Texas Pension Accounting Tweak Will Shift Debt to Schools, If Only Symbolically

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In light of newly adopted GASB accounting rules, the Teacher Retirement System of Texas in 2015 will require school districts, colleges – and any other government entities that pay into the system – to declare their employees’ pension liabilities on their books.

From the Killeen Daily Herald:

School districts across the state will soon have more debt listed on their general fund balances and teachers could see a smaller paycheck…

[…]

“TRS does not want to put this liability on their books so they are taking the allocation to the districts and the cities and colleges and saying, ‘You record this amount; I’ll record this amount,” said Dane Legg, a partner at Lott, Vernon and Company PC, the Killeen Independent School District’s external auditing firm.

Legg reviewed the upcoming financial policy change with board members at their mid-December workshop.

In laymen’s terms, this means Killeen ISD will have to show a $48 million liability in its budget for about 28 years, the amount TRS said it owes toward Killeen ISD employees’ pensions.

The liability stems from the TRS Trust Fund, which is underfunded but will be fully funded in 28 years.

“It’s not set in stone — that number has not been set yet — but this was what they were charged to do to give people a heads up and go ahead and come up with their best guess,” Legg said.

TRS is $28.9 billion underfunded statewide, Legg said. And officials expect many government entities will take issue with the new GASB 68 policy because it will force some of them to look like they are in debt.

“TRS determines how that liability gets allocated by the district, and TRS is only taking a small piece of that $28 billion, and they are giving most of the rest to the district to record,” said Megan Bradley, the chief financial officer for Killeen ISD.

The district will not have to fund the liability, it will simply be a book entry, Legg said. TRS will fund it, however, by changing its member contribution rates and possibly the district’s match rate.

The Teachers Retirement System of Texas managed $124 billion in assets as of the end of 2013.

 

Photo by www.SeniorLiving.Org

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