State to begin reporting pension liabilities
CHARLESTON, W.Va. -- New government accounting standards set to begin next year could put the hurting on states that do not adequately fund their pension programs, although officials do not expect West Virginia to experience much of a change.
Starting July 1, 2014, the Governmental Accounting Standards Board will require state governments to calculate unfunded pension liabilities — the amount of money still owed on state employees' retirement plans — into their financial statements.
For the first time, pension debts will appear alongside other liabilities like employee payroll and bond payments.
Harry Mandell, actuary for the West Virginia Consolidated Public Retirement Board, said that will be bad news for states and cities where officials have neglected paying into pension plans, allowing debt to climb and climb.
With information about pension debts front and center, debt-ridden municipalities could have a difficult time borrowing money.
But Mandell said West Virginia has focused on paying its pension liabilities. While the Mountain State also will be required to report its pension debt alongside other liabilities, it probably will not affect the state's reputation with lenders, Mandell said.
"We're making our required contributions. It will affect other states more than it will us," retirement board executive director Jeffrey Fleck said.
It hasn't always been that way.
In 1991, West Virginia's Teachers Retirement System was only funded at 8.8 percent. Lawmakers eventually got their act together in 1994, adopting a 40-year plan to pay off the unfunded liability.
At the end of fiscal year 2012, the teacher pension plan was funded at $5.14 billion, or 53 percent. Fleck said 2013's figures are not complete yet, but he expects the teachers' pension plan is now funded at about 56 percent.
"Which is the best it's been in the history of the plan," he said.
The state's other major pension plan, the Public Employees' Retirement System, is 77 percent funded at the end of fiscal year 2012, with an unfunded liability of $1.2 billion. The state also is on track to pay off that account.
A report by Moody's Investor's Service recently found West Virginia's unfunded pension liability was 86.2 percent of its annual revenue in 2011. That's the 13th highest percentage in the country.
The state's pension liability, as reported by Moody's, is the 24th largest in the nation at $9.2 billion.
The ranking is based on the Teachers' Retirement System and the Public Employees Retirement System.
West Virginia still is much better off than states like Illinois or Connecticut, where unfunded liabilities are 241 percent and 190 percent of the states' annual revenues, respectively.
Contact writer Zack Harold at 304-348-7939 or zack.harold@
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