“For years, states have been warned to stop making unrealistic promises about investment returns—a trick used to make shortfalls look smaller than they really are—and to fully fund their retirement systems instead of deferring payments to later years. Both strategies are widespread in state pension systems, and both have contributed to the mess that states now face. Policy makers have clung to the belief that reforms were unnecessary because future investment growth would close the funding gaps.
That idea should now be dispelled. Even a decade of growth wasn’t enough for many pensions to fully recover from the last recession—and that should have been a warning right there, if policy makers were paying attention.”