Foundation Debunks Myths About Fixing Public Pensions

Houston — Laura and John Arnold Foundation (LJAF) today released “‘GASB Won’t Let Me’: A False Objection to Public Pension Reform,” a policy paper intended to educate the public and policymakers on sound options for pension reform by challenging common myths about employee benefits reform. In this paper, Dr. Robert M. Costrell, Professor of Education Reform and Economics at the University of Arkansas, separates fact from fiction on state funding policies for accrued pension debts versus structural pension reform proposals.

“It is a misperception that new benefit structures raise costs in the short run because of a Government Accounting Standards Board (GASB) accounting rule that accelerates amortization schedules,” says Dr. Costrell. ​“GASB rules pertain only to financial reporting and not to legislative policy. Several states have made responsible reforms and continue to amortize unfunded liability, just as they did before enacting reforms.”

Dr. Costrell emphasizes reform efforts must be evaluated on their own merits and not be confused with amortization schedules, since the two are not in conflict and both are imperative for working toward a responsible future.

“Without significant changes to current systems, public pension payments will quickly crowd out other discretionary spending like education and public safety,” says Dr. Josh B. McGee, LJAF’s Vice President for Public Accountability Initiatives. ​“Dr. Costrell’s work debunks one of the most pervasive myths used to stymie these much needed reforms. It is imperative we repair broken systems for future generations.”

LJAF actively seeks opportunities to invest in states and municipalities where leaders and citizens have a sincere interest in implementing fundamental reforms that fully address the cost, incentive and labor market problems created by the current public pension system.

LJAF welcomes the opportunity to be a resource to those who share this goal. The full paper can be found here.