Nothing screams “sexy political story!” than a change by the Governmental Accounting Standards Board. So try to hang with us here, as this one does impact the state’s ongoing budget issues as well as how it accounts for the amount of investments on hand to fund Georgia’s future pension obligations.
Walter Jones has all the details, and we’ll summarize a few here.
First, the shocker: Georgia may have to recognize that pension debts are seven times larger than current estimates show.
No estimates are available from the Employees’ Retirement System of Georgia as of Friday. But Joshua Rauh of Northwestern University estimated that nationally it could boost the figure for outstanding liabilities more than seven times.
“While this information will, in some cases, give the appearance that a government is financially weaker than it was previously, the financial reality of the government’s situation will not have changed,” the GASB observed in its explanation.
But the caveat is, Georgia is still ranked as one of the healthiest states with respect to current coverage of future pension liabilities.
A comparison of all 50 states’ pensions released June 18 by the Pew Center on the States noted that Georgia is ahead of the 80 percent most financial experts describe as the minimum, prudent funding level that 34 states fall below.
Incidentally, the pension fund for legislators had 128 percent of its needed investment.
The Pew Center classified Georgia as “a solid performer at how it managed its long-term liabilities for pensions.”
Changes will require Georgia to move to a “mark to market” method of valuing assets in the pension fund, as opposed to a current seven year average. This will likely mean more volitility of the measure, and could mean bigger budget problems during downturns as more contributions would be needed as asset values fall. Read Jones’ full article to get the nuances of that. The big picture point is, the accounting changes will have direct and sudden impacts on the state’s budget going forward as reserves are increased.