Just about every public worker pension plan in the nation is underwater, and this is due to the way these pension plans are structured. They are based a guaranteed benefits model which is essentially a ponzi scheme. In order to keep paying the guaranteed benefits to the retirees you have to keep expanding the worker pool. And, unfortunately, not even the government is able to keep growing its work force fast enough to keep the pension funds funded.
So something will need to give, and given that most states in the union are also financially insolvent there is going to be some heavy pressure on the federal government to bail these pension funds out. Charles Krauthammer says it shouldn’t happen, and he’s right:
First of all, the federal government is bankrupt. We’re out of money.
Second, bailing out the states is only going to perpetuate the problem. Rather than reforming these pension plans to sustainable models the states can actually afford to pay for, bailouts would only maintain the status quo.