Bond vigilantes at work

SACRAMENTO — For those who wonder about the practical importance of transparency, I offer as evidence the latest result of a modest rule change from a mind-numbingly named organization – the Governmental Accounting Standards Board, or GASB (pronounced Gaz-bee). The group’s stated goal is to promote accountability through “excellence in public-sector financial reporting.” This is exciting stuff for people who wear green eyeshades.

But it has practical importance for taxpayers. For decades, state and local governments have been able to essentially hide – or at least downplay – the size of their unfunded pension and retiree health-care liabilities, or debts. GASB passed rule changes that make governments more directly account for these debts. California governments are starting to report pension debts differently in their 2015 financial statements, which is becoming a wake-up call. (Medical costs and other non-pension benefits will be accounted for differently in the 2017-2018 fiscal year.)

Where are the bond vigilantes?, Krugman always asks.   They were swarming all over California protecting bond holders from folks like Krugman.   Now we have permanent anit-Kanosian rules built into the accounting system, we can always calculate the cost of Kanosian fraud.

The article demonstrates that Jerry "Dills Act" Brown understands the nightmare.