E.J. McMahon, writing in today's WSJ (paid subsc), argues that public pension funds around the country are hiding as much as $1 trillion in future liabilities by using optimistic actuarial assumptions. McMahon believes that the 8 percent rate of return many public funds assume they'll make is too rosy. "If private-sector accounting standards were applied to these systems," he writes, "they would all look much worse."
Meanwhile, yesterday's NY Times noted that NYC's reportedly sound pension fund suddenly goes $49 billion in the hole if you tweak a few actuarial assumptions. (A previous story foretold pension problems around the U.S.).
The undercurrent in all these stories is that there are more cases of San Diego-itis out there. Are they right?
