The Executive Director of the State Retirement Agency recently confirmed that county governments do not need to report the state teacher pension fund’s unfunded liabilities, despite the teacher pension shift. As he described in a hearing before the Senate Budget & Taxation Committee, the state pension fund’s unfunded liabilities will not be reflected on county governments based on the new Governmental Accounting Standards Board (GASB) Rule 67. Counties had concerns that their new funding responsibility for the teacher pension system could be misconstrued as an assumption of liabilities and negatively affect county bond ratings.
Following the pension shift, the Executive Director of the State Retirement Agency contacted GASB to ask them about Maryland’s scenario. The initial response was that the counties would be required to show their proportionate share of the unfunded liabilities for the teachers, and incoming revenue offsetting that liability in their financial statements. Once the new GASB rules were finalized, however, the Director wrote to GASB to ask the question again asking specifically if the way that Maryland is funding the teacher’s liabilities created a “special funding situation.” This time, GASB agreed and assured the Director that
Maryland’s 24 subdivisions will not be required to disclose and report their proportionate share of the State teacher pension plan’s unfunded liablities. Those liabilities will appear on the State’s financial statements only.
The Director recently sent a letter to each of the Chief Financial Officers of the Local Education Agencies and counties to inform them of GASB’s response. This decision accurately reflects the fact that county governments did not assume responsibility for the unfunded liabilities of the system when they took on a share of the teacher pension’s normal costs. To listen to Director testify before the Senate Budget & Taxation Committee on January 16, 2014, click here.