Accounting change could pressure taxes

Washington-- An accounting change by U.S. actuaries could dramatically increase contributions needed to cover the cost of public employees' pension funds, analysts said.

The American Academy of Actuaries is considering new standards that would require local governments to provide two estimates of returns on investments made on behalf of public employee pension funds, The Washington Post reported Friday.

Most municipalities estimate returns on investments at 8 percent, about twice the amount federal regulations permit for private firms, the Post reported.

But, the estimate may be too high. The number of public pension budgets considered underfunded jumped fivefold to 40 percent in 2006, compared with 2000, the Government Accountability Office reported.

Vallejo, Calif., near San Francisco, declared bankruptcy in May due to salary and pension fund obligations.

Pension fund managers are unhappy with the change. "I'm not sure why you should confuse things by even implying that you should be using a different system than the one you are using," said Maryland Treasurer Nancy Kopp.

"We are trying to be as straightforward and transparent as we can, and we also are trying to have a diversified portfolio to ensure we will be well funded," she said.

Copyright 2008 by United Press International.