State treasurers voiced concerns about a proposal unveiled Tuesday by the Governmental Accounting Standards Board that recommends they provide five-year projections of cash flows and information about future financial obligations.

The concerns surfaced here at the Issues Conference on Public Funds Management, sponsored by the National Association of State Treasurers.

The NAST gathering coincided with GASB’s release of so-called preliminary views in a document entitled “Economic Condition Reporting: Financial Projections.”

The proposal, which GASB is floating for public comment and hearings, would require issuers to provide the cash-flow projections if they wanted a clean audit.

GASB said users of governments’ financial statements need this information to assess an entity’s financial health.

Several state treasurers at the conference who had not reviewed the board’s proposal and had only read about it in media accounts expressed reservations.

“We do have a basic concern about what sort of future fiscal projections are expected, with what detail and with what caveats they would be presented,” said Nancy Kopp, the treasurer of Maryland.

She noted that if such projections had been required in 2006, they would have proven wrong after the 2008 financial crisis.

“It’s when you get to projections and hypothetical information, we get most concerned,” she said.

The treasurer’s office of Maryland currently posts projections on its website based on present law and economic assumptions.

“But these are unaudited, best-guess assumptions,” Kopp said.

Another state treasurer, who moderated the pension panel, said she had qualms about the proposal’s impact on small municipalities.

Janet Cowell of North Carolina said she was concerned that governments would have to hire outside actuaries to prepare the projections, incurring additional expenses when budgets are already strained.

“It seems like a reasonable time period to me,” Cowell said, referring to the proposed five-year benchmark.

“Obviously we’ll have to think about what it means from an operational perspective,” she said.

During the pension panel, GASB’s chairman, Robert Attmore, pointed out that many governments already prepare similar projections in their budget processes.

“We are not talking about predicting the future,” he said. “We’re talking about projecting current policy and known changes forward.”

Attmore conceded GASB knew this project would be “somewhat controversial.”

That’s why the standard setter released the proposal as preliminary views, he said.

In addition, the board has asked more than 50 governments to test the proposal and report back about any problems, including how time consuming and costly the projections are.

GASB will incorporate that feedback into its future deliberations and cost-benefit analysis, he said.

Users of governments’ financial statements are looking for “as much information as they can get to make their decisions,” the chairman told The Bond Buyer.

Separately, a bond attorney on the pension panel said the National Association of Bond Lawyers would release later this week the fourth and latest draft of its pension-disclosure guidance.

Issuers balked at an earlier draft of the guidance that would have required them to provide future projections of a pension plan’s funding status.

While issuers said such information was speculative, analysts favored such disclosure, saying it would boost transparency about possible credit risks.

In its third draft, NABL struck a middle ground.

That draft said that if an issuer had one or more specific indications of financial distress, an actuary, either from the pension system or a third party, should prepare future projections covering a 10-year period.

Former NABL president John McNally said the issue of projections was the main area of contention in the ongoing project, which NABL is slated to finalize by the end of January.

In an interview, McNally said GASB’s proposed move on projections would not cause NABL to delay its pension guidance.

“We’re going to come out when we come out,” he said. “It will dovetail as best we can.”

When GASB weighs in with its final recommendations on projections, NABL will revise the pension guidance as it deems appropriate, he added.

Elsewhere at the conference, during a panel discussion about implementing new rules in the municipal securities market, the chairman of the Municipal Securities Rulemaking Board cast doubt on whether the Securities and Exchange Commission would release a permanent municipal advisor registration scheme and definition this year.

“I expect it’s going to be after the first of the year,” said Alan Polsky, vice president at Dougherty & Co. in Minneapolis.

According to the SEC’s website, the final muni advisor rule and definition are scheduled for release by the end of the month.

The board in September pulled five proposed muni advisor rules that had been pending with the commission.

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