Commentary: Bond lawyers not waiting for new public pension rules from Government Accounting Standards Board
Published: July 13th, 2011
By the time the Government Accounting Standards Board nudges state and local governments into being honest about what taxpayers really owe on pensions, it will be too late. So, bond lawyers are gearing up to force transparency sooner.
Why? Because their clients are at risk and have no way of knowing how big that risk actually is. The only thing they know is somebody — public workers, taxpayers, bondholders, the poor, the young, the old, the sick — has to take a huge hit. Soon.
State and municipal governments simply cannot pay the debts politicians racked up during at least two decades of profligacy and accounting lies.
The biggest debt is for retirement benefits promised but not paid for and hidden off balance sheets with at least three layers of false bookkeeping that would land any person or private business executive in prison.
That unavoidable debt is at least $1.26 trillion as of 2009, according to a Pew Center on the States study released earlier this year, but probably more than $3 trillion and growing every day because politicians refuse to fix it.
That is more than the total official debt state and local governments are paying off now.
A Congressional Budget Office study released in May explicitly states that as of 2009, “By any measure, nearly all state and local pension plans are underfunded, which means that the value of the plan’s assets is less than their accrued pension liabilities for current workers and retirees.” And that’s using the bogus numbers.
Proposed GASB rules released Friday would begin to show the real numbers, but would not take effect until Fiscal Year 2014. For the lawyers who do municipal bond deals, that is not fast enough.
According to a recent National Association of Bond Lawyers draft report, they will be ready with new, tougher transparency standards by the end of this year.
These lawyers worry not only about the honesty of retirement benefits reporting by governments, but the “time lag.”
So they want “cautionary language” and honest numbers along with official dishonest numbers projected ahead 10 years as well as from the past decade.
Those are the ugly numbers politicians keep off the books so they can claim balanced budgets even as they dig us ever deeper into an abyss of debt.
They use pensions and promised retiree health benefits as a secret line of credit, then blow the trillions of dollars they borrow and leave future taxpayers, workers and bond investors holding a big nasty bag. Somebody has to pick up the tab.
Bond lawyers want to make sure it is not their clients. Unions want to make sure it’s not their members. As for taxpayers? They are supposed to just pay up and shut up.
What about the children, the old, the poor, sick, halt and lame whom politicians always are wringing their hands about? What about the sociopaths politicians threaten to release to prey upon society even as police and courts are cut back?
All are supposed to serve their traditional role as hostages politicians use to extort even more money from taxpayers.
Public officials who fought the new GASB rules for years now are stalling for as long as they can. They want to put off the day of reckoning until after they flee.
Pension fund managers, meanwhile, take on more and more risk in a desperate effort to meet impossible earnings goals, setting workers and taxpayers up for a bigger fall in the next downturn.
Those who try to claim the Great Recession caused pension fund problems that are merely temporary ignore two facts: Funds, which must grow about 8 percent a year, lost $179 billion before markets crashed, and they literally never can earn enough during the next 30 years to catch up.
Sluggish GASB efforts, quicker NABL guidelines, the Public Employee Pension Transparency Act and proposed Truth in Accounting laws are efforts to force state and local governments to be honest with taxpayers, workers and investors about how catastrophic this reality is.
Instead of fighting and delaying honesty, our leaders should implement it. Now.
Nothing prevents any government from immediately adopting any or all of the rules and practices recommended in those proposed regulations and laws. Why wait?
Taxpayers, public workers and investors must demand it.
Note: Frank Keegan is a national editor for The Franklin Center for Government and Public Integrity, Watchdog.org and statehousenewsonline.com. CapitolBeatOK is affiliated with The Franklin Center.
Any disgusted public employee, journalist, activist organization or citizen watchdog who wants help exposing government waste, fraud and abuse may contact him at: firstname.lastname@example.org.
For a comprehensive primer on state and municipal government pensions, check sunshinereview.org.