WASHINGTON — State and local government officials meeting in San Antonio Tuesday approved two policy statements, one opposing any federal intervention into public pension systems and the other against including members of governmental boards as muni advisers who are subject to federal regulation.
Members of the Government Finance Officers Association voted to approve the policies at their annual business meeting.
The pension policy puts the GFOA membership squarely against identical bills introduced by Rep. Devin Nunes, R-Calif., in the House and Sen. Richard Burr, R-N.C. in the Senate that would bar state and local governments from issuing tax-exempt, tax-credit, or direct-pay bonds unless they submitted annual pension reports to the Treasury Department.
The reports would have to include detailed information about the pension plans, including unfunded liabilities, planned contributions, assumptions, investment returns, and the amount of pension obligation bonds outstanding. Public pension plan sponsors would have to report their liabilities using a Treasury bond rate, which would be 4% to 5%, far below the 7% to 8% market rate that governments typically use.
The bill in the House has 51 co-sponsors and is pending before the House Ways and Means Committee. The one in the Senate has seven co-sponsors and is pending before the Senate Finance Committee.
But GFOA said in its policy statement that “the vast majority of public pension funds are prudently managed under state law, where jurisdiction best resides” and that federal regulation “would only serve to undermine state and local governments authority to effectively govern and finance their retirement plans.”
“Claims of a crisis in state and local government pensions are based on a handful of poorly funded plans and faulty assumptions that are inconsistent with governmental accounting standards set forth by the Governmental Accounting Standards Board,” the policy stated.
The policy on appointed members of governmental boards opposes the Securities and Exchange Commission’s proposed rule on the registration of muni advisers, which does not exempt all appointed members of governmental boards from the definition of muni advisers, who must now register with the SEC and Municipal Securities Rulemaking Board and comply with MSRB rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Speaking at a meeting of the Council of Infrastructure Financing Authorities on Monday, Dave Sanchez, an attorney-fellow in the SEC’s office of municipal securities, said the SEC has gotten more than 1,000 written comments on the proposed rules, many of them opposed to the definition of muni adviser. But Sanchez stressed the rule is only proposed and may be changed before finalized later this year.
Sanchez pointed out that Dodd-Frank only exempted employees of municipal entities as muni advisers. The SEC went one step further in its proposed registration rules for advisers, saying elected officials and certain appointed officials should also be exempt from the definition of muni adviser, he said.
The SEC only wants to include in the adviser definition those appointed governmental officials who provide advice on muni financings and products, he said.
However, GFOA and other muni groups have complained the SEC did not exempt all appointed officials in its proposed registration rules on grounds that they “are not directly accountable for their performance to the citizens of the municipal entity.”
In its policy statement, the GFOA said it “insists that the SEC exclude all governing body members and employees of appointed bodies, including those that serve across jurisdictional boundaries” from the adviser definition.
“If Congress had intended for appointed members of governing bodies to be included within the municipal financial adviser definition, it would have made this point clear in the statute,” the GFOA said.
