The GA(A)P in Underfunded State Pension Liabilities

GASB Seeks Better Reporting

Many state government pension plans are seriously underfunded, which is looming as a significant financial crisis for the United States. State government financial statements often fail to reflect the full extent of the impact of the commitments made by state governments to their employees when the employees retire. (See Roger Lowenstein, “Looking for the Next Crisis,” New York Times Magazine, June 27, 2010, pp. 9-10.) The current standards as set by the Governmental Accounting Standards Board (GASB) provide information that may be inadequate for users to accurately assess pension obligations for states. On June 16, 2010, GASB issued its Preliminary Views on “Pension Accounting and Financial Reporting by Employers.” The comment period deadline was September 17, 2010. Prior to issuing its Preliminary Views, the board received nearly 120 written comment letters in response to its March 2009 Invitation to Comment (ITC) on the topic. That feedback plus what was heard during two days of public hearings was considered by the board in developing its Preliminary Views. The board plans to issue an exposure draft of a Statement of Governmental Accounting Standards in June 2011. According to its timetable, a final standard is expected to be issued in May 2013.

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