GOP pension-reform effort scrambled by Democratic House takeover

Laste modified: Monday, November 19, 2012
A special House committee voted Thursday to recommend that the Legislature replace New Hampshire’s public-employee pension system with a 401(k)-style defined-contribution plan for newly hired state workers.

But that party-line vote – seven Republicans in favor, two Democrats opposed – came two days after an election that saw Democrats retake the House. Gov.-elect Maggie Hassan has said she opposes a defined-contribution plan, and leaders in the Republican-led Senate were already uneasy about estimates that introducing such a plan could cost as much as $1.2 billion.

As a result, the defined-contribution idea, which had been championed by House Republican leaders including Speaker Bill O’Brien, seems unlikely to go far in the coming legislative session.

“It definitely would have a rocky road ahead of it, for political reasons and the arithmetic reasons,” said Sen. Jeb Bradley, a Wolfeboro Republican who has long worked on pension-reform issues.

That doesn’t mean pension reform is dead – legislators from both parties say they want to continue studying the issue. But those discussions may focus less on defined-contribution plans than on tweaks to the current pension system or alternatives such as a cash-balance plan, a hybrid that would combine the pension system’s defined-benefit nature with individual accounts as in a 401(k)-style plan. The cash-balance concept has been praised by the New Hampshire Municipal Association and the New Hampshire School Boards Association.

Public-employee unions remain unenthusiastic about the whole subject.

“It’s time that we start looking at the larger issues that the state has, and focus on jobs,” said Diana Lacey, president of the State Employees’ Association. “We don’t have any choice if the Legislature wants to go on one of these study rides. We have to go along. But it’s a waste of money. . . . Let’s move on, folks.”

Two days late

The Republican-led Legislature passed a pension-reform law last year that shifted the burden of contributing into the New Hampshire Retirement System, which manages pensions for state and other public employees, including teachers, firefighters, police officers and municipal workers.

But House Republicans wanted to look at a more fundamental change to the retirement system for public workers, moving from the current pension system to a defined-contribution plan. That, advocates said, would make retirement benefits more portable for employees, bring public benefits in line with those in the private sector and help stem future growth of the pension system’s multibillion-dollar unfunded liability.

In July, O’Brien appointed a special committee to study defined-contribution plans and make a recommendation to the House for legislation, presumably to be taken up in the 2013 session.

“The current level of benefits for public employees is unsustainable and taxpayers just can’t foot the bill in this recessionary climate,” O’Brien said in a statement at the time. “I’m confident this committee will work quickly and thoroughly to move toward a defined contribution plan that will save taxpayers money while also bringing about long-term solvency to the system.”

The committee spent months studying the issue and the idea that the “transition cost” of implementing such a plan could be lower than the initial estimate of $1.2 billion depending on how it was designed. The panel was preparing to make its recommendation Oct. 23, two weeks before the election, but delayed the final vote after a nearly three-hour hearing.

The panel’s next meeting was scheduled for two days following the election.

In the meantime, the landscape changed. Democrats took 222 seats, a majority, in the House in Tuesday’s vote. O’Brien is set to lose his leadership post.

When the defined-contribution study committee met Thursday, three of its eight Republican members – Rep. Gregory Hill of Franklin, Rep. Spec Bowers of Sunapee and the chairman, Rep. William Smith of New Castle – had lost their seats in the election. (One of the panel’s three Democrats, Rep. Randy Foose of New London, didn’t run for re-election or attend Thursday’s meeting; Rep. Patrick Abrami, a Stratham Republican, also was absent.)

Two Democratic members, Rep. Steve Shurtleff of Penacook and Rep. David Campbell of Nashua, urged the panel to not take a vote at all, given the changed political climate. 

“In light of the election, I think that may be a wise course, is to continue the study,” Campbell said. “Because certainly, this plan here is not going to happen right now. . . . I think to make a recommendation at this point, while you can do it, I think it’s probably not in the best interests of the overall study going forward.”

But Rep. David Hess, a Hooksett Republican, said the committee should complete the task it was given.

“We have a charge and we have a moral responsibility, if not a legal responsibility, to respond to that charge,” Hess said. “Saying, ‘Let’s wait until next year,’ I think is an abdication of that responsibility. And while the political situation has certainly changed, some might say dramatically, I still think we have that obligation, and not making a recommendation is simply not fulfilling our charge.”

So the panel spent nearly an hour and a half tweaking Smith’s five-page draft report, removing some of its more provocative language, including a statement that the current pension system “in some ways resembles a Ponzi scheme.” That, Republican Rep. Carol McGuire of Epsom said, was “inflammatory, and not entirely correct.”

The committee’s recommendation, adopted on a 7-2 vote: Introduce a defined-contribution plan for all newly hired state workers. Other government bodies, such as county and city governments, would have the option of sticking with the defined-benefit system or opting into the defined-contribution system.

But there was also a general recognition that the committee’s report was unlikely to gain much traction in the newly Democratic-controlled House. 

“Who knows?” said Republican Rep. Neal Kurk of Weare. “The Senate might enjoy reading the report.”

Study may continue

Still, Shurtleff and Campbell, who is running for speaker against current House Democratic Leader Terie Norelli of Portsmouth, both said during Thursday’s hearing that the debate over reforms to the pension system shouldn’t end.

Shurtleff said in an interview that he intends to introduce a bill in the coming session “to keep this committee going and to continue looking at this whole area and to get all the stakeholders involved, to try to come up with something that’s fair and equitable for everybody.”

Dave Lang, president of the Professional Fire Fighters of New Hampshire, said the Legislature should address the retirement system’s long-term solvency and costs, but that such reforms can be made within the framework of the existing defined-benefit system.

“It’s probably one of the poorer decisions that could be made, moving from a defined-benefit plan to a defined-contribution plan, from a cost perspective for employers,” he said.

Bradley said many policymakers like the idea of a defined-contribution plan, but worry about the additional cost it’s projected to carry. And, he said, given Democratic control of the House and governor’s office and a narrow Republican majority in the Senate, any reform bill would need bipartisan support.

But he said he was heartened by the willingness voiced by Shurtleff and Campbell to continue looking at the issue.

“Reasonable people can disagree, but I think, as long as there’s a willingness to have a discussion . . . I find that pretty encouraging, quite frankly,” Bradley said.

(Ben Leubsdorf can be reached at 369-3307 or bleubsdorf@cmonitor.com or on Twitter @BenLeubsdorf.)