Public pension funding does not crowd out education spending, according to a forthcoming study by National Conference on Public Employee Retirement Systems that identifies frequent tax changes as a bigger problem.
The study, "Peaceful Coexistence: The Facts About Pensions and Education Funding," is based on research to be presented Tuesday at the NCPERS Public Safety Conference in New Orleans.
The study found that in 2016, state and local government pension contributions accounted for 4.1% of state revenue, compared to 28.3% of revenue going to education.
The 72-page study reviews several recent studies on the subject of pensions plans' impact on education spending and includes a state-by-state analysis comparing each state's expenditures on education and funding with economic and revenue trends.
According to the study, the reasons many states and localities feel squeezed when it comes to pension plans and education is because they tend to cut progressive and stable taxes, such as income and property taxes, in good economic times, and then fill the resulting budget gaps with more risky revenue schemes, such as excise taxes and lotteries, instead of building sustainable revenue systems.
"When governments constantly fiddle with and shift revenue sources, this has the unfortunate effect of rendering many tax systems regressive," said study author and NCPERS director of research Michael Kahn. "A healthy tax system does not require frequent changes. On the contrary, revenue systems should be designed to help state and local governments steadily weather the ups and downs in the economy and serve as a source of stable funding for a variety of obligations, including education and pensions."
NCPERS executive director and counsel Hank Kim said in the same statement that despite polarizing rhetoric that presents pension plans and education as an either-or proposition for state and local governments, the study shows that pension contributions absorb too little state and local revenue to crowd out a major function, such as education.
NCPERS represents more than 500 public pension funds throughout the United States and Canada. Its members are public trustees, administrators, public officials and investment professionals, who collectively manage more than $4 trillion in pension assets.