Pension Calculations Based on Future Returns Do NOT Leave Cities With a Gaping Hole

Mary Williams Walsh seriously misrepresented the issues in discussing the debate over the discounts rates that public pension plans should use in assessing their liabilities. The goal of any formula for funding pensions should be to maintain a relatively even flow of funds into the pension in order to avoid sharp disruptions to government budgets.

The formula that pension funds typically use, which involves a smoothing process and discounts liabilities based on the expected rate of return of...