Industry News

On April 17, 2023, the National Conference on Public Employee Retirement Systems (NCPERS) released its report, Do Public Pension Expenditures Impact Education Spending? According to NCPERS, over a 26-year period from 1993 to 2019, the growth in education funding has been stable and increased to about three times the annual rate of pension spending. During this period, the growth of pension funding averaged 0.82% annually while education funding increased at 2.48% annually. The report states that “those who argue that pension expenditures are outpacing education funding fail to look at the impact of volatility in pension funding.”

Other key findings presented include:

• Pension funding is not likely to shift education funding since pension contributions are a relatively small part of state and local revenues.
• During the last 25 years, the average pension expenditures were 3.6% of state and local own-source revenues (i.e., taxes and fees collected by municipalities) as compared with education expenditures being 33.8%. As a result, even if pension expenditures increase faster than education expenditures, pension funding is unlikely to crowd out education funding since the ratio of both should remain about the same.
• State and local governments face many competing priorities and should establish approaches so their revenue systems are consistent with the economy.

The study concludes that, “public pensions do not crowd out education funding—or funding for other public services including health care and public safety.” 

The report is available here.