Public pension accounting rules and economic outcomes
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 a...
| Main Authors: | , , |
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| Format: | Article |
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Elsevier
2018
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| Online Access: | http://hdl.handle.net/1721.1/114873 https://orcid.org/0000-0002-2221-5198 |
| _version_ | 1826198891996905472 |
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| author | Naughton, James Petacchi, Reining Weber, Joseph P |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Naughton, James Petacchi, Reining Weber, Joseph P |
| author_sort | Naughton, James |
| collection | MIT |
| description | 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. Keywords: Public pension;
Economic consequences of accounting rules; Real decisions |
| first_indexed | 2024-09-23T11:11:36Z |
| format | Article |
| id | mit-1721.1/114873 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T11:11:36Z |
| publishDate | 2018 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | mit-1721.1/1148732024-07-12T16:40:10Z Public pension accounting rules and economic outcomes Naughton, James Petacchi, Reining Weber, Joseph P Sloan School of Management Petacchi, Reining Weber, Joseph P 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. Keywords: Public pension; Economic consequences of accounting rules; Real decisions 2018-04-23T17:08:05Z 2018-04-23T17:08:05Z 2015-02 2015-02 2018-04-20T11:13:56Z Article http://purl.org/eprint/type/JournalArticle 0165-4101 http://hdl.handle.net/1721.1/114873 Naughton, James et al. “Public Pension Accounting Rules and Economic Outcomes.” Journal of Accounting and Economics 59, 2–3 (April 2015): 221–241 © 2015 Elsevier B.V. https://orcid.org/0000-0002-2221-5198 http://dx.doi.org/10.1016/J.JACCECO.2015.02.002 Journal of Accounting and Economics Creative Commons Attribution-NonCommercial-NoDerivs License http://creativecommons.org/licenses/by-nc-nd/4.0/ application/pdf Elsevier SSRN |
| spellingShingle | Naughton, James Petacchi, Reining Weber, Joseph P Public pension accounting rules and economic outcomes |
| title | Public pension accounting rules and economic outcomes |
| title_full | Public pension accounting rules and economic outcomes |
| title_fullStr | Public pension accounting rules and economic outcomes |
| title_full_unstemmed | Public pension accounting rules and economic outcomes |
| title_short | Public pension accounting rules and economic outcomes |
| title_sort | public pension accounting rules and economic outcomes |
| url | http://hdl.handle.net/1721.1/114873 https://orcid.org/0000-0002-2221-5198 |
| work_keys_str_mv | AT naughtonjames publicpensionaccountingrulesandeconomicoutcomes AT petacchireining publicpensionaccountingrulesandeconomicoutcomes AT weberjosephp publicpensionaccountingrulesandeconomicoutcomes |