So we knew that when the new Government Accounting Standards Board requirements for public pension reporting came out, reported funding levels across the country would drop like a rock, but we didn’t really know how much.
Turns out that the good folks at the Center for Retirement Research at Boston College did some of that work for us a couple of years ago, studying 127 public pensions across the country.
Remember, the new standards have two parts: pensions must report their holdings at current market value, and not average those values over 3-5 years as they had before. And the unfunded liabilities, the portion that they do not believe are funded by current holdings, would have to be discounted at the long-term borrowing rate for the municipality involved, producing a blended rate likely lower than then expected return, and thereby decreasing the apparent funded level.
As of 2009, the numbers for Colorado didn’t look good at all. The school portion of PERA would fall from 65% funded to 52%, and the state portion from 63% to 48%. With current funded levels slightly lower, the actuals are also likely lower now.
It’s important to remember that these are accounting changes, and that the plans didn’t suddenly become less solvent overnight. But as a better reflection of reality, they are still pretty sobering.
