OPINION

Rep. Nunes: Pension Reform Matters

SHEILA WEINBERG

Pension reform may not be a top priority for residents in Fresno, mainly because the city’s employee retirement system is one of the only public pension programs in the United States that has a surplus. Unlike Fresno, a large majority of state and local governments – including California – are racking up a massive amount of pension debt, putting Americans’ futures at risk.

Like most state and local governments, California’s pension information is not transparent and the state consistently underfunds its pension programs. Residents in California may not know that state government officials excluded $111 billion of retirement debt from the state’s balance sheet last year. Residents probably also don’t know that California’s unfunded employees’ retirement benefits represent 46% of state bills or that California has less than 80 cents put aside to pay each dollar of pension benefits promised. That’s why Truth in Accounting analyzes government financial documents and produces accurate reports for citizens: because they deserve to know the truth. The good news is that we’re not in this fight alone.

Recently, Rep. Devin Nunes (R-Visalia) resubmitted H.R. 4822, The Public Employee Pension Transparency Act (PEPTA) bill, which aims to adjust how state and local governments disclose employee pension plan obligations. As a certified public accountant and someone who leads an organization that analyzes government finances, I understand the tremendous value PEPTA brings to pension reform.

Though there are many important details to this bill, there are two main implications: (1) an online database containing searchable information about states’ pension plans and (2) a lower, more reliable interest rate.

The online pension database will increase transparency and allow people to view the funds of their local and/or state pension plan. Currently, pension figures are buried in complicated hundred-page documents. To find the correct data, it takes me, who has over 30 years of experience analyzing financial documents, hours to sift through and examine. If so many citizens are counting on their pension when they retire, why are state and local governments making it so difficult to find the correct numbers and understand the data?

Currently, state and local governments calculate the pension liabilities they report by assuming the pension plan investments will earn 6% to 8% interest in the future. But some observers believe those assumptions are not appropriate to use in financial calculations. PEPTA would require governments to calculate in addition to the standard 6- to 8-percent rate, a significantly lower discount rate based on Treasury yields. The way the math works, this would lead to much higher, and perhaps realistically higher, liability calculations.

Our way out of this crisis is simple: We must hold our elected officials accountable and demand transparent financials. Pension liabilities are increasing at an unsustainable rate and state and local government officials are failing to increase the amount of funds to pay for these liabilities. The process is easy – when your expenses increase, so do your payments. For too long, governments have been promising retirement and healthcare benefits they will never be able to fulfill.

It’s clear that the time for pension reform is now and it can start with PEPTA. With this bill, Representative Nunes is advocating for what we at Truth in Accounting have long believed: Citizens deserve the right to have transparent and accurate government financial information.

Weinberg, a certified public accountant, is the founder and CEO of Truth in Accounting