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Tuesday, October 5, 2010

The Great GASB

Accounting standards for public entities such as UC are set by GASB, the Governmental Accounting Standards Board (pronounced gaz-bee). Calpensions.com is reporting that GASB is considering rules that could impinge on the UC pension.

One proposed rule would require a change in the way unfunded liabilities are discounted. Another would affect the period of amortization of past unfunded liability which the Regents have pushed out to 30 years. The rules proposed would appear not to affect the "normal cost" of the plan (essentially, an estimate of what incremental liability is being added annually). Apparently, the discount rate applied to that calculation would remain as it is.

But if the unfunded past liability is subject to a lower discount rate than we have been using, that shift would raise the estimate of what had to be amortized. And if the amortization period were shortened from 30 years to a lower figure, that also would raise the annual cost, assuming the Regents pay some attention to their own funding guideline which is normal cost + amortization of past unfunded liability. (So far, they are not meeting their own guideline.)

Oakland: We (may) have a problem.

The article from calpensions is at http://calpensions.com/2010/10/05/pension-rules-shakeup-will-gasb-do-it-again/

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