The Government Accounting Standards Board (GASB) has just adopted new rules for the calculation of pension liabilities. This move has been long expected. It has also been long dreaded by most public sector pensions because as the Wall Street Journal (WSJ) makes clear, states would now be required to use more conservative assumptions as they determine their unfunded actuarially accrued liabilities.
Using the new numbers, three of Ohio’s systems are worse off and one is actually better off. The School Employees Retirement System went from being 72.6 percent funded to 60.3 percent, a shocking 12.3 percent drop. Meanwhile, the School Teachers Retirement System, which was already poorly funded at 59.1 percent before the GASB change, declined 1.9 percent to end up at 52.7 percent.
The Ohio Police and Fire Retirement Fund also took a hit under the new GASB standards with a 4.9 percent drop from 72.8 percent to 67.9 percent.
Only the Ohio Public Employees Retirement System improved, moving from 77 percent funded to 79.6 percent funded. As of the writing of this blog, the Highway Patrol System was not available.
It is important to note that the numbers outlined here and referred to on the chart in the WSJ story were analyzed by the Center for Retirement Research at Boston College and are not necessarily the same numbers outlined by the individual Comprehensive Annual Financial Reports issues by the individual pensions.
These numbers continue to highlight the need for comprehensive pension reform, in particular for the funds that are showing the largest shortfalls, namely the School Teachers and School Employee pension systems.
While there are currently significant changes to the systems being considered by the General Assembly, none of those changes will fundamentally alter the fact that taxpayers bear all the risk while public sector retires reap all the rewards.
Only a shift from defined benefit plans to defined contribution, or mandatory hybrid, plans will restore equity between taxpayers and the public sector and bring stability and flexibility to Ohio’s retirement system.
