WASHINGTON — A coalition of state and local groups has written a letter to Securities and Exchange Commission member Daniel Gallagher countering his recent comments about pension obligation disclosure and arguing that any problems in the area are individual and not universal.
Gallagher said in a speech last month at the Municipal Securities Rulemaking Board's 1st Annual Municipal Securities Regulator Summit that problems with pension and other post-employment benefit liability disclosure remain despite efforts at reform, and that municipalities should value and disclose their total liabilities using a risk-free discount rate such as the treasury yield curve.
On Monday, 11 groups including the National Governors Association, the National League of Cities and the National Association of State Retirement Administrators responded.
"We understand the SEC's interest in appropriate disclosure of state and local government pension obligations," the letter states. "However, your comments could lead many to believe that the disclosure issues are systemic, rather than individualized problems. Public pension funds hold some $3.6 trillion in assets, professionally managed and invested in diversified portfolios. This amount equals 16 times the annual payout of these funds, assuming no additional contributions or investment earnings."
The groups told Gallagher, who has been outspoken on muni issues, that state and local governments have already undertaken a wide variety of reforms.
"You may not be aware of the many significant changes state and local governments have made to their retirement plans," the letter suggests. "Nearly every state and numerous local governments have made changes to strengthen their pension reserves and to ensure the sustainability of their retirement plans since the Great Recession. These changes have included increases in employee contributions to pension plans, increased risk-sharing and other hybrid features, reduced benefit levels, higher retirement ages and lower cost-of-living adjustments."
The letter closes with an invitation for Gallagher to meet personally with members of these groups to discuss the matter further.
The other groups are: the National Conference of State Legislatures; the Council of State Governments; the National Association of Counties; U.S. Conference of Mayors; International City/County Management Association; National Association of State Auditors, Comptrollers and Treasurers Government Finance Officers Association and the National Council on Teacher Retirement.
