunn, had minor changes made in its wording by selectmen. Dunn said the letter was prompted by the state "reneging on its commitment to cities, towns and school districts."
The letter points out that in 1977 the state made a promise to pay 35 percent of the employer's share of the state retirement system costs for police, firefighters and teachers in a law which passed by both houses of the legislature and signed by Governor Meldrim Thomson.
The letter reads: "In 2009 the state scaled back its commitment from 35% to 30% for fiscal year 2010, and to 25% for fiscal year 2011, which represented a budget cut of $27.9 million. This savings in the sate budget had to be made up by local property taxes, a process called downshifting.
"In 2011 the state completely reneged on its commitment to partially pay local government costs for the state retirement system and abdicated its funding responsibility by going from 25% to 0% beginning in fiscal year 2013. This time the state saved a total of $124.2 million by cutting that amount from the 2-year state budget. Once again, however, every penny of that amount had to be raised through local property taxes. In total, the elimination of the state's 35% retirement contribution for teachers, police and firefighters from 2010-2015 has cost cities, towns, school districts and counties collectively approximately $315 million."
The letter goes on to point out that the state had a general fund surplus of $47 million last year and that preliminary revenues for the fiscal year which ended on June 30 of this year were up by $159 million over last year.
"We believe the time has come for the State of New Hampshire to provide some type of property tax relief and demonstrate a semblance of integrity by restoring its commitment to fund 35% of the retirement system costs for police, firefighters and teachers," the letter says.
Selectmen said in the letter that residents of the state should ask all candidates for state office whether they will support property tax relief by honoring past promises made to contribute to retirement system costs and tell those who answer no "that they do not deserve to be elected."
Richard Grenier, chairman of the Board of Selectmen, said the issue should be brought to the attention of the members of the Belknap County delegation and it should be pointed out to them that "the costs got passed down because you voted for it."

Area retirement contributions jump; Laconia may have to cut budget lines


LACONIA — Property taxpayers will be contributing more toward funding the pensions of municipal employees — school teachers, police officers, firefighters and other workers — following the decision of the trustees of the New Hampshire Retirement System to raise the employer contribution rates for fiscal years 2018 and 2019.

At the same time, City Manager Scott Myers said that "significant increases in contributions to the retirement system continue to be a challenge in budgeting to meet other municipal needs. While we support our employees and want to ensure them a secure retirement, the costs place severe restrictions on spending to address other needs in the budget. As the New Hampshire Retirement System takes a bigger share, there is less to go around." 

The retirement system is funded from three sources: investment earnings, employee contributions and employer contributions. The employee and employer contribution rates represent the percentage of employee's annual compensation, including overtime, contributed by employees and municipalities.

The employee contribution rates are set by statute; the rate for school teachers and other employees is 7 percent and the rates for police and firefighters are 11.5 percent and 11.8 respectively. the municipality contributes to the retirement system. These rates have changed only once in the past 20 years.

The employer contribution rates are adjusted every two years based on a number of factors, chiefly the assumed rate of return on the system's investment portfolio as well as the expected life span of current retirees and projected growth of employees' earnings. With the biennial adjustment of rates, municipal employers not only contribute toward the retirement of their current employees, but also bear the entire cost of any shortfalls in the system arising from poor returns on investments or losses from actuarial assumptions, such as when employees retire, how long they live and how much they earn.

This year, the trustees traced the rate increase to a reduction in the assumed rate of return on investments, which represents the bulk of the system's revenues and weighs most heavily on employer contribution rates. At the same time, the expected life span of retirees was extended and the projected growth in payroll for school teachers was reduced. The anticipated rate of return on investment was lowered from 7.5 percent to 7.25. As retirees live longer, they collect benefits The longer retirees live, the more pension benefits they collect. Finally, with declining school enrollment the number of teachers contributing to the system has shrunk, from 18,709 in 2009 to 17,732 in 2015, or by 5 percent, which drove a 10.78 percent increase in the employer contribution rate for school teachers.

The current employer contribution rates are 29.16 percent for firefighters, 26.38 percent for police officers, 15.67 percent for school teachers and 11.17 percent for other employees. The new rates, effective July 1, 2017 are 31.89 percent for fire fighters, 29.43 percent for police officers, 17.36 for school teachers and 11.38 percent for other employees. For example, the employer contributions will increase from $14,915 to $16,311 for a firefighter earning $51,149, from $13,740 to $15,328 for a police officer earning $52,085, from $6,465 to $7,162 for a school teacher earning $41,259, and from $4,449 to $4,532, for a light equipment operator earning $39,832.

With 184 employees, the city has budgeted $1,975,875 in retirement contributions for the current fiscal year. More than 70 percent of employer contributions are applied against the unfunded liability of the pension plan, which was $4.2 billion as of June 30, 2015. The unfunded liability arose from several factors. A flawed funding methodology that masked the financial condition of the system led to low employer contribution rates from 1991 to 2007. Some $900 million was diverted from the pension fund to finance a special account applied to cost-of-living adjustments and subsidies for health insurance. And investments underperformed, especially during the recessions of 2001-2002 and 2008-2009.

While pressures on the system have mounted, the state has shed its share of the employer contributions for municipal employees. Beginning in 1940, the state shouldered a portion of the contributions for teachers, police and firefighters, which in 1977 was set by statute at 35 percent, with municipalities, school districts and counties paying the balance of 65 percent. In 2010 the state trimmed its share to 30 percent and a year later to 25 percent before scrapping it altogether in 2013.

"Since the state walked away from its commitment, it's added to the problem," Myers said. He remarked that even if the city could leave the retirement system, it would be billed for its share of the unfunded liability, which would amount to several million. 

Seizing drugs, saving lives


TILTON — Reflecting on the seizure of a large cache of drugs last week, Police Chief Bob Cormier remarked "We're looking at cases like this in a different light – not just finding drugs, but saving lives," adding that the 270 grams of heroin represented "270 grams of death sentences."

The heroin, along with fentanyl and 20 grams crystal methamphetamine, were found after Officer Jeremiah Trott stopped a westbound car bearing a false inspection sticker on the overpass over I-93 Monday evening. Earlier, he observed the same vehicle and a pickup truck together at the nearby park-and-ride. Shortly after he stopped the car, the truck stopped behind it.

The car was driven by Bryan Franklin, 39, of Penacook and the truck by Cre Clay, 21, of Nashua, who is described by police as Franklin's girlfriend. Trott spotted drugs and paraphernalia in the car and found that Clay was driving with a suspended license. Cormier said Franklin and Clay drove to Tilton in Franklin's car and collected the pickup, for which they had a bill of sale. Trott impounded both vehicles and requested a search warrant. Without grounds to arrest them, both Franklin and Clay, who was charged with operating after suspension, were released.

Along with the drugs, police recovered a significant amount of cash, evidence of drug sales and a handgun, which was reported stolen in Boston. Cormier said that the case has been referred to the United States Attorney and police are pursuing an investigation with agents of the United States Drug Enforcement Administration in anticipation of seeking federal indictments on drug and weapons charges against Franklin and Clay once the investigation is complete.

"We want to make sure we do thorough investigation," he said, "and make sure we have the right suspects." Meanwhile, Clay is scheduled to be arraigned on a charge of operating after suspension in Sixth Circuit Court - Franklin Division in December.

"This was a great arrest by a patrol officer," Cormier said, stressing that a large quantity of drugs apparently destined for the Lakes Region would not reach the streets. He said that drug runners frequent Exit 20, with its many parking lots and ready access to Laconia and Franklin, making it a frequent rendezvous for drug traffickers from Massachusetts and local dealers. Officers, he said, watch for pairing of vehicles, particularly those between vehicles bearing local and out-of-state plates.