Chip Taylor

Accounting for future costs

The New York Times reports that GASB, the Governmental Accounting Standards Board, has a new rule requiring state and local governments to account for the present value of costs associated with providing health care benefits promised to retirees.

Supporters say the rules will help state and local officials, investors and taxpayers understand the magnitude of these commitments to current and future retirees.

But public employees — civil servants, police officers, firefighters, judges, teachers and state university professors — predict that the rules, combined with the soaring cost of health care, will speed the erosion of health insurance in the public sector, as happened at many private companies in the early 1990's.

In other words, public employees fear that, if forced to confront the actual costs of what they are promising, local governments will promise less. That seems very likely. I think that it will also have the effect of making it more likely that retirees will actually get what they are promised.