Debt

Capitol Alert
By Dan Walters
dwalters@sacbee.com
March 18, 2016 12:07 PM

  • New accounting standards require pensions to be on balance sheet
  • The rules will also require health care obligations to be listed
  • Pension reformers praise inclusion as helping their cause

Although its 2014-15 budget was balanced, California’s state government ended the fiscal year $175.1 billion in the red, thanks largely to state retirement obligations that had to be included in its balance sheet for the first time.

Under new rules by the Governmental Accounting Standards Board, state and local governments must list unfunded pension liabilities as debts alongside the more traditional bonds and other forms of debt.

Counties and other local governments have been rolling out their annual financial reports this year, some showing multibillion-dollar deficits for pension obligations, so the state’s report was not unexpected.

Pension reform advocates have praised the new GASB standards, saying they drive home their point that pension obligations are debts that distort state and local finances.

The newly revised state data are contained in the “comprehensive annual financial report” that Controller Betty Yee issued on Friday. And she noted in a cover letter that the debts for “postemployment benefits” will jump again in the report for the 2017-18 fiscal year, when state retiree health care must be included under GASB’s rules.

Gov. Jerry Brown’s proposed 2016-17 budget pegs unfunded health care obligations at $71.8 billion, and he has been negotiating new contracts with state labor unions that compel employees to begin paying down those costs, most recently with the California Correctional Peace Officers Association.

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