Local and state government employees better brace for pension cuts.
I would advise not looking for sympathy from taxpayers who do not have as much access to generous 401k’s or pensions themselves. Taxpayers also have been educated on how government officials have “cooked the books” in promises and faulty accounting gimmicks.
Local government pensions have been going through more stringent accounting methods deemed necessary by the Government Accountability Standards Board (GASB).
Chief Investment Officer showed a new report of the financial cracks growing wider in these pension funds:
With the growth of liabilities outpacing that of investments last year, the aggregate funded status of state and local pension plans declined in fiscal year 2016, according to a new report from Boston College’s Center for Retirement Research.
The report said that in 2016, liabilities valued under the old and new standards grew by 5.6% and 6.3% respectively, which exceeded asset growth, causing the funded ratios to drop. It also said the value of liabilities depends on the rate used to discount promised benefits.
The traditional discount rate averaged 7.6% across public plans in 2016, while the blended discount rate used for the new GASB standard averaged 7.3%. As a result, the liabilities measured under the new GASB standard were about $160 billion (or 3.3%) greater than those measured under the traditional method.