Accounting, Politics, and Public Pensions

Source: Steven W. Thornburg and Kirsten M. Rosacker, CPA Journal, April 2018

Defined benefit pension plans offer politicians a convenient way to satisfy public employee demands while providing the means to defer budgeted cash payments and hide the accumulation of public debt from taxpayers. The authors describe how this plays out in practice and how accounting standards facilitate such activity. The accounting profession, and Governmental Accounting Standards Board (GASB) in particular, could do more to inform taxpayers about the state of public finances. The longstanding failure to do so, the authors argue, allows public debt to accumulate until a crisis is reached.