Municipal OPEB Contributions: The Roles of Governance Structure, Fiscal, and Socioeconomic Factors During and After the Great Recession

Abstract

Many governments offer other postemployment benefits (OPEB) to their employees, and discretionary contributions to OPEB plans are important to plan financial well-being. This paper reports a study of municipalities' actual annual contributions to their OPEB plans from fiscal year 2008 through 2015, a time span encompassing the Great Recession and subsequent gradual recovery. Giving effect to cities' governance structure (form of organization and extent of employee unionization) and certain fiscal and socioeconomic variables, we estimate a model of plan contributions normalized by the related actuarially required contributions. We find that Mayor-Council (MC) cities are associated with comparatively higher OPEB plan contributions relative to Council-Manager cities. We control for MC cities' discount rates to address the consequences of optimistic rate assumptions. The effect of unionization on contributions is evident directly, but unionization is not noteworthy when conditioned on form of government. This suggests that MC cities manage their OPEB plans in a fiscally accountable manner.