The Los Angeles Public Pension Time Bomb For Taxpayers

The L.A. Daily News reports:

Already facing deficits of more than $110 billion, public-employee pension plans in Los Angeles and elsewhere in the state have overestimated future investment income in a move that could imperil the systems and require taxpayer bailouts, former Mayor Richard Riordan and other financial experts warn.

Pension systems in California are operating on assumptions of a 7.5 percent to 8.5 percent annual return on investment portfolios, but investment experts say historical trends suggest stocks will increase by only 6 percent to 7 percent annually.

Coupled with rising retirement rates and growing pension benefits, the resulting squeeze could leave dozens of pension funds without enough money for payouts.

"I'm worried about the whole state," Riordan, who worked with Los Angeles-based Rubalcava Capital Management in reviewing pension systems, said Thursday.

"I think the clear thing is that L.A. is better off than the vast majority of cities in California. ... However, (Los Angeles officials) are going to have to revisit their assumptions on annual returns sooner rather than later. ... There are big problems ahead, and they should be tackled right now."

In the very near future,Moody's and S&P are going to have to downgrade municipal debt.The future looks bleak for many cities.Instead of place for middle class workers,the cities are going to become places driven by retired workers.This will lead to a further decline in population in many cities.