County Executive Owens Receives GASB 45 Report From Task Force
Annapolis, MD (November 15, 2006)
Anne Arundel County Executive Janet S. Owens announced she has received and reviewed the Government Accounting Standards Board Statement 45 (GASB 45) Task Force Report. The detailed report examines the accounting treatment of Other Post Employment Benefits (OPEB) beginning fiscal year 2008.
In October of 2005, Chief Administrative Officer Robert Walker appointed a task force to study the pending implementation of GASB 45. Similar to pension accounting requirements, this standard requires governments to quantify and recognize the cost of OPEB attributable to former and current employees.
Implementation by the County must begin in fiscal year 2008, which begins July 1, 2007. In preparation for the fiscal year 2008 budget, which will be finalized in May of 2007, the County must have a plan in place with respect to the requirements of GASB 45. Rating agencies have advised that the inclusion of this liability on the financial statements of a government and the government’s approach to managing this liability will affect their review of the entity’s bond rating, thus potentially making it more expensive for the entity to borrow money.
The report quantifies the liability to be as much as 2.3 billion dollars. The rule allows amortization of this liability over a period of up to thirty years. Absent any changes to the retiree health benefit package, the additional cost to fully fund the amortization would be 75 to 137 million dollars annually, depending on the discount rate allowed under the GASB rule.
The report identifies a suite of options to successfully implement this accounting requirement from which the new Administration may choose.
"This is a huge liability to County government, just as it is for the State of Maryland," said County Executive Owens. "The incoming Administration will need to carefully examine the options presented by the Task Force."
In accordance with the charge to the Task Force, the report does not provide recommendations or solutions to the conundrum the new rule creates; rather it sets forth the necessary background and actuarial analysis necessary for the incoming Administration to reach conclusions and make decisions in the short interval between taking office and the budget presentment for fiscal year 2008.
The 14-member Task Force chaired by Ron McGuirk, Senior Economic Advisor to the County Executive, was comprised of representatives from the County government, Community College, Board of Education and organized labor.
The Task Force met on eleven occasions, while an on-going working committee comprised of Merit System professionals provided analytical support to the Task Force.
County Executive Owens and Mr. Walker have presented the report to County Executive-Elect Leopold, along with members of the County Council.
Director of Communications
Anne Arundel County Executive Janet S. Owens
Arundel Center - 44 Calvert Street
Annapolis, MD 21404