Economic Effects of Pensions
Studies reveal that public pension benefits have positive effects on local and state economies. In 2023, state and local government retirement systems in the U.S. distributed $175 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.
State and Local Studies
Analyses of the impact of public pension payments on their state's economy:
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Alabama: Economic Impacts of RSA, PEEHIP, and SEIB Benefit Payments on Alabama, Retirement Systems of Alabama, November 2007
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California: Economic Impacts of CalPERS Pensions in California, FY 22-23
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California: The Impact of CalSTRS Benefit Spending on California's Economy, March 2025
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California: Economic, Fiscal, and Social Impacts of LACERA Pensioners, December 2022
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Colorado: Colorado PERA Economic and Fiscal Impacts, July 2020
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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
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Indiana: Economic Impact of PERF Payments - Fiscal Year 2008, Indiana University - Kelley School of Business, 2008
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Louisiana: Pensions in the Parishes, Louisiana Budget Project, 2017
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Minnesota: Measuring the Impact of Minnesota's Retirement Systems, Andrea Lubov, Ph.D., March 2008
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Mississippi: Report to PERS: The Impact of Payments to Beneficiaries by the Mississippi Public Employees Retirement System, Mississippi State University (January 2008)
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Missouri: 2017 Economic Impact Report, Missouri Local Government Employees Retirement System
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Nevada: Economic Impact for Nevada, National Institute on Retirement Security, March 2013
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Ohio: Economic Impact Analysis of The Ohio Police & Fire Retirement System in 2018, December 2019
- Oregon: Economic Impact Study, Oregon Public Employees Retirement System, January 2009
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South Dakota: South Dakota Retirement System's Economic Impact on the State's Economy, Stuefen Research, LLC, June 5, 2007
Taxation of Retirement Income
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.
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Taxes in Retirement, Kiplinger, January 2023
Other Resources
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Pensionomics 2023, National Institute on Retirement Security
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State Fact Sheets for state employee and teacher pension systems, National Institute on Retirement Security
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Unintended Consequences: How Scaling Back Public Pensions Puts Government Revenues at Risk, 2020 Update, National Conference of Public Employee Retirement Systems, April 2020
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The Economic Benefit of Public Pension Dollars in Small Towns and Rural America, National Institute on Retirement Security, March 2020