Public pension funds were net revenue generators for state and local governments in 2018, surpassing taxpayer contributions by $179 billion, according to a biennial study released Tuesday by the National Conference on Public Employee Retirement Systems.
That represents a 30.6% increase from the original study covering 2015-2016. In 2018, pension funds generated about $341.4 billion in state and local revenues through investments and retiree spending, while the taxpayer contribution to those pension plans was $162 billion.
For 40 states, public pensions were net revenue positive above taxpayer contributions, up from 38 in the earlier study. In the remaining 10 states, public pension funds were either revenue neutral or a significant subsidy for the taxpayer contributions in 2018, according to the study, "Unintended Consequences: How Scaling Back Public Pensions Puts Government Revenues at Risk."
The study methodology traced the economic impact of public pension fund investments and public retiree spending on state and local economies, using historical data from the U.S. Census Bureau, the Bureau of Economic Analysis and the Department of Labor's Bureau of Labor Statistics. Together, those two measures contributed $1.7 trillion to the U.S. economy, the study found.
Given the 30.6% increase over the past two years, "if public pensions didn't exist, policymakers would need to increase taxes on their constituents to sustain the current level of public services," said Michael Kahn, NCPERS research director and the architect of the study, in a statement.
Hank H. Kim, NCPERS executive director and counsel, said in the same statement that public pension funds "are often cast as a pawn in political dramas over short-term spending," but that efforts to diminish them would backfire. "This study underscores that breaking faith with public pensions is actually a costly strategy for state and local government," Mr. Kim said. NCPERS represents more than 500 funds in the U.S. and Canada that collectively have more than $4 trillion in pension fund assets.