In The Great Gatsby, F. Scott Fitzgerald wrote, "it takes two to make an accident." While not to be confused with a literary masterpiece, quotes are rolling out of a new publication called GASB, and it is an accident waiting to happen.
GASB stands for Governmental Accounting Standards Board, and every public pension plan is subject to some new rules. Much is being reported about the "unfunded liabilities" of retirement plans. The Virginia Retirement System reports that it is funded at about 64% for state employees and 61% for teachers. The Governor and General Assembly have taken action to reduce the costs in the "long haul," but there are few immediate solutions.
As with your personal investments, the stock market is always a gamble. GASB is fundamentally a call for disclosure. Those who are liable for pension payments will have to report their status. In the past, the unfunded liabilities were reported as a footnote. Now there will be sunshine. Sen. Walter Stosch, chair of the Senate Finance Committee, recently stated, "it is clearly the intent of the General Assembly to sufficiently fund the VRS liabilities." As my colleague and the former Director of VRS, Bill Leighty, describes the present system, "The Commonwealth acts like a mortgage holder who tells the mortgage company what he is willing to pay."
Transparency is good, but there is another shoe to drop in GASB. The unfunded liability for teachers must now be reported locally. Billions will now be placed on the books of cities and counties. What will be the impact on debt ratings? Are smaller and poorer districts prepared to deal with this? AND, will the discussion begin prior to budget deliberations next spring? If not, accounting standards will be the least of our worries, it will look like the NASCAR and Talladega.