Connecticut Wrestles With "Financial Tapeworm"
Warren Buffett has added his voice to the growing chorus of concern over public pension obligations. In his annual letter to shareholders, the legendary investing guru calls underfunded public pension plans a "gigantic financial tapeworm."
Buffett said he anticipates lots of bad news in the coming decade about public pensions, and he stresses the need for prompt remedial action where problems exist.
Connecticut is one of the states struggling to come to terms with a chronically underfunded public pension system, and according to a recent Hartford forum, it can learn from other states in its quest to rein in its liabilities.
More than 40 states are wrestling with underfunded liabilities that threaten their long-term fiscal health.
Donald Boyd, Fellow at the Rockefeller Institute of Government recently authored a report on the subject. He said New Jersey has taken a responsible approach. "What they have done is gone on what they call a seven-year ramp," he explained, "so that each year they'll step up one-seventh toward the eventual payment of that 'arc' -- the full amount. So they have started that process both of being better about paying -- they also cut back benefits."
Boyd added that it may be politically difficult for the state to stick to its resolution as the payments get larger.
Governor Dannel Malloy's budget chief, Ben Barnes, said it's important for the public in Connecticut to realize that resolving the problem will mean real financial pain. "We also need to be mindful of how the decisions we make today," he said, "and the decisions that were made in the past will form the choices we have before us going forward. I think that's the most helpful way is to look at these problems like having to make ever-growing pension contributions in order to deal with our unfunded pension liabilities -- how will those decisions impact the choices that are available to future legislatures and governors?"
The two were participating in a public forum sponsored by the MetroHartford Alliance that was broadcast as part of WNPR's Where We Live.
Watch the complete forum here.