The Wisconsin Retirement System was created 40 years ago to help protect public employees and their beneficiaries against the financial hardships of old age and disability, to attract and retain a qualified public workforce, establish modest benefits, and achieve administrative savings. There's no doubt that the WRS has done that and more over the last four decades.
The WRS is more than just a retirement benefit for state and local government employees. As one of the only fully funded public pension systems in the country, the WRS helps strengthen the state’s economy. Money paid to and spent by participants in defined pension benefits like the WRS support significant economic activity that ripples through the economy, creating a multiplier effect as one person's spending becomes another person's income. In Wisconsin, more than 85% of WRS pensions go to retirees living in Wisconsin, who purchase goods and services and pay their taxes here.
Pensionomics, an annual analysis from the National Institute on Retirement Security, calculates each state’s economic benefit stemming from state and local pension payments. The impact of those pension plans is substantial.
“Benefits paid by state and local pension plans support a significant amount of economic activity in Wisconsin,” Dan Doonan, executive director of NIRS, said. “In 2018, around 225,000 residents of Wisconsin received almost $6 billion in pension benefits from state and local plans. Expenditures made by retirees of these pension systems provide steady economic stimulus to Wisconsin communities and local economies across the state.”
Doonan said each dollar paid out in pension benefits in Wisconsin supported $1.50 in total economic activity. “In 2018, retiree expenditures stemming from state and local pension plans benefits also supported 53,000 jobs that paid $2.7 billion in wages and salaries as well as $8.8 billion in total economic output. In addition, $1.6 billion in federal, state, and local tax revenue was generated. Basically, with more economic activity, tax revenues will rise.
The WRS accounts for more than 95% of the Wisconsin public pension assets included in the Pensionomics study. A well-funded and well-managed retirement plan like the WRS is not only good for employees, but also for the state.
“The WRS is widely viewed as the successful system in retirement circles,” Doonan said. “It's maintained its strong funding levels and the state has a long track record of being very responsible and making sure the contributions are made both by employees and employers, which is a big factor. Over time, retirees have also seen increases in their benefits to help manage inflation during retirement.”
For the WRS specifically, investment earnings generated by SWIB comprise approximately 80% of revenues needed to fund the system with the remainder split evenly between employee and employer contributions. That 80% investment return compares to just 60% nationwide. Wisconsin state and local governments spend just 2.1% of their budgets on the WRS compared to the U.S. average of 5.2%.
“I think it's noteworthy that retiree pensions are an economic stabilizer as well,” Doonan said. “They do help stabilize the economy during difficult times, much like Social Security is an economic stabilizer. It's a very dependable source of income.”
Want to learn more about the economic impact the WRS has on Wisconsin? Check out episode 14 of The SWIB Podcast.