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New GASB pension rules put unfunded liabilities at $4.6 trillion

A new analysis of state pension funds using new GASB accounting rules finds...

New financial reporting rules from the Governmental Accounting Standards Board are expected to show that public pensions aren't as well funded as some had previously thought. A new analysis from non-profit financial reform advocate State Budget Solutions could provide a glimpse of what the new reporting rule will reveal.

The SBS report on the state of government pension funds indicated that average public employee pension plans are only 41 percent funded, and that total unfunded liabilities topped $4.6 trillion as of 2011. Previous estimates, including a 2010 estimate suggesting the pensions were underfunded by $885 billion, used the previous accounting model. The new report used the most recent standard approved by the GASB.

"There is no option for status quo or incremental adjustments. Drastic reforms, innovations and political courage are needed to put our states and municipalities back on the path to fiscal survival," said Bob Williams, president of State Budget Solutions. "Real reform must be based on actual numbers instead of the optimistic outlook presented by using unrealistic assumptions."

The rules are expected to take effect in 2014. According to the Rockford Register Star, the Teachers' Retirement System in the state of Illinois could see its funded ratio drop from 48.4 percent to 18.8 percent under the new accounting standards.

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