NEPBA NH Director Stephen J. Arnold Sr. Testifies at Decennial Commission on Retirement Reform

Chairman Hess and Esteemed Commission Members,

Please allow me to introduce myself. My name is Steve Arnold. I am a retired Portsmouth Police Detective, Past President of the NH Police Association, Former NHRS Trustee and current State director of the New England Police Benevolent Association.

I am a charter member of the retirement reform that has occurred over the last 12 years. At the onset of the reform discussions, in 2005-2006, I was the President of the NH Police Association representing every police officer in our great state. Needless to say, I was thrown into the fray with zero legislative or political experience. I was soon educated!

During this time, former firefighter Union president David Lang and I founded what is now the NH Retirement Security Coalition. Our primary goal and function was to protect the benefits promised to our members at the time of their employment. Today our coalition in empaneled by every union, organization and association representing New Hampshire’s Police Officers, Firefighters, Teachers and Public Employees.

In 2007, I was appointed by Governor John Lynch to the New Hampshire Retirement Systems Board of Trustees. I served until my retirement in 2009. As you are aware, this was a volatile time for the pension fund and our state and national economies. It was also during this period that it was realized that the pension fund’s funding mechanism was determined to be incorrect showing an under funded crisis.

It was discovered that nearly two decades earlier, the legislature, under pressure of cities and towns, changed the funding mechanism to give relief for a single year. This legislative change was not returned to normal the following year, as agreed upon, and was simply forgotten until our crisis was revealed in 2005-2006. During those years the employees paid their correct contribution at 5 and 9.3% for groups I and II, respectively, all the while the cities, towns and state were fluctuating with the changing economies. During some of those years the employers paid nearly nothing, then jumping to extraordinary rates, like a bad financial rollercoaster.

As the Legislature took up this underfunding matter in the mid 2000’s it was the employees that took the brunt of the crisis blame. For decades, public employees negotiated their terms of employment which included retirement benefits, wages and insurance. During the lean years non-wage related benefits were negotiated in good faith and agreed upon by all employers. Our retirement benefits were part and parcel of those negotiations, setting our contribution rates, earnable compensation and post-employment benefits, such as COLAS and Insurance. Part of this process also included a Special Account that funded our insurance stipend and annual COLAS for our retirees.

Again, let me emphasize that the employees paid their fair share without question or relief. It was a condition of employment that we paid as police officers and firefighters 9.3% of our wages. We had no choice. The Supreme Court as you know recently ruled that there is no vesting until retirement and that there is no employment contract. They got this wrong! No full-time employee working then or today has an opt out option of the NH Retirement System. Let me re-emphasize that this continues to be a condition of employment. Period.

As the Legislature impaneled the first pension commission, the employees looked to work with our elected officials to harmoniously solve the problems. Yet we were shunned and blamed for the problems and were the target of harmful reforms and rhetoric. And for the past decade we have continued to suffer attacks and benefit changes further harming our members. The Legislature drained our Special Account, virtually ending our Post-Employment benefits, and putting the money back into the corpus of the fund. Keep in mind that all the while the employees were funding the Special Account, the State was engaged in a gain sharing scheme that took funds when benchmarks were met. The State’s share of the money was never put into the corpus.

The Legislature also made our municipalities suffer by removing their 35% State contribution. This cost shift not only hurt the cities and towns financially, that burden was passed onto the taxpayers, and our employees got hurt again. As residents, we employees are also taxpayers. To add insult to injury, the cities and towns then began offering no wage increases to the employees. How much suffering can our public servants endure. We got hurt financially by the state and our pension benefits, we got hurt by ending post-employment benefits, we got hurt by reducing our earnable compensation, we got hurt by increased taxes then we got hurt with no wage increases. This trickle-down effect truly hurt every NH public employee and their families. Yet the most harm of all has been the lack of COLAS to our most vulnerable members, the retired and disabled members, who have seen extraordinary increases to the Cost of Living and outrageous and unsustainable insurance hikes that have decimated their pensions. Let me use myself as an example. I retired in 2009. Since my retirement, my pension had been reduced 8 times, with no relief in sight due to unstained insurance increases. My insurance is now more than half of my take home pension. I am not alone. My situation represents the story of virtually all retirees.

The New Hampshire Retirement System is supposed to be independent of our State government, yet the State has taken control of the System through legislative changes and continues to harm the members of the Retirement System through the systematic changes to the Board of Trustees, limiting our input through representation of our 48,000 active members, appointing bureaucrats and political friends, and removing Trustees from the Board and the “Independent Investment Committee.” The State continues to fail the retirees by not appointing a retiree to the Board where there needs to be a representative to have input and monitor the interests of the 36,000 retired stakeholders.

In closing, I implore you to end that pain to your public employees. We have come to accept the changes that were forced upon us. It’s time to move forward and stop tinkering with the System. We are on track to pay off the “Mortgage” and the fund is growing again. We are losing good employees to other states and are in a recruitment and retention crisis. Good candidates for employment do not want to come to a State that continues to reduce benefits and allow extraordinary insurance premiums to cannibalize their salaries and pensions, offer low non-competitive wages and fail to appreciate the value of their service.

Mr. Chairman, thank you for this opportunity to address you and the committee. I will be happy to take questions.

Respectfully submitted,
Stephen J. Arnold, Sr., NH State Director
New England Police Benevolent Association