Be sure to click on “what some economists calculate”. Either way, Colorado falls between 10th and 20th but the pension liability changes from $17 billion to $53 billion.
Here’s an excerpt from a March 2nd interview with Warren Buffet on CNBC regarding unrealistic pension fund assumptions…
BUFFETT: Yeah. Well, I haven’t read that speech, but if it says what you said, it was a mistake. It was a big mistake. I— yeah, and not only that, but they use unrealistic assumptions even in determining how much they have to put in the pension funds to meet the obligations. I mean, the pension fund assumptions of most municipalities, in my— in my view are nuts, you know. And— but there’s no incentive to change them. I mean, it’s much easier to get a friendly actuary than it is to face, you know, an unhappy public.
BECKY: Well, so who’s right? Because this has gotten to be such a huge debate, and you have two sides that are painting two very different pictures and using two very different sets of numbers to say how bad of a situation different municipalities, different states are in at this point. Who do we believe? Is there a set of numbers that tells the absolute truth?
BUFFETT: Well, I— actually, I’ve seen some pretty good numbers on that. But the— I would say that when they have pension assumptions that assuming they’re going to earn 8 percent or something like that when bonds are yielding what they are now, you know, that’s crazy. And…
BECKY: I told somebody that who deals with pension funds a couple of weeks ago, and they said, `Well, you’re just wrong because if you look at where things could go over the next 10 years, you’re just wrong.’
BUFFETT: Yeah.
BECKY: What’s a safe assumption for pension returns?
BUFFETT: Well, I use— we’re required, with our utilities, to use certain pension assumptions I don’t want to use. But we’ve used about as low as— anyway, but I think this. I think that— well, I think it’s nonsense, for example, when a company has subsidiaries in Europe and then they have them here, and they have an assumption for their pension fund in Europe that says we’re going to earn 4 percent over there and we’re going to earn 8 percent in the United States. I would say let’s give the money to the United States. The pension fund accounting has been terrible over the years. And many managements, I don’t think, understand it very well themselves, and many, you know, in a sense prefer not to understand it. You know, they care about their own pension, too.
We could— we could use a real overhaul of pension assumptions in this country. There’s been some of that, but I’ve been writing about it for years. You know, it— nobody’s really got an incentive to do it, you know, that’s one of the problems. But… (emphasis and highlighting added – ed)
