Alicia Munnell, the director of the Center for Retirement Research at Boston College, nicely frames the public pension problem in a blog post today:

Public plans around the world cannot sustain today’s level of benefits in the face of increased life expectancy, two financial crises in a decade, and low expected investment returns.  Expensive provisions – early retirement benefits, spousal protection, and cost-of-living adjustments (COLAs) – were introduced when retirees were few and the ranks of active teachers had swelled to service the Baby Boom.

She also makes a few broad recommendations:

One Canadian administrator makes the point in the documentary that no entity can guarantee pensions if the money is not there to pay them.  In public plans in both the U.S. and Canada, the money is not there to pay the current level of promises in the future.  The message is that we need to recognize and accept this fact and set up a new system with sustainable benefits.  Sustainability has two dimensions.  The benefits must be affordable, in the sense that people cannot receive benefits for longer than they work.  And the pension system must have some flexibility so that orderly reductions can be made in bad times and increases provided when times are good.

These concerns are relevant here in Washington, even though our public pension plans are generally considered to be in good shape when measured using the actuarial method of accounting. (For more, see here.) As shown in a Seattle Times report on our state’s pension systems, which Dick linked to on Monday, when measured using a market-based approach, Washington’s pension system is not nearly so well funded.