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Total Impact - New Rules

7 Counties
2011 - $Billions

Report  Impact    New
Assets   $17.8 -$1.0 $16.8
Debt 7.6 +8.3 15.9
Net $10.2 -$9.2 $1.0

If the new pension reporting rules had been in effect in 2011 these 7 counties together would have "written off" about $9 billion of their "Net Worth"

That's about how much real past pension expenses they never reported to the people.

There are over 3000 counties in the US - tens of thousands of cities, school districts, special districts ...

Click for my new report.

• How Pension Funds Work
• GASB's & Moody's Changes
• Explanation of Fatal Flaw
• Pension Expense - 4x more
• Lower Assets, More Debt
• 2015 -Oceans of Red Ink
• Moody's - Double Payments

Bill Gates was asked this question at the 2010 Aspen Ideas Festival - Do we have a huge unaccounted for pension overhang problem that’s going to hurt our government budgets?

Bill GatesClick here to see a short video of Bill's response including why he says today's government reporting of pension finances is fraudulent.

* (The quote at the top of the main article is paraphrased from Bill's video.)

Moody's New Credit Analysis

Moody's Investor Services won't wait for the new pension reporting rules. They intend to adjust government reported pension finances in their credit ratings.

Moody's projects their adjustments will triple the amount of unfunded government pension debt across the US. They will also conclude governments are paying their Pension Funds far less than is prudent.

Click here for my report on Moody's adjustments applied to 6 Bay Area - North Coast counties.

John G Dickerson

Today's Fraudulent Pension Accounting
Ends in Two Years

Only pension accounting fraud allows governments to pretend their budgets are balanced.*
   - Bill Gates, July 2010

My County – Mendocino – incurred hundreds of millions of past pension expenses they never reported to the people. Across the nation hundreds of billions of past government pension expenses have been hidden by a “Fatal Flaw” in how governments report pension finances.

That’s about to change. Big Time.

I've just released a new report - Unmasking Staggering Pension Debt & Hidden Expense (click for copy) - 1.9MB.

At the end of June, 2012 the Governmental Accounting Standards Board (“GASB”) imposed major reforms in how state and local governments report pension finances that will kick in over the next 2 years. Then Moody’s announced their intention to make big adjustments to government reported pension finances in their credit-rating analysis.

My specific goal is to show how GASB's current rules have a "Fatal Flaw" - how it allowed hundreds of billions of unfunded government pension debt to develop without the people knowing - and why the new rules are absolutely necessary.


My general goal is to describe to concerned citizens what the impact of GASB's new rules and Moody's adjustments will be.

My report shows the impact these changes would have had on the 2011 audits of 7 California counties that have their own County Pension Funds - Alameda, Contra Costa, Marin, Mendocino, Orange, San Mateo, and Sonoma.

I had the honor to present the content of this new report to reform colleagues in Contra Costa and Marin counties in the last part of February. ( Email me or give me a call - click Contact on the top menu - if you'd like a presentation to your group.)

Click here or on the picture to see a video of my presentation to Marin's Citizens for Sustainable Pension Plans on 2/28.

The Fatal Flaw

Here's a very simple example of the "Fatal Flaw" in how governments report their pension finances. It's why Bill Gates says "fraud".

Mendocino's Pension Fund reported "Unfunded Pensions" were about $125 million in 2011.

The Fatal Flaw

The "Growth of Debt" - Unfunded Pensions - happened over the previous 8 years. The debt got bigger in 6 years and declined in two.

Only the County has to eliminate these Unfunded Pensions. The Actuary set up "Amoritization Payments" over the next 30 years. If everything else goes according to plan at the end of 30 years the County's payments will eliminate the Unfunded Pension debt.

The Trillion Dollar Question

When does the EXPENSE happen that creates the County's $125 million Unfunded Pension debt?

Hundreds of billions of unfunded government pension debt exists because for more than 2 decades GASB gave us the wrong answer.


Today's Absurdity

The amount governments pay to Pension Funds today is what they report as their Pension Expense. (It's more complicated - but this is the core concept.)

Part of what they pay are these "Amortization Payments". Therefore the amount of each year's future Amortization Payment will be part of the Pension Expense the County will report in that year.

Today - government financial statements are trying to tell us the payment of a debt creates the debt. That's absurd. The payment of a debt eliminates the debt - it does't create it.

The real expense happened before the $125 million Unfunded Pension debt. It happened in the 8 years labeled "Growth of Debt".

Governments didn't report the pension expense that created today's hundreds of billions of unfunded pension debt. In 2 years they will.

As Bill Gates says (paraphrase) -

The Government Accounting Standards Board allows governments not to report full pension costs. Whenever something’s free it gets overused, and so improving the pensions of people who are already retired – never shows up on the budget. Letting people retire early, have more overtime factored into their retirement – all these things come from the fact that when the person who says "yes" to those things – the government person – doesn't feel any pain at all because there's no number that ever shows up (in financial statements).

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