April 19, 2007

SACRAMENTO, CA – Retirement benefits paid by the state’s two big public pension funds, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), generate a powerful $21 billion in economic activity statewide every year, according to the first ever study of pension payments, CalPERS announced today.

The CSUS Applied Research Center of Sacramento State University analyzed the economic impact of $13.8 billion in retirement benefits paid to retirees of the two retirement systems during the 2006 calendar year. The study analyzed the ripple effects to approximately 674,000 retirees and beneficiaries living in California.

The report indicates that retirees’ income produced additional economic activity, commonly called a “ripple effect,” of another $7.3 billion, for a combined total economic impact of $21.1 billion on the state economy. In addition, the spending of retirement checks generated almost 139,000 jobs and created an additional annual payroll of $4.8 billion. CalPERS pensions generates a return of $8.55 to the California economy; every dollar contributed to CalSTRS generates a return of $6.71.

“This study puts an exclamation mark on what we already knew: retirees pension payments represent billions and billions of dollars that contribute to the strength of state and local government,” said CalPERS Chief Executive Officer Fred Buenrostro. “When you take into account that 75 percent of a CalPERS retiree pension payment comes from investment earnings, not tax dollars, it is even that much more impressive.”

The study indicated that the CalPERS and CalSTRS retiree economic footprint is as large as some major industries. Its economic activity exceeds the size of the forestry and fishing industry and nearly equals the size of the hotel and accommodations industry of California. The overall economic output is more than the combined value of export goods to four of California’s major trade partners.

The study was conducted by Dr. Robert Fountain, professor emeritus and director of the CSUS Applied Research Center, and Dr. Robert Waste, professor of public policy and administration at CSUS. In their analysis, the researchers used the economic impact model called IMPLAN (Impact Analysis for Planning), which was developed by the federal government and is widely used and widely accepted for economic impact studies. In addition to statewide calculations of impacts, the study also breaks down the economic impacts county by county.

The full study can be found on the CalSTRS Web site.

CalPERS is the largest public pension fund in the U.S., with more than $240 billion in assets. It administers retirement plans covering approximately 1.5 million active and retired California public employees and their families.

CalSTRS is the second largest public pension fund in the U.S., with assets of approximately $160 billion. It provides retirement benefits to nearly 800,000 active and retired California public educators and their families.