Just how unrealistic is Minnesota’s expectation that its major pension plans will earn an investment return of 8.5 percent per year? Consider this: Of 126 major public plans across the country, only one out of ever ten expects that return. The rest anticipate less. So says the Wall Street Journal, which collected information from two national organizations of retirement plans. The single-largest target, pursued by 59, or roughly half of the plans, was 8 percent.

These investment targets–“discount rates,” in the jargon–are important because they are part of the calculations involved in determining the taxpayers’ liability for public pensions. Setting the rate too high is akin to a minimum-wage employee buying an expensive new car on credit, on the theory that “I’ll be rolling in dough within a year.”

The hook for the Journal’s article is the decision an investment board in California recently faced: Should it reduce its target (the more conservative approach), or keep it the same (the “hope for the best” approach)? The Journal noted that the question pitted math versus politics: “The fund’s actuary had recommended that the California Public Employees’ Retirement System adopt a more-conservative long-term investment expectation; nearly a dozen local officials attended a meeting last week to urge Calpers not to change the rate.”

Math versus politics. Can you guess which won out? If you said “politics,” you’re a winner. Or rather, a loser, if you’re a California taxpayer, since your liabilities will continue to grow. The problem isn’t limited to California, of course: The Minnesota Free Market Institute’s Pension Reform Project has been alerting lawmakers to this problem for a while now. Wilshire Associates predicts that going forward, the actual investment return for the median state will be not 8.5 percent–a figure used by the Minnesota State Board of Investments–but 6.5 percent. That leaves a gaping hole in the promises that Minnesota lawmakers have extended to public employees.

How did we get here? The economic crash is a very large factor, of course. But the bigger, longer-term factor is the nature of both politics and the pension plans. It’s easy for today’s political leaders to purchase government on the cheap by shifting some of the cost of hiring employees down the road, in the form of retirement benefits. Don’t want to pay out too much money today in contributions to a defined-benefit pension plan? No problem; just assume high investment returns.

To repeat the obvious, governments all over should follow the lead of the private sector and start shifting their approach to retirement from defined benefits (traditional pensions) to defined contributions (a 401k). Doing so will provide predictability to public finances, and encourage responsible budgeting.