Our 50 states and myriad communities are highly varied in so many ways — and their governments’ spending on pension benefits reflect that diversity. A report by the National Association of State Retirement Administrators (NASRA) looks at how those governments spend on the pension plans they provide.
And spend they do. In “NASRA Issue Brief: Spending on Public Employee Retirement Systems,” NASRA reports that U.S. Census Bureau statistics show that from a national perspective, contributions state and local governments make to their pension trust funds amounted to 4.1% of their direct general spending in 2013. The spending is back on the rise after falling: NASRA says the contributions were 5% of their spending in 1985, fell to 2.3% in 2002, and 11 years later were approaching 1985 levels.
But it should be no surprise that contributions to the pension trust funds vary widely from state to state The top three: Illinois, Louisiana and Nevada, at more than 7% of direct general spending; the lowest: North and South Dakota, Vermont and Wisconsin, all at less than 2%. The percentage of spending devoted to covering pension contributions is much higher for city governments, says NASRA, a phenomenon it attributes at least in part to their delivering more labor-intensive services than states and therefore having to commit a higher share of their budgets to salaries than do states as a result.
Many factors account for the variations, according to the report. Variables include:
And the proportion of spending can be exacerbated in the future if a government fails to pay required contributions, NASRA notes.
Not only are states and cities spending on contributions to their pension trust funds, NASRA says that many have found that it makes more sense financially for them not only to keep their plans in place, but also to not close them to new employees. Instead, NASRA says, they have adjusted employee and employer contributions and/or restructuring benefits.
And spend they do. In “NASRA Issue Brief: Spending on Public Employee Retirement Systems,” NASRA reports that U.S. Census Bureau statistics show that from a national perspective, contributions state and local governments make to their pension trust funds amounted to 4.1% of their direct general spending in 2013. The spending is back on the rise after falling: NASRA says the contributions were 5% of their spending in 1985, fell to 2.3% in 2002, and 11 years later were approaching 1985 levels.
But it should be no surprise that contributions to the pension trust funds vary widely from state to state The top three: Illinois, Louisiana and Nevada, at more than 7% of direct general spending; the lowest: North and South Dakota, Vermont and Wisconsin, all at less than 2%. The percentage of spending devoted to covering pension contributions is much higher for city governments, says NASRA, a phenomenon it attributes at least in part to their delivering more labor-intensive services than states and therefore having to commit a higher share of their budgets to salaries than do states as a result.
Many factors account for the variations, according to the report. Variables include:
- states’ financial relationships with their municipalities;
- employee and employer contributions vary;
- how funds in pension trusts are invested;
- relevant state laws and regulations; and
- demographic factors such as retirement rates, hiring rates and wage trends.
And the proportion of spending can be exacerbated in the future if a government fails to pay required contributions, NASRA notes.
Not only are states and cities spending on contributions to their pension trust funds, NASRA says that many have found that it makes more sense financially for them not only to keep their plans in place, but also to not close them to new employees. Instead, NASRA says, they have adjusted employee and employer contributions and/or restructuring benefits.
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