Do Governments Hide Resources from Unions? The Influence of Public Sector Unions on Financial Reporting Choices

This study explores whether unionized municipalities use aspects of governmental (or “fund”) accounting to obscure the amount of resources available through the use of fund balance accounts. I first investigate whether governments with unions report more resources outside of the general fund, a primary measure of operating performance, and instead within less visible funds where financial statement users are less likely to focus. Second, I explore whether unionized governments hold resources within less transparent general fund balance account categories – that is, have higher ratios of reserved or designated fund balance. Primary findings are consistent with both hypotheses. Corroborating analysis reveals that effects are magnified when unions have the ability to strike or are located in states without right-to-work laws. Overall, the evidence suggests that unionized governments shelter resources within less visible accounts and funds to avoid reporting large discretionary resources