| Article ID: | iaor199873 |
| Country: | United States |
| Volume: | 9 |
| Issue: | 1 |
| Start Page Number: | 5 |
| End Page Number: | 20 |
| Publication Date: | Jan 1997 |
| Journal: | Journal of Public Budgeting, Accounting and Financial Management |
| Authors: | Sneed Cynthia A., Sneed John E. |
| Keywords: | management, government, public service, statistics: regression, time series & forecasting methods |
Prior research has examined the relationship between government expenditures and the complexity of a governmental unit to examine the fiscal illusion hypothesis. Fiscal illusion posits that unfunded government obligations lead to rapid government growth because taxpayers perceive the cost of services to be lower than would be possible if the services had to be financed with immediate tax increases. This study investigates whether unfunded pension obligations are a source of fiscal illusion for states. The results of the analysis support the fiscal illusion hypothesis that states with unfunded pension obligations have higher levels of spending.