Welcome to the latest edition of This Week in Pensions! You need to know this news in the fight for a secure retirement. We have gathered the best stories about pensions and retirement security from the week.
Legislators in Connecticut are making strides toward easing the income tax burden on middle-class retirees as the General Assembly mulls over a proposal to expand the state’s current tax exemption on retirement earnings. Currently, retirees whose annual income is less than $75,000 are exempt from paying state income taxes–however, that financial cliff poses a problem, say some state lawmakers. In a public hearing last Friday, Senator Cathy Osten argued that the present system is unfair–just one dollar over the current threshold can significantly impact retiree earnings. Michael Barry, the campaign coordinator for the Connecticut Coalition for Retirement Security, spoke about the need to keep retirees in the state, pointing out that every dollar paid out in pension benefits translates into $1.25 in revenue cycling back into the state’s economy. The new measure would transition retirees into a graduated system, granting a partial exemption to those with an income over $75,000, which would gradually decrease as income increases, topping out at $100,000. Senator Osten said she hopes to one day eliminate taxes on all retirement earnings in the future. Budget negotiations continued throughout this week.
The National Conference on Public Employee Retirement Systems (NCPERS) released a report this week about the impact of pension funding on education budgets. Do Pension Expenditures Impact Education Spending? takes a deep dive into historical data on states’ pension contributions and how they affect education expenditures and state economies. Key takeaways from the report include:
- From 1993 to 2019, education funding grew three times the annual rate of pension spending. Education budgets have grown steadily in this period, while pension funding has not.
- Pension contributions are a smaller chunk of state budgets than education funding. Average pension expenditures are 3.6% of state revenues from taxes and fees, while education expenditures average 33.8%.
- Public pension funding does not significantly impact funding for education or other public services, such as public safety.
NCPERS Executive Director Hank Kim said, “Critics of defined benefit pension plans continue to spread false claims about pension costs negatively impacting education funding, but the data doesn’t lie. Further, pensions play an important role in attracting and retaining teaching staff. It’s vital that we protect these benefits as teacher shortages across the U.S. become increasingly dire.”
Be sure to check back next Friday for the latest in the fight for a secure retirement! Sign up for NPPC News Clips to receive daily pension news from across the country directly to your inbox.