Public Pension Finances in California

This blog post based on a new Stanford paper argues that California has big future problems due to under-funded pensions.  Given the defined benefit promises to public sector workers, the stock market rate of return has to be roughly 8% a year to meet these promises.  If the stock market "merely" averages a 5% rate of return then we will have a big problem financing the promises to the retiring Baby Boomers.   For the stock market to grow at 8% a year and abstracting away from pricing bubbles -- the world's economy will have to growing at an impressive clip.  In the absence of such growth, either pension entitlements will be paired back or taxes will have to increase to finance past promises or other spending will need to be cut.    Could California's medium term growth be retarded by public pension promises?  

Comments

[CoCoChang1]

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