NH City Sues State over Increase in Pension Contributions

March 9, 2010 (PLANSPONSOR.com) - The city of Concord, New Hampshire, and two other plaintiffs have filed a lawsuit claiming the state violated the state Constitution by increasing what municipalities and school districts must pay into the pension system for police officers, firefighters, and teachers.

The state for years has paid 35% of the employer contribution to the New Hampshire Retirement System for those employees, but the current budget reduced that portion to 30% this year and 25% next year, which in turn increases the portion local governments must pay, according to the Concord Monitor. Judy Silva, acting director of legal services and government affairs for the New Hampshire Municipal Association, the advocacy branch of the Local Government Center, said forcing municipalities and school districts to pay more into the system amounts to an unfunded mandate, which has been unconstitutional since 1985, the Monitor reports.

The suit claims the change will cost local governments $9 million this year and $18 million next year.

Associate Attorney General Anne Edwards, who will respond for the state, said she had not yet seen the suit, but State Representative Neal Kurk, who worked on the budget in the House Finance Committee, said he did not see how increasing local contributions could be an unfunded mandate, since the state never required local governments to join the retirement system. “When the retirement system was set up, we gave them an inducement to join,” Kurk said, according to the news report. “But we did not require them to join. The fact that we’re reducing the inducement I think escapes the constitutional prohibition.”

The New Hampshire Retirement System was created in 1967 to coordinate four existing statewide programs for public employees: the New Hampshire Teachers’ Retirement System, the New Hampshire Policemen’s Retirement System, the New Hampshire Permanent Firemen’s Retirement System, and the Employees Retirement System of the State of New Hampshire. The state and local governments in 1977 began splitting the employer contribution for the police, firefighters and teachers, according to the New Hampshire Municipal Association.