PERA likes to claims that there's no immediate threat to the long-term health of its retirement fund, despite the fact that as of October, it counted its liabilities as 60% funded. Part of this claim rests on the assumption of long-term 8,5% returns, and that there's plenty of time to make up the difference.
While 8.5% return isn't unreasonable, this ignores two factors that in isolation don't make much difference, but in combination can lead to wildly varying results.
First, many different distributions of returns can, over time, lead to the same average annual return:
The blue curve is a simple, constant 8.5% return. The other curves represent different annual returns over time, resulting in the same ending balance, and thus the same average annual return of 8.5%.
Second, PERA has obligations, and it has to pay those obligations every year, drawing down the principal. Let's now add on a constant annual payment:
The blue line returns to $0, meaning that an 8.5% return funds the 20-year obligations 100%. But look at the other curves. The more the returns are delayed, the more the principal has been drawn down beforehand.
These are highly simplified assumptions, of course. The incoming administration is likely to pursue policies that will depress markets for years by increasing uncertainty, making it harder to make up the deficit at the end. So I'd discount PERA's assertions of long-term solvency fairly steeply.