Tuesday, August 4, 2009

Public Sector Pensions and Politics

The SJ Mercury points out that public sector pensions are based on unrealistic actuarial projections. See here:

The current level of benefits is built on an assumption of an 8.25 percent annual gain on investments after expenses for Federated, and 8 percent for safety workers. These unrealistically high assumptions leave taxpayers solely on the hook when returns come up short, as they have — drastically — the past two years...

City Council members are reluctant to confront unions on bread-and-butter issues and, with term limits, have little incentive to tackle long-term problems. But if nobody faces up to this, a taxpayer revolt is inevitable. And waiting will only make things worse.

Find me an investment advisor who can guarantee 8.25% annual gains in perpetuity, and I will show you a Brooklyn bridge for sale. (For the record, Madoff doesn't count.)

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