https://en.wikipedia.org/wiki/Pensions_crisis#U.S._State-lev...In general, underfunded pensions and large increases in expenses are a looming threat to many state and local governments. In California, many cities are expecting their pension costs to increase by 50% or more. Few have much in the way of spare cash to begin with.
It's not just the mismanagement of professional pension management funds, though you are of course right that that is a major concern. Broadly, the crisis is the result of applying unreasonable discount rates (8% or more) and making unrealistic promises about contributions and payouts. This is very, very easy to do when you're negotiating a union contract, as a state generally has little choice but to pay up when the time comes. It's also easy to do when you can bump up the assumed discount rate a bit and use the cash this frees up for goodies for your voters.
These weren't just poor management decisions made by self-interested private companies. Indeed, private pensions often assumed much less rosy discount rates and fared much better. These poor financial management decisions were quite often made by union leadership and local officials, some of them elected.
Sad to say, shifting from a defined-benefit system to a defined-contribution system seems to be the only way to guarantee that this particular form of politically expedient mismanagement will not recur. This doesn't have to be 401(k)s, 403(b)s, or other market-oriented system. But whatever the eventual system is, it clearly cannot look anything like the pensions of yesteryear. That system has failed, and the kindness and compassion and pure intentions at its heart has gone to waste.
Let there be no doubt - this is tragedy.