It's always wonderful how governments deal with their employees, and here's yet another example of why California seems to be basically broke. Per the New York Times, on California government pensions vs. the absence of such protections in the private sector:
Stockton is spending some $30 million a year to pay for them, but it has less than 70 cents set aside for every dollar of benefits its workers expect. ... Calpers ... argues that the state Constitution bars any reduction in pensions — and not just for people who have already retired. State law also forbids cuts in the pensions that today’s public workers expect to earn in the future, Calpers says, even in cases of severe fiscal distress. Workers at companies have no comparable protection.
How much of a return should you expect on funds invested in pension plans? Once again, compare the pensions for public sector employees in California to the proposal by a few senators to introduce private sector pensions (from Reason.com):
... Unlike government pensions, this plan’s liabilities won’t be backed by state taxpayers and will provide a rate of return that’s about half of what the public employee system receives. That’s further proof of the unrealistic investment-income returns expected by the state’s taxpayer-backed retirement funds. When taxpayer money is at risk, the government assumes a generous rate of return of 7.75 percent. When taxpayer funds aren’t on the line, then state officials suddenly become conservative and realize that U.S. Treasury bond rates are all we can realistically bank on to fund defined-benefit pensions.
