Much like personal credit ratings, nations, states and towns are evaluated for credit ratings as well through a combination of factors such as financials, balance sheets, and debt ratios.
This small change in the accounting practices could have far reaching effects. Those effects are still on the horizon and impossible to predict for local governments such as the cities of
For example, the state of
What effect does shifting numbers not counted before to the debt side of the balance sheet mean locally? At this point no one is absolutely sure.
"At this point it may or may not affect the county's credit rating, we just don't know for sure," interim County Administrator and Finance Director
You may ask why a state or local government would need a credit rating, but that rating is taken into account when bonds are issued or the body must borrow to meet budgetary requirements. Traditionally
"Right now we are trying to become familiar with the changes the GASB has made and trying to determine what it will mean to the city,"
One possible result of the change, beyond affecting credit ratings and solvency of some local and state governments, could be the disappearance of the pension plan at the local level. Guardino didn't suggest as much, but if the result of the GASB changes is detrimental to local government the leap isn't a big one.
"At the state level providing the pension plan for employees is required and all those employed by the state get the benefit of it," he said. "At the county or city level it's a choice to participate and some of these governments choose to find their own retirement option for their employees."
According to Guardino the earliest some clarification will be forthcoming from the state to answer some of the questions local officials have will be October of this year when a conference is scheduled to be held statewide.
Simons has a question he would like to see answered by the state where this new potential financial liability is concerned.
"When I or any employee retires they will get their check directly from the state, not from the city of
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