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Politicians and unions hide liabilities for public pensions

California Gov. Brown proposes solutions but doesn't include assumed rate of return. Credit: latimes.com

Public pensions across the country generally calculate future liability by assuming an 8% rate of return. “The problem with that is the 8 percent assumption is totally bogus,” says Connecticut columnist George Gombossy, noting that that public pension returns there have averaged just 5.7% for the past ten years. Most other states have similar problems with overly rosy projections that do not track reality. When that happens, pension funds have funding shortfalls. Assuming 8% but getting 5.7% means you will be 20% short at the end of ten years.

More about public pension liabilities at IVN.

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