many political figures have argued the need to drastically reduce the generosity of public sector pensions, and possibly to default on pension obligations already incurred.
This paper shows:
- Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009.
- The argument that pension funds should only assume a risk-free rate of return in assessing pension fund adequacy ignores the distinction between governmental units, which need be little concerned over the timing of market fluctuations, and individual investors, who must be very sensitive to market timing.
- The size of the projected state and local government shortfalls measured as a share of future gross state products appear
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