The change to the GASB pension reporting rules will change how many look at the pension gap. While it doesn’t require a certain discount rate be used, it does mandate that unfunded liabilities be carried on balance sheets.

That means that the state of California, a gap of $113.5 billion will be shown to those interested enough in public-sector finance to look for it. The picture of state finances will play into the hands of those who are looking to reform state pensions. It might even come to the aid of the Governor, who has been calling for some form of reform since he took office.

While the 78 percent funding ratio of the state pension fund results in a large number, it isn’t in too terrible of shape today. However, other local governments in California are facing funding ratios of half or lower. For these municipalities the new GASB standards could require they report a safer-discount rate of 4 percent or lower, likely doubling the reported size of their unfunded mandates.

From the Sacramento Bee:

A few days ago, the Pew Center on the States released a report on the nationwide gap between promises made to public employees for pensions and what states are spending to close the gap.

On paper, California isn’t in awful shape. Its major pension program, with $516.3 billion in liabilities, was reported to be 78 percent financed, just shy of the 80 percent level that actuaries generally advocate.

Read the full article here.