Submitted by Taps Coogan on the 29th of September 2017 to The Sounding Line.
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CNBC’s Rick Santelli recently spoke with the Kiski Group’s Charles Millard about the growing pension crisis in America’s states and cities. With news of Minnesota’s pension liabilities exploding higher after applying more realistic accounting rules, Mr. Millard warns other states and cities are in similar situations:
Mr. Millard:
“Suddenly what looked like, lets say, a trillion of under-funding, which is an enormous amount for a public plan, is now about nearly $1.2 trillion of under-funding. Minnesota actually owes the same per year, but the present value calculation of it has changed.”
Rick Santelli:
“Right and an additional $6,000 for every man woman and child in the state of Minnesota. You know to me, what is a big issue here is that we are talking about taxes and trying to get a fine pencil, but in the big picture we need to address this. Many states can’t go bankrupt, many cities won’t or can’t. How is this all going to end, especially at a time where government treats this issue so differently in their own backyard than it treats the taxation of its citizens privately?”
Mr. Millard:
“It’s a great point, It’s a great point. It’s not really a ticking time bomb cause it won’t explode, it’s more like a slow leak, and that tire’s going to go flat. About ten years ago Philadelphia spent about 5% of its budget on pension and retirement. Today it’s about 15%. So that’s either a 10% budget cut for everything else or a 10% tax hike in a city that can’t really afford a 10% tax hike. So where we are talking about Federal taxes, which are of course important, you need to realize, if you live in Philadelphia, and many other cities have similar problems, if you don’t do something about the pension liabilities, it’s the same thing as having a tax hike or a budget cut.”
As the battle over pensions heats up across the country, and virtually every state finds its pensions woefully underfunded, it is important to remember that pension entitlements are the second largest element of average American household wealth after their homes.
There is more to interview below, so enjoy:
Santelli Exchange: America’s pension crisis and taxpayer risk from CNBC.
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