That’s because the pension plans for state workers and retirees will be calculated more conservatively as a result of the change by the Governmental Accounting Standards Board.
“The new standards will improve the way state and local governments report their pension liabilities and expenses, resulting in a more faithful representation of the full impact of these obligations,” said GASB Chairman Robert H. Attmore.
No estimates are available from the Employees’ Retirement System of Georgia as of Friday. But Joshua Rauh of Northwestern University estimated that nationally, it could boost the figure for outstanding liabilities more than seven times.
“While this information will, in some cases, give the appearance that a government is financially weaker than it was previously, the financial reality of the government’s situation will not have changed,” the GASB observed in its explanation.
Under current standards, Georgia’s plan had in 2009 just over 85 percent of the money it will need over the next 30 years to pay expected retirees.
A comparison of all 50 states’ pensions released June 18 by the Pew Center on the States noted that Georgia is ahead of the 80 percent most financial experts describe as the minimum, prudent funding level that 34 states fall below.
Incidentally, the pension fund for legislators had 128 percent of its needed investment.
The Pew Center classified Georgia as “a solid performer at how it managed its long-term liabilities for pensions.”
However, the most recent audit of the pension shows the funding level fell the following year to just 80 percent.
Still, funding level is likely to be significantly lower under the new accounting guidelines. One reason is that the investment assets will have to be reported at their current value rather than the seven-year average Georgia uses.
Until now, states have used the averaging to smooth out losses over several years, according to Laura Quinby, research associate at the Center for Retirement Research at Boston College.
Taxpayers may not save much in the long run, according to Chuck Freedman, the vice president of the Georgia State Retirees Association. Since 11 percent of those in the new program have opted out and the vast majority of those participating only contribute 1 percent of their paychecks, they’re not going to squirrel away enough to retire without other government benefits, he warns.
“Long term, when these people retire, the amount of retirement that they are going to draw is going to be consistently less than the (traditional) plan members to the point where they may require state support from other programs,” he said.