Uncooking The Pension Books

If you think government pensions look bad now, just wait until new rules requiring less book cooking go into effect...

The Sisyphean task of funding U.S. state and local-government retirement plans, a hidden risk for municipal-bond investors, will get even more daunting under proposed new accounting rules.
Pensions in Illinois, New Jersey, Indiana and Kentucky may have less than 30 percent of the assets needed to cover promised benefits under the measure, according to data from the Boston College Center for Retirement Research. The changes, which take effect starting in June 2013, will alter how liabilities are calculated and how assets are reported on financial statements.

They haven't even been balancing the cooked books, so this is going to be quite revealing.

Illinois, which already has the U.S. state pensions with the widest gaps between assets and promised benefits, will see two of its funds fall to the lowest among the 126 plans studied by the Boston College center. The state Teachers system’s funded ratio will drop to about 18 percent, the lowest level in the study, from 48 percent, and the State Employees’ Retirement System of Illinois will sink to 22 percent from 46 percent, ranking second.
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New Jersey’s Public Employees’ Retirement System will see its funded ratio drop to about 30 percent from 62 percent, while the New Jersey Teachers’ Pension & Annuity Fund will fall from almost 58 percent to about 25 percent, according to the Boston College study released in November.