For the second week of Retirement Security Month, we are highlighting a post from January 2019 on public pensions and rural areas.
We’ve been talking a lot this month about the economic benefits of public pensions at both the state and national levels. Through the investment activities of the pension fund and the spending of pension benefits by retirees, public pension plans generate substantial economic activity as well as tax revenue for local and state governments. It’s important to note that public pensions particularly benefit rural areas, where the spending of pension benefits can represent a significant portion of the economic activity in local communities.
A recent report by Pacey Economics examines Colorado PERA, the state’s public pension plan, and its impact on Colorado’s economy. Consistent with other reports, the Pacey report finds that PERA has a substantial economic impact in the state. By analyzing actual benefit payments from 2018, Pacey researchers concluded that PERA paid out $4.1 billion in annual payments to Colorado residents. This generated $6.47 billion in economic activity last year. This economic activity supported 35,031 jobs, which paid $1.62 billion in labor income.
The Pacey report also emphasizes the impact of PERA benefit payments on rural areas. Since rural areas tend to be less populous and have less diverse economies, their local economies are more greatly affected by the spending of pension benefits. As an example, the report states: “during the recession of 2009–2011 the payments driven by the Pueblo-Southern Mountains region benefit recipients amounted to $274 million, and was a large source in limiting the negative economic impacts during the downturn in the area.”
This finding regarding rural areas is consistent with the findings of another organization, the Louisiana Budget Project (LBP). In their “Pensions in the Parishes 2017” report, LBP concludes that the smaller and more rural the parish, the greater the impact of benefit payments from Louisiana’s three largest statewide public pension plans. The report’s author states: “…it is clear that pensions are especially crucial to the economic health and retirement security of smaller and more rural parishes. In some rural parishes, pensions account for as much as 2.5 percent to 4 percent of all personal income.”
The findings of the Pacey Economics report regarding Colorado PERA echo those of the National Institute on Retirement Security’s Pensionomics report. Looking at slightly different numbers from 2016, NIRS reaches roughly the same conclusions regarding economic impact, jobs supported, and labor income created.
These reports are a critical reminder that public pensions are a vital economic lifeline for rural areas, especially during economic downturns. When misguided legislators propose harmful changes to public pensions, they should consider the damaging effects these changes could have on their communities.