Honorable Vicki Truitt, Chair, House Committee on Pensions & Investments
John S. O'Brien, Director, Legislative Budget Board
HB2365 by Truitt (Relating to financial accounting and reporting for this state and political subdivisions of this state.), Committee Report 1st House, Substituted
The bill would allow the state and political subdivisions of the state to follow state statutory modified accrual standards of accounting as described in the bill, if other accounting bases conflict with state law. The state or its political subdivisions could account for other post-employment benefits on this statutory basis if generally accepted accounting principles (GAAP) require accounting on any basis other than pay-as-you-go.
The bill would have the practical impact of exempting those who choose the alternate accounting from the Governmental Accounting Standards Board (GASB) statements 43 and 45. These statements require governmental entities to account for other post-employment benefits (OPEBs), in particular retiree health benefits, in a manner similar to methods used for pension benefits.
The bill details how the state shall account for OPEBs; if they are not advance-funded then only pay-as-you-go accounting is allowed; if they are advance-funded then certain actuarial accounting amounts shall be disclosed, though these amounts are not clearly tied to the amounts required by GASB. The bill states that if the state intends OPEBs to be a benefit in future years, then it shall file a supplemental schedule presenting government-wide financial statements with some accounting for OPEBs. There is no suggested method as to how the determination of the state's intent to provide benefits would be made, or by whom.
The bill potentially prevents
Adverse opinions on
The bill would allow the Comptroller to establish an OPEB trust fund for state, higher education, and public education employees. This would be a revocable trust fund, with no employee or retirement system oversight, and could be dissolved at any time for any purpose, though funds transferred from another trust fund would remain in trust. Hence it would not qualify as a GASB trust fund, and it is unclear how it would be treated by the bond rating agencies.
The Teacher Retirement System reports it would save some funds in the near future if it did not have to calculate the GASB liabilities for financial reporting, though the savings would not be significant. On the other hand, calculating those liabilities could provide the state some help in planning for potential future funding of retiree health benefits. If the state advance-funded some liabilities, then any discrepancy between the actuarial amounts mentioned in the bill and GASB amounts may require all the systems to calculate both at additional cost.
No immediate significant fiscal implication to units of local government is anticipated.
The bill's language would allow political subdivisions to report retiree health benefits on a pay-as-you-go basis, or per the methodology proposed by GASB. If they chose to report on a pay-as-you-go basis, they would also have the option of reporting the GASB required information in their footnotes. As per the above analysis, this would mean for those opting out of GASB reporting, financial statements would receive qualified and/or adverse opinions from outside auditors and their bond ratings could be affected, which would have a significant long-term fiscal impact.
304 Comptroller of Public Accounts, 323 Teacher Retirement System, 327 Employees Retirement System, 352 Bond Review Board
JOB, KJG, SD, WM