GASB 45 and the Florida Public School System: Impact, Implications, and Possible Solutions to the Unfunded Liability Problem

March 2013
Summary

The disclosure requirements under General Accounting Standards Board (GASB) 45 draw attention to a possible unfunded liability for government employers providing other than pension post-retirement benefits (OPEB). While these liabilities are far less than pension plan liabilities, they are still substantial. A recent white paper reported that the unfunded OPEB liability for the Florida school districts was in excess of $3.5 billion. While the OPEB category includes pharmacy, dental, vision, long-term disability, and long-term care benefits, post-retirement medical benefits for public sector retirees represent a significant share of potential OPEB liabilities. This paper provides an analysis of the potential impact that unfunded liabilities identified under GASB 45 will have on the school districts operating in Florida. In addition to highlighting the extent of the GASB 45 problem, we analyze the factors that impact on OPEB liabilities, identify the variety of assumptions that are used in calculating OPEB liabilities as well as the different benefit programs reported by the school districts, and discuss possible options for addressing the OPEB liability problem.