

Taxpayers on the hook for $3 trillion in pensions - startuprules
http://money.cnn.com/2010/08/19/news/economy/state_pension_funds/index.htm

======
houseabsolute
I think that number is a little sensationalist. What's the net present value
of the obligations? My simplified calculation makes these assumptions:

    
    
        1. Discount rate of 0.04.
        2. Uniform payments of the entire $2 trillion over the next twenty years.
    

Under those assumptions the present value is only about $1.4 trillion over
twenty years, or about $70 billion per year. A substantial sum, to be sure,
but not compared to a number of other things we do. A higher discount rate
around 6% decreases the yearly cost about 20%.

------
lionhearted
I think there's a very real chance the younger generation says, "Look, you
guys voted goodies for yourself and then didn't fund the programs. We're not
paying" - and work to have these programs nixed. I wouldn't count on any
pensions or benefits as part of my retirement strategy.

~~~
ck2
Except politicians also like their pensions so they will never vote them away.

That's like expecting congress not to vote itself a pay raise or put
themselves on regular health care like average people - it will never happen.

From what I have read, all sorts of games are played with pensions to make
sure they are as high as possible, like giving people high salaries for their
last few months, etc.

Why are pensions anything more than a minimum survival payout I would like to
know? They should set a maximum cap of $10k per year per person if taxpayers
have to pay it.

~~~
anamax
> Except politicians also like their pensions so they will never vote them
> away.

They'll switch to defined contribution with lots of contribution.

Note that the typical career path for politicians involves other govt jobs,
not "in office forever". (State universities are a favorite place to end up.
CA has lots of boards and commissions.)

> Why are pensions anything more than a minimum survival payout I would like
> to know? They should set a maximum cap of $10k per year per person if
> taxpayers have to pay it.

That's unreasonable, but defined contribution isn't. That's pay-as-you go, so
there's no liability.

------
jpcx01
The federal government is going to have to get involved here at some point.
When states go broke due to these exploding pension costs, the yound
productive people will just move to one of the few remaining states that
doesn't have this burden.

------
MaysonL
See: <http://nasra.org/resources/RauhResponse.pdf> for a contrary analysis.

