New Hampshire's pension system must be changed to spare property taxpayers from the rising costs of benefits for government workers, the sponsor of a pension reform bill said Friday.
State Sen. Jeb Bradley, a Wolfeboro Republican, testified at a Senate hearing on his bill that workers must share in the burden of dealing with the system's nearly $5 billion unfunded liability.
"We know how we got into this situation. Employers didn't pay enough for years," Bradley said.
But Bradley said workers, not just local taxpayers, must share in the solution.
"If we do nothing and continue to kick the can down the road, when we have to take the medicine we have to take, it's going to be even more bitter and unpalatable," he said in a room filled without about 350 people, mostly union workers.
Union spokesmen did not object to proposed changes affecting newly hired workers, but they said it wasn't fair to ask existing workers to pay the pension system's unfunded liability because that is a bill owed by municipalities and schools. They also said reforms were adopted four years ago to address the unfunded liability by spreading the costs to communities over 30 years.
David Lang, president of the New Hampshire Professional Firefighters Association, said local taxpayers may not like it, but it is their bill.
"I know it's painful," he said.
Perhaps the most contentious part of Bradley's proposal would cut benefits to workers not vested in the system with less than 10 years of service. Bradley argues they should not expect the same rights as vested workers, but a coalition representing employee groups argues they are protected by the constitution.
Bradley's bill also would raise the retirement age for police and firefighters from 45 to 50 if they are not vested in the system. They also would have to work five years longer to qualify for a pension.
Sean Morrison said he got a job as a Hampton firefighter 21/2 years ago, so the proposed cuts would hurt his family. Morrison, a sergeant with the New Hampshire Army National Guard, said he's on leave from his third tour serving his country in Iraq.
"When I go back next week, who's going to fight for me," he said.
Newly hired workers would pay higher contribution rates under the bill. Police and firefighters would pay 11.3 percent instead of the 9.3 percent current workers pay. Other government workers would pay 7 percent instead of 5 percent.
The New Hampshire Retirement Security Coalition backs retirement age and contribution changes affecting new workers. So does Gov. John Lynch.
In his budget address this month, Lynch proposed eliminating the state's subsidy for local retirement costs and, in exchange, increasing newly hired workers' share of pension costs.
Lynch said his proposed changes would save municipal and school employers $1.5 billion over 20 years.
Bradley's bill goes farther. He also would change the composition of the retirement system board to give employers equal say with employee members. The coalition supports changing the composition, but not as Bradley proposes.
Bradley also wants to prevent workers from using sick and vacation time and using career buyouts to boost benefits. He would immediately end allowing police to add overtime from special details to their retirement benefit. The coalition does not support these changes.
Lynch would exclude end-of-career payouts in the final retirement calculation and would increase from three years to five years the period used to calculate average end-of-career pay for new hires.
Bradley said $89 million earmarked for higher benefits would be put into the fund to reduce the system's unfunded liability -- pegged at 58.5 percent as of June 30. The system's assets were $4.9 billion on June 30 when Fiscal 2010 ended. The coalition argues the transfer of the money is unconstitutional and breaks a negotiated agreement in 2007.
Bradley also would eliminate a 4 percent growth in medical subsidies provided to some retirees to offset the cost of their health coverage. The coalition said the state should wait for a court to rule in a lawsuit over the issue.
Bradley proposes studying whether the public pension system should move from the current defined benefit system to a defined contribution system or 401k system used by the private sector.
The New Hampshire Retirement System covers current and retired teachers, firefighters, police officers and state and local government workers. The system covers 76,000 active and retired public employees.