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Jon Pritchett (President & CEO of Mississippi Center for Public Policy)

Sep 12, 2018|

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

The financial exchange. Is Cole a hurdle England and also now in West Palm Beach, Florida. Check out our website at financial exchange showed dot com and find the station closest to you. This is the financial exchange radio network. Mean. Joining is on the line at a talk a little bit about the status of public pensions. John merchant John as the president and CEO of the Mississippi center for public policy. He joins us on the line right now John thanks for coming on the house. Thanks John. The the first sentence of your article that you published last week. Pretty much says it all unfunded public pension my liabilities are not a fun subject they're not there they're boring for a lot of people. But my question because this is something that we need talked about a little bit more how bad his the situation gotten with these unfunded liabilities. Well if you'd look at the study referenced from the American legislative exchange council now. I think beer is a lot of people that look at this as you know lots of organizations. Data. And it depends on the methodology. That and so on which one of these others. And the mobile ratings. The Tax Foundation a status EU com and there's every possible different I like what Alec has done I think it's best most conservative methodology and actually and it gives us. That there accurate data the most conservative beta which is that the which make plans based on and that picture's not pretty. If we look at. What they did was look at municipality or state unfunded. Liabilities. And benefits at about six trillion dollars. Big number to look at the scary thing about it is. How fast it's growing last year. We had a single year growth of the unfunded liabilities. In the aggregate of 433. Billion. Or an end John let's let's hone in on that because in my view. This is an economy that is in good shape at the moment and typically. That's when you kind. Deal with things like building up your rainy day fund and shoring up programs that need help because when things go downhill which inevitably at some point they always do. You don't have the ability to do that so what's most concerning for me is. Hey this is the time when we should be trying to shrink those deficits. And inspect instead of just getting bigger why is that the case. Yeah it's not a popular subject. It's it's hard to win elections. Much reduced they're really good communicators. On you know it's taking. Radiate funds or additional tax revenue instead of using it for you know high a profile very popular cause. And people you know building. Help for teachers whatever may be popular. This is a difficult subject. You know it's. It's sort of but like it says in the article being so we're one of the party of drops. Somebody's going to be an adult I agree with you when we have these periods. We just went through it really challenging period where it was difficult to catch up. We did have the mechanisms in place to be funding appropriately for the promises that they need now we get to a position where we're. All healthier. It turned to get returns that much greater than they get a ball past decade and eat your right now's the time to try to fund. As much as possible that the debt the liability that we have currently. You know Massachusetts not the worst. But certainly. It's not near the top either and so there there are some reforms that politicians should get credit for but there's a lot more than needs to be done. And we're not getting the full picture risk and the reason I. I wrote this article and the taxpayers understand. The full picture. Which is why use Alex Robert the president predicted the best the best picture what's going on across every state and it doesn't look at every municipality. But their methodology does and has mostly not just the state retirement plan but it's also hold various it is now. John what states are in the best shape and what can you draw from them in terms of what has made them successful at dealing with decision. Yet. Well obviously. You would think that. States where you don't have anti union presence would be better off as some cases they are but there're other states like my own in Mississippi for example. We're we're compliment on being ratio percentage how much money we have going toward that debt. We're in very bad shape and we can't blame that on. Union negotiation. We had planned on not putting money away. Not accountant who were a more conservative annual rate of return for example a lot of the states are. You know using their assumed rate of return. Somewhere in neighbors seminary percent. You you know it's more likely to be conservative I think you'd something more like the treasury rate or something it's. You know at two or 3% range. Because as soon as we don't have those numbers just experience that period of time. Been readers can see this growth on the debt side so to answer your question who's doing a good job at North Carolina in the job of Wisconsin doing it. There are few states that started it is reforms Ohio Pennsylvania and Michigan. I think the most important thing about it antennas because that list of the most important things for civil just admitted. And secondly to be transparent about it for example. Let's put all of this data. Right out front on easily accessible web sites. You know the treasurer in North Carolina for example. Percent of Graco of this made the information available go directly did it it is being installed church programs. But that's one other news in the position where across the board is that politicians were transparent about. As most citizens didn't understand what their obligation or how fast these viability grow. And now we're starting to get a little bit of it but in my view not many pieces really have a full picture of of how much of the budget. Is being eaten up by our past sinden the liabilities that we have and it's not. This is anti pensioners are anti public employee but it promises we've made in the should try to open. But not letting the citizens. After all employee. The people who have the pension and retirement programs and political know how they have been on bought that these these. Promises have been unfunded now that creates this big big problem big math problem the media basically. And that we've got to figure out how to address that masters down a little bit of that. In putting together a plan I think the plan is is a little to back loaded. If you don't have great growth that they'll have a really help the economy. You're gonna run to the for the same problem out of your actions no point not enough money torched that the debt liability. John we just have about thirty seconds left so real quick here. These problems took years to get to this point how is typically take to get them fixed. Well there's a lot things need to be done. You know. There's a whole laundry list of things that can be done. But the reforms aren't easy and is not going to be a short period kindness the magic of compound interest you don't become. The wealthy. Investor. In a year we're not gonna get healthy regard and it pension liabilities in the year on it where are we talking about. It tenure here. The hope is that we don't get to a point where states. We're in the worst shape insert asking for other states eat I eat the federal government to bail out yup a bit in May from port well. Very good John thanks for the time thanks for put this together for us. John Pritchard is the president and CEO of the Mississippi center for public policy. We are gonna see states and territories fail Puerto Rico's within months of failing in their Connecticut Illinois. Connecticut's not within months and not months but years yacht Betty B you're talking the you can spread that. Pain out over he said ten years. Even if you had a plane we're gonna spread out over twenty years thirty years you know it's gonna come up is in town meetings you're gonna start going to town meetings. And you know you vote on your town or in and be right say. Well gee how what we have to spend my property taxes are gone up by 7% because we didn't put money away for the teachers' pension rights and health care. Right that's when it hits home when you see in town meetings. That's when it really starts to hit the pocket and in win use a homeowner see your property taxes skyrocketing. And that is what is occurring. Maybe then you wake up and.