The GASB rules will force state and local governments to stop burying their pension costs in their financials, and show investors upfront what they owe.The new rules would also require governments to report more realistic, lower expected rates of returns on their pension assets, instead of the often overstated returns they now use to paper over holes in their plans blown out by bad investments, among other things….The funded status of Los Angeles’ three retiree plans would drop dramatically under the new rules. Los Angeles’ combined plans would fall from 77% funded to 50% funded, SBS found. The city says it has $31.8 billion in combined assets for all its plans, and that it owes $41.1 billion in benefits for its government workers. But under the new methodology, the city would owe about $23 billion more to retirees not backed by assets, SBS says.
For years, states and cities had been hiding the true cost of their generous pension programs. Now that they’ve been stripped of their accounting gimmicks, the true cost of these unviable programs is becoming clear.This is not what a comeback looks like.[California seal image courtesy of Shutterstock]