New accounting standards will require state and local governments to acknowledge the full cost of health benefits promised to retirees, ...

The article does go on to explain what this means. In brief,

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rules, developed by the Governmental Accounting Standards Board, an independent nonprofit organization, apply to all state and local governments. They require employers to measure and report the long-term costs of retiree health benefits while employees are still working. Under current practice, most public employers do not report such costs until they pay for the promised benefits, often many years after employees have retired.

"State and local governments have generally been looking at the tip of the iceberg," said Karl D. Johnson, project manager for development of the new rules. "Our standards require them to measure the iceberg. Many public employers have never looked under the water. They just looked at what they could see on the surface — what they have to pay this year for current retirees — without measuring the cost of their commitment to provide retiree benefits to large numbers of active workers."

In large states, Mr. Johnson said, such unfunded liabilities for retiree health benefits total billions of dollars.

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What is really interesting is objections that are starting to appear (and where they are coming from):

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Labor unions and health plan administrators said the standards could jeopardize health benefits for millions of retired public employees. Moreover, they said, the standards will cause a fiscal shock to state and local government agencies and could harm their bond ratings.

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Private companies got hit with this in the early 90's with something called FASB 106. In fairness it did cause companies to reduce or eliminate benefits to their retirees if only because it caused companies to recognize what the costs of those promises really were. When 106 came along the original estimates of the unfunded (i.e., unrecognized) liabilities of the Fortune 500 by a very significant margin. Translation, they were insolvent and could not pay the bill for the promises they had made.

The best part of the entire article (worth many chuckles) is

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Unions contend that the standards will force public employers to overstate their liabilities for retiree health benefits, because the standards ignore the fact that employers can reduce or eliminate health benefits in the face of fiscal pressures.

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