The Problem of Public Pensions

Felix Salmon pens an interesting couple of paragraphs:

The fact is that a defined-benefit pension scheme is always going to run the risk that it won't be able to meet its liabilities as they come due. The California pension plans constitute an attempt to save hundreds of billions of dollars to pay for the pensions of the state's workers; the attempt might succeed, or it might not.

But right now there are clearly more important and urgent things to do with California's tax revenues than throw them into a pension pot to support the retirees of the 2040s and beyond. CalPERS might not be perfect, but it's a lot less dysfunctional than most of the rest of the state government. Let's get our priorities straight here.

This is a sentiment very common among CEOs of struggling companies, which is why we have laws to make them put in their pension contributions anyway.  Should we feel differently about states?

Both libertarians and liberals evidently do.  Libertarians complain about excessive public pensions, which are indeed excessive, grossly irresponsible gifts from politicians to some very powerful constituencies.  But that's neither here nor there, because people worked, often for decades, under those promises; you can't just unilaterally abrogate them.

Liberals, meanwhile, want to ignore pension contributions so that there don't need to be drastic cuts to services.  But it seems to me that the same problem applies--you can't dip into the pension fund no matter how worthy your cause.  Delaying the contributions for a few years in an emergency won't hurt--but if you endorse it, I think you'll find that it's always an emergency.

Of course, there's no actual means of cutting state level pensions, since Chapter 9 doesn't seem to apply to states, only municipalities.  So this is going to be a political problem:  are we willing to cut state pensions?  And If so, how, since their inviolability is often built into state law?

I'd guess that broad public sentiment runs in favor of cutting the pensions.  But the most motivated sentiment belongs to the pensioners.