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New Hampshire School Boards Association
Legislative Bulletin
June 10, 2011
A Brief Summary of Education Issues at the State House
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Legislature Adopts Comprehensive Retirement Reform
Both the House and Senate have now adopted the Committee of Conference report on SB 3, moving retirement reform further toward realization. With strong votes in support of the bill in both the House and Senate (House: 250-112; Senate: 19-4), SB 3 now goes to Governor Lynch for approval.
Key Provisions of SB 3:
Changes Impacting ALL employees:
Employee contribution rates will increase. Group I teachers, state and local employees will see a 2% increase in their contributions; from 5% to 7%. Group II police will increase from 9.3% to 11.55%, and Group II fire will increase from 9.3% to 11.80%.
Changes impacting employees vested as of January 2012 (10 years of credible service in the system):
Employees will be limited in the amount of extra and special duty pay that is included in their earnable compensation to determine a pension benefit that is based on their highest 3 years of compensation.
Changes impacting non-vested employees (less than 10 years of credible service in the system):
Earnable compensation will no longer include incentives to encourage members to retire, severance pay or end-of-career longevity payments, nor pay for unused sick or vacation time. An individual's pension benefit will be based on calculations that are averaged over the highest 5 years of compensation instead of 3 years. In addition, a pension benefit will be limited to a maximum of 85% of the average final compensation, or $120,000, whichever is less.
Changes impacting new employees hired after July 1, 2011:
In addition to those changes impacting non-vested employees, all extra and special duty pay will be excluded from earnable compensation. Group I teachers and employees will not receive a service retirement benefit until age 65, but may receive a reduced allowance after age 60 if the member has at least 30 years of service. Group II members will not receive a retirement benefit until age 52.5, but may receive a reduced allowance after age 50 if the member has at least 25 years of service.
Other Changes:
- SB 3 now establishes parameters for part-time employment. For Group I (teachers and employees), in no instance shall part-time employments exceed 32 hours in a normal calendar week. For Group II (police and fire), the same 32-hour limit applies, but an exception was made for seasonable employment. If the 32-hour week is exceeded, the total hours may not exceed 1,300 hours in a calendar year.
- Money remaining in the Special Account will be transferred to the pension annuity fund.
- The current medical subsidy payment to current retirees will not be increased.
- Two study committees are created to continue work on establishing a defined contribution plan and reviewing matters related to disability benefits, medical subsidies, and COLAs. Committee reports are due November 1, 2011.
- The NHRS Board of Trustees will consist of 13 members: 4 employee representatives (teacher, employee, police, fire), 4 employer representatives (school, municipal, county, state), 4 nonmembers qualified with investment and/or financial experience, and the state treasurer. Quarterly reports describing recent board actions, changes to actuarial assumptions, and investment returns, must be provided to the legislature.
- RECALCULATION OF EMPLOYER RATES: NHRS must recertify employer contribution rates for fiscal years 2012 and 2013 to reflect the changes made by SB 3. The employer rates shall be effective as soon as possible, not to exceed 30 days from the approval by the board of the system actuary's recalculation. While deliberations continue on the conference committee for the state budget, neither the House nor Senate is proposing to pay any direct share of local employer contributions as of July 1, 2011. Until new rates are certified, the current TOTAL rate for teachers of 10.70% will increase to 13.95%. Currently, with the state paying a 25% share, school districts are paying 8.02% for teachers. This July, school districts could be paying the full 13.95% if there is no state share. Legislators hope the retirement reform measures will lower local rates enough to be comparable to the level originally anticipated HAD THE STATE PARTICIPATED AT THE 25% LEVEL, which for teachers was 10.46%.
ACTION ITEM
SB 3 is a priority bill for NHSBA, as reflected in our resolution adopted at the January Delegate Assembly. Its reform measures address the increasing unfunded liability, which has grown from $2.75 billion when we first started working on these issues, to $4.7 billion. Previous efforts changed the actuarial accounting methodology, but the continued impact of redirecting $900 million in pension funds for expanded benefits has left NHRS without a "cushion" to respond to recent declines in the market and investment returns. Continued increases in the costs associated with retirement, and the contribution rates paid by employers, is not sustainable. Call the Governor's office now (271-2121), or by email, and urge support for these reforms that have no impact on current retirees, little impact on vested workers, and modest changes to those members with less than 10 years of service.
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Retirement "Spiking": The 125% Rule
HB 462, relative to the determination of employer assessments for excess benefits paid by employers, was originally introduced in the House, then amended by the Senate, and now a Committee of Conference has tentatively agreed on language. Briefly, this penalty is to be assessed when end-of-career payments increase a member's average final compensation by more than 25% over the member's "base pay". Such payments "spike" the pension benefit for which the employee is entitled, and for which corresponding "contributions" have not been made. HB 462 modifies the method of calculating the penalty and phases in the assessments upon employers over a 4-year period beginning July 1, 2012: 25% assessed and collected at the end of FY 2013, 50% in FY 2014, 75% in FY 2015, with full assessment and collection beginning in 2016. These penalty assessments apply to any contracts or collective bargaining agreements entered into on or after January 1, 2010. In addition, NHRS must implement an interactive estimator on their website for employers to evaluate the probable costs associated with this penalty.
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State Budget Update
HB 1 and HB 2: The Committees of Conference on the state budget have begun their deliberations. Additional meetings have been scheduled for this weekend and next week, with closure needed by next Thursday, June 16 for House and Senate adoption by Thursday, June 23. Yesterday conferees agreed on revenue estimates upon which their budget decisions will be made. The main differences for education funding are in the Senate's addition of $3.2 million ($1 million in Tuition & Transportation, $600,000 in Dropout Prevention each year) to meet federal maintenance of effort requirements to maintain $12 million in Perkins funds for the regional Tech centers, and the Senate's addition of funding for kindergarten construction. See last week's Bulletin for a summary of House/Senate budget provisions. |
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"Other" Legislation
In addition to the state budget, additional Committees of Conference are working on compromise legislation:
HB 337, amending the calculation and distribution of adequate education grants. House and Senate conferees (Reps. Lynne Ober, David Hess, Andrew Renzullo, Connie Soucy; Senators Nancy Stiles, Molly Kelly, Jim Rausch) are scheduled to begin deliberations next Monday. The House refused to a conference committee on SB 183, so deliberations will focus on the provisions in HB 337 as adopted by the House and then as amended by the Senate. Both versions contained hold harmless provisions that level fund adequacy for all districts at the same amount of funding for Fiscal Years 2012 and 2013 that was received this year in FY 2011.
HB 542, prohibiting a school district from requiring that a parent send his or her child to any school or program to which the parent may be conscientiously opposed. House and Senate conferees (Reps. Michael Balboni, Joseph Pitre, Gregory Hill, Jack Flanagan; Senators Nancy Stiles, James Forsythe, Molly Kelly) are scheduled to begin deliberations next Tuesday. House language referred to any "school or program" to which a parent was conscientiously opposed, while the senate made reference to parental determination that specific content is objectionable.
HB 622, relative to adjustments to the semi-annual and quarterly collection of property taxes in towns and cities. Tentative agreement was reached on language that allows for the adjustment in the method of calculating the partial payment of taxes related to an increase or decrease in local education taxes resulting from a change to the town's or city's adequate education grant. The change applies to both semi-annual and quarterly collection of taxes.
SB 75, relative to clarification of part-time service in the state retirement system. House and Senate conferees (Senators Fenton Groen, Jeb Bradley, Sylvia Larsen; Reps. Kenneth Hawkins, Seth Cohn, Steven Winter, Wyman Shuler) are scheduled to begin deliberations next Tuesday. Despite being addressed in SB 3, some concern remains with defining part time employment within NHRS and prohibiting members in retirement from returning to full-time employment.
SB 196, relative to the renomination or reelection of teachers and prohibiting assessing teacher performance based solely on assessment scores. House and Senate conferees (Senators Nancy Stiles, James Forsythe, Molly Kelly; Reps. Michael Balboni, Ralph Boehm, Gregory Hill, Mary Gile) are scheduled to begin deliberations next Monday. This bill increases from 3 to 5 years the time required for a teacher to be entitled to the rights of notification and hearing for failure to be renominated or reelected. It also prohibits nonrenewals for reductions in force from being based solely on seniority. In addition, for the issue of nonrenewal, review by the state board of education becomes the exclusive remedy available to a teacher.
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For the complete text of any bill, go to the general court web site and enter the bill number, e.g. SB1, HB34 or CACR3 (no spaces!), and make sure the Session Year is 2011. For more information on specific legislation, please call Dean Michener, NHSBA Director of Governmental Affairs at 603-228-2061, or email: deanm@nhsba.org
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Dean Michener
NHSBA Dir. of Governmental Affairs |
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