WEST SACRAMENTO, Calif.--(EON: Enhanced Online News)--A new economic impact study released today shows that benefits paid by the California State Teachers’ Retirement System (CalSTRS) to retirees and their beneficiaries statewide generate an $11 billion annual boost into the state’s economy—an amount equivalent to the output of California’s world-renowned wine industry.
“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”
The study, commissioned by CalSTRS and prepared by economists at the University of the Pacific, measures the annual impact that CalSTRS benefit payments have on California’s labor income, employment, economic output and tax revenues. Its findings are based on $9.2 billion in ongoing monthly and quarterly benefit payments which CalSTRS issued during the 2011–12 fiscal year. This accounts for both direct impact from expenditures, as well as indirect and induced effects resulting from the members’ initial spending of their CalSTRS benefit payments.
“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 Dana Dillon, Chair of the Teachers’ Retirement 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 every day purchases at supermarkets, restaurants, department stores, automotive services—and ultimately, as taxpayers and homeowners.”
“Overall, the results show that CalSTRS benefit payments are a substantial economic driver to all areas of California,” said lead study author Jeffrey Michael, director the Business Forecasting Center at University of the Pacific and a professor in the university’s Eberhardt School of Business. “Retiree spending is even more impactful in rural areas where it often generates more than one percent of the total Gross Regional Product.”
The results showed that the spending:
- Supports 92,815 jobs throughout the state;
- Generates $4.4 billion in total labor income; and
- Creates $1.2 billion in tax payments to state and local governments through income, sales and corporate profit taxes.
The study noted that statewide employment supported by retired educators was similar in size to the entire non-profit sector in California. The impact on total labor income is comparable to the state’s online/direct sales sector, and the total economic impact is equivalent to California’s wine growing and production industry. In addition, the study notes 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.
To make the study’s findings more precise, industry spending information was derived from the Consumer Expenditure Survey for persons 65 and over who reside in the western United States, then cross-referenced with CalSTRS retiree data by county and region. The study’s methodology utilized known expenditure patterns of after-tax disposable income by retirement-age households and 250 detailed models of the California economy by geographic region, as well as the impacts of local and state taxation and out-of-state spending.
The California State Teachers’ Retirement System, with a portfolio valued at $170 billion as of July 31, 2013, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. For 100 years, CalSTRS has served California's public school educators and their families, who today number 862,000 from the state’s 1,600 school districts, county offices of education and community college districts.