Warren Buffett Warns about Unfunded Public Pension Liabilities—Again

Ivan Osorio • February 27, 2019
Would you invest in a state with large unfunded pension liabilities? Warren Buffett likely wouldn’t. In a long interview with CNBC this week, the famed billionaire investor was asked by viewer, “How do you see the unfunded pension liabilities across the United States affecting our economy over the next 10 years?” Part of his response (at 50:58):

If I were relocating into some state that had a huge unfunded pension plan I’m walking into liabilities. ‘Cause I mean, who knows whether they’re gonna get it from the corporate income tax or my employees—you know, with personal income taxes or what. But that—that liability isn’t gonna—you can’t ship it offshore or anything like that. And those are big numbers, really big numbers. And they may come—you can delay a long time. [For the full transcript, see here.]

This isn’t the first time Buffett has warned about the danger to state finances posed by unfunded pension liabilities—five years ago, in his annual report to Berkshire Hathaway shareholders, he said, “During the next decade, you will read a lot of news—bad news—about public pension plans.”

Yet, the situation persists, because, as Buffett said in the CNBC interview this week (at 51:30):

But the politicians are the ones that really haven’t attacked it in a good many states. And when you see what they would have to do, I say to myself, “Why do I wanna build a plant there that has to sit there for 30 or 40 years?” Cause I’ll be here for the life of the pension plan and they will come after corporations, they’ll come after individuals. They—just—they’re gonna have to raise a lot of money.

Indeed, the true level of taxation is reflected in the level of government spending. And unlike budgetary appropriations, which lawmakers need to approve periodically (usually annually), pension obligations are baked into the public finance cake, and must be paid one way or another. They also lead to higher borrowing costs for states. That’s something companies should probably consider when making location decisions.

Warren Buffett Warns about Unfunded Public Pension Liabilities—Again


What does this have to do with me as an individual? Underfunded state pensions means the state government will raise taxes to cover those pension liabilities.

How Well-Funded are Pension Plans in Your State? | Tax Foundation

 

First, most are ponzi schemes at best and 2 nd, they are funded with "investments, ie stocks and bonds", and any real reset will reduce their assets to near 0, at which point the people with the pensions will be 100 % bailed out with your assets if any government is left, and seeing that the people owed are retired government employees, they have a lot of clout.

 

"As of fiscal year (FY) 2016 (the most recent data available), states reported a combined $1.4 trillion in state pension plan funding deficits."
Wow! Big numbers...The only solution I see is the State(s) will have to scale back on its pension payments. Yes, it will go to court but you can't get money from a turnip and it costs very little for a state to tie something up in court...until they lose and still that is small money compared to the costs of payments. My Idaho is looking pretty good as we are #6 as of 2016...

 

We’re number 10! Could be better but at least we’re not the poor schmucks across the river.

 

It really doesn't matter what your State ranking is.....only difference is some are circling the drain a bit more than others. Let the stock market crash, and not recover, and it will be hard to place a ranking on how sorry pension plans are.

The problem is the ONLY way out of the box for the US dollar is to inflate, then hyper-inflate. Except in the short term before purchasing power is totally gone, it won't matter whether you get a check (from pension, or from SS, or have 401k/IRA funds) or not, in the long run.....the dollar won't buy anything in the future when the faith in it is gone.

Oh yeah.....they will come up with a "new dollar" that is supposed to fix all.....but unless paper currency is backed by something real that you can easily exchange in and out of, then history says ALL fiat paper money goes to zero.

I'm near 70.....and in my lifetime, I would not be surprised for all of this to happen. But even if they manage to keep juggling the balls, surely some one in their 30-40's is out of their mind to think there will be any kind of future payments to them. Your ONLY option (IHMO) to save your long term funds in mostly precious metals, and at the first hint of inflation over 10-15%yr, move whatever paper savings you have into real goods.

 

Louisiana is no.36,that’s not good. That’s were I get my retirement from. I have already drawn five times more than I paid in. I worked under social security thirty one years,and under a state pension fund for twenty years. My social security check was cut almost in half because I was on the state pension plan. I might starve but I will have a house to have to live in.l am 76 so maybe it will miss me.

 

Just numbers to play with.
I remember when I was a bit younger and all said it would not exist when I hit retirement.
I did not believe that to be the case.
NTL I did not waste time wringing my hands.

 

Ha,No one in my family has lived long enough to draw more than 3 S.S.Checks,I'm ready to get some of our lai-jon back!

 

This is one of the reasons I say dems will come after your money.
Hell they're already doing it IL.
There they're going to tax any one who has a private retirement plan and l is stupid enough to stay to fun the states massive insolvent retirement fund.

From Feb 19:

 

This should of been done already for whats just around the .5 deck !
One road / belt plus all the rest has laid the path.
CDN has plastic TP now !!!!
Sloth

 

That chart is over two years old. It would be interesting to know what the numbers were at the close of 2018. Things are worse then people are being led to believe. I wonder if states will start looking at increasing the retirement age. I was speaking to someone and they believe the retirement age will be going up to 72. But the schools, state etc... will need to do this also.

 

The retirement age is going up to death.

 

Hence Covid and the vaccines...and the booster shots....and the "new" strains of Covid.