Apparently pensions invest in stock markets, and so the momentary panic that comes with stock dips becomes fodder for those who are afraid that somewhere, some retired teacher is able to pay the bills. So too, when stocks recover, pension assets recover along with other portfolios (hat tip, brim tip).
I am not going to hold my breath that the pension Chicken Littles are going to walk back the overblown claims made in the past year. There are jurisdictions that have messed up pensions, but that's largely from temporary insanity (hi, New Jersey!) rather than the fundamental structures of all public pension systems.
California’s pensions are underfunded by over $1 trillion — oh, but that doesn’t mean other pensions are failing — what is it your article is saying…?
Which “California’s pensions” are you talking about? There are multiple state-level programs. According to the Center for Retirement Research database, California PERF and California Teachers were funded in 2009 at 83% and 78% of liabilities, respectively, and that’s at a relatively low point in asset calculations.
Average state public employee pensions can continue paying benefits at their current levels for another 13 years, even with the assets currently on hand and even with no increase in contributions. In California, the pensions are good for 15 years. The contributions to these plans amount to just 2.9% of state spending (according to the National Association of state Retirement Administrators) or 3.8% (according to the Center for Retirement Research at Boston College). This is more or less in line with the private sector, where employer contributions to employee pensions come to approximately 3.5% of employee compensation. It is true that they are underfunded, but not because workers are holding out on them. They are underfunded because the value of their holdings has declined along with the rest of the stock market. This would only be a problem if every single worker retired at once, which is not likely to happen. (See here:
http://modeducation.blogspot.com/2011/03/relax-public-pensions-are-fine.html)
A self-interested report by the pension plans themselves is probably not that reliable. Noting that plans have averaged 1% return over the past three years is hardly comforting news, given that they’re all assuming an average 8% rate of return.
Moreover, the report (http://www.ncpers.org/Files/2011_06_ncpers_public_fund_study.pdf) included “responses from 215 state and local government pension funds with a total number of active and retired memberships surpassing 7,590,000 and assets exceeding $900 billion. The vast majority – 83 percent – were local pension funds, while 17 percent were state pension funds.”
Only 36 responses from state pension systems? That’s only about a THIRD of the 116 major state-level plans that exist. And it’s not like these plans need to be surveyed in the first place: They all publish CAFRs with an actuarial section.
Who wants to bet that the third of pension plans covered in this “study” are a representative sample, as opposed to a carefully selected group of the ones doing better?