Majority of benefits spent in California
The next time teachers’ pensions are attacked as being the cause of economic ruination, consider countering that retirement benefits paid by the California State Teachers Retirement System (CalSTRS) provide an $11 billion boost to the state’s economy – an amount equivalent to the state’s renowned wine industry.
That’s the finding of a recent study commissioned by CalSTRS and prepared by economists at the University of the Pacific.
Direct economic boost
“The study clearly points out that the majority of educator retirement benefits are being spent in the California communities where retired educators live, and often times, built their careers,” said CTA Board Member Dana Dillon, who also chairs the CalSTRS board. “Besides the gift of having enriched young minds and helping shape the future of the state’s youth, retirees are a direct boost to their local economy through everyday purchases at supermarkets, restaurants, department stores, automotive services and ultimately, as taxpayer and homeowners.”
The study measures the impact that CalSTRS benefit payments have on California’s labor income, employment, economic output and tax revenues. The findings are based on $9.2 billion in ongoing monthly and quarterly benefit payments which CalSTRS issued during the 2011-12 fiscal year, accounting for both direct impact from expenditures as well as indirect and induced effects resulting from the members initial spending of their benefits.
The benefit payments are a substantial economic driver to all areas of California.
Rural areas benefit
“Retiree spending is even more impactful in rural areas where it often generates more than one percent of the total Gross Regional Product,” said Jeffrey Michael, director of UOP’s Business Forecasting Center and a professor in the university’s Eberhardt School of Business.
In fact, statewide employment supported by retired educators was similar in size to the entire nonprofit sector in California. The impact on total labor income is comparable to the state’s online/direct sales sector. In addition, the study notes that of the $2.4 billion the state contributes annually to CalSTRS, state and local governments receive a 50 cent return on each dollar via taxes.
Results of the study show that the spending:
• Supports 92,815 jobs throughout the state;
• Generates $4.4 billion in total labor income;
• Creates $1.2 billion in tax payments to state and local governments through income, sales and corporate profit taxes.
You can read the study at www.calstrs.com/economic-impact-study.