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New GASB Pension Rules to Impact PLeasanton Balance Sheet

Original post made by Transparency Is Overdue, Another Pleasanton neighborhood, on Aug 9, 2011

GASB's New Pension Accounting Rules Coming to Pleasanton

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Comments (16)

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Posted by San Jose planning for impact
a resident of Another Pleasanton neighborhood
on Aug 9, 2011 at 5:21 pm

GASB Releases Proposed Changes to Pension Reporting, Effects Already Measurable

July 28, 2011

The Governmental Accounting Standards Board (GASB) has issued two Exposure Drafts documents outlining proposed amendments to the existing pension standards. The reforms are intended to improve how costs and obligations associated with government pensions are calculated and reported.

In San Jose, the proposed changes are already being taken under advisement, and using the proposed new rules, the City Auditor's office has re-examined their pension liabilities. Under the proposed GASB guidelines, the city's unfunded pension liabilities will (at a minimum) nearly double, from $1.1 billion to $2.1 billion (as of June 30, 2010).

Web Link


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Posted by Mendocino analyzes new GASB pension rules
a resident of Another Pleasanton neighborhood
on Aug 9, 2011 at 6:27 pm

Major Change in Mendocino County Financial Statements Coming: Pension expense = 10 million. Strike that - pension expense is 50 Million Dollars.


"Yes - reported pension expenses will jump from around $10 million today to about $50 million.

The Governmental Accounting Standards Board (GASB - pronounced "Gas-Bee") sets the rules for how state and local governments produce their financial statements. GASB is one year away from imposing huge reforms on how governments must report their pension finances.

The Fatal Flaw

In a nutshell - GASB allows governments today to report the pension expenses that create Unfunded Pension Debt as expenses in the future when the debt is paid. But they aren't they're expenses of the past when employees earned those pensions and the debt was created

Because of this "Fatal Flaw" nearly a half billion dollars will be extracted from Mendocino County's weak local economy over the next 30 years to pay pension expenses the County never reported to the people.

But GASB now knows how costly their mistake has been all across the US. The rules are about to change - big time.

They're gonna hit Mendocino County like a ton of bricks."

I discovered this website while researching this new topic. It is excellent and I encourage others to read view this website:

Web Link


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Posted by anonymous
a resident of Another Pleasanton neighborhood
on Aug 9, 2011 at 8:24 pm

I'm all for more transparency. If it weren't for the efforts of a few pleasanton residents that went to city hall asking for the information regarding pensions, we would have had another bad contract force fed into the budget. It is past the time that our employees accept the realities that their pensions & healthcare benefits are costing taxpayers. It needs to end and the employees need to make concessions that reflect both reduced revenue and increased pension costs.

Why should we be paying for people to retire at age 50 with 98% of their salary. We shouldn't. I hope the current contract negotiations with the PD reflect both the increased cost of pensions and that the revenues that are paying 2011 wages are only at 2005 levels.


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Posted by Reality sets in
a resident of Another Pleasanton neighborhood
on Aug 10, 2011 at 9:00 am

The jig is up !! ...truth-telling time. The public is the employer and boss. We have a right to know everything that is going on in every department, and most definitely where every penny goes ! !
Three cheers IF we every do learn what secret deals are made in the back rooms.


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Posted by Bill
a resident of Amberwood/Wood Meadows
on Aug 10, 2011 at 12:47 pm

In the corporate world isn't this called "cooking the books".

The book that is a classic "How to Lie with Statistics" should be updated with a chapter on "How to Fool the Public with Smoothing Algorithms".


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Posted by Netty
a resident of Another Pleasanton neighborhood
on Aug 10, 2011 at 2:11 pm

Sounds like its time to move to the boondocks where they have few public employees! Otherwise, expect the vacuum cleaner to be applied to your wallets and purses. Also, since the Obama Economy is one of the big reasons pension funds are in such dire straits, be really thoughtful about who you vote for in 2012.


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Posted by Informed Resident
a resident of Mohr Park
on Aug 10, 2011 at 3:07 pm

Get ready for the "government pension earthquake" that is about to hit our Nation! As with real eartquakes, California will lead the Nation with perhaps the largest "hole" in its State, County & Municipal pensions funds. It easy to see why Union Membership is only growing in the Public Sector. Our politicians continue to be bought off with the reelection votes that the Unions provide them. In turn, many politicians then vote to approve large pension packages for public employees. While organized labor has brought some benefits to the work place, feeding at the "public pension trough" will be our State's next financial earthquake.


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Posted by Mike
a resident of Highland Oaks
on Aug 10, 2011 at 3:55 pm

La pregunta grande is whether the state and municipalities will rob their respective Peters to pay Paul or simply lower pension payments to the biggest gluttons on the list.

I sympathize with everyone who will be affected by this.


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Posted by Hurry up with the transparency
a resident of Another Pleasanton neighborhood
on Aug 10, 2011 at 6:43 pm

From CalPERS:

"SACRAMENTO, CA – The California Public Employees' Retirement System (CalPERS) today reported a 20.7 percent return on investments in preliminary estimates for the one-year period that ended June 30, 2011...

As of June 30, 2011, the market value of CalPERS assets stood at approximately $237.5 billion. A year earlier, the fiscal year ended with $200.5 billion. Investment returns are based on compounded daily earnings over the year, including continuing member contributions and benefits payments, and don't precisely correspond to one-year changes in market value."

The math doesn't work. If the assets on June 30, 2011 stood at 237.5 billion, and one year earlier they were 200.5 billion, and they achieved market returns of 20.7%, why aren't the assets 200.5 billion TIMES (1 + .207%), or 242 Billion? What happened to the difference between 242 Billion and 237.5 Billion? Where did that 4.5 Billion go? Was the CalPERS return really 21%, or is it that pension expenses are exceeding pension revenue even when the fund returns almost 21%? If that's the case we are in very serious trouble.

As of yesterday (8-9-2011) CalPers assets totaled 224 Billion. Today markets lost 4.6%. If CalPERS lost 4.6 percent there assets have decreased another 10 Billion for a total reduced total valuation of about 214B. That is much less than the 237.5 Billion they were claiming as recently as five weeks ago.

CalPERS says, "Investment returns are based on compounded daily earnings over the year, including continuing member contributions and benefit payments, and don't precisely correspond to one-year changes in market value."

So even though taxpayers have contributed probably 10 billion to the CalPERS fund over the past year, the CalPERS assets have only grown over the past year and five weeks by 14 billion. 14 billion minus 10 billion in contributions equals 4 Billion in net investment gains. That isn't 20.7%.

Taxpayers are on the hook for the 100's of billions in current shortfalls. How can we allow this to happen?

I hope someone can explain this to me.


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Posted by Get Ready for GASB
a resident of Another Pleasanton neighborhood
on Aug 11, 2011 at 8:47 am

Get Ready for GASB
Pension accounting changes should prod advance planning.
BY: Girard Miller

"As reported here last month, the Governmental Accounting Standards Board (GASB) has issued an exposure draft of proposed changes in pension accounting rules that will repaint the landscape in municipal finance. Once the rules become final as expected, pension liabilities will be displayed on the balance sheet, and the "true cost" of pension benefits must be reported in the operating statement — even if the employer fails to make the necessary annual contributions. That true cost will be higher than most employers now pay. Although implementation is still a year or two away depending on the size and nature of the system, it's time now to begin preparing for the implications of some important changes.

- Debt managers must prepare to explain to investors and bond rating agencies how their balance sheet will look after these liabilities (which total about $1 trillion nationally) become reportable, and why.

- Labor negotiators will finally have a better way to show the impact of promised benefits and the fiscal consequences of future proposed benefits increases.

- The amortization of unfunded liabilities will be accelerated, which will result in higher actuarially calculated employer contributions. The old game of deferring pension costs for 30 years and rolling over the debt forever, like a credit card, will end next year.

- Pension trustees and administrators need to figure out whether they will require employers to contribute on the basis of generally accepted accounting principles (GAAP) or on some other formula. In many cases, the GAAP requirements will present "sticker shock" and the pension plans will find it necessary to tip-toe in GASB's direction rather than plunge in immediately.

- Budget officers need to prepare for whatever this means in their 2013-14 fiscal year budgets, and some states and large municipalities with $1 billion pension plans must address these as early as next summer.

- Although these accounting rules apply only to pensions, the GASB has begun a parallel study project for other post-employment benefits (OPEB) such as retiree medical plans that will inevitably need to follow the same or similar standards. When we add those numbers, the total balance-sheet liabilities for an average employer with both pension and OPEB benefits at average levels will exceed $150,000 per state and local government employee."

The rest of the article talks about action guidlines for states & cities to use in preparation of the rule changes.

Web Link


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Posted by Bill
a resident of Amberwood/Wood Meadows
on Aug 11, 2011 at 12:17 pm

The people running the CalPERS pension fund aren't crooks, just optimists. Dilbert 8/10/11.


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Posted by intersting
a resident of Another Pleasanton neighborhood
on Aug 11, 2011 at 5:01 pm

"The math doesn't work. If the assets on June 30, 2011 stood at 237.5 billion, and one year earlier they were 200.5 billion, and they achieved market returns of 20.7%, why aren't the assets 200.5 billion TIMES (1 + .207%), or 242 Billion? What happened to the difference between 242 Billion and 237.5 Billion? Where did that 4.5 Billion go? Was the CalPERS return really 21%, or is it that pension expenses are exceeding pension revenue even when the fund returns almost 21%? If that's the case we are in very serious trouble."

Interesting observation. You mention that market losses equaled 4.6% and, therefore, Calpers has lost 10B. Calipers asset allocation is something between 50-60% in equities so their actual loss is probably something closer to that percentage of the 10B you suggest. I think today's market gains provided significant relief from yesterday's losses, although I'm not suggesting that these gains provide any real relief to the long term problems facing the pension system. They don't.

Regarding the quoted text, that is a legitimate concern. When Calpers was claiming 61% funding our own pension plans were 52 -60% funded. I think the PD was the group 60% funded, but the city has transferred 8 million (I think) from the retiree medical account to the PD group plan in an effort to increase their funding to the group level. They are probably less than 60% funded when factoring the additional 8 million contribution.

This is a complex issue with the potential for significant fallout if not properly addressed. Pleasanton's unfunded pension liabilities are more significant than the unfunded liability of CalPERS as a whole. There is a reason for that.

The GASB discussion is interesting in that the rule changes will change the complexion of the discussion for the better. Hopefully Nelson and Emily can comment on these changes during a forthcoming council meeting. I would love to here their opinion.

Back to the top, I'll take a look at the CalPERS CAFR and report back.


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Posted by Interesting
a resident of Another Pleasanton neighborhood
on Aug 11, 2011 at 5:26 pm

I just want to clarify something. What I find INTERESTING with the quoted text from the above post is that the increased cost/payment into the plan still doesn't cover the cost of the plan. We currently pay almost twice the advertised price of the plan yet the funding status continues to shrink, even as the returns grow. Adding to the issue is that the disparity between the contributed funds and the payments to annuitants continues to escalate in a very unhealthy way (more money going out in pension payments than coming in contributions).


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Posted by ?
a resident of Another Pleasanton neighborhood
on Aug 11, 2011 at 7:37 pm

How will these new standards affect the management and cost of our city government? I assume this will be an issue for Calstrs as well so how will it affect our school districts?


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Posted by The council meeting
a resident of Another Pleasanton neighborhood
on Aug 15, 2011 at 7:45 pm

I hope this topic is discussed at tomorrow's council meeting? Issues as important as this need to be explained to the public. I'm sure by now the finance department has analyzed the potential impacts of the GASB changes and I, as someone that will attend the council meeting, hope to hear Emily or Nelson provide their opinion.


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Posted by Crazy Jake
a resident of Happy Valley
on Aug 15, 2011 at 9:53 pm

Oh boy! There sa goin' to be a meetin' and sounds like its gonna be a real good time had by all. Everybody bring their dancin' shoes and corn cob smokers!


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