Ohio Auditor Decries New Pension Accounting Rules

Ohio Auditor Dave Yost says Ohio’s local governments could be harmed by new rules from the Governmental Accounting Standards Board pertaining to pension liabilities.

Specifically, Yost says the new rules will cast a false light on the finances of local municipalities due to the way health care must be reported. From the Cleveland Plain Dealer:

The [Governmental Accounting Standards] board recommended governments account for and report post-employment benefits besides pension liabilities, such as health care, the same way they do for pension liabilities. The board concluded that these non-pension benefits are a form of compensation such as salaries and pensions, promised to employees in exchange for their present services and thus should be included.

But in Ohio, retirement medical coverage is not guaranteed by state pension systems. State law requires local governments to contribute to one of five state pension plans: the State Teachers Retirement System, Ohio Public Employees Retirement System, Police and Fire Pension Fund, School Employees Retirement System and the Ohio State Highway Patrol Retirement System.

State law allows pension systems to offer medical insurance, but there is no legal obligation to employers beyond the employer pension contribution. Yost noted in his written testimony that Ohio’s pension systems choose to fund medical care through established contributions.

Yost said the proposed rule requires employers to record a liability they have no control over and, in Ohio, a liability state retirement systems have no duty to ever provide.

“Recording this liability will result in misleading financial statements. When the public looks at local government financial statements, with this other post-employment benefit now recorded as a liability, they may see what appears to be a government in the red, when the reality is something altogether different,” Yost said. “This will prove to be a difficult issue for local government finance officers to explain to their legislative authorities and, ultimately, taxpayers.”

Yost is scheduled to testify today in a Chicago hearing on the new accounting rules.

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