Government accounting rules have forced a California audit that has revealed an increase in the “debt” it owes for pension liability by 2,000 percent this year. The state could nearly double the debt again next year when it is forced to account for unfunded retiree health benefits.
The Governmental Accounting Standards Board (GASB) is instituting new rules, under statement No. 68 and 71. State and local governments are now required to present greater transparency in the calculation of their “net pension liability,” which the PublicCEO blog warns is a “hidden” and “unsustainable” long-term drain on basic services.
According to a news release by California State Controller Betty Yee, “The GASB accounting rules will help to increase transparency, which will in turn focus local and state governments on ensuring they adequately plan for these important long-term obligations.”
Under the old rules, last year’s “CAFR” only reported a $3.2 billion pension debt for the state pension plans covering obligations for judges and the closed pension for legislators. But the report for June 30, 2015 now includes “debt” for the five California Public Employees’ System (CalPERS) plans of $39.4 billion, and $22 billion for the state’s one-third proportion of the California State Teacher’s Retirement System.
The shock and awe of “hidden” debt will become even worse next year, when GASB requires California’s CAFR to acknowledge that the debt associated with “net OPEB obligation” of lifetime retirement healthcare is understated at $22.3 billion.
Controller Yee in January estimated that the CAFR for June 30, 2016 will be required to post a state debt for “other post-employment benefits” associated with lifetime retiree health care, which will jump by $51.8 billion to $74.1 billion.
Combining the two-year increase for pension and healthcare debt will mean that California’s balance sheet reserve for retirement debt will jump by $110.2 billion by June 30, 2016.
For taxpayers, California’s balance sheet increase amounts to $8,694 per state household, and is almost equal to the entire $117.5 billion in state spending for 2016.
The new debt figures are in addition to what the California Policy Center and Stanford University estimated pension “Total Unfunded Liabilities” to be last year — namely, $281.5 billion, or $22,210 per state household.
With the addition of the GASB’s required balance sheet adjustments, each of California’s approximately 12.7 million households now is on the hook for about $31,904 in pension obligations.
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