California’s unfunded pension debts may be larger than acknowledged
The unfunded liabilities of state and local pension funds are Californias biggest unresolved political issue at least in financial terms.
We know, with fair accuracy, how much money flows into and out of those trust funds now and into the reasonably predictable future, as well as the current value of their investment portfolios.
What we dont know is what those investments in stocks, bonds, real estate and hedge funds will earn in the future. And while theres no way to precisely predict those earnings, the assumption of how investments will fare determines the size of the pension debt.
For many years, the California Public Employees Retirement System and other state and local pension systems have assumed earnings, technically called the discount rate, in the 7.5 percent to 8 percent range, and they seemed to be generally on target.
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