generic photo of a small town's downtown

Don't mess with public pensions. Unless, that is, you want small towns and rural communities to suffer. That could be one way to interpret some of the findings of a report from the National Institute on Retirement Security.

The report reveals that not only do such communities experience an outsized benefit from those pensions, compared to major cities and metropolitan areas, but those same dollars also make up "significant amounts" of the total personal income of the recipients themselves.

The study found that in 2018, public pension benefit dollars accounted for anywhere from one to three percent of gross domestic product, on average, among the counties and states studied.

With younger people moving to larger cities and metropolitan areas in pursuit of higher-paying jobs, that leaves older people in place in many towns and counties—which have shrunk accordingly.

In many of these smaller places, the study says, the largest employer is often a public entity, such as a school district—and usually among the benefits offered is a defined contribution plan. Since many of the employees of such public entities remain in their communities once they retire, and collect and spend their pensions there, that has the effect of keeping money in the community when those retirees spend their pensions at local businesses.

While on average, between 2000 and 2018, rural counties have lost population, small town counties and metropolitan counties have gained population. And rural counties and counties that contain state capitals have the highest percentages of their populations receiving public pension benefits.

The report says that counties containing state capitals are outliers from other metropolitan counties, however, and it's probably due to a higher density of public employees and the likelihood that most of them stay in those counties once they retire.

And while small town counties get more of a bang from the bucks coming from pension benefit dollars in terms of both GDP and total personal income than do rural or metropolitan counties, rural counties see higher benefits from personal income than do metropolitan counties while the latter instead derive more benefit in terms of GDP than rural counties.

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Public pensions buoy economies of small towns, rural communities

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