State Pension Accounting Estimates and Strong Public Unions

52 Pages Posted: 31 Aug 2018

See all articles by Samuel B. Bonsall

Samuel B. Bonsall

Pennsylvania State University - Department of Accounting

Joseph Comprix

Syracuse University

Karl A. Muller

Pennsylvania State University - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: August 22, 2018

Abstract

Concerns are commonly raised that strong public unions extract generous pension benefits from state governments and are the cause of states’ burdensome pension obligations. Prior research (Anzia and Moe 2015) finds evidence supporting such concerns. Consistent with incentives to minimize such perceptions, our findings suggest that state pension plans with stronger public unions select higher discount rates to improve reported funding levels. While riskier asset allocations are used to support the higher discount rates (which equal the expected return on the plan assets), most of the higher rates appear opportunistic. In addition, consistent with a desire to avoid drawing attention to persistent plan underfunding, our evidence indicates that stronger union plans are less likely to select longer amortization periods to recognize pension deficits when underfunding is larger. We do not, however, find evidence for asset smoothing periods being used to delay the recognition of investment losses on plan assets. Together, our findings suggest that stronger union plans take steps to make their pension obligations look less burdensome to the public.

Keywords: public pensions, unionization, GASB

JEL Classification: H55, J45, J51, M41

Suggested Citation

Bonsall, Samuel B. and Comprix, Joseph and Muller, Karl A., State Pension Accounting Estimates and Strong Public Unions (August 22, 2018). Available at SSRN: https://ssrn.com/abstract=3236890 or http://dx.doi.org/10.2139/ssrn.3236890

Samuel B. Bonsall (Contact Author)

Pennsylvania State University - Department of Accounting ( email )

University Park, PA 16802-3306
United States

Joseph Comprix

Syracuse University ( email )

Whitman School of Management
721 University Avenue
Syracuse, NY 13244-2450
United States
315-443-3674 (Phone)
315-442-1461 (Fax)

Karl A. Muller

Pennsylvania State University - Department of Accounting ( email )

Smeal College of Business
384 Business Building
University Park, PA 16802-3306
United States
814-865-0202 (Phone)
814-863-8393 (Fax)

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