Pension Reform

By Ed Mendel
June 29, 2015

An accounting board best known for requiring the calculation and reporting of the debt owed for retiree health care promised government workers, which often turned out to be shockingly large, is having another moment.

This month the Governmental Accounting Standards Board applied new rules for reporting pension debt to retiree heath care. It’s a broader look, shows year-to-year changes, and requires local governments in state systems to report their share of debt.

And the new numbers must be reported on the face page of financial documents, not buried deep in the notes of lengthy documents known only to those with green eyeshades.

This month also is the end of the first fiscal year for which local governments are required to report their share of pension debt under the new rules. The two big state pension systems, CalPERS and CalSTRS, are helping local governments do the paperwork.

The purpose of the new rules was briefly outlined last week by the accounting board chairman, David Vaudt, in an interview with CNBC about the change for retiree health care, often called in government Other Post-Employment Benefits.

“Previously, what happened under current standards is that the pension and OPEB liabilities appeared in the footnotes of the financial statement, and regretfully that didn’t get the attention of the policymakers, the mayors and councils, the governors and the legislators,” Vaudt said.

“So, what the new standards will do is they will elevate that pension liability, that OPEB liability to the face of the financial statement. And this will provide a much clearer picture, an enhanced picture, of what these promises actually are, what the magnitude of those promises are, and whether assets are being set aside to actually pay for those benefits in the future.”

Needless to say, public knowledge of a problem does not necessarily lead to a prompt political solution.

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