Public pensions are financed primarily from two sources: contributions and investment earnings. Over time, investment earnings finance a majority of the cost of a typical public pension plan. According to the U.S. Census Bureau, for the period 1982 through 2010, investment earnings accounted for more than 60 percent of public pension revenues; employer contributions made up approximately 26 percent, and employee contributions were around 13 percent.
According to the U.S. Census Bureau, in 2008, employer (taxpayer) contributions accounted for 2.9 percent of all state and local government spending, including capital expenditures. When capital expenditures are excluded, employer contributions accounted for 3.8 percent of all state and local government spending.
The growth of employer contributions vis-a-vis state and local spending is charted using Census data.
The effects of credit financing of retirement benefits for employees of state and local government is the focus of much study and analysis, including by bond rating agencies.
Both employee and employer contributions to state and local retirement systems have increased in each of the past ten years according to data published by the U.S. Census Bureau. Employees in the aggregate contributed $1.2 million more to fund their benefits, while employers contributed roughly $9.8 million more in 2011.