The Public Pension Problem: It's Much Worse Than It Appears

The Public Pension Problem: It's Much Worse Than It Appears | Stock News & Stock Market Analysis - IBD:
"...The nation's largest pension fund, the California Public Employees’ Retirement System, earned a mere 0.6% in the last year, significantly below its 7.5% target.
Its sister fund, the California State Teachers Retirement system, which also aims for a 7.5% annual return, instead notched a 1.4% gain for the year.
The New York State and Local Retirement System, which ended its fiscal year on March 31, reported a gain of just 0.2% versus an investment goal of 7%.
It's likely that other pension funds have similarly failed by a wide margin to hit their investment targets given that most government pension funds rarely perform significantly better than the broader market.
These disappointing numbers come on top of a substandard fiscal 2015, when pensions systems earned on average 3.2%, well below their average projections of 7.6% annually.
In a March report Moody's Investors Service estimated that the 2015 investing shortfall increased unfunded liabilities at government pension plans by 17%.
Given that most funds likely performed even worse in the fiscal year that just ended, it's probable that debt increased again by at least 2015 levels, if not more.
A recent study by the Rockefeller Institute, for instance, estimates that a pension plan which is currently 75% funded actually has a one-in-six chance of seeing its funding level plunge over the next 30 years to just 40% of what it needs to pay retirees, even if the plan hits its investment goals. That's because pension systems rarely achieve their investment targets precisely each year, but rather experience extreme variations that can make a system financially unstable even when it appears to be achieving its long-term plans..."