Public Pension Problems Mount for Local CA Governments:
"California’s public pension system is broken. A decade of fiscally irresponsible behavior by state and local policymakers has left the state with a massive unfunded public pension liability.
Unless government officials muster up the political courage to implement reforms that would make government pensions and retiree health-care benefits sustainable, the cost of government services will continue to be inflated and growing pension costs could threaten the very solvency of state and local governments.
Under the state’s “defined-benefit” pension system, workers receive a pension determined by a formula based on the number of years the employee works, a fixed multiplier, and his or her final (or highest) salary. The amount needed to pay the costs of these benefits is determined using assumptions about what the average pension fund investment return will be, how long retirees will live, how much salaries and inflation will increase, etc. These assumptions are projected out decades into the future, which creates a whole other set of problems and allows for fudging of the assumptions to determine how much must be contributed to the system. The benefits are paid for by a combination of employee contributions, employer (in this case, the government) contributions, and pension fund investment earnings."
"California’s public pension system is broken. A decade of fiscally irresponsible behavior by state and local policymakers has left the state with a massive unfunded public pension liability.
Unless government officials muster up the political courage to implement reforms that would make government pensions and retiree health-care benefits sustainable, the cost of government services will continue to be inflated and growing pension costs could threaten the very solvency of state and local governments.
Under the state’s “defined-benefit” pension system, workers receive a pension determined by a formula based on the number of years the employee works, a fixed multiplier, and his or her final (or highest) salary. The amount needed to pay the costs of these benefits is determined using assumptions about what the average pension fund investment return will be, how long retirees will live, how much salaries and inflation will increase, etc. These assumptions are projected out decades into the future, which creates a whole other set of problems and allows for fudging of the assumptions to determine how much must be contributed to the system. The benefits are paid for by a combination of employee contributions, employer (in this case, the government) contributions, and pension fund investment earnings."