The Hippo, New Hampshire largest circulation weekly and second largest circulation newspaper, just ran a story featuring J. Scott Moody’s comments (see pages 6 & 7) based on our new study on New Hampshire’s pension crisis (pdf).
The New Hampshire Center for Economic Policy (NHCEP) issued a new report today which details the size and sources of the state’s growing unfunded liability crisis.
“At the end of the 2010 fiscal year, New Hampshire’s pension and benefits system was underfunded by $4.7 billion, an amount that has grown by 58 percent in just two years,” noted NHCEP president J. Scott Moody. “One reason for this growth is that the state’s investment revenues were down, just like everyone else in the Great Recession, but expenses, especially for health care, have gone up faster than the state estimated.”
“In addition to the recent expansion of this unfunded portion,” adds Chief Economist Wendy Warcholik, “New Hampshire has been underestimating this long-term liability all along, and should have been paying more into the system to fund the pensions and benefits that have been promised to public sector employees. This means that over the next 30 years, New Hampshire taxpayers will be paying some $20 billion to pay these expenses and make up the current unfunded liability.”
“The snapshot using today’s numbers is clearly unsustainable,” Mr. Moody continued, “but our research shows that it is actually getting worse every year. The problem is that the state underestimates future investment revenues by using an anticipated long-term return of 8 percent. This means they are not setting aside enough to pay future liabilities, which makes the unfunded liabilities even higher.”
“Until flaws in the system are amended to match anticipated revenues with future pension and benefits liabilities, increased payments into the retirement system will never close this gap.” Mr. Moody concluded: “Right now, it’s like pumping more and more air into a flat tire that still has a big hole in it. Until you remove the nail and fix that hole, you’re not going anywhere.”
To read the complete report by the New Hampshire Center for Economic Policy, please click this link: http://nheconomics.org/wp-content/uploads/2010/08/NHCEP-Liberty-in-Economics-Volume-1-Issue-1-New-Hampshire-Pension-Crisis-021711.pdf
Mr. J. Scott Moody and Dr. Wendy Warcholik are available for press interviews, on-air appearances and in-person presentations of this research. If you have any questions or would like to arrange a meeting, please contact Martin Sheehan, the Director of Communications via e-mail at or by calling 207-650-7335.
Today’s Union Leader is reporting that New Hampshire Senate Republicans are planning to unveil a new pension reform package. According to the article:
The bill raises mandatory contributions by employees, increases retirement ages and required years of service, cuts the number of workers serving on the New Hampshire Retirement System and reduces the compensation that can be considered in pension formulas.
The bill also calls for a study that could lead to creation of a plan like the 401(k) plans that have come to dominate retirement planning in the private sector.
This is an encouraging step forward in the discussion, but more aggressive steps will be necessary in the future. As we pointed out previously, the current New Hampshire pension liabilities are being dramatically underestimated. A more detailed study on this issue is forthcoming.
Overall, the article hits the nail on the head in terms of the primary concern of the bill:
For the most part, the changes will apply to people who are hired after June 30, 2011. Others apply to those with less than 10 years of service, including the changes in retirement age.
The fact that most conditions won’t change for more experienced workers means the reforms would have a slow-motion effect on righting a serious funding shortfall.