In case you missed it, the Federal Reserve’s quarterly Financial Accounts report last week included a change to accounting for state and local pension-fund programs. The central bank revised its data for unfunded liabilities, applying a “projected benefit obligation” method instead of the prior “accumulated benefit obligation” approach. With the change increasing unfunded obligations by $2.3 trillion — more than double the previous total — “the Fed dropped a bomb,” according to Stephanie Pomboy of researcher MacroMavens LLC, who says states will eventually need to cut spending or raise taxes to compensate.
Now I’m wondering what made them chose the prior methodology and what made them decide to change it?
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