For those thinking that the finalized reforms to the state-worker pension system took care of all its issues, think again.
The outstanding problem is the fund’s assumed rate of return. At the moment it is 7.5 percent. And with the reforms, this rate of return would put the system on a path of long-term health. But that rate of return is not even close to reality.
In the last decade, the system has returned 4.8 percent, which means that the fund is not on a path to long-term sustainability with the current contribution and benefit levels.
Change will not be easy, since just a 1 percent decline in the assumed rate of return – to a still unrealistic 6.5 percent – will increase the unfunded liability by roughly $500 million, which logic dictates then would require either increased contributions or decreased benefits.
So, what to do? It is time for all the parties involved, the state as well as its employees, to sit down and craft a solution that is fair to both the taxpayers and the workers. To not do so is a serious abuse of the public trust. •