Texas Moves To Block Accounting Rule on Retiree Health Costs
Texas officials are "on the verge" of rejecting a Governmental Accounting Standards Board rule that requires public employers to report the cost of retiree health benefits, the New York Times reports (Williams Walsh, New York Times, 5/18).
GASB, a not-for-profit organization that establishes accounting standards for public employers, established the rule in 2004, and it takes effect this year for the largest public employers. The rule requires public employers to report the current and future costs of health care and other benefits -- such as dental, vision and life insurance -- for the estimated 24.5 million public employees.
States must pay their liabilities over a 30-year period, and liabilities will count against net assets for states that do not allocate funds to cover the costs each year. Under the rule, Texas would have to begin to report the cost of retiree health benefits on Dec. 15, 2007 (California Healthline, 3/12).
The Texas House on a 142-0 vote passed legislation that would make the rule inoperable in Texas. Originally, the bill would have prohibited state governmental bodies from adopting GASB's rule.
It has been scaled back to allow, but not require, government bodies to comply.
The state Senate is scheduled to vote on the measure on Monday. If passed, Texas Gov. Rick Perry (R) is expected to sign the legislation.
According to the Times, passing the legislation "would be an unprecedented rebuff" to GASB, and board officials "are watching to see if Texas inspires copycat rebellions elsewhere." Because GASB lacks an agency to enforce its standards, it must rely on elected or appointed officials to comply.
GASB spokesperson Gerard Carney said Texas' legislation marks the first time in the board's 23-year history that any state has sought to avoid compliance with one of its standards. Carney said, "This is a disturbing reminder of what can happen when politicians interfere with an independent system that was designed to protect financial reporting from politics and other self-interests."
Other state and local governments have delayed taking steps to comply with the rule because they believe that the overall high cost of health care will mean the federal government has "no choice but to step in and remake the nation's health care system, taking states and local governments off the hook," according to the Times.
Susan Spataro, auditor of Texas' Travis County and a leader of the opposition to the GASB rule, said that the county had commissioned its actuarial firm, Milliman, to calculate the total cost of benefits. Milliman determined benefits would cost the state $89 million, but a second opinion from Deloitte determined a cost of $320 million for the benefits.
Spataro said that the differences in the estimates show the total cost of retiree benefits is "not measurable" and that she is unwilling to certify or base tax decisions on the estimates. She added that the "creditworthiness of Travis County has not changed" because of its decision to reject the GASB regulation.
Further analysis of the reports showed that the firms' initial reports used different starting dates and statistical techniques. After working together with Travis County, the firms eventually reached similar estimates, according to the Times (New York Times, 5/18).