To understand what is going on with public pension funds across the country, you have to be a determined number cruncher and master an array of investing strategies, state-level rules and regulations.  You also have to be ready to read a lot of bad news.  David Cho of the Washington Post has taken his charge at the problem and come up with a very depressing picture that can only be solved by concerted action, including at the national level.

Cho writes that state pension funds and OPEBs (Other Post-Employment Benefits) have lost “about $1 trillion” in the worth of their investments, which means that “within 15 years, public systems on average will have less than half the money they need to pay pension benefits.”  Whoops!  This means that police, paramedics, firefighters, teachers, health workers, and a host of other government employees may face major reductions in their pensions, especially as the elderly population grows. 

The problems are so widespread that they could lead to paralysis.  First there is the standard 8% return on investments that public pension funds use to calculate the amount of money they are earning — whether or not they actually make 8% in a given year.  Then there are the risky investment vehicles (surprise!) that pension funds dove into; after all, everyone else was doing it….  And with these losses, Cho writes that state pension managers are actually looking again to riskier investments in the hopes of covering their past losses.

Some pension funds are predicting that it will take more than forty years of good returns for them to restore their balances to previous levels.  Generally speaking, preventive journalism should include proposed solutions, which Cho doesn’t try to do.  The question is whether any are actually out there.

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