Finance Committee - 4/4/2018 Page 6
Mayor Donchess
What was it as of June 30, 2015 do you still have that?
Mr. McIntire
| do. It’s also on Page 130. There are three years there and that is how long these new accounting standards
have been present. As of June 30, 2016 it was slightly more than 65%.
Mayor Donchess
As of June 30, 2015?
Mr. McIntire
Yes.
Mayor Donchess
That’s a little depressing.
Mr. McIntire
May | sir? | recognize that and | kind of have become a little used to it. I’ve made some notes in preparing and
| want to make sure | put it in perspective. Nashua certainly isn’t the only one with that liability. As | indicated
there is a funding schedule out there that has the plan becoming fully funded, | do believe it’s in 2039. Sure
that is a little ways off but it is on a funding schedule. The other point | like to make to perhaps put it in context,
| indicated that before a couple of years ago when these new accounting standards came into place, | think |
said it was probably in the disclosure somewhere around Page 100. Rating agencies and financial institutions
knew where to go find that buried on Page 100. So they have always known that Nashua and the cities and
towns in New Hampshire and across the country had this pension liability. When it showed up in on the
balance sheet just a couple years ago, it surprised a lot of people but it really didn’t surprise the rating
agencies and financial institutions because they knew where to go find the disclosure in the notes. Hopefully
that provides a little more perspective. And again, the General Fund, most readers are still going to focus on
the General Fund.
Mayor Donchess
So the State’s objective is to bring the percentage of funding as visa vie the liabilities to 100% by 2039 as Mr.
McIntire suggested. Now as a result, most of the $23 million dollars that we are paying to the State Pension
System has nothing to do with the current employees. It has to do with recapitalizing the system, trying to build
up the capital that they have. | think they have about $7.5 billion in assets. They want to get to $12.5 billion.
Of course each year the pension system pays out benefits and takes in money. According to the Executive
Director of the Pension System, about 80% of the money we are paying in is for the recapitalization. So if we
were just paying pensions for current employees, we wouldn’t be paying $23 million we would paying more like
$5 million. How this happened | don’t really totally understand how they could have let this happen. But there
was a time 20 years ago or so, maybe a little more, where the pension was more than 100% funded. They
reduced contributions and made a lot of bad decisions and the result was what we see now. The people today
are paying the price for those bad decisions in that we are trying to recapitalize the system.
The reason that our pension liability went up $2 million dollars in the current fiscal year over the previous one is
that, as Mr. McIntire said, they reduced the assumed rate of return for these on-going years from 7.5% to
7.25% and that increased our bill by nearly 10% up to $23 million dollars. Those of us who have to pay this
really ask the question, given that the State of New Hampshire and the City of Nashua really never are going to
come to an end, why is it So important to build this up to 100% when it requires such an incredible sacrifice in
