New accounting rules will require states and local governments to fully fund their obligations

Government has a set of accounting standards they must abide by when reporting their financials.  These rules are managed by the Governmental Accounting Standards Board (GASB).  In 2012 GASB created a new rule requiring state and local government’s to disclose their pension and other unfunded obligations in their financial statements.  The aftermath of being required to report these unfunded liabilities brought to light a huge secret these levels of government were hiding – they were not fully funding pension and other obligations.  So in 2014, GASB enacted another new rule – they will require governments to carry their unfunded retiree-benefit obligations on their balance sheets.  Meaning, every city, county and the state’s budget will look much worse than in years past.  This means that state and local governments will have to add billions of dollars in retiree obligations to their books – North Carolina specifically will have to finally address the state employee health plan.

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Sarah Curry

Sarah Curry is Director of Fiscal Policy Studies at the John Locke Foundation.

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