SAN ANTONIO — Facing the prospect of costly new congressional regulation of public pension plans, the Government Finance Officers Association is arming its members with facts designed to combat what it says are misconceptions about the health of the industry.
“There has been so much misinformation out there that the GFOA is really trying to set the record straight,” said Elizabeth Kellar, president of the Center for State and Local Government Excellence in Washington, pointing to a new fact sheet sponsored by GFOA and 11 other associations representing state and local government.
The fact sheet, to be posted on the GFOA’s website after its annual conference ends here Wednesday, targets what panelists on pension funds consider misleading reports about the risks of public pensions. Some media reports and statements by congressional leaders have presented dire scenarios involving bankruptcy and government bailouts, speakers said.
Kellar said the word “crisis” was rarely used before the economic collapse of 2008 that lowered the investment assets of the public pension funds, along with those of every other market participant.
“The media has decided that this is an immediate crisis rather than a long-term issue,” she said.
“The vast majority of public pension plans are not in crisis and will not run out of money, certainly not in the next few years,” said Leigh Snell, director of federal relations for the National Council on Teacher Retirement. “The federal government’s help is not required.”
Federal intervention in the form of the Public Employee Pension Transparency Act, sponsored by Rep. Devin Nunes, R-Calif., is the most immediate concern for pension fund managers and issuers of municipal debt.
The Nunes bill would prevent state and local governments from issuing tax-exempt, tax-credit, or direct-pay bonds if they failed to file annual reports with the Treasury Department disclosing certain information, including how they calculate their unfunded pension assets and liabilities.
The bill also would require governments to value their pension assets and liabilities using a so-called riskless rate of return pegged to a Treasury rate of 4% to 5%, which is lower than the more broadly used historic rate of return of 7% to 8%.
In 2006, Congress rejected similar public reporting requirements for corporate pension plans because the private sector convinced lawmakers that such reporting significantly increased costs and volatility, and was irrelevant.
The U.S. Chamber of Commerce testified that “these calculations are among the most burdensome and costly procedures a plan can ever endure,” “would not provide relevant information in the majority of cases,” and “this information would unduly alarm plan participants.”
With Republicans in control of the U.S. House, public employees are seen as political targets for conservatives.
In Wisconsin, public workers have battled Gov. Scott Walker’s legislation to reduce of eliminate collective bargaining rights.
Pension officers say they want to combat the idea that public employees and their pension plans are a drain on the economy.
“We have grown to almost $3 trillion without the federal government telling us to do that and without the federal government’s help,” Snell said.
“Recent studies have documented public retirement system pension distributions annually generate over $29 billion in federal tax revenue, more than $21 billion in state and local tax revenue, and a total economic impact of more than $358 billion,” according to the GFOA fact sheet.
“Oftentimes, when we meet with members of Congress, we tell them that pension benefits in their district are larger than any other business payroll in that Congressional district,” Snell said.
The idea that public pension benefits are “lavish” is also incorrect, he said. The average public pension is $22,600 per year, he said.
“It’s certainly not these $1 million levels that some people are talking about,” he said.
Lack of transparency is also not a valid issue, several speakers said. Most public pensions are well explained on websites and in reports delivered through the mail.
In Texas, the board meetings of the Teacher Retirement System are even webcast, said executive director Ronnie Jung.
