The federal Governmental Accounting Standards Board wants state and local governments to reveal more information about pension funding, Reuters reports.The board, which sets accounting standards, is considering more stringent disclosure standards that would require public pension funds to provide information about how their long-term investment return rates are derived. Governments would also have to make more thorough calculations for annual cost-of-living adjustments and projected salary increases.
The call for more transparent pension accounting comes as huge unfunded pension liabilities threaten to crush state and local governments across the country.
A 2010 report from Robert Novy-Marx at the University of Chicago and Joshua Rauh of Northwestern University estimates that the combined state pension gap could be more than $3 trillion, in part because state pension funds use overly optimistic investment return forecasts.
Bond buyers and politicians are now calling for more accurate pension accounting. The three major credit ratings agencies and the SEC are also ramping up scrutiny of public pension funding.
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