The funding policy for defined benefit pension plans covering government employees represents an important decision for government entities sponsoring those plans. In recent years, a number of state and local governments have experienced extreme funding shortfalls (e.g., New Jersey, Illinois, and Detroit), raising concerns about whether government entities are contributing enough to their pensions. Governmental Accounting Standards Board Statements Number 67/68 (hereafter, “GASB 67/68”) fundamentally alter the financial reporting of pension liabilities, by (i) requiring pension liabilities to be estimated using a potentially lower discount rate (which increases estimated liabilities and any funding deficits), and (ii) mandating recognition of funding deficits (surpluses), which were previously only disclosed in footnotes, as a liability (asset) on governmental balance sheets. Although GASB 67/68 only changes financial reporting requirements and acknowledges specifically that funding decisions are outside its scope, we find, for a sample of 100 large state-administered plans, that governments increase pension contributions upon applying GASB 67/68, over time as well as compared to corporate pension plans as a control group in difference-in-differences tests. In cross-sectional tests within governmental plans, the funding response is primarily observed from governments expecting a larger dollar impact to applying GASB 67/68, and from governments facing more adverse economic or political consequences from financial statement recognition. Government plans that increase funding are also more likely to have passed benefit cuts, suggesting that taxpayers and public employees share the costs. Overall, these responses suggest that governmental entities are willing to take actions with cash flow consequences to avoid recognizing large liabilities on-balance sheet; purely accounting changes, therefore, can have “real” effects on governmental pension policy.