Friday, February 29, 2008

Warrent Buffett's Pension Comments

Arguably the one of the worlds smartest investors and a devout practitioner of common sense, Mr. Buffett expressed strong sentiments in his annual shareholder letter regarding the folly being practiced in the world of public pension funds. To quote: “Public pension promises are huge and, in many cases, funding is woefully inadequate. Because the fuse on this time bomb is long, politicians flinch from inflicting tax pain, given that problems will only become apparent long after these officials have departed. Promises involving very early retirement — sometimes to those in their low 40s — and generous cost-of-living adjustments are easy for these officials to make. In a world where people are living longer and inflation is certain, those promises will be anything but easy to keep.”

I'm no Warrent Buffett, but I'm smart enough to know that MPSERS (the Michigan Public School Employees' Retirement System) will not be able to keep all of the promises it has made. Our legislative leaders need to fix funds $31 Billion deficit; that's almost $19,000 per student in Michigan. It's $6 Billion worse than last years deficit - and that's after Lansing "fixed" the "problem" by adjusting the value of the funds investments. When Lansing "fixes" something and the problem gets worse by $6 Billion we're in bad shape. How much worse does it need to get before someone takes real action?

2 comments:

Anonymous said...

Is this the same board member that has numerous principals on the "retire to rehire" program? Yes - it takes money out of the pension to cover paying the elder principals. "How much worse does it need to get before someone takes action?" OK-let's start with paying your administrators out of the district budget...

Rob Lawrence said...

This board member will do what it takes to save the district operating dollars while retaining expertise and leadership. The rules allow administrators to retire. We are then allowed to hire them under contract - same as any retiree under any other pension plan or system in the United States. Our savings come from the elimination of payments to the pension plan (plus savings from a more competitive health care plan). I'll take advantage of every money saving opportunity under the current rule book because I'm not getting help from anywhere else.