Public Pension Accounting Reform: Preparer Incentives and User Interest

59 Pages Posted: 4 Dec 2014 Last revised: 22 May 2018

See all articles by Abigail M. Allen

Abigail M. Allen

Brigham Young University - Marriott School

Reining Petacchi

Georgetown University - Department of Accounting and Business Law

Date Written: May 2, 2018

Abstract

We examine the lobbying behavior of state governments and their financial statement users in the development of public pension accounting standards GASB 67 and 68. We find that states’ opposition to liability increasing provisions is increasing in the severity of pension plan underfunding, budget deficits, balanced budget requirements, and employee unionization. By contrast, we find that support from financial statement users is amplified in states with poorly funded plans and large budget deficits, suggesting government lobbying is misaligned with a user interest perspective. We also find that public employees overwhelmingly oppose the standards, relative to external users, but the difference is moderated in states with constitutionally protected pension benefits. This finding is consistent with the expectation that pension accounting reform will motivate benefit cuts as opposed to funding increases. Analyses of ensuing state pension reforms confirm that states opposed to the accounting reform are more likely to cut pension benefits.

Keywords: Public Pension, GASB, Standard Setting, Lobbying, Government

JEL Classification: M41, M48, H75

Suggested Citation

Allen, Abigail M. and Petacchi, Reining, Public Pension Accounting Reform: Preparer Incentives and User Interest (May 2, 2018). Harvard Business School Accounting & Management Unit Working Paper No. 15-043. Available at SSRN: https://ssrn.com/abstract=2533492 or http://dx.doi.org/10.2139/ssrn.2533492

Abigail M. Allen (Contact Author)

Brigham Young University - Marriott School ( email )

Provo, UT
United States

Reining Petacchi

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

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