FT reminding us that there are still significant problems in front of us. The pension funding shortfall is estimated to be between one and three trillion dollars. I feel a little let down by the article. It uses Illinois as the example (one of the authors is based in Chicago). I would have preferred to see CalPERS. Remember that they just decided they needed another $600 million from California (and then decided to delay addressing the problem). The FT also chooses to use the rosier picture of states, stating that five states have sufficient funds. Under alternative accounting (study by Stanford), only two states (Florida and Washington) have sufficient funds.
At some point we may have to deal with the fact that because many pension funds didn’t perform well in light of a bunch of AAA securities performing like junk, many pensions decided to diversify into stocks to chase performance. If there is a market rout ahead of us, these problems will only grow.
