Does Public Pension Funding Affect Where People Move?

In prior briefs, the Center has focused on the impact of pensions on state and local finances, including their influence on total budgets, borrowing costs, and the fiscal health of troubled jurisdictions. Overall, this research found that pensio ns play only a modest role. However, one other way that pensions may impact public finances is through where individuals choose to live. Past research has found that individuals are more likely to move to places with the best “bundle” of amenities and opportunities. Influential factors may include house prices and jobs, as well as government finances, such as taxes and debt. More recently, unfunded pension liabilities have raised concerns about jurisdictions’ ability to manage their finances, as an increasing portion of today’s taxes must be used to cover past shortfalls and future taxes may end up being higher as well. This brief explor es the role that unfunded pension liabilities play in migration from state to state. Policymakers care about migration, because it is linked to economic consequences. For example, when many people leave a state, the loss of income tax revenue and consumer spending can hurt the state’s economy. Therefore, understanding the underlying force s that contribute to migration patterns is important. The discussion proceeds as follows. The first section describes broad migration patterns. The second section summarizes the data used for the analysis. The third section explains the methodology for analyzing how state differences in unfunded pension liab ilities relate to interstate migration patterns. The fourth section presents the findings. The final section concludes that while economic factors and the distance between locations are the primary drivers of migration, a state’s pension funding also pl ays a role, albeit small.