What is CalSTRS doing to address the employer reporting requirements of the new GASB accounting standards?

Ask Jack Jack Ehnes

CalSTRS is in dialog with our stakeholders, including school employers, and plans to conduct informational presentations and publish materials which will be available on our website.

The new accounting standards, GASB Statement 67, Financial Reporting for Pension Plans, and Statement 68, Accounting and Financial Reporting for Pensions, bring about significant changes in financial reporting requirements for pension information by the state, local governments and school employers which CalSTRS has previously communicated through our website and during advisory committee meetings.

The new calculations required by GASB will significantly increase the appearance of the unfunded liability for accounting purposes only, but will not change the actual amount of the funding shortfall, $70 billion, or CalSTRS’ need for a long-term funding solution. Under the new standards, either the state or school employers along with individual educational entities may be required to carry their proportionate share of CalSTRS’ unfunded liability as a liability for accounting purposes on their books. It’s unclear at this time how much, if any, of the unfunded liability will have to be reported by school employers, as opposed to by the state, who is the plan sponsor. CalSTRS is researching this issue and will provide information as it becomes available. Meantime, the new measures could add a “Net Pension Liability” on school employer balance sheets, which has the potential to dwarf most other liabilities and may result in a negative fund balance position for school employers.

Again, while the new accounting rules help underscore the need to address the funding shortfall, they should not unnecessarily detract from any meaningful dialog that restores the long-term viability of the fund.