Truly Conservative Pension Forecasts Could be Coming
Critics say the pension funds’ “discount rates” are based on very rosy, perhaps unattainable, projections of earnings. But were they to reduce those rates to a safe level, the unfunded liability numbers would soar, and the political fallout would be intense.
The dynamics of pension accounting — and therefore its politics — are changing.
The Connecticut-based Governmental Accounting Standards Board is decreeing that state and local governments and their pension funds must not only fully report unfunded liabilities on their balance sheets as debt but must also include what those liabilities would be using super-safe bond earnings.
A Stanford University team has already analyzed California’s three state pension systems on the latter basis and reported a half- trillion dollars in unfunded liabilities.