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Florida is not alone in hiding the truth about pension debt from their citizens and employees; all 50 states are guilty according to a report last week from State Data Lab who analyzed the publicly available statistics.
Just like spouses might hide credit card balances, states hide this debt from citizens and leave it for future taxpayers to pay.
Watchdog group “Truth in Accounting” recommends that states begin to dig out of their pension debt hole by adopting “FACT-Based Budgeting”, an acronym for Full Accrual and Calculation Techniques.
Pension debt could not be hidden in financial footnotes and appendices. Debt would have to be truthfully and transparently shown, on a timely basis, before budgets are passed. Each year, citizens could clearly see whether the budget causes debt to increase or be paid up. No longer could government “credit card” debt for today’s services be accumulated for future taxpayers to pay.
If FACT-Based Budgeting were adopted in Florida, every budget would include estimates of year-end debt, as well as current year spending. Cities who maintain their own pension plans, like the City of St. Augustine, should be included. Citizens could then see whether spending plans increase or decrease their state’s debt.
Only six states have less than $1 billion of pension debt: MT, NE, ND, SD, WI, WY
Common political excuses about state pension debt include:
We make our annual contributions
|Annual contributions are like paying the minimum balance on the credit card.The principal remains and grows.|
We can pay it over time
|The debt increases over time, withAccumulated interest
More employees joining the plan
More employees retiring
We don’t have the money to pay the balance
|Pension costs are part of current compensationPensions should be funded yearly, along with salary
Future taxpayers will foot the bill for past services they did not receive
Our state says pension debt is less than your figures
|Government accounting rules allow states to hide much of their pension debt from public view.The average state hides $10.4 billion of $11.7 pension debt off-balance-sheet|
Tags: accounting rules, balanced budget, Florida Retirement System, government accountability, pension fund debt, political excuses
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