The Government Accounting Standards Board (GASB) has proposed new standards for Pension Accounting and Financial Reporting, which will affect how public agencies report their financial obligations and liabilities regarding pensions. GASB is a private panel that creates accounting and public reporting rules for state and local governments. Several years ago, when GASB put forward new accounting and financial reporting standards for Other Post Employee Benefits (OPEB) including retiree medical care, we saw a nationwide move to reduce the vesting periods and level of retiree medical benefits public employees receive, as well as an increase in the amount employees contribute toward these benefits.
This time around, preliminary indications suggest that should GASB’s new proposed changes be adopted, the effect will be a dramatic increase in reported pension liability for public agencies. Some of the proposed changes include separating accounting for pension expense from pension funding, dramatically reducing the anticipated rate of return retirement systems use, changing the amortization period. Other changes will create confusion about pension financing and the misleading impression that public agencies have greater pension liabilities than they actually do, providing a misguided impetus for slashing pension benefits.
Local 21, our International Union, and a coalition of labor groups and actuaries have been researching potential long and short term impacts of these changes. Local 21 has also been investigating how other labor unions and our allies are responding to these proposed changes nationally, and encouraging labor leadership on this issue in California. This week, Local 21 and our International union provided written responses to GASB on the impact of the proposed changes during an open period for public comment. We also facilitated the coordination of additional comments on behalf of the Public Employee Committee in San Francisco, and helped our International to send a letter to Senator Tom Harkin and Representative George Miller on the issue.
