State of Indiana Pension Debt Getting Worse

Several accounting changes have taken place in the last few years for states to show more transparency in how they report their pension debt.States used a very misleading discount rate method of 7.5%. If you were a business using this same method, you’d be investigated by IRS and your accountants probably wouldn’t even do it. The GASB issued accounting guidelines for change in 2012 and now the new data is rolling out.

For Indiana (graphs below), without boring the audience to death, the new accounting methods are applied and the state pension funding ratio drops dramatically. The pension fund “unfunded liabilities” jumped to over $60 Billion. A $4 Billion increase from the year before.

Here’s more from ValueWalk.com:

Recently, the American Legislative Exchange Council (ALEC) has produced a report that is nothing short of alarming. The report suggests that the 7.5% discount rate utilized by many pension systems is nothing more than a flight into wishful thinking. When a realistic discount rate, such as the risk-free rate, is utilized the state’s pension system appears to be unconscionably unstable. The report entitled “unaccountable and unaffordable” exclaims, “Faulty accounting and reporting methods obscure the magnitude of unfunded liabilities.”

indiana pension

indiana pension 2

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s