State and local governments’ expenditures on their pension plans rose in fiscal year (FY) 2014, according to the National Association of State Retirement Administrators (NASRA). The report came in its March 2016 update of “NASRA Issue Brief: State and Local Government Spending on Public Employee Retirement Systems.”
NASRA projects that the percentage of direct general expenditures by state and local governments together, on a national basis, will rise from 4.1% in FY 2013 to 4.5% for FY 2104, and to just over 5% of total spending in FY 2014. State and local governments combined contributed an estimated $121 billion to pension funds in FY 2014, a figure that is projected to equal 4.5 percent of projected state and local direct general spending.
And the increase is most dramatic for cities: As a percentage of total spending, pension costs for cities were 32% higher than those of states for the period 1985-2014, says NASRA.
The Issue Brief includes the caveat that while these figures reflect pension spending overall, spending varies widely from one jurisdiction to the next and is sufficient in some, but insufficient in others.
Similarly, how pension plans have made adjustments has varied. NASRA says that generally, those adjustments “have been proportionate to the plan’s funding condition and the degree of change needed.” Some state and local governments have considered closing their plans to new employees, but most determined that doing so would not reduce costs — it would increase them. Instead, NASRA says, they have adjusted employee and employer contribution levels or restructured benefits, or both.
The issue brief notes that state and local government pensions are financed through contributions from state and local agencies and their employees, as well as the investment earnings on those contributions. And it adds that state and local government pension benefits are paid from trust funds to which those public employers and retirees have contributed, and not from general operating revenues.
NASRA projects that the percentage of direct general expenditures by state and local governments together, on a national basis, will rise from 4.1% in FY 2013 to 4.5% for FY 2104, and to just over 5% of total spending in FY 2014. State and local governments combined contributed an estimated $121 billion to pension funds in FY 2014, a figure that is projected to equal 4.5 percent of projected state and local direct general spending.
And the increase is most dramatic for cities: As a percentage of total spending, pension costs for cities were 32% higher than those of states for the period 1985-2014, says NASRA.
The Issue Brief includes the caveat that while these figures reflect pension spending overall, spending varies widely from one jurisdiction to the next and is sufficient in some, but insufficient in others.
Similarly, how pension plans have made adjustments has varied. NASRA says that generally, those adjustments “have been proportionate to the plan’s funding condition and the degree of change needed.” Some state and local governments have considered closing their plans to new employees, but most determined that doing so would not reduce costs — it would increase them. Instead, NASRA says, they have adjusted employee and employer contribution levels or restructured benefits, or both.
The issue brief notes that state and local government pensions are financed through contributions from state and local agencies and their employees, as well as the investment earnings on those contributions. And it adds that state and local government pension benefits are paid from trust funds to which those public employers and retirees have contributed, and not from general operating revenues.
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