Public Pensions Fuel Economic Activity Across Pennsylvania

New KRC report documents county-by-county impact
Date of Press Release: 
June 6, 2013

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HARRISBURG, PA (June 6, 2013)—Pension benefits earned by retired school and state employees inject millions of dollars into regional and local economies across Pennsylvania, according to a new Keystone Research Center (KRC) policy brief released today.

Pennsylvania’s statewide retirement plans paid out $7.6 billion to Pennsylvania residents in 2012, according to the brief. Taking economic multipliers into account, those payments translated into $13.2 billion in economic activity.

“Pension benefits send positive ripple effects through local economies across Pennsylvania,” said Dr. Stephen Herzenberg, economist and executive director of the Keystone Research Center. “Retired teachers and first responders shop at local stores, eat at corner diners, and receive care in community nursing homes.

“Governor Corbett’s pension plan would jeopardize the retirement security of a future generation of workers, and that would harm the economies of many communities across Pennsylvania.”

Dr. Herzenberg was joined on a media conference call today by Rep. Scott Conklin of Centre County, home to one of the largest concentration of retired state workers of any part of Pennsylvania.

“The retirement security enjoyed by state and school employees has helped to make places like Centre County some of the most recession-proof in the state,” Rep. Conklin said. “Jeopardizing the retirement security of school and state employees directly threatens the stability and health of many parts of Pennsylvania’s economy.”

Senator John Blake of Lackawanna County said the incomes of middle-class families have stagnated in rural regions such as his. “With rural incomes flat-lining, the pension benefits of retired school and state workers are even more pivotal in sustaining economic growth, especially during recessions and slow recoveries,” he said.

The KRC policy brief features maps of Pennsylvania detailing the county by-county impact of the pensions paid out by the Public School Employees’ Retirement System (PSERS) and State Employees’ Retirement System (SERS).

In 11 counties, most of them more populous urban counties (Allegheny, Berks, Bucks, Chester, Cumberland, Dauphin, Delaware, Lancaster, Montgomery, Philadelphia, and Westmoreland), retirement benefits exceeded $225 million.

As a share of the local economy, Pennsylvania’s statewide public pension plans are most important in lower-income rural areas. In 34 of 67 counties, most of them rural, Pennsylvania’s statewide retirement plans accounted for 2% or more of the regional economy.

By metro area, retirement system payments accounted for more than 3% of personal income in State College, and between 2% and 3% in Johnstown-Altoona and Harrisburg-Lebanon-Carlisle.

Governor Corbett’s pension proposal would reduce future pension payments for current employees and shift new workers into 401(k)-type individual retirement accounts that provide only about half as much retirement income as traditional pensions, even with the same level of contributions.

Earlier KRC research has shown that the Governor’s proposal will also increase the state’s unfunded pension liabilities and raise the taxpayer cost of retirement benefits for new employees.

“A plan that digs a deeper pension hole and undermines retirement security is not the pension reform most Pennsylvanians are looking for,” said Dr. Herzenberg. “Policymakers should build on cost-effective pension reforms enacted in 2010 and take real steps to shore up retirement security, not erode it further.”

Read the Policy Brief