[charleslmunger]

In addition, it's not necessarily salary of the last year - it's income from the state. Which, until a few years ago, included overtime and unused sick/vacation days. The incentives were totally crazy - cities and counties paid salaries up front, but the state generally paid pensions. So it was common practice to divert all overtime to employees who were going to retire that year, to spike their income and get them a higher pension. With sick days and overtime, it was not unheard of for the calculated pension to end up paying more than the actual salary did before retirement.

To add insult to injury, Senate Bill 400 under Gray Davis (who was later recalled in a special election) retroactively increased pension payments for people who had already retired and started drawing pensions. And CALPERS keeps two sets of books, dramatically overstating the actual performance of their investments. [1]

It's a horrible mess - nobody wants to strip the earned retirement away from retirees, but the math just doesn't work out. When the market provides better-than-predicted returns, employee contributions are reduced and benefits are increased. When all of those extra returns are wiped out by a bubble popping, everything stays the same and the difference is made up by taxpayers. And it's incredibly attractive for politicians to buy the support of unions and their membership, when the cost won't be paid until long after they're termed out of office.

[1] https://www.nytimes.com/2016/09/18/business/dealbook/a-sour-...

[ethbro]

Public sector pensions should be run by a Federal Reserve-like "appointed but not elected" system.

As you've stated, actuarial calculations + short term politics don't mix.

[conanbatt]

I think the economical argument that is most fundamental is that public benefits are a promise of the states future revenue. It is like a bond with no adjustment to risk.

If people like public pensions let them have it, but let only people in their sector pay for it. It is absolutely immoral for someone to pay a tax to fulfill the promise of a decade old decision on someone else. Few things show how clearly people forget the State doesnt have money of its own than thinking that the state can fulfill an obligation without taking more from the innocent bystanders.

Defined benefit plans should have a defined tax scope, and if they fail, they go bankrupt and thats it.

[charleslmunger]

Even then, the risk of overly rosy prediction of returns by bureaucrats is high. A defined contribution system, plus a social safety net (medicare, social security, etc) is a better system.