Numerous articles in the popular press have highlighted financial problems facing state and local governments. According to a 2013 report issued by The PEW Charitable Trusts, there exists an unfunded pension gap in 61 key U.S. cities totaling more than $217 billion (A Widening Gap in Cities: Shortfalls in Funding for Pensions and Retiree Health Care, p. 2). For example, Lexington, Kentucky, had an unfunded pension liability of $296 million dollars in 2012 which the mayor said was caused by “optimistic investment-return assumptions, a punishing market decline, benefit sweeteners made without understanding their long-term impact, and chronic shortfalls in governmental contributions.” Several solutions to the pension problem have been proposed or enacted by various state and local governments, including issuance by the Governmental Accounting Standards Board (GASB) of Statement No. 68, Accounting and Financial Reporting for Pensions. This paper summarizes the key provisions of the Statement, and offers suggestions for future study of governmental pension accounting.
Journal of Government Financial Management, Vol. 63, No. 3, Fall 2014