Study: AL pensions help sustain Alabama's economy - KFVS12 News & Weather Cape Girardeau, Carbondale, Poplar Bluff

Study: AL pensions help sustain Alabama's economy

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MONTGOMERY, AL (WSFA) -

The more than $25 billion worth of pension funds that are administered by the Retirement Systems of Alabama help to support more than 36,000 jobs in Alabama. That's according to a new study.

The National Institute on Retirement Security examined each state's pension funds to see how the taxpayer funded contributions translate into consumer spending on behalf of retirees and active pensioners.

"It shows that there's a multiplier of 7.79 for each dollar paid by taxpayers into pension funds in Alabama," said Leura Canary, RSA's Chief Counsel. "They get 7.79 worth of economic impact for that dollar."

But one of the state's economists isn't sold on the study.

"The methodology worries me," said Dr. Keivan Deravi, a professor of economics who has also helped to recruit companies like Mercedes-Benz, Airbus, and Hyundai to Alabama.

Deravi says you can't look at money that's already being circulated in Alabama as a way to measure economic impact because one way or another that money will see some kind of activity in the state.

"There's no question about the fact that the money spent by retirees creates economic impact but that economic impact was originally due to happen at some other point in time," Deravi said.

Canary says the study has value in explaining that pension funds provide consistent value to those who depend on it before and during retirement. Canary added that the design of the RSA's defined benefit plan protects members from the ebbs and flows of international market conditions.

Some states have floated the idea of converting future retirement plans for state employees to those that would more closely resemble 401K plans, which are more susceptible to peaks and valleys in earnings and losses.

"401Ks shift the risk of the market to the individual and so people can't depend on a steady income with a 401K like they can a pension system and so they're more apt to spend and make financial plans based on that steady income," Canary said.

Deravi described the study as a sort of "shell game," comparing the study's results to proving how you can move money from one hand to another.

"The only factor that we have to consider, taking into consideration economic impact, is value added at fresh point. It has to be money that was already not leaked from the system," Deravi said.

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