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Unmasking Hidden Costs: Best Practices for Public Pension Transparency. Civic Report. No. 63.

ERIC Descriptors: Federal Government; State Government; Local Government; Government Employees; Retirement Benefits; Accountability; Municipalities; Disclosure; Access to Information; Costs; Politics of Education; Best Practices; Budgets; Teaching (Occupation); Teacher Retirement; Funding Formulas; Validity; Educational Finance; Public Policy

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In 2010, the pension plans of state and local governments came under increased scrutiny in response to their generally weak financial positions and mounting costs to taxpayers. By some measures, these funds are as much as $3 trillion short of the assets they would need to cover the promises they have made to government workers and retirees. However, several shortcomings in these funds' financial disclosures have made it difficult for even lawmakers and policy experts to accurately evaluate pensions' actual financial condition. There are several steps, over and above what the Government Accounting Standards Board already requires, that funds could take that would disclose their finances more fully. The recommendations lie in five areas: (1) Discounting; (2) Smoothing; (3) Accrual method; (4) Projections; and (5) Normal cost. These steps would make it easier to answer such questions as: How well funded is a given state's pension plan? How much does a public employee's pension in a given state cost? And what effects are pension costs likely to have on the next few years' budgets? The report also discusses which entities should be responsible for implementing these changes in disclosure policy. It argues that states should voluntarily adopt them, and that they should require municipalities to do so. The federal government should also take steps to encourage states to make the recommended disclosures. (Contains 3 tables and 18 endnotes.)

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Author:Barro, Josh
Publication:ERIC: Reports
Date:Feb 1, 2011
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