Portsmouth's pension plan questioned during budget hearing

‘On verge of going out of control,’ resident says

By Jim McGaw
Posted 6/18/21

Although the annual budget hearing earlier this month focused mainly on the town’s plan for the senior center, a couple of members of Portsmouth Concerned Citizens (PCC) raised concerns over the town’s pension plan.

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Portsmouth's pension plan questioned during budget hearing

‘On verge of going out of control,’ resident says

Posted

PORTSMOUTH — Although the annual budget hearing earlier this month focused mainly on the town’s plan for the senior center, a couple of members of Portsmouth Concerned Citizens (PCC) raised concerns over the town’s pension plan.

Larry Fitzmorris of PCC said the “fastest road to financial disaster is to mismanage the pension plan.” 

According to Mr. Fitzmorris, the town’s pension plan is funded at 49.5 percent, “substantially below the 60 percent that is required by the state. This percentage of the funding of the pension plan is declining rather rapidly, while costs are rising.”

For example, he said, the town budgeted about $160,000 for the pension plan in fiscal year 2020, but about $435,000 in 2021 and $760,200 for 2021. The most recent hike in pension plan contribution represents more than 30 percent of the entire proposed budget increase, Mr. Fitzmorris said. 

In short, he said, the town’s pension system “is on the verge of going out of control, in our judgement.”

Mr. Fitzmorris said while the town is not doing anything improper, there are several reasons why pension system contributions have gone up, such as pensions liabilities going up due to more people in the system, increased benefits for employees, or faulty actuarial assumptions.

Town Administrator Richard Rainer, Jr., responding to a query from Mr. Fitzmorris, said the most recent market value of the pension plan is “$69 million and change.”

And, according to council member Keith Hamilton, the town is at about 61 percent funding, which does indeed meet the state requirement.

 “That’s good, so that we all understand, but we’re pouring a lot of money into this,” said Mr. Fitzmorris, who maintained that the pension plan needs to be managed better and in a more transparent fashion. 

“There should be a pension summary page somewhere in this budget that says, ‘This is your costs.’”

Another member of PCC, Tom Grieb, also questioned the town’s contribution to its pension plan, but offered a different argument than Mr. Fitzmorris. Mr. Grieb said the pension contribution noted in the budget is substantially higher — by about $200,000 — than it should be. 

“Obviously this error needs to be corrected before the budget is approved,” said Mr. Grieb, who blamed the deviation on an error by the town’s actuary.

“The problem is the actuary used the wrong investment return rate,” he said, noting the actuary used a rate of 6.4 percent, and not the correct rate of 6.75. “This is a major mistake that needs to be corrected so the residents are not overtaxed.”

Mr. Rainer said the 6.75-percent rate is mentioned twice on one page of the budget, but he promised to look into the matter and get an answer for Mr. Grieb.

Town Council President Kevin Aguiar said he was surprised by Mr. Grieb’s comments, reminding him he had previously stated in e-mails that the town was underfunding the pension contribution. 

Mr. Grieb replied he wants the contribution to be higher, but without the burden placed on taxpayers “in a very un-transparent way.” If the pension is indeed solvent, why not spend the extra money on something else — such as sprinklers for the senior center? Mr Grieb asked. 

Surplus concerns

Mr. Fitzmorris, as he has in past years, also raised questions about the town’s surplus, and charged that residents are being overtaxed while funds are “sitting in the town bank account, doing nothing.”

According to the 2019 and 2020 audits, the town has amassed a surplus of about $1.62 million over the past two years, while the school department has collected about $1.22 million.

“Therefore, the residents have been overtaxed by almost $3 million in the last two budgets,” Mr. Fitzmorris said. He accused the council of “stockpiling” money without telling residents what they plan to do with it.

$69.07M budget

The $69.07 million budget was provisionally approved by the Town Council on May 10. The council can make changes to the spending plan before it is formally approved on Monday, June 29.

The total budget represents a 3.7-percent increase, which includes the Staffing for Adequate Fire and Emergency Response (SAFER) grant the town received to augment its firefighting force. That means the increase in expenditures, Town Administrator Richard Rainer Jr., said, is actually 2.62 percent without the SAFER grant.

The proposed budget calls for a property tax rate of $15.31 per $1,000 of assessed valuation — a 1.57-percent increase over the current rate of $15.073, the administrator said.

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