Town and school officials in Southern New Hampshire can only hope the economy continues to improve since in a year and a half, they could face what one local leader calls "crippling" budget hikes.
That's because the latest rate increases proposed by the state Retirement System call for employer pension contributions of up to 31 percent for police officers and 30.3 percent for teachers starting July 1, 2011.
For firefighters, the increase would be 25.1 percent and 21 percent for other municipal employees. Meanwhile, the rate for state employees only rises 11.4 percent.
"That's quite a crippling blow, quite frankly," said Derry Town Administrator Gary Stenhouse, noting taxpayers in his town will have to dig down for an additional $540,000 if the rate increases for police, firefighters and other workers are approved by system trustees in September.
And the more than $500,000 won't even cover the pension contributions required for Derry's teachers since town government and the school district operate independently from each other, Stenhouse said.
"The money still comes from the same poor people's pockets," he said of taxpayers. "It just tells me there is something dramatically and drastically wrong with the state pension system."
When the current rates were approved, the town was forced up to come up with an additional $200,000, Stenhouse said. Now, the projected increase is close to triple that amount.
Stenhouse blames the rate hikes on what he calls the Retirement System's "overly optimistic" projections.
The system's increases, he said, have taken a toll on communities and school districts over the years, forcing taxpayers to pony up more money with no one being held accountable.
He compares the situation to the dilemma some towns face when they do not budget enough money for winter road maintenance and then run out of money for snowplowing and salting long before the last snowflake has melted.
At that point, a lot of finger-pointing takes place and the weather is blamed for causing too many snowstorms. However, proper planning would have avoided such problems, he said.
"It didn't snow any less in Derry than anywhere else," Stenhouse added.
State: It could have been worse
Although Kim France, the system's spokeswoman, said the state is trying to make up for an 18 percent loss in fiscal 2009, the performance of the retirement trust fund's investments have improved since then.
The trust fund has grown from $4.3 billion when the fiscal year ended June 30 to $5 billion.
"The Retirement System isn't minimizing the impact of the investment losses," France said. "If you look around the nation, the Retirement System is actually doing better than most."
Other retirement systems have suffered losses of 25 to 30 percent, she said.
Only a year ago, the pension rates were projected to rise 25 to 35 percent, while now they are to increase between 11 to 31 percent, with an average of 22 percent, she said.
"The increase is actually a little bit lower than projected," France added.
Although the proposed rates were announced a little more than a week ago, she said there have been few inquiries from municipal officials, including at a statewide conference held last week at the Local Government Center in Concord.
The system contends benefit amounts established by "statutory mandates" were not adequately funded through past contribution rates.
The actuarial methodology and accounting practices used before the current recession led to "overstating the funding status of the trust, lower employer contribution rates, and a weak funding ratio," the system said in its announcement of the proposed rates.
Towns to plan as needed
Some area town and school officials said although the new rates seem high, they are resigned to planning accordingly when it comes time to draft their fiscal 2012 budgets.
But first, they must still plan for fiscal 2011. Londonderry Town Manager David Caron said one way he will prepare for the increases and hold the line on expenses is by not creating any positions.
Nearly 200 town employees in Londonderry will be affected by the rate increases, Caron said, but a projected figure for how much more the town will have to spend is not yet available.
Under the retirement system, which serves 51,000 current employees and 24,000 others who are retired, there are two classifications — Group 1 and Group 2 workers.
Members of Group 1, which includes teachers and most other municipal employees, must contribute 5 percent of their pension. Group 2 employees — police officers and firefighters — must contribute 9 percent, Caron said.
Brian Blake, superintendent of the Sanborn Regional School District that serves students from both Kingston and Newton, said although the district has yet to calculate the impact of the proposed rates, it will just have to plan carefully.
"It's going to be a significant increase that we are going to have to include in our future budgets," he said.
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Proposed rate increases
Police 31.06 percent
Teachers30.37 percent
Firefighters25.15 percent
Other town employees21.07 percent
State employees11.4 percent
