Commentary
Michigan Already Diverges From GASB Rules
In a "Coalition for Secure Retirement-Michigan" press release arguing against closing the school employee pension fund to new members and converting to a 401(k) plan, former head of the Michigan Senate Fiscal Agency Gary Olson argued that the state would face transition costs mandated by the Governmental Accounting Standards Board.
"Any deviation from GASB accounting guidelines could result in short-term savings but could result in a drop in Michigan's credit rating, which may increase borrowing costs for the State of Michigan and local units of government," the release stated.
What Olson neglects to mention is that the state is in charge of setting pension funding policies and already flouts GASB standards. The table below is from state financial reports and describes the GASB required report for the Annual Required Contribution. It also shows how much the state contributed. It has only met or exceeded its GASB reporting standard in two years during the past decade.
In fact, Michigan's consistent underfunding of the school employee pension fund shows that the state ought to close its pension system.
State officials argue that timing issues impact its ability to meet these schedules. However, by converting to a defined-contribution retirement system, the state would no longer be able to pass along the uncertain costs of current benefits onto future taxpayers.
Source: "Michigan Public School Employees' Retirement System: Comprehensive Annual Financial Report for the Fiscal Year Ended Sept. 30, 2011," (Michigan Office of Retirement Services, 2011), 47, http://goo.gl/hyUcr (accessed Feb. 15, 2012).
|
Like CapCon on Facebook
Follow CapCon on X
Michigan Already Diverges From GASB Rules
In a "Coalition for Secure Retirement-Michigan" press release arguing against closing the school employee pension fund to new members and converting to a 401(k) plan, former head of the Michigan Senate Fiscal Agency Gary Olson argued that the state would face transition costs mandated by the Governmental Accounting Standards Board.
"Any deviation from GASB accounting guidelines could result in short-term savings but could result in a drop in Michigan's credit rating, which may increase borrowing costs for the State of Michigan and local units of government," the release stated.
What Olson neglects to mention is that the state is in charge of setting pension funding policies and already flouts GASB standards. The table below is from state financial reports and describes the GASB required report for the Annual Required Contribution. It also shows how much the state contributed. It has only met or exceeded its GASB reporting standard in two years during the past decade.
In fact, Michigan's consistent underfunding of the school employee pension fund shows that the state ought to close its pension system.
State officials argue that timing issues impact its ability to meet these schedules. However, by converting to a defined-contribution retirement system, the state would no longer be able to pass along the uncertain costs of current benefits onto future taxpayers.
Source: "Michigan Public School Employees' Retirement System: Comprehensive Annual Financial Report for the Fiscal Year Ended Sept. 30, 2011," (Michigan Office of Retirement Services, 2011), 47, http://goo.gl/hyUcr (accessed Feb. 15, 2012).
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.