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Colorado State Treasurer Walker Stapleton on the impact on the government and U.S. economy of public pension spending.
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-- it's not news to anyone that our country has to make significant reforms of public pensions across the border of those bonds are just gonna go bankrupt in fact.
Cities have gone bankrupt over them in the problem isn't really getting any better.
A new report shows that even those states have collectively cut a hundred billion dollars from the public worker pensions there is still an 800 billion dollar gap.
Joining me now to discuss how to pace.
Colorado State treasurer walker -- ten.
Mr.
treasury thanks so much for joining us we certainly appreciate your time it and let's get right to because the study I was talking about is coming from researchers at Boston College.
And I'm actually surprised to see that -- that was that big that they cut a hundred billion dollars or closed the gap by a hundred billion dollars.
But it still is 800 billion dollars of that that even still doesn't get as close do you believe that number.
And you know are you surprised that we have and maybe even -- programme.
I don't believe the number Melissa -- not only a big problem this is a threat.
Runaway entitlements are a threat which threatens he -- The problem is.
Is that.
The gap is based on inflated.
Investment return assumptions hi Joshua -- -- professor at Stanford business going Robert -- be -- have written a paper where they think these liabilities could be as large as four trillion dollars.
I number that is trillions more than even the Wall Street Journal reported this weekend in their article.
The problem is is that this is gonna end up affecting every single household in America yeah this is something that we cannot be complacent about we have to be proactive and fix this problem.
Or else it's going to be a debt that we're gonna leave to future generations of American -- -- that would explain to eat but I want younger viewers what you're talking about the beginning of the problem is even bigger -- most people think.
And that is because when they go ahead may make their reservations.
Bob what did liabilities are down the road.
-- budget in 678%.
Growth in their investments.
Every year and no one is how exactly right of return right now.
Many of these plans Melissa including Colorado have an average investment return assumption.
Over the next thirty years of approximately 8% Michael Bloomberg said that a seven and a half percent average investment return is indefensible.
And a 7% return if somebody offers it -- should take it and hope that their name is not Madoff.
I mean and the reason for these inflated investment returns is a higher yet investment assumption is the -- you have to fund the plan primarily.
And all that does is create -- deferred liability and leave a debt burden on future generations of Americans and we need to actually be better than that and get off the couch and do something about this problem.
Before it affects every household in America yet anecdotally just to give you an example we have a 25 billion dollar pension liability here in Colorado.
That is approximately 151000 dollars per individual 30000 dollar -- hello.
Talk about what we can do about it -- because you look at you know state workers in some place is -- are making a big deal out of paying 10% more.
Towards their retirement benefits that they did -- three years ago.
That's nothing that doesn't even get as -- how do you actually solve this problem.
Well you have to solve the problem you know Boston College this has a great center for retirement studies that he's doing research.
On hybrid plans that are being adopted by states like Michigan and Rhode Island in or again.
And in hybrid -- State's insurer pension pick a number to thirty grander forty grand pretty good when you compared to the private sector no expectation of ever getting Social Security benefits.
For younger workers and then.
After that an individual is responsible for investing for their own retirement security in a defined contribution plan what it does list is it gets the states.
Out of insuring.
We're out of time and you are so right we have to be honest about this problem and face up to what the real numbers -- is almost no one is doing that thanks for coming on tonight we appreciate your -- for having me on the.
