Recent studies reveal that public pension benefits have positive effects on local and state economies. In 2011, state and local government retirement systems in the U.S. distributed over $120 billion more in benefits than they received in taxpayer-funded contributions. Personal income from state and local government pensions exceeds the personal income derived from the nation's farming, fishing, logging, and hotel/lodging industries combined. The expenditure of public pension benefits results in an economic impact that reaches every city and town of every state.
Several states have produced analyses of the impact of public pension payments on their state's economy.
California: CalPERS Economic Impacts in California (statewide and by district, March 2014
California: CalSTRS Economic Impact Study, August 7, 2013
Colorado: Colorado PERA Economic and Fiscal Impacts. April 2015
Illinois: 2014 Economic Impact Study, Illinois Municipal Retirement Fund (May 2014) and TRS Benefit Payments by Illinois Legislative District & Their Impact on the Illinois Economy, Teachers' Retirement System of the State of Illinois, May 2, 2008
Indiana: Economic Impact of PERF Payments - Fiscal Year 2008, Indiana University - Kelley School of Business, 2008
Minnesota: Measuring the Impact of Minnesota's Retirement Systems, Andrea Lubov, Ph.D., March 2008
Mississippi: Report to PERS: The Impact of Payments to Beneficiaries by the Mississippi Public Employees Retirement System, Mississippi State University (January 2008)
Nevada: Economic Impact for Nevada, National Institute on Retirement Security, March 2013
Oregon: Economic Impact Study, Oregon Public Employees Retirement System, January 2009
South Dakota: South Dakota Retirement System's Economic Impact on the State's Economy, Stuefen Research, LLC, June 5, 20007
Forty-three states tax individual incomes, and most provide full or partial exclusions for retirement income. Retirement income is generally received in the form of pension benefits for state or local or private sector service, Social Security, or federal government or military benefits. Tax exclusions for retirement income vary among states, and are influenced by factors including age, residency while receiving benefits, and marital status, among others. A compilation of state policies governing exclusions for retirement income can be accessed via the link below.
State Personal Income Taxes on Pensions and Retirement Income: Tax Year 2014, National Conference of State Legislatures, April 3, 2015
Pensionomics 2014: Measuring the Economic Impact of DB Pension Expenditures, National Institute on Retirement Security (July 2014)