BEDFORD — The escalating cost of funding the New Hampshire Retirement System is putting an additional squeeze on already tight town budgets.

According to Town Council Chairman Bill Dermody, a recent notice from the NHRS establishing rates for the town’s contribution to employee retirement costs showed a significant increase.

“Even if there were no other changes to the number or salary of our public employees, the rate increase adds close to $1 million to our collective NHRS obligations,” Dermody said in a letter to The Bedford Bulletin.

For every $1 million added to the Bedford budget, the tax rate goes up by about 30 cents per thousand dollars of assessed home value, Dermody added.

Dermody said the current system is a far cry from what was established at the beginning of the program in 1967.

“When municipalities were initially mandated by the Legislature to participate in the NHRS, the State paid 40 percent of the cost,” Dermody said. “Subsequently, the Legislature began reducing the state’s participation until two years ago when the Legislature cut the state’s share to zero.”

Dermody said the town is “gravely concerned” about the its ability to maintain town services, infrastructure and staffing levels and come up with a budget that keeps taxes affordable.

“Nobody is taking issue with those in the retirement system,” he said. “The object is not to take retirement away from any individual.”

Town Manager Jessie Levine said there are two separate issues to be considered.

One is the absence of the state’s contribution to the retirement system, which she said towns have been absorbing since 2010.

“We’ve already taken that hit,” she said.

The other is the new rate, which is set by the trustees of the NHRS every two years.

“Rates have been going up increasingly to close the gap of the unfunded liability,” Levine said.

While the new rate is not effective until July 1, 2013, Levine said the town has to come up with about half of the rate increase, or an additional $143,000, in next year’s budget.

According to a fact sheet found on the NHRS website, the retirement system trust fund stood at $5.9 billion as of June 30, 2011, up about $993 million from 2010.

The NHRS is currently 57.4 percent funded, meaning the retirement system has an unfunded actuarial accrued liability, which is the difference between the actuarial value of the retirement system’s assets and the actuarial value of benefits already accrued.

While the unfunded liability is attributed by the NHRS to the trust fund’s investment performance over the past 10 years, the fact sheet points to public policy decisions made more than 20 years ago that have been reversed.

Levine, who is expected to present her budget to the town council this week, said she is preparing a budget that addresses needs as presented by department heads, and will work with the council to make any necessary adjustments.

School Superintendent Tim Mayes said the district is about six months behind the town in terms of budgeting because it operates on a fiscal year as opposed to the town’s calendar year, but said the district’s estimated contributions to the retirement system is about $650,000.

As the school budget is developed, Mayes expects the contributions issue to play a role.

“We’ll just have to weigh that in terms of the budget and how that should impact the bottom line,” he said.

Mayes said the district has had to deal with similar budget hits in the past, including fluctuating health care costs for employees, with a nominal increase some years, and more significant in others.

“The board has had to manage that over the years, and has done that successfully,” he said. “We’ll manage this the same way.”

Mayes will give a brief overview of the school district budget on Nov. 13.