STILL MORE ON THOSE UNDERFUNDED PUBLIC PENSIONS:
The American Academy of Actuaries is considering new standards that would require local governments to provide two estimates of returns on investments made on behalf of public employee pension funds, The Washington Post reported Friday.
Most municipalities estimate returns on investments at 8 percent, about twice the amount federal regulations permit for private firms, the Post reported.
But, the estimate may be too high. The number of public pension budgets considered underfunded jumped fivefold to 40 percent in 2006, compared with 2000, the Government Accountability Office reported.
Pension fund managers are reportedly unhappy, but this seems like a good move to me. Much more on the story here. The goal of politicians, of course, is to promise as much as possible to government workers so as to get their support, while putting as little as possible away to fulfill those promises, so as to have as much money available to do other things they want to do. Seems like they’ve been getting their way too much. And the Fannie Mae and Freddie Mac examples should illustrate what happens when future risk involving public money isn’t properly accounted for.