Pensions provide economic boost

Industry study supports efforts to strengthen public retirement systems

By Michael Pramik, Ohio Public Employees Retirement System

Aug. 21, 2025 – State and local public pensions provide a huge benefit to taxpayers, contributing substantially to the U.S. economy through both retiree spending and asset investing.

Take Ohio as an example. As of 2023, the state’s public pension funds held $214.2 billion in assets. Those investments generated $38.2 billion in personal income for Ohioans and $8.7 billion in state and local tax revenues. That’s not just a boost for retirees – it’s a powerful driver of economic activity that touches every corner of the state.

These findings come from the 2025 edition of the National Conference on Public Employee Retirement Systems’ “Unintended Consequences” study, which tracks the economic impact of public pensions nationwide. The report compares the tax dollars contributed to pensions with the revenue and economic activity generated in return. The results are striking: In 2023, every $1 in taxpayer contributions to public pensions produced about $13.41 in total economic activity. That’s a sharp rise from $9.59 in 2016 and $10.55 in 2018, NCPERS said.

The analysis underscores that defined benefit pensions don’t just provide secure retirements for teachers, firefighters and other public servants – they also strengthen local economies. Pensioners spend their benefits in their communities, while pension funds invest billions in assets that ripple through state economies. Altogether, U.S. public pension assets of $5.5 trillion supported an estimated $1.9 trillion in state economic activity in 2023, generating about $453 billion in state and local revenues.

Public pensions also play a critical role in the workforce, the study stated. Many states that experimented with shifting workers into 401(k)-style plans found it harder to attract and retain qualified employees. Some even reversed course, returning to defined benefit systems after experiencing workforce instability.

This updated study builds on NCPERS’ earlier reports and validates projections from its 2017 “Economic Volatility” study, which warned that dismantling pensions could result in a $3 trillion shortfall in economic activity by 2025. The latest data show just how much is at stake.

For taxpayers and policymakers alike, the message is clear: Public pensions are more than affordable. They are a net positive for communities. They safeguard retirements, stimulate economies and generate tax revenues far beyond the initial investment.

As Ohio’s numbers illustrate, the benefits extend well beyond retirees, making pensions a cornerstone of both economic stability and public service.

Michael Pramik

Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.