LAST WEEK, Dave Solomon issued an editorial regarding the New Hampshire Retirement System and its current funded status. And while the article included a decent amount of fact-based information, its central thesis was lost.
A few issues were apparent from the onset. First, what is the purpose of comparing the Retirement System’s unfunded liability to the state budget?
Saying things like “the state comes up about $5 billion short” is an unnecessary and sensational soundbite.
The state doesn’t need $5 billion upfront, it is not falling short, it is not bankrupt.
Also, the state is only responsible for 25 percent of the retirement system’s cost, the other 75 percent comes from the cities and towns.
Even if you wanted to make the comparison of budget totals to the total cost of the UAAL, which we believe is fallible, you would have to include all of the other 470 budgets that contribute to the retirement system.
Second, what is the point of quoting a report that is downright wrong?
Pointing to a piece from a misinformed report that claims the state does not disclose its pension liabilities is ludicrous. Each year the New Hampshire Retirement System does a thorough job providing an update on the funded status of the system that includes its pension liabilities and the total cost of retirement.
We can only assume quoting this report was to garner unnecessary panic about the status of the retirement system and to continue to cry that it is bankrupt, when it clearly is not.
Third and most importantly, the article left out a lot of key pieces of information regarding retirement costs in New Hampshire. It’s become a little redundant when the only pieces written on retirement are focused on the unfunded liability.
While Solomon’s article did a good job in covering the information from the New Hampshire Retirement System that Public Information Officer Marty Karlon provided, the article still missed the opportunity to really explain what the UAAL is. Retirement issues are bulky, detailed, and they can often be confusing, but pulling only certain pieces from its intricate history and process is dangerous.
Another piece the article missed was that when the NHRS was put on a plan to pay down the UAAL, it was understood the UAAL would grow larger in the first half and begin to decrease in the second half of its payment plan.
Because it grew doesn’t mean the plan isn’t working, it doesn’t mean the retirement system is bankrupt, and it doesn’t mean providing retirement benefits to public employees is unaffordable.
It just means that to rectify the mistakes of the past, we must deal with the situation at hand and ride out the payment plan.
The UAAL is a fact, it exists for exactly the reasons that Marty Karlon was quoted discussing.
Decisions made 20 years ago created a shortage of funding. Yet, again and again, the fact that a plan has been put in place AND the fact that the plan is working doesn’t get much coverage.
It is important to point out that we saw that plan working just as it’s meant to be this year. Employers will see a decrease in their rates across 3 out of 4 employee groups over the next biennium.
Also, what the article failed to discuss was the actual costs of retirement benefits. The UAAL portion of the rate makes up 90 percent of what is being paid.
That means only 10 percent pays for the actual benefit.
Yes, the costs seems high right now, and yes, 20 years from now seems like a long time to wait to see rates drop significantly, but when it does, employees will be paying 90% of their own benefit.
This fact is also backed up by a report from Boston College’s Center for Retirement Research, which was hired by Gov. Sununu’s Decennial Commission on Retirement this year. The Center found New Hampshire to be one of the most affordable plans in the country, largely due to the fact that the state and communities pay very little toward the actual benefit. Their report showed that retirement benefits provided by the state of New Hampshire and its municipalities is half the cost of the national average.
So, while we are hopeful to see retirement issues covered in the news, it’s important to make sure that when it is discussed, it is discussed fully, honestly, and with facts, not salacious headlines and quotes from misrepresented reports.
Submitted by the New Hampshire Retirement Security Coalition, whose partners are the unions, associations, and organizations that represent more than 78,000 active and retired public employees in New Hampshire.
EDITOR’S NOTE: We stand by our story.