Unintended Consequences: How Scaling Back Public Pensions Puts Government Revenues at Risk
Unintended Consequences: How Scaling Back Public Pensions Puts Government Revenues at Risk provides a comprehensive, data-driven analysis of how public pensions support state and local economies through both investment of pension fund assets and retiree spending.
The 2025 update of NCPERS’ landmark study reveals that public pensions generated a staggering $2.9 trillion in economic output and $661.9 billion in state and local tax revenues in 2023 alone—$445.2 billion more than taxpayers contributed. Download the report.
The findings underscore the need for policymakers to evaluate the economic impact of public pensions holistically before considering reforms. Reducing benefits or closing pension plans may appear to save money in the short term, but the long-term costs could include reduced economic activity and public services, higher taxpayer burdens, and diminished retirement security for public servants.
What Impact Do Public Pensions Have on the U.S. Economy?
In 2023, public pensions contributed $2.9 trillion to the U.S. economy: $1.9 trillion from the investment of pension fund assets and $980.7 billion from retiree spending of pension checks.
Are Public Pensions Affordable for Taxpayers?
Yes. In fact, NCPERS research reveals that public pensions are net revenue positive for taxpayers:
- In 2023, forty-three states saw a net revenue gain from public pensions, highlighting their widespread fiscal benefits. This trend has grown steadily since 2016.
- Public pensions generated $661.9 billion in state and local tax revenues—$445.2 billion more than the $216.7 billion contributed by taxpayers.
- For every dollar taxpayers contributed to public pensions in 2023, they generated $13.41 in economic activity.
What is the Economic Impact of Retirees Spending Pension Checks?
Retiree spending of pension checks stimulates local economies, especially in rural areas, by supporting small businesses and providing a reliable source of income. In 2023, this generated $208.9 billion in state and local tax revenues and contributed $980.7 billion to the economy.Download the full report to learn more.
State-by-State Breakdown of Tax Revenue Generated from Public Pensions
To navigate, use the arrows on the lefthand side to zoom in and out, and hover over each state to view the data.
Explore NCPERS' Research Library for additional insights on public pension funding, long-term sustainability, and economic impact.