Arizona's government pension funds use a discount rate of either 8 or 8.25 percent, considerably higher than the 5 percent they have actually earned over the last decade. Consequently, while Arizona's unfunded pension liabilities are officially $16 billion, a huge sum, the unfunded liabilities using the actual rate of return of 5 percent are more like $37 billion. That's $5,800 for every man, woman, and child in the state.
We are being misled about the health of our pension systems but the legisalture could put a stop to that by requiring a lower discount rate be used to calculate funded levels. If pension funds expect taxpayers to pick up the tab, the least they can do is be straight-forward about the bill we're facing.