Both the business media and the popular press have emphasized the underfunding problems associated with pension funds that are set aside for state and local government workers, a group that also includes teachers and professors at state-affiliated colleges and universities. The realization that pension funds are typically underfunded stems from the fact that the accounting standards associated with state and local government employee pension funds have led to greater transparency since 2011. This paper examines, explains, and interprets the historical development over the last 70 years of accounting standards for state and local government pension funds in the United States. Changing accounting standards, along with economic and social change, have led to consequences such as employers transforming their pension programs to avoid substantial costs and significant liabilities, for example by changing from defined benefit to defined contribution plans.

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