Public Pensions As Revenue Generators

And “significant” revenue generators at that. According to their latest ‘research’ brief the National Conference of Public Employee Retirement Systems (NCPERS) posits that if “public pensions were dismantled, our economy would suffer a loss of about $3 trillion by 2025.” And it gets funnier:

True, the pension money comes from taxpayers, but it should be understood that it is part of the compensation of workers providing public services. If these services were privatized, they would cost taxpayers more. The goal of private companies is to make profit. The goal of a public service is to ensure the public good. (page 2)

Opponents of public pensions often argue that taxpayers cannot afford them. Common sense will tell us that investment of pension fund assets and spending of pension checks by retirees must have a positive impact on the economy and revenues. The results shown in Tables 2 and 3 support this commonsense contention. Next we examine whether public pensions are net revenue generators. Column 4 in Table 4 shows the total state and local revenues generated by investment of pension assets and spending of pension checks, column 5 shows the taxpayer contribution, and column 6 shows the net revenues attributable to public pensions (column 6 = column 4 – column 5). The results in Table 4 show that in 2016, pension funds generated approximately $277.6 billion in state and local revenues. Taxpayer contributions to state and local pension plans in the same year totaled $140.3 billion. In other words, pension funds generated $137.3 billion more in revenues than taxpayers contributed. (page 18)

The first obvious flaw in this argument is that a total contribution amount of $140.3 billion nationally is ridiculously inadequate for honestly funding benefits as it is generated by a  politician/actuary cabal that seeks the lowest conceivable deposit amount. And as to all those other numbers, let’s isolate what the NCPERS people have for New Jersey in their tables.

  1. Having pension assets of $73 billion in the New Jersey Retirement System translates into $1.2 billion (1.64%) going to State & Local revenue.
  2. Paying out $10.4 billion to retirees means that State & Local revenue is augmented by $4.5 billion (43%)
  3. Since New Jersey taxpayers are only paying $3.1 billion, that means
  4. Public pensions are a $2.6 billion net gain for New Jersey taxpayers ($1.2 + $4.5 – $3.1).

Which basically means that if the trust was liquidated and the state stopped paying all retirees going forward then New Jersey would need to come up with $2.6 billion annually to cover the losses from having terminated the plan after paying out roughly 30% of the ‘promised’ benefits (which is all that the $73 billion would buy). On the other hand, were all plan participants to have their benefits doubled with no additional contributions required then New Jerseyans would get a $4.5 billion windfall from the additional State & Local revenue generated on top of the $2.6 billion we are already enjoying.

9 responses to this post.

  1. Posted by Tough Love on May 16, 2018 at 1:24 pm

    Wow, rarely have I heard SO MUCH BS in one place………. but certainly NOT surprising coming from NCPERS.


  2. Posted by skip3house on May 16, 2018 at 1:27 pm

    “….And it gets funnier:…….”


  3. Posted by NJ2AZ on May 16, 2018 at 1:42 pm

    Please contact your lawyers, Mr Bury, for i just suffered a severe eye-rolling injury reading this tripe and i intend to be made whole!

    good grief…you can’t make this stuff up.


  4. Posted by dentss dunnigan on May 16, 2018 at 2:27 pm

    Was this originally from “The Onion”


  5. Posted by SeeSaw Jr on May 18, 2018 at 1:52 am

    If these services were privatized, they would cost taxpayers more. The goal of private companies is to make profit. The goal of a public service is to ensure the public good. (page 2)
    If $200K per year public sector FF jobs (and similar “public safety” jobs) were privatized the private sector would be bidding on these jobs at 1/5 (20%) of their current compensation total, and most likely have more qualified candidates AND employees in the positions. This is due to the competition in a free market. To say these jobs would cost more is pure nonsense. The same argument can be made in virtually ALL public sector jobs.


  6. This is like a joke I have heard “a cannibal can never go hungry as he always has something to eat.” That is what we have come to and if you go to Brielle, lavalette etc you will see many young retired teachers and public safety types living it up. In fact a team of male teacher lifeguards always wins a skills competition as they have spent their whole life on the beach.


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