Lone Star State Trying to Opt Out of GASB 45

March 9, 2007 (PLANSPONSOR.com) - A rebellion against an accounting rule requiring government agencies to determine the cost of their accrued health and other benefits to retirees is gathering steam among Texas officials.

In fact, Texas Senator. Robert Duncan has proposed a bill rejectingStatement Number 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (See  GASB Hands Down Nonpension Benefit Accounting Guidance ) for both the state government and local Lone Star State government agencies as well, according to an Austin American-Statesman news report. Representative Vicki Truitt has introduced a companion bill in the Texas House.

The rule, Duncan told the newspaper, improperly requires the state to account for benefits “that are not a legal obligation” and that can be adjusted or eliminated at any time.”To impose this requirement doesn’t make sense,” Duncan said.

However, accounting experts said the legislation is an attempt to lessen the impact of the state’s long-term obligations, which, in this case, could amount to a $50 billion liability over 10 years according to one estimate, the report said.

If the legislation passes, “We’re going to look like idiots,” Michael Granof, a professor at the University of Texas McCombs School of Business, told the newspaper. “What this says is that Texas, alone among the 50 states, won’t measure the liability and therefore not manage it.If we don’t put the liability on the books, it still exists. It’s not going away.”

Texas Comptroller Susan Combs also has joined the revolt. On March 1, Combs urged her fellow state chief financial officers to join her opposition, sending them copies of a letter she wrote to the accounting board protesting the new rules.

The rule takes effect in stages. The Texas teacher and state employee retirement systems will begin reporting their liabilities in their fiscal 2007 report. The state will start reporting in fiscal 2008.

Robert Attmore, the chairman of theGovernmental Accounting Standards Board (GASB) that instituted the rule,said whether the long-term costs are legal obligations is irrelevant. In the case of Texas, “it’s clear there is an obligation – it’s part of the compensation for services,” he said, according to the report.

“Governments frequently pay less but provide greater retirement benefits,” he said. “There’s no question that’s part of an employee’s compensation.”

A GASB fact sheet on the rule is  here .