Unfunded Public Pension Liabilities and Local Citizen Oversight

29 Pages Posted: 6 May 2013 Last revised: 5 Aug 2014

Kevin T. Rich

Marquette University - Department of Accounting

Jean X. Zhang

Virginia Commonwealth University

Date Written: August 1, 2014

Abstract

We examine whether unfunded public pension liabilities are associated with citizen oversight through legislative and electoral means in local governments. Our focus on municipal pension plans is timely and relevant, given the prevalence of underfunded pension plans and GASB’s recently issued statements on state and local pension reporting. Using a sample of 84 locally administered municipal defined benefit pension plans in 2009, we find evidence that the level of unfunded pension obligations is negatively associated with both provisions allowing direct citizen participation in the legislative process and electoral voter activism in the form of recent recall attempts. Overall, our empirical evidence is consistent with citizen oversight mechanisms playing an important role in the pension funding decisions of municipal governments.

Keywords: Pensions, Citizen oversight, Voter activism, Local government, Municipal accounting

JEL Classification: M38, M41

Suggested Citation

Rich, Kevin T. and Zhang, Jean X., Unfunded Public Pension Liabilities and Local Citizen Oversight (August 1, 2014). Accounting Horizons, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2261211 or http://dx.doi.org/10.2139/ssrn.2261211

Kevin T. Rich (Contact Author)

Marquette University - Department of Accounting ( email )

College of Business Administration
PO Box 1881
Milwaukee, WI 53092
United States

Jean X. Zhang

Virginia Commonwealth University ( email )

301 West Main Street
P.O. Box 844000
Richmond, VA 23284
United States

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