Why paying down New Hampshire pension debt faster would be a win for taxpayers
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Why paying down New Hampshire pension debt faster would be a win for taxpayers

A “catch-up” payment toward the New Hampshire Retirement System's unfunded liabilities would reduce pension debt and yield long-term cost savings.

  • The state government accounts for nearly $818 million (18%) of the current unfunded pension liabilities held by the New Hampshire Retirement System (NHRS).
  • Pension liabilities are promises made on behalf of the government to public workers and must eventually be fulfilled. Unfunded liabilities operate just like debt. The longer they are held, the more interest they will accrue and the more their costs will be passed on to future generations.
  • Unfunded public pension liabilities accrue interest at the same rates as the NHRS discount rate—currently 6.75% annually—making NHRS unfunded liabilities among the most expensive taxpayer-backed debt held by the state.
  • The state’s 2022 revenue has far surpassed the annual budgets of previous years. As of April, actual revenues exceeded expectations by $382 million, creating a unique opportunity to dedicate some of this one-time windfall to reducing long-term NHRS-related costs and financial risks.
  • Given that budget writers currently have $382 million in unexpected revenue and costs remain high for the foreseeable future, there is no better time to pay down this debt than right now.

Paying Down Pension Debt Faster Is Prudent Fiscal Policy

  • Paying down debt associated with promised, constitutionally-protected public pension benefits faster is a time-tested way to save taxpayers money over the long-term by avoiding interest costs.
  • A payment into NHRS would also immediately lower the annual operation costs of funding the system by reducing debt servicing payments.
  • States that have fully funded their pension obligations (e.g., Wisconsin, South Dakota, etc.) are better positioned to face future recessions and budget challenges.

Takeaway: A “catch-up” payment toward the New Hampshire Retirement System’s unfunded liabilities would benefit taxpayers by reducing pension debt and yielding long-term cost savings.

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Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.

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