I’m sick of the tiresome worry that public employee pensions could send Stockton right back to bankruptcy. But that worry is here to stay. CalPERS, the state pension system, is fastened on to Stockton’s toe for life, like Shel Silverstein’s Yippieyuk.
Now an actuary association is proposing a solution, reports Dealbook: ”pension actuaries should provide plan boards of trustees and, ultimately, the public with the fair value of pension obligations and estimates of the annual cash outlays needed to cover them.” In other words, pension fnds should be honest about pension costs.
“That means pension officials would disclose something they have long resisted discussing: the total cost, in today’s dollars, of the workers’ pensions, assuming no credit for expected investment gains over the years. … Economists refer to this elusive number as the plan’s total liability, discounted at a risk-free rate.”
No more rosy projections of bountiful investment returns defraying the costs of pensions, followed by the brutal reality that pensions cost a lot more than cities thought. What a concept.