States and government employee unions are united to hide the true extent of the cost of pension promises, and the impacts on other basic government services. Leading Republican congressmen have introduced legislation to shine light on these costs.
The Pew Center On The States reported last February that:
$1 trillion. That’s the gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises.
Why does it matter? Because every dollar spent to reduce the unfunded retirement liability cannot be used for education, public safety and other needs. Ultimately, taxpayers could face higher taxes or cuts in essential public services.
Actually, the gap may be closer to $3-trillion, as this National Bureau of Economic Research study lays out. In April, the American Enterprise Institute (AEI) study reported a $3.04-trillion shortfall in funding. The AEI recommended that pensions must disclose greater detail regarding investment risk and pension plans should reform their accounting methods to include the market value of plan liabilities. Then, legislators could have a better idea of how to reform and plan.
Last week, Congressmen Devin Nunes (R-California), Paul Ryan (R-Wisconsin), and Darrell Issa (R-California) introduced The Public Employee Pension Transparency Act (H.R. 6484).
Require that state and local pension plans report two sets of information to the Secretary of the Treasury which will be made available on the internet for public review; one that will detail current public pension liabilities based on existing accounting methods, as well as the methods and assumptions used in that set of numbers, as well as a second set of numbers that would detail the current pension liabilities “but will do so using uniform guidelines,” including what the bill’s authors termed “more realistic discount rates, as well as controls to assure assets are counted using a reasonable estimate of fair market value”.
Deny the ability to issue federally tax-exempt bonds to any state or local government that refuses to report their public pension liabilities.
Cong. Ryan said:
“The Public Employee Pension Transparency Act will make government more accountable to taxpayers by shining a light on the financial soundness and unfunded obligations associated with these plans and I’m honored to join Representatives Nunes and Issa in sponsoring this common sense legislation.”
Additionally, the bill’s authors noted that “state and local government leaders and employee unions are already talking about the possibility of a federal bailout of their pension programs,” going on to note that “Congress must preempt this effort by making a clear policy statement that the American taxpayer will not bailout state and local governments that have recklessly promised unaffordable benefits to their workers”.
Congressman Darrell Issa, Incoming Chairman of the Oversight and Government Reform Committee said: “The American people have a right to know the truth about the unfunded liabilities being run-up by state and local pensions. Quite frankly, if they have nothing to hide, there’s no reason why the states and local governments who control public employee pensions should not embrace this effort to ensure that the taxpayers have a more transparent accounting of the true nature of pension liabilities.”
Lending its support to the measure was the U.S. Chamber of Commerce.
Kicking back, who might have to start really doing their job:
The National Association of Counties, United States Conference of Mayors, National League of Cities, International City/County Management Association, National Association of State Auditors Comptrollers and Treasurers, Government Finance Officers Association, International Personnel Management Association for Human Resources, National Council on Teacher Retirement and the National Association of State Retirement Administrators have announced their opposition to HR 6484, the Public Employee Pension Transparency Act
Their argument:
“This legislation represents a fundamental lack of understanding regarding the strong accounting rules and strict legal constraints already in place that require open and transparent governmental financial reporting and processes. The organizations urge Congress to oppose the legislation because it conflicts with existing governmental accounting standards, increases state and local government costs, and undermines investor confidence in the municipal bond market,” according to the press release.
Yeah, sure, their current oversight, management, transparency, and honesty about public sector pension obligations has worked sooo well.
