Phaster: you are correct, sadly enough.
Pension plan managers essentially have to predict future outflows and future inflows in order to determine their solvency. The outflows are fairly easy to predict–# of pensioners, amount owed to each, their longevity, etc.
Inflows are future contributions from employees and employers, plus investment returns. Today’s politicians and pension managers overstate their likely future returns by saying it will be between 7 and 8 percent. (Private sector companies must be more realistic and are at about 4%). This allows government plans to push the true cost into the future, a future that is now arriving with a vengeance.
Again, think what a normal recession or stock market correction would do to these underfunded pension plans. Public services will be cut and taxes raised. People will flee the pension-irresponsible states like CA, NJ, IL, and go to the states with more honest and realistic public sector pension plans.
