How to Cheat a Retirement Fund

The New York Times reports:

The S.E.C. is now making inquiries about the underfunding of other public pensions, and its assertiveness is welcome. But this effort cannot ultimately fix the problem, because all the S.E.C. can do is force states to follow the budgeting rules that are set by the Governmental Accounting Standards Board. These rules offer, at best, only the illusion of transparency, because they allow governments to base their budgets on economic fictions.

Consider, for the sake of comparison, how private corporations, in measuring the value of the assets in their pension systems, are required to use real portfolio market prices. Government accounting standards, in contrast, allow public pension systems to measure their assets based on average values looking back over a period of years. In most instances those average values add up to a figure that is much higher than the amount of money the pension plan actually has.

As we've said before: how long before the SEC shuts down underfunded public pension plans?