Mercury News editorial: CalPERS' bad year shows its debt will not vanish magically

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It's time to end the high-risk gamble with taxpayer money at the California Public Employees' Retirement System and local government retirement funds around the state.

The announcement last week by the nation's largest pension system that its investment earnings for the past year were a dismal 1 percent should be interpreted with caution; one year's return tells little about the long-term health of the system. But die-hard defenders of the status quo insist that a few years of solid market investments will unburden taxpayers from about $250 billion to $400 billion of statewide debt directly attributable to public-employee pensions -- and a year like this shows the folly of funding plans based on irrational exuberance.

We have no idea what the future economy and investment markets will look like. So pension systems must stop building their finances around assumptions that the growth of the 1990s will return. And they must stop pretending that even 1990s growth rates would be enough to pull them out of the huge financial hole they've dug.

If Gov. Jerry Brown is serious about pension reform, he must protect pension accounting from politics and introduce financial discipline. We've already run up a credit card tab equal to $20,000 to $32,000 for every California household.

full: http://www.mercurynews.com/editorials/ci_21123635