Treasurer Ken Miller urges accounting group to keep pension obligation focus on the state, not local school districts


In July, CapitolBeatOK’s analysis of “exposure drafts” from the Government Accounting Standards Board (GASB) concluded that public school districts  – employers of the vast majority of the education workforce in Oklahoma — will need to account, list and disclose transparently their share of pension obligations within the Oklahoma Teacher Retirement System (OTRS).

If ever they go into effect, the revised standards would lead to important changes in financial reporting of pensions by state and local governments.

This week, a high-ranking state official who works in management of retirement resources confirmed this interpretation by simply observing it  “appears to be accurate.” 

Subsequently, CapitolBeatOK asked state Treasurer Ken Miller, chairman of the Oklahoma State Pension Commission, if there have there been discussions or communications with school districts in Oklahoma concerning the draft standards from GASB. 

Miller’s spokesman, Tim Allen, told CapitolBeatOK, “The commission has not contacted school districts. I can’t speak to what GASB is doing to seek input from them.” The treasurer has, however, communicated concern about the exposure drafts to GASB, with suggested changes. 

 

The language in question is found in exposure draft #27 (Accounting and Financial Reporting for Pensions) and in exposure draft #25 (Financial Reporting for Pension Plans), the proposed GASB language now in review. Public comments on the two exposure drafts will be taken by the GASB through next Friday, September 30.

That deadline is followed by public hearings October 3, 13 and 20, and “user discussion forums” on October 4, 14 and 21. 

CapitolBeatOK asked Miller for his comments on issues most directly impacting school districts.

In reply, the treasurer transmitted a letter he sent September 19 to David Bean, director of research and technical activities at GASB. 

In that letter, Miller offered suggestions on three aspects of the drafts. 

He wrote, “The most significant concern is the proposal to have local employers in Oklahoma’s state-sponsored pension plans report a portion of the pension liability on their own financial statements. In Oklahoma, the law clearly keeps pension liability for the state-sponsored pension systems with the State.” 

Miller agreed the state’s financial statements should include accurate pension liability information, but wrote on behalf of the pension commission, “we feel that GASB should provide for an exception in jurisdictions, like Oklahoma, for state-sponsored plans where the legal liability to pay the actual pension obligations is retained by the state. The exception should distinguish between cost-sharing plans whose responsibility for any net pension liability rest solely with the employers and cost-sharing plans in which the legal liability rests with a state government.”

Later in the letter of suggestions, Miller contended, “While it is true that local participating employers and employees must make contributions under state law to help fund the state pension systems, the State … provides ear-marked state taxes to help with the financing burden in most cases. So the burden of financing the cost does not reside solely with the local government entity.”

Miller argued that “inclusion of the proportionate share of net pension liability, deferred inflows/outflows of resources and pension expense as part of the employers financial statements would force local governments in Oklahoma to show that they have liability that does not legally exist.” 

In a second suggestion, Miller issued cautionary words about the projection of the employer’s (a school district, for instance) proportionate share as a projected long-term contribution. 

He argued, “Under Oklahoma law there is a new obligation created each fiscal year. It is factually and legally no different than the local government’s obligation to pay FICA taxes or any other known and recurring expense paid by the local governmental entity.” 

In a third suggestion, Miller offered technical critiques of the draft’s proposed discount rate information (the ways in which long-term pension obligations are projected, and rates-of-return estimated).