Municipal OPEB Contributions: The Roles of Governance Structure and Economic Factors

• In Event: Government Financial Reporting Issues

Abstract

This paper reports a study of municipalities’ actual annual contributions to their other post-employment benefits (OPEB) plans. In sum, governance structure and economic climate are important influences on actual OPEB contributions. Using panel data for the period 2008 - 2015, we estimate two models of such contributions along with models of (1) the annual required contribution (ARC), (2) the difference (DIFF) between ARC amounts and actual contributions, and (3) unfunded accrued actuarial liabilities (UAAL). We find strong negative relationships between strong-mayor governments and both ARC and actual contribution amounts. We find further that the extent of unionization is negatively associated with the ARC but positively associated with actual contributions. Other noteworthy associations with contributions are (1) property values (positive), (2) direct debt (negative), and (3) unemployment (negative). A strong-mayor-union interaction term bears a negative relationship with DIFF, meaning that in strong-mayor governments, as unionization increases, the shortfall between ARCs and actual contributions diminishes. Finally, the UAAL regression estimate shows a strong negative relationship with strong-mayor governments, explaining the same finding with respect to the ARC.

Authors

• Laurence E Johnson, Colorado State University

• Suzanne Lowensohn, University of Vermont

• Alan Keith Styles, Cal State University - San Marcos