National Conference of State Legislatures
National Association of Counties
National League of Cities
United States Conference of Mayors
International City/County Management Association
Government Finance Officers Association
International Municipal Lawyers Association
National Public Employer Labor Relations Association
International Public Management Association for Human Resources
American Federation of State, County and Municipal Employees
American Federation of Teachers
National Education Association
International Association of Fire Fighters
Fraternal Order of Police
National Association of Police Organizations
National Association of State Retirement Administrators
National Council on Teacher Retirement
National Association of Government Defined Contribution Administrators
National Conference on Public Employee Retirement Systems
National Conference of State Social Security Administrators
AARP

 

October 14, 2011

 

Director of Research and Technical Activities                          
Governmental Accounting Standards Board
Project No. 34
Via email: director@gasb.org

 

On behalf of the above-named organizations, we are responding to the Governmental Accounting Standards Board’s Exposure Draft (ED) on revisions to GASB Statements 25 and 27, providing standards for accounting and reporting on the pension benefits that governments provide to their employees. Our organizations represent a wide range of users of governmental and retirement system financial reports, including state, county and local governments, policymakers, elected and appointed officials, public employee unions and retirees, public pension trustees, and other governing or sponsoring bodies of governmental pension plans. While many of us will be submitting comments separately, we wish to collectively relay our continued support for transparent and useful financial reporting standards that account for the specific nature and needs of governmental jurisdictions and their stakeholders and changes that further promote this objective.

Given the significant departure the EDs make from existing governmental pension accounting standards, we strongly urge GASB to be even more deliberative in reviewing and implementing the proposed changes than they have been in preparing them. While we are pleased GASB is field testing the new standards, we are concerned that the timeline may be too compressed to properly assess the impact on all of the stakeholders or to provide adequate time to receive feedback and to evaluate the costs and benefits of all aspects of the proposed rules. This will be critical not only in determining needed final revisions, but also the necessary education and transition time for implementation.

GASB should continue to include the annual required contribution as an integral and essential part of its pension accounting and reporting standards. GASB’s proposed changes would significantly alter the way state and local governments account for pension benefits. In particular, governments would be required to put the net pension liability on their balance sheets rather than the existing practice of reporting their payment of the annual required contribution. While GASB has continued to recognize the long-term nature of governments and their obligations in a number of respects, the Board’s decision to separate pension accounting from long-term funding costs represents a radical departure from long-held practice.

This departure will create much confusion in that the numbers used for accounting purposes would no longer be the same as what is used for pension funding and governmental budgeting purposes. Even though the proposed accounting numbers should not be interpreted as reflecting the funded status or required contributions to the retirement system, there already has been serious misunderstanding in this area. Furthermore, for the numerous retirement systems that share costs across multiple jurisdictions, as proposed, the EDs could result in an assignment of liabilities to jurisdictions that are in direct conflict with how they are allocated under their state statutes and trust law.

However, if GASB is going to move forward on separating governmental pension accounting from funding, it should, at a minimum, clearly and specifically articulate in the final rules that new accounting measures are not based on, and should not be used for, governmental pension funding or budgeting. Furthermore, we again urge GASB to allow time for sponsoring governments to fully understand this departure and recognize the impacts of the proposal before the rules are finalized and implemented.

Thank you for the opportunity to offer our views as you move forward with this important project.

 

National Conference of State Legislatures (Michael Bird, 202-624-5400)

National Association of Counties (Deseree Gardner 202-942-4204)

National League of Cities (Neil Bomberg, 202-626-3000)

United States Conference of Mayors (Larry Jones, 202-861-6709

International City/County Management Association (Elizabeth Kellar, 202-962-3611)

Government Finance Officers Association (Barrie Tabin Berger, 202-393-8020)

International Municipal Lawyers Association (Chuck Thompson 202-742- 1016)

International Public Management Association for Human Resources (Tina Chiappetta, 703-549-7100 x244)

National Public Employer Labor Relations Association (Christi Layman, 703-533-1019)

American Federation of State, County and Municipal Employees (Steve Kreisberg, 202-429-1000)

American Federation of Teachers (Bill Cunningham, 202-393-6301)

National Education Association (Al Campos, 202-822-7345)

Fraternal Order of Police (Breanna Bock-Nielsen, 202-547-8189)

International Association of Fire Fighters (Jim Cho, 202-737-8484)

National Association of Police Organizations (Bill Johnson, 703-549-0775)

National Association of State Retirement Administrators (Jeannine Markoe Raymond, 202-624-1417)

National Conference on Public Employee Retirement Systems (Hank Kim, 202-624-1456)

National Council on Teacher Retirement (Leigh Snell, 540-333-1015)

National Association of Government Defined Contribution Administrators (Susan White, 703-683-2573

National Conference of State Social Security Administrators (Maryann Motza, 303-318-8061)

AARP (Gerri Madrid-Davis, 202-434-3797)