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Research Details
Public Pension Accounting Rules and Economic Outcomes, Journal of Accounting and Economics
Abstract
We find a negative association between a state?s fiscal condition and the use of discretion in applying Governmental Accounting Standards Board (GASB) rules to understate pension funding gaps. We also find that the use of discretion is negatively associated with states’ decisions to increase taxes and cut spending. In addition, we find that the funding gap understatement is positively associated with higher future labor costs. Importantly, this association is primarily attributable to the GASB methodology, which systematically understates the funding gap. This suggests that the GASB approach is associated with policy choices that have the potential to exacerbate fiscal stress.
Type
Article
Author(s)
James Naughton, Reining Petacchi, Joe Weber
Date Published
2015
Citations
Naughton, James, Reining Petacchi, and Joe Weber. 2015. Public Pension Accounting Rules and Economic Outcomes. Journal of Accounting and Economics.(2-3): 221-241.