Industry News

On March 24, 2026, the National Association of State Retirement Administrators (NASRA) updated its standing issue brief, State and Local Government Spending on Public Employee Retirement Systems. The brief examines the cost of pension benefits for state and local governments. Based on U.S. Census Bureau data, about 5.16% of all state and local government direct general spending (which includes all government expenditures except intergovernmental transfers) was used to fund pension benefits in Fiscal Year (FY) 2023.   

State and local government direct general spending on public pensions has remained relatively stable over the past 30 years, declining from 3.4% in FY 1994 to about 2.3% in FY 2002, and has consistently remained above 5.0% since FY 2017.

In aggregate, state and local governments contributed $226 billion to pension funds in FY 2023. According to the brief, “employer pension contributions since FY 2021 include additional funding, above actuarial requirements, contributed by several state and local governments…and is expected to result in a relatively stable percentage of spending on pensions, assuming increases in aggregate state and local spending that is consistent with recent years.” 

The brief also finds that across state and local governments in 2023, spending on pensions varied from less than 2.0% of total spending to over 13.0%. This variation was mainly due to: 1) differences in benefit levels; 2) differences in the magnitude of unfunded pension liabilities; 3) level of commitment by plan sponsors to make required pension contributions; 4) portion of the state’s population that lives in an urban area; and 5) fiscal condition of government plan sponsors.   

In FY 2024, state and local government employer contributions to statewide retirement systems were 81% of total pension contributions and 19% were for locally administered systems. As a percentage of total spending, pension costs were about 31% higher for cities than for state governments over the period from 1988-2017. This is primarily attributable to the types of services delivered at the local level which results in a larger portion of local government spending on salaries and related benefits compared to state government spending.    

In addition, the brief explains that public pensions are financed from the combination of employee contributions, employer contributions, and investment returns. Since 1995, investment earnings amounted to 59% of all public pension plan revenues, with about 30% from employer contributions, and 12% from employee contributions.   

The brief also includes a table showing state and local government pension contributions in FY 2023 as a percentage of state and local government direct general spending on a state-by-state basis.   

The brief is available here.