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New Hampshire’s Growing Public Pension Funding Crisis. J. Scott Moody President New Hampshire Center for Economic Policy. On the web at: On Facebook at:

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New Hampshire’s Growing Public Pension Funding Crisis

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New Hampshire’s Growing Public Pension Funding Crisis

J. Scott Moody


New Hampshire Center for Economic Policy

On the web at:

On Facebook at:

On Freedom Connector at:

Liberty in economics

What is the New Hampshire Center for Economic Policy?

  • Founded in 2010

  • A 501(c)3 non-profit, non-partisan organization.

  • Dedicated to pursuing public policies that are focused on “Liberty in Economics.”

  • Constitutional Government—setting limits to government activism

  • Fiscal Federalism—clearly defining the roles between state and local governments

  • Balanced Budgeting—debt should be used only as a last resort

  • Introduce Martin Sheehan, Director of Communications

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Unfunded Pension Liability is $3.4 billion

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Unfunded OPEB Liability is $1 Billion

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Growth in NH’s Pension Payment

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BUT, Pension Liability is Understated ! !

  • Economist Robert Novy-Marx (University of Chicago) and Joshua Rauh (Northwestern University) dispute the “discount rate”

  • According to the Government Accounting Standards Board, the discount rate is based on the long-term return of a 60 percent mix in stocks and 40 percent in bonds which is around 8 percent.

  • Novy-Marx and Rauh argue it should be the default-free rate of return—proxied by the 10 year yield on Treasuries or currently about 3.43 percent.

  • New Hampshire uses an 8.5 percent discount rate.

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NH’s Pension Liability Could Nearly Double

  • NH’s total pension liability, in 2008, was $7.8 billion.

  • Novy-Marx and Rauh estimate that the pension liability is at least $9 billion and could be as high as $14.2 billion.

  • This means the annual pension payment should be much larger.

  • Rauh estimates that the pension payment should be at least 75 percent higher.

  • In 2011, that means a payment of $486 million versus the actual payment of $277 million.

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NH’s Pension Burden in Perspective

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  • Only serious reforms of the pension system will bring down the pension liabilities to sustainable levels.

  • Another study will examine reforms in more detail . . . complicated by court-mandated pension property rights.

  • But . . . the one obvious solution is to move from a defined-benefit system to a defined-contribution system for all new employees.

  • The OPEB liability is a lost cause and should be eliminated as WV recently did.

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