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Barry with Stephanie Banchero from the Wall Street Journal

Dec 14, 2012|

Wall Street Journal writer Stephanie Banchero joins Barry on the show to discuss teachers pensions.

Transcript - will not be 100% accurate

Well as a country US states carries total of about 325. Billion dollars in unfunded. Teachers' pension liabilities. The reporter on this story Stephanie bench -- from the Wall Street Journal Stephanie I -- compliment you on your research wonderful work. Thank you very but I actually didn't -- what they read that it was done diet group. A teacher evaluation and research group. Which -- what's led to this unfunded liability I mean this isn't just a problem that's relegated to Massachusetts it's. A problem in Illinois California Indiana Rhode Island it's all over the country how did this happen. Yeah pretty much every state is being an unfunded liability to Japan since. Mean people would say that it what we offered to teachers did particularly sweet and they have what we know it defined benefit. So basically what that needed when they retire they're guaranteed mr. -- Monday -- based on their salary years of service arm. And a lot of people say you know what we really need to move them more to a 401K plan when we're not guaranteeing. How much money work and give them so what happened -- because we're guarantees that quite a bit of money are what some people would say it quite a bit of money. -- -- -- Have not had the money to find that and what they just ignored putting money into the consistent and as a result we're looking at 325 billion dollar all right. Well you know I looked at illegally went through pension reform here in Massachusetts it started Lleyton 2011. It got implemented in 2012. But it was very modest I mean it was like a drop in the bucket and and and are -- unfunded pension liability here in the state is still growing so clearly didn't have an impact. On our State's going through sincere. Pension reform is there anybody that you could point to is an example and you say while. New York -- due -- the right way area because of the York's not that bad right New York State's unfunded liabilities and as bad as the rest the country. Yeah yeah -- great question that report notes that into the last year alone twenty states have little need strict tinkering with their lot to try to fix that problem. What it would be out there is luck indeed just -- but we really needed the major overhaul of the problem. I'm gonna have a didn't come to keep it like for example in Ohio this year they. Eight increased the age at which acute -- retired to take full benefit and several other states they've been spent. Being that the ticket have to put into the pension system I guess it's going to be very teachers here I mean this -- what you Eagles saint typical stay at. Look at the money you promised that -- into the system like we were supposed to. You don't do what you were supposed to do so you know don't blame us for that and start all right now. You -- have and many state agreed to several changes try to fix the problem. But you know like -- there's a big hole to dig ourselves out of right now. Do you think there's the potential you know I look at -- Indiana and Illinois and you point to the city of Chicago do you think there's a potential. That in the next five years will have teachers' pensions defaulted on. No I don't think I don't and I don't think don't you think let's not forget that we had a really bad economy and keeps your attention. -- -- Are they you know they take the money invested and yet much of what he is getting the return on the investment. And we had as we know a bad economy and the investment. The return on the investment is not being great what. Usually state bailout will get between 60% return on our investment and that all be -- but that's what we're seeing now would mourn the one to 2% range. They're people that say you know look like that waited out a little while if we can. They return -- -- won't put it up so we can help fill the coffers a little bit. I'd I'd I would be surprised if -- beat fault I think you know I mean look there's one way to fix the problem while we don't have enough money at the that you just pack Smart money instead spent. I don't think we keep people out on. Though we did see it in Rhode Island an in Alabama right. Not on teachers' pensions but on municipal pensions yeah. Right right right yeah yeah I mean I -- I think government looking at this problem -- saying look we gotta do something. I need a teacher here and need to say OK look we understand that to like for example in Ohio and get particular agreed to these changes to union supported the changes. -- added that you know we're not beneficial to them because they feared what the result would be which is like that. And -- -- complete collapse of the system. That's good to hear I'm when I'm glad to hear that there's some reasonable -- take it didn't involved in this because it is. It's not just a regional problem this is a national problem for the most part so. Brett and what happened at about -- -- -- problems that they public employee -- an estimated that it more than eight trillion dollars in. Unfunded liabilities across state for our public employee pensions. I'm -- take up a lot of the public employee pensions because obviously we have a lot -- but it's not just teachers there -- kind of public employees that are you look at this stage the issue. -- you're talking about cops and firefighters right. Now -- great work thank you very much that. It Stephanie Ventura Wall Street draw when it give you the numbers I thought it would be important. To give you the numbers throughout New England just so you have an idea so if you're in Connecticut listening to the program. Did your pension if your teacher in Connecticut your pension is underfunded by nine billion dollars in your 61%. Funded. Maine state of Maine. Europe pension is 80% fund -- Europe's strongest out of all of the New England states with a pension deficit of one point three. Billion dollars Massachusetts has an unfunded teachers. Liability pension of eleven point seven billion dollars it is 66%. Funded. New Hampshire I -- here -- be in better shape in this New Hampshire teachers' pension is only 57%. Funded and they have a deficit. Of two billion dollars Rhode Island 59%. Funded with a deficit of one point three. Billion dollars Vermont 63%. Funded with a deficit of 840. Five billion dollars. Some of the worst offenders across the country. West Virginia only 46%. Funded in West Virginia -- that's they take the hit for everything -- it pretty much on every they're running out analysts. Well you know who else is on every bad list is Illinois. Illinois has an unfunded in a surprise to hear Steffi say that she didn't take we'll have defaults I think. I think you do have default and I think Illinois won the first states to default on their -- Loss of anyone says hey Barry at the politicians right here in Massachusetts -- the same type of a pension system is teachers will would be incentive beat for a changing the teachers and not change in the politicians situation well that's he raises a good point because. The whole system. Has to be changed and there's a lot of resistance to that because. -- it's not just your politicians but every state trooper is gonna say hey I don't want any changes made to my iPad -- this is what I signed up for. Every every police officer -- you take about. You know your city cops your town cops. They're covered by the Massachusetts pension plan. They are docket -- they're not gonna just roll over itself sure take my attention away or increase by attack us or not they they're gonna fight this. Is so this is something here to be dealing with firefighters say you ever talk to your brother about it. At -- time he's you know he's is he concerned about it. It's like yeah I mean we can get him on the phone someday if you want he's a feisty one is only coming if I was a forty year old firefighter I'd be worried yeah I'd I'd be. Because figure forty year old -- you could live another fifty years and I can tell you if you're carrying that kind of deficit right and you know how resistant people are to tax increases Brady -- You can't just. Pass a tax increase and expect everybody to withstand the other thing that happens as the more you tax. Right that's what the population of Massachusetts has gone up at all in 23 years that's why we lost a congressional -- -- Our population is stagnant wrestle population the whole country's rising right -- wide of people leave Massachusetts a telling. They're leaving because of the high property taxes the high sales taxes the high income taxes and the high cost of living and were they going to go to a state that's less expensive self. Well it's just about any state to go to New Hampshire in her New Hampshire it's a lot this article to write these people are not stupid and. And really get religion here like I have friends from the midwest and living down -- say. Why it's so expensive it's not like we're living in paradise or something I mean I don't know why I noticed here like until -- like Red Sox with the patriots Mathis who likes the Bruins. Yeah -- I like the ocean that's what I tell the -- -- pay a high price for the ocean. No we way we pay high taxes because of all the legacies that are being created if you go out to air result which is a relatively young and new population with a population growth of you know on on averages -- -- -- 56% and not a whole lot of culture gone on what they're either they don't have fifty years ago it era of firefighters on the -- that hire fifty years ago because it's a young population you know what these young states -- where the population -- -- is -- -- are starting to take -- they're getting -- -- defined benefit pension -- they -- learning. Out in Arizona their learning from the mistakes made in Massachusetts they don't wanna be like us and they kid if there's an art. They -- password for today's program is. The word. Pension my email address if you have a question or comment my email address is Barry Armstrong at wrko.com. We'll take a look at some of your text messages. When we come back. And -- what we got lots to go here on the financial.