The Legislature has completed its work on the two-year budget for the State of NH. The budget was approved without the governor's signature. One of the major impacts to our FY2012 budget were reforms to the NH pension system. June 29, 2011 I received an informational bulletin from the NH Retirement System (click here for link) outlining some of these pension reforms. To summarize...
- Employee rates will increase to 7.0% of salary beginning on July 1, 2011
- Employers will assume 100% of the rate for their employee's effective July 1, 2011. Previously this was subsidized by the State of NH @ 25.0%. This is an increase in our expenses of approximately $1 million for FY2012 that was not budgeted.
- The NHRS plans to begin a process to re-certify employer rates for FY2012 and FY2013 based on the reforms made by the legislature to the pension system and expect to complete this process in 1-3 months. These new rates would be effective upon approval by the NHRS Board of Directors and not retroactive.
- The NHRS Board of Directors voted in June 2011, to seek an injunction to stop the implementation of part of the pension reform legislation. Specifically, this injunction is meant to prohibit using the same demographics and projected rate of return on investments that were used in the employer rate certification process in November 2011 for FY 2012 and FY213. The NHRS Board of Directors recently lowered the projected rate of return on investments from 8.5% to 7.75% based on advice from their actuaries. Using the new lower projected rate of return on investments would most likely result in higher, not lower employer contribution rates for FY2012 and FY2013.
- The reform legislation changes the composition of the NHRS Board of Directors effective July 1, 2011.
- The state level NEA, Fire and Police unions have filed a suit against the pension reforms claiming that some of the changes are illegal.
The Bedford School Board at their June 27, 2011 meeting approved the use of Bedford's ARRA Ed Jobs Grant (approx. $238,000) in FY2012 to supplant school level salaries. In addition, they approved the use of FY2011 year-end funds to be used to pay for the Peter Woodbury School roof project ($290,000). These were two items included in the contingency plan adopted by the Board in April 2011 that needed to be decided prior to the end of the current fiscal year (June 30). The contingency plan was developed and approved by the Board in April 2011 to prepare for the potential additional expenses due to pension reform as well as reductions in aid for vocational education tuition. The board accepted my recommendation to hold off on any final decision on the remainder of the contingency plan until their July 11 meeting. My recommendation was meant to provide a little more time before the Board makes a final decision to implement the plan. Given that we most likely will not know the impact of the pension reforms and the legal challenges for a while ... and we are being billed for 100% of the employer retirement rate as of July 1, 2011 it seems inevitable that we will need to implement the contingency plan in its entirety. However, this decision will not be made until the July 11 Board meeting.
As it stands today, after the July 11 board meeting, principals will begin finalizing student assignments for grades K-6 and communicating these assignments mid-July (if they haven't already been communicated). The middle school and high school student schedules will probably not be completed until mid-August due to their complexity and will be communicated prior to the opening of school.
It has been an interesting spring ... and the summer looks to be just as challenging.
