Taxpayers Not Burdened by Public Pensions

According to a study by NCPERS, public pensions are generally cost-effective and pump trillions of dollars into local economies.

Taxpayers only contribute about 20 cents on the dollar toward public pension plan contributions, according to a recent paper by the National Conference on Public Employee Retirement System (NCPERS). 

The organization also cites research by the National Institute on Retirement Security (NIRS) indicating that every dollar paid in pension benefits creates $2.21 in economic output. This results in about $3.7 trillion of pension fund assets invested in the U.S. economy by public pension funds, NCPERS suggests.

Research by the National Institute on Retirement Security (NIRS) points out that economic activity generated by the spending of retiree pension checks in 2014 resulted in $189.7 billion in tax revenues. At the same time, $120.5 billion was contributed toward pension systems in taxpayer contributions to state and local pension funds that year.

NCEPERS says, “Opponents of public pension often argue that taxpayers cannot bear the heavy burden of funding public pensions. The fact is quite the opposite. When public programs are funded on a pay-as-you-go basis, taxpayers put up every dollar for the services they receive. But public pensions are funded in advance, over the course of many years, with investment earnings and employee contributions powering asset growth.”

According to the organization’s study of California Public Employees Retirement System (CalPERS) and California Teachers Retirement System (CalSTRS), their investments support 1.45 million jobs. It notes that if the 2016 average salary in California is about $90,000 and 2016 average tax rate is about 17%, CalPERS’ and CalSTRS’ investments in California will generate $22.2 billion in state and local revenues.

However, NCEPERS notes the often bleak state of pension funding. It maintains that if “governments continue to dismantle public pensions, they will inflict $3 trillion in damage on our economy by 2025. In short, while public pensions are cost effective and beneficial, dismantling pensions is costly and short-sighted for taxpayers.”