Supreme Court Rules in Favor of State in Suit over Pension Subsidies
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The New Hampshire Supreme Court has ruled that the changes to state law reducing the state subsidy to local governments for pension costs for teachers, police officer and fire fighters do not violate the State Constitution.
Prior to July 1, 2010, the State of New Hampshire picked up part of the pension costs for the political sub-divisions. Rather than pay the full assessed employer portion for their employees, the political subdivisions paid 65% of the cost, with the state paying the remaining 35%. As part of the 2010-2011 budget, the legislature scaled back this subsidy to a 70%/30% split for fiscal year 2010 and a 75%/25% split for fiscal year 2011. (This subsidy was later eliminated entirely in the 2012-2013 budget.)
The City of Concord, Belknap County and Mascenic Regional School District filed the suit after these provisions passed, arguing that this change amounted to an unfunded mandate, thus violating Part I, Article 28-a of the New Hampshire Constitution. The article states that the State may not place a mandate on a political subdivision without providing funding to fulfill that mandate.
Given the recent nature of 28-a, having only been passed in 1984, this issue has only appeared before the New Hampshire Supreme Court six times. In their ruling on this case, the Court outlined:
(F)our elements that must be present before Article 28-a is violated: (1) the State must mandate or assign to a local subdivision (2) a program or responsibility (3) that is new, expanded, or modified from what existed before the state action and which (4) necessitates additional expenditures by the local subdivision”
However, previous case law has used a narrow definition of “responsibility” establishing that “an increase in expenditures alone is not dispositive of whether a program or responsibility has been expanded or modified.”
The Court continued by noting that the State has no control over the salary of those working for political subdivisions, the primary determinant of the state portion of the pension costs. Were 28-a constructed to prevent the legislature from changing or eliminating this contribution, the State would be at the budgetary mercy of the political subdivisions. The court notes that “Nothing in the text or history of the article indicates that…the amendment was intended to circumscribe the ‘supreme authority’ of the legislature by requiring it to fund local function over which it has no effective control”
In concluding, the Court found that the changes made “…does not require an additional category of local employees to be part of the NHRS. Rather it merely shifts part of the financial obligation for funding the NHRS from the state to the local subdivisions without altering any underlying activities. While (it) results in increased expenditures, (those) alone are not a violation of article 28-a.”
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