Wall Street Journal: Public Pension Problems

The Wall Street Journal recently had an article up on government pensions. The basic direction is that even though we've had a significant bull market, public pensions are still having issues.

Liabilities of major U.S. public pensions are up 64% since 2007 while assets are up 30%, according to the most recent data from Boston College’s Center for Retirement Research . . . In the 1980s and 1990s, double-digit stock and bond returns convinced governments they could afford widespread benefit increases . . . The Illinois Supreme Court in 2015 threw out cuts by the legislature that were expected to save tens of billions of dollars . . . The Maine pension fund, which back in the early 1980s assumed a long-term investment return of 10%, now assumes a rate of 6.75%. If that rate were just 1 percentage point higher—where it was about 10 years ago—the projected $2.9 billion shortfall, most of which must be paid off over the next decade, would drop by more than half to $1.1 billion.


Here's my wild guesses:

The projections of 10% investment returns in the 1980s were way too aggressive, but it was used as justification for governments to give "widespread benefit increases."  Then government, backed by unions, said that changes to pensions couldn't be made, which is why courts are throwing out attempts to correct what happened in the 1980s. And now with the bull market probably closer to the end of its life versus the beginning of its life, pensions across the nation are still seriously underfunded.