By Merrie Spaeth, KERA Commentator
http://stream.publicbroadcasting.net/production/mp3/kera/local-kera-744441.mp3
Dallas, TX –
Warren Buffet, legendary founder of Berkshire Hathaway, recently published a letter labeling the issue of pensions promised government workers, teachers, police and firefighters as a "bomb", a time bomb. You're thinking, well, I'm not a public servant, why should I care? Because the financial implications affect you. You're the tax payer!
The money to pay for pensions comes from what the employee puts in, what the municipality or state contributes - those are your taxes, and whatever money is generated by the pension funds' investments.
The Pew Charitable Trust published a study finding that states and municipalities have promised retired workers $2.7 trillion in benefits, and set aside only $2 trillion. (The numbers are boggling, aren't they?)
Here in Dallas and Texas, we're fortunately not in dire straits, but we're at risk. In Dallas, the police and fire pension fund is on track to reach full funding. The city of Dallas was in trouble in the mid '90s because it projected wildly unrealistic rates of return on its investments. Now the city's employee retirement fund has scaled back its expectations to a more achievable level. But, according to published news articles, Duncanville is underfunded by $800,000 and Farmers Branch by as much as a million dollars. Their choice will be to raise taxes or cut promised benefits. Last year, Attorney General Greg Abbott reported that over 80 of the 96 public pension plans in Texas had unfunded liabilities of more than $23 billion.
While there have been changes, the hard choices still haven't been made. At the state level, the legislature has been authorizing funds for teachers' retirement as required by law, but then not appropriating the funds for it.
Okay. What can we realistically demand? An agency called the government accounting standards board has just tackled the issue of whether the accounting rules for public pension bodies should be changed. Here's why these rules matter. The G.A.S.B.. has a sister agency in the private sector called the Financial Accounting Standards Board. It can swoop in and demand the fiduciary agents of a pension fund for a company's employees make changes. Or else. While the G.A.S.B. does have powers, it's a more complicated situation because these funds are created by government bodies, states and cities. The G.A.S.B.'s staff prepared a report for these discussions which detailed all the creative ways cities and states are using which have the result of making pension funds look sound when they're not. For example, giving retirees retroactive increases without reflecting the extra required costs. If the public pension funds and their regulators had to more accurately show the real cost of promised pensions and benefits, the out cry and the shock would force local, state and federal officials to take action. What those actions could be, should be, or might be is another topic. So here's a catch slogan: G.A.S.B. - apply to all funds equally. OK, maybe it's not too catchy, but it could save us from being really caught in the future.
Merrie Spaeth is a communications consultant based in Dallas.
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