While pension finance is a relatively obscure discipline that requires of its practitioners expertise both in investments and actuarial calculations, it is a mistake to think the fundamentals are beyond the average policymaker or journalist. One policy question of extreme importance to discussions about the future of public worker pensions is how much pension funds can legitimately expect to earn over the long term. The reason this question is critical is because the more the pension fund earns, the lower the annual contribution will have to be. Just how much lower each percentage point gain offers is startling….
Policymakers have to face the fact that when these projected rates of return come down, and they will, government worker pensions as they are currently formulated will disappear. Hiding behind the “complexity” of this issue, and instead echoing the sanguine talking points of CalPERS spokespersons who have not sat in the closed door meetings, is simply irresponsible.
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