Fitch: Risks vary widely in local government pensions

(Reuters) - Fitch Ratings said on Monday that local government pension liabilities vary largely for the more than 1,000 local governments it rates because each government's pension situation varies.

The new Governmental Accounting Standard Board's standards set to take effect over the next two years are a "step in the right direction toward better transparency and comparability of government pension liabilities," the rating agency said in a report. It said it does not expect any major rating changes due to these new pension accounting standards.

Under new GASB rules that were approved in June, state and local governments post their net pension liability -- the difference between projected benefit payments and the assets set aside to cover them -- on their financial statements.

Also under the new rules, pensions with insufficient assets to cover their obligations will have to project lower rates of return on their investments, closer in line to the yield on a municipal bond. Earnings provide 60 percent of pension funds' revenues.

Local governments are short billions of dollars for retirement promises made to employees. The Pew Center on the States recently estimated that U.S. cities have a combined shortfall at least $99 billion. The underfunding has of late pushed some cities toward bankruptcy and into protracted political fights.

(Reporting by Caryn Trokie in New York; additional reporting by Lisa Lambert in Washington; Editing by Leslie Adler)

Source: http://news.yahoo.com/fitch-says-u-local-government-pension-risk-varies-144915367--sector.html

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