Pensions are not a gift, they’re a promise
There is talk these days in New Hampshire and elsewhere about reducing retirement benefits for public workers in order to address state budget concerns. The phrase “penny wise and pound foolish” comes to mind.
Some seek to increase the costs paid by teachers, firefighters and police officers for their pensions. Others seek to reduce or delay the amounts ultimately received by these workers when they retire. Still, others would begrudge them the right to receive their pensions at all, arguing that workers in private industry generally do not receive pensions. It’s not that making budgets balance is not important. It’s just that changing the bargain made with state employees after the fact isn’t fair. I think we all recognize the need to attract skilled workers to New Hampshire. We have good initiatives, such as Stay Work Play New Hampshire, because we need young people to choose New Hampshire as a place to settle and eventually raise their families.
Nationally, about 15 percent of all nonfarm workers are public employees. These employees teach our children and prosecute crimes. They are the first responders we so respect when we hear of their selfless sacrifices. They comprise an important aspect of our workforce. They are highly skilled and contribute to the success of the communities in which they live. Why wouldn’t we encourage young people interested in public service careers to move to New Hampshire?
I work closely with young people beginning their legal careers. What my young colleagues want is similar to what motivates young workers starting most careers. They want work that is inherently interesting, they hope to achieve a degree of success in their jobs and they want jobs that allow them to reliably provide for their families. It is this last component that is implicated by the current debates.
According to the New Hampshire Retirement System, most public workers in New Hampshire have paid a consistent rate of contribution to their pension funds for many years. Employees in the system reliably paid these contributions and planned their finances accordingly. In 2011, the law was changed to increase employee contribution rates as much as 20 to 25 percent. Similar promises by the state to local communities to share the costs of retirement benefits also underwent dramatic change as the state discontinued its cost sharing.
Many state workers make the decision to trade higher private sector pay for retirement benefits not commonly available in the private sector. That’s a fact of life everyone has known for years. In most cases, it has been a great benefit to the state. I know from my years in the judicial branch that we were fortunate to be able to hire some highly talented staff because of state retirement benefits. Research completed at Boston College and elsewhere shows that public employees suffer a wage penalty. They earn less than their counterparts in the private sector, but this amount is just about made up by pension benefits.
I grew up in a world where a deal was a deal. If public retirement benefits are changed or withdrawn for employees already in the system, we will lose our ability to attract new employees to public jobs. Uncertainty is not our friend. Other states have addressed this concern by making changes prospectively; that is, only having them apply to employees who join the public workforce after changes are adopted into law. At least that puts people on notice and honors expectations. At the end of the day, I don’t think it’s fair or just to change the rules after the game begins. New Hampshire is a special place where public commitments have meanings. We should honor them.
John Broderick Jr., a former chief justice of the New Hampshire Supreme Court, notes that the views expressed above are his own and not necessarily those of the University of New Hampshire Law School, where he serves as dean.