WASHINGTON, June 16 Public pension and finance
groups are striking back at a member of the U.S. Securities
Exchange Commission who said last month that state and local
retirement systems mislead people about their true financial
Last month Commissioner Daniel Gallagher said that
governments were not appropriately accounting "trillions of
dollars in liabilities" in pension benefits promised to workers.
"Your comments could lead many to believe that the
disclosure issues are systemic, rather than individualized
problems," wrote 11 major public finance groups, including the
bipartisan National Governors Association, in a letter to
Gallagher dated Monday.
"Public pension funds hold some $3.6 trillion in assets,
professionally managed and invested in diversified portfolios.
This amount equals 16 times the annual payout of these funds,
assuming no additional contributions or investment earnings."
The groups, which also included the National Association of
State Retirement Administrators and the U.S. Conference of
Mayors, added that since the 2007-09 recession many states have
made reforms and closed funding gaps. A recent Boston College
analysis found their changes "fully offset or more than offset
the impact of the financial crisis," they added.
The financial crisis devastated the chief source of revenues
for public pensions - investment returns - just as the recession
forced many governments to cut their contributions to the
retirement systems. Recent Federal Reserve data shows state and
local government employee retirement funds were short $1.37
trillion at the end of the first quarter of 2014, a much smaller
gap than the $1.5 trillion shortfall in the first quarter of
2013 but larger than the $1.12 trillion gap five years earlier.
The fight over funding has recently heated up again, as new
government accounting standards for public pensions come online
Gallagher said the new standards still leave opportunities
for state legislatures to hide underfunding.
The associations, though, said the standards require plenty
of disclosure on how much actuaries recommend states contribute,
funding history, and the underlying assumptions used to
calculate how much a state should pitch in for pensions. Beyond
the standards, they added that credit rating agencies are now
looking closer at pension obligations and the groups themselves
provide guidelines for disclosures of pension obligations.
(Reporting by Lisa Lambert; Editing by Lisa Shumaker)