Friday, February 11, 2011

Small Portion of State Government Spending goes to Public Pensions

Employer (taxpayer) spending on pension benefits for employees of state and local government has been the object of growing attention.

A closer look reveals that a relatively small portion of all state and local government spending goes to public pensions. According to the latest estimates,less than three percent of all state and local government spending was used to fund public pension benefits.

The vast majority of public employees are required to contribute a portion of their wages—typically five to 10 percent—to their state or local pension fund; some share pension costs equally with their employers.

An estimated 30 percent of employees of state and local government do not participate in Social Security, including substantially all of them in seven states, approximately one-half of all of the nation’s public school teachers, and two-thirds to three-fourths of firefighters and police officers.

In most of these cases, employers and employees are contributing to the pension fund in lieu of contributions to Social Security, reducing state and local taxpayer costs by an estimated $15.6 billion annually.

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