Republicans want transparency on public employee pensions
Republicans push for transparency on public employee pensions
By Gretchen Randall
Date: February 23, 2011
Issue: Another side of the public employee situation is the question of pension solvency and whether the federal government would bail out states that run out of money to make pension payments. Now Republicans in both the U.S. House and Senate have introduced legislation, the Public Employee Pension Transparency Act, that would require full disclosure on assets in these pensions. The proposed bill would also prohibit bailouts of these public employee pensions by the federal government.
According to leading financial experts, the enormous debt reported by public employee pensions fails to convey the true size of the debt confronting taxpayers because public pensions are able to calculate their liabilities using unreasonably high discount rates. In many instances, they also distort fair market value of assets in order to hide debt.
The Public Employee Pension Transparency Act (H.R.567 & S.347) will establish new transparency rules, allowing plans to report their existing financial data but also requiring them to report their methods and assumptions. Public employee pension plans will also have to report their liabilities using a uniform accounting standard that will provide realistic rates of return and tie assets to more reasonable fair market valuations. Failure to report will result in the suspension of all federal tax-exempt bonding authority for the jurisdiction(s) whose employees are covered by the non-compliant plan.
Comment: “Public employee pensions represent trillions of debt carried by the American taxpayer. Unfortunately, this debt is masked by accounting practices that would never be tolerated in the private sector. It’s time to open up the books. Once we enact this bill, retirees, government workers, policy makers, and most importantly the people who are paying the bills, can make up their own minds about the soundness of public pensions,” according to Rep. Devin Nunes (R-CA), key author of legislation.
Background and links: Independent studies demonstrate that public employee pensions had approximately $1.94 trillion set aside to pay retirement benefits promised to government workers as of 2008. However, these pensions have liabilities of $5.17 trillion, which means that they are underfunded by $3.23 trillion. Ten states including Oklahoma, Louisiana, Illinois, New Jersey, Connecticut, Arkansas, West Virginia, Kentucky, Hawaii, and Indiana are projected to run out of pension funds by 2020, the vast majority of states will have exhausted their pension funds by 2030.
According to the Wall St. Journal, one Democrat, Rep. Mike Quigley (D-IL) has expressed interest in supporting the bill even though Illinois Governor Quinn’s budget left open the possibility the state might ask for federal help if it couldn’t pay its pensions. http://online.wsj.com/article/SB10001424052748703803904576152882725460082.html?KEYWORDS=gop+bill+takes++aim+at+pension+disclosure
Contact: Gretchen Randall