When it comes to private pensions, social security and Medicare, we're accustomed to hearing about future doom-and-gloom-problems that executives and politicians today are too wimpy to do anything about (medical care may be a slight exception). When it comes to public pensions, the story is much the same.

The New York Times Magazine notes that a reckoning is coming. Already there are some "horror stories" in the making. By one estimate, if states make contributions at recent rates and if they earn 8 percent annual (a huge assumption), 20 state funds will be out of cash by 2025; Illinois will go belly-up by 2018.

This still isn't registering in the minds of politicians and the electorate. But the long-term solutions are similar to that of social security. You've got to either tinker with benefits, generate super high returns, or goose public contributions. Unfortunately, you can't count on significantly higher returns in the future. But some state managers will no doubt be praying for this. This plays to the benefit of hedge funds and private equity funds, which are associated with higher returns.

For more:
- here's the article

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