Feb 2, 2011|
Louisiana is facing a state pension crisis. Garland talks to Kevin Kane, President of the Pelican Institute of Public Policy about the crisis.
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Automatically Generated Transcript (may not be 100% accurate)
Sports later. Bridge -- seventy WW. WWL -- FM and 1053. I should go to climb inside Garland thing. Or 60187. Or 66889. -- seventy. Is Garland. -- 10 o'clock hour. Readily admit. They -- to restrain -- Who's -- bouncing all over the place. -- a road to. Wouldn't really block I couldn to a stranger musings. Last night. After spending hours watching the Middle East explodes in listening to all the -- and soon. Doing my homework on the Internet etc. And basically what incentives can I just so confused. I don't know which way you look. And -- the answers are I -- -- we -- questions are. In the in. The V processor do my homework to friends of -- Both very successful business people who have a lot of respect for has sent me an email. A vote on something from an organization called the pelican institute. So. -- -- find out and I have worked with the -- -- in the suitable for a just forgot him the corrupt organization. In his usual go look and I I don't really think you know more about going okay. This cockamamie right this is cockamamie laughed or is that moderate left a moderator -- can read anything anymore is Newt. So -- looking Foreman don't they'll find is the most curious pelican institute. The libertarian who's gonna think tank that brought -- occupancy -- for the alleged -- gold -- drew phone. And I certainly. Well like chemicals in the question then. -- -- President and -- to a vote Republican in two important. And actually. I've had you'll usually leech treatment organization. When we talk about less on food that. Yet the last time I was on we discussed the accent when brighter level 20% of the up -- 20% of Louisiana ins are on food stamps okay so I'm Rebecca wouldn't mind. Horrible memory these super consumed it sort read. -- I do believe we're reading. Take a little bit of broken. -- We have four public pension program. All four programs severely. Underfunded nugget state. Chris you turn -- John Kennedy -- loosen government bring him in on the south conversation excel. -- -- -- -- -- Recent. Actuarial estimates on the rails to put put them to America's -- were who usually you're not right or left. There's statisticians and mathematicians. Say. Unfunded -- unfunded liability for the pork programs. 815. Billion. No -- -- Louisiana. Whose promise to -- -- blowing retirement health benefits in short. By all most. 30000000003. Full billion. Then you say yes cement from Louisiana pension fund shortfall. Assume. A generous return. So eighteen and thirty -- Romo -- cast in stone. Or based on optimistic. Actually were you figures. For Kevin and you're shooting an article are -- pulled up on Wall Street Journal that said rumor about the municipal bond fears are overblown. If you're half correct. This state is in jaw again -- trouble with double in the best bond ratings in the country. I don't care if it's 30000000040. Years from now we're in huge huge sell off. What should we believe this soon where is it in the headlines with the newspapers doing the TV stations. Why should we think this is anything other then what libertarian hyperbole. Well I'll tell you the easiest way to to get some perspective on this. Is is to talk to people talk to legislators and when you'll be talking to John Kennedy you'll see this really isn't very a partisan issue. Even under the rosiest. Circumstances even if you. Minimize the total size of the unfunded liability. I -- we put a number out there was. Eighteen billion their organizations that say it's as high as 24 billion some people say it's a little less than eighteen billion. But something in the neighborhood of seventeen or eighteen billion is Oprah I think a pretty conservative estimate. -- and that's not taking into consideration the eleven billion or so. From other post employment benefits they're promised I don't care and organ driven and include that -- that took well -- we call OP EB other post employment benefit Rosalyn entered the you have to trick or -- But -- OP EB -- other post employment benefits that would be healthcare life insurance things like that. Just to stay on eleven about eleven error in the added to the eighteen so would that thirty billion that we had in the report is the is the eighteen. Unfunded pensions in the 114. Other post employment benefits now there's a difference there is a distinction between the pensions. Which are constitutionally. Guaranteed -- and the other post employment benefits. Which can be changed by statute but it's that the bottom line is the state is making promises and it doesn't have the money to keep those promises. Is now all. You just mentioned that federal law requires. That the private sector employers hold those sorts of 80% who promised pension benefit. Unfortunately Louisiana governor employees and taxpayers. Received no such protection. Does that just endemic to Louisiana is that. Provision. I think it's probably true around the country I -- the state governments don't hold themselves to the same standards that private companies are held to use of Louisiana pensions hold between 55 and 61%. Of their promised benefits and then again they're there assume when they look at the future there assuming a rate of return of between. Seven and a half. To eight point 25% each year which as you know is pretty darn optimistic. Do you think most legislatures. Led religiously towards. The governor is -- -- self aware of this. There's sir oh they're very aware of -- we're very we're very much aware aware of it for awhile. Oh absolutely fact last year in legislative session they did take some steps in the right direction. To address these things now speaker Jim Tucker had actually filed a bill last year. That would have changed the defined. What we put the pension system as it currently just be called defined benefit you know what your benefits you gonna be after you retire from her. What Tucker propose was switching to a defined contribution system. Which is like a 401K where you're primarily responsible for saving for your own -- I understand that would take care of the future -- that picture of the eighteen billion of the thirty day. It would not and we again we are all we are legally obligated to pay that out now how we're gonna do that. Is another as it is is -- really -- -- you know suction -- and Ford have been before actually learn -- on -- no interest in politics -- interest in economic policy. But forced the study a lot of year. Obama legislator and I'm governor. And never -- on my kids put in -- in my face I say. Who moved to a billion dollar budget deficit who got got higher education health. Police fire. Who. And I know and I'm sitting on a minimum actuarial figures according to your institute. Of eight team billion. Based on optimistic figures that may be actually more than thirty billion. Got to see some into the microphone in front of my face but the whole school and home. If you're right if you're not exaggerating your for you're not gonna whack away institute that I don't know anything about it in your printers are all wrong. Other than Barack. How can this not be front page news not just here. Because Walsh read your article -- why municipal bond fears are overblown. They're gonna turnover attraction to -- this -- Well look you know I read the Wall Street Journal every day every day just about every day they have an article in the air about the -- the pension problem. But this has in the past year becoming much higher profile. Don't you and -- -- in thirty billion dollar figures in the even well it did did and it actually has some of the states the numbers are much much larger -- -- California Illinois their their -- -- -- are even worse. So while Sony is easy rising numbers are rating down right. I you know I'm not an expert on bond ratings -- what goes into that. And I'm not sure -- what what how this will all play out in the long run. But get to keep this in a very simple level this is. We're making promises we don't have the money to keep these promises it's like running up credit card that has no limit is just like teachers. In this -- teachers police officers all sorts of government employees. And and -- hand it to illustrate how this problem kind of develops and then and what's happening here. You know let's say you're a teacher of and you work for 25 years a portion of your salary is devoted to. The pension fund its TR SL as the teachers retirement fund so let's say over 25 years. About 200000 you contribute about 200000 dollars have mandated. Yes -- about 200000 dollars goes into the teachers' retirement pension fund and and you retire. And you get you retire at 80% of your salary let's say you're making 50000 dollars when you retire. You now can collect 40000 dollars a year. For the rest of your life. Well in ten years at 40000 dollars a year you collect 400000 dollars. And you pay 200000 dollars in what if you live 2030 years collecting 40000 dollars a year to do the math. And what doesn't work and we're good teachers and firemen could say show us like we got through -- security. I don't care but to mom and dad receiving quarter Garland this was mandated. It. They made me do it I want my money and what you're saying right now. It's not there now in -- reports it will -- cannot -- to become an in port will go from. Well we need to do is engage in more reform. What I think the what we should ultimately do is make that switch from the defined benefit pension to defined contribution. But this system won't solve the -- won't solve the immediate -- look this is a Ponzi scheme and OK and there's no easy way out of a Ponzi scheme you've made people promises. They're expecting their money there is no easy way out I wish I could come here and -- all for some some magic solution but there isn't. -- forgiven her preacher come that soon your publisher. I'll have you back. Assume whole -- and that's absolutely -- this is this is your personal four part series so we will have much more on that I'll call you soon will continue to burn my kid -- -- -- present pelican institute. Public policy. Are you ago. This is the blues or. On -- road today. Showing. Proof. But what I suspect what do you think to secure when we travel. Quickly you guys not let them talk. Then I guess she's right I didn't mean to in fact I even told kind when he left us said look. I'm so punch drunk. From doing research. And when -- on the air. Every caller settlement should not true because they're actually -- that's not true because that. Liberal and on and on. Don't what I was cruel and saving him. Use soon loudly and usually use. That I haven't read is that he. Front page headline. I haven't heard it lead any news sketched. We talk what to do in 2000000002 billion budget -- can do our lifestyle. Education. Etc. -- -- Good friends and better retired teachers. That -- -- in his induced to go infant and her -- pension now since his convict. Well this guy representing the pelican institute. Supposedly. Operating on actuarial. Reports. Mathematical. Nonpartisan. CQ reports. -- up for. Public pension funds in Louisiana. They're all under -- to -- them. Of eighteen billion. And a maximum of thirty bill. And those are optimistic. Projections. Of Louisiana opponents. -- -- -- -- talked a money manager web site point redness. And assume that's true I'm running on its own Louisiana bonds. This can cure your market don't know if that's true. But he said nobody knows there's nobody is talking about that's. And they've gotten broken spirits as well for legislators -- the governor -- could -- have you heard about this. Now when they say unfunded. That means. Ain't no money. So just what we debated the last Al war. So obscurity ain't got no money -- would you want it because it was mandated. Teachers firemen. Police are gonna say the same thing. Okay it'll copy I'm with you we need to tell him. What we're scared to death of about two billion. There were facing this fiscal year. If this is correct. The State's bond rating goes down. And there's much much bigger trouble now. Before a blow this up too big. Because I find it. Rather unbelievable. That this can be true. And is nowhere in the media. I find it unbelievable. That this can be true and our legislators and governor aren't shouting it from the rooftops. Find a little bit. Not believable because. If your journal and I do settle on a friend Bob Tucker is trying to fix the future. Of pension problems. Well that doesn't do anything. To pump and whatever may be 1110000000181000000030. Billion Shelton. Against state treasurer Joan Kennedy coming on right after this show. And I'll be -- ask -- -- The news the pelican institute putting out bad information. If -- Litsch rectifier. If they're not. Where the homes storage and is good. Harbinger of potential repercussions. There's gonna make two billion look like child's play so. That's what -- thing -- I have information. I'm challenged the sorts. I've challenged their partisanship. In there isn't. A challenge and a footnote actually where yields. So. I got enough to say if this is true. Sounds like a gigantic problem we're not where. And I have. If the information I've gathered. Is correct or not. That's the -- you. Everything he's got a report from Social Security. To war news. To. Dixon budgets and in rebuilding infrastructure. It can't you just beat. Liberal conservative. My we're of the highway because they know I -- When we go to. Houston. -- Howard Euro on governor of the appreciative. Only -- -- unfunded pension funds to improve the walls so look what he's an area. And Indies and take apart the farm and -- it's so expensive and estates. Unfunded teachers aren't. But -- states and municipalities. Will find soccer stadiums football stadium it -- But they'll when he comes to funding a teacher's retirement -- apartments one. They don't want to become kind of sports people. I have to build stadiums for the while other patient or unfunded I teachers on everything. And people getting tired of it and while he used an integrated building soccer stadium we get to complaining about the armaments tension on. And happens Allstate from not being proud of the attacks these kind of insist that -- deal. -- state to complain about money put yet didn't do these stadiums will soccer we could put weeks. Event billion dollars leader embellished. Resume regular thunderbird pension votes. Well a lot of money being put in the -- off target stadiums can use that it takes away from money yet can -- to pension funds and soon and it's. I had my delist sports fans want these stadiums you papal. -- the paper you'll stay. Well you know the argument would be is that it's money put him but his money raised -- make very. Profit out of good news is that true and in Texas. I don't think it all and any profits made out -- profits and NFL it's profit it can bite you in the sports. I read this yet when he put him to people it's kind of media policy burning. And people that it's into my grandkids. And Albanians can edit is the. It was this is the problem use -- lose in the you're human that I have just set on not just here but everywhere. And teachers and firemen police and an -- where. That's their clones or being drained or. More importantly not being funded in the first place. And there -- other municipal and state investments. There may be good -- gentlemen statistical and economic reasons to do it I -- tourism. Which is hard to put on. A fixed dollar figure on an etc. Or you can have a tough. Battle to explain that if this situation it is what the pelican institute says it is. What do you think to secure when -- seven coming right back. The states and it keeps you connected 24/7. 365. C news talk and sports leader -- -- big 871053. WWL I. -- WL dot com. We're talking about. An article. On the -- but I -- miss Geico because studies -- promote something called Republican. Institute. Miss that I can figure -- it's if it's got -- political -- it's libertarian. I don't know which means conservative which wouldn't I don't think we're gonna do what you're talking about because there are talking about money. What they claim is through actual were no reports not their opinion. CPA Jerry trained mathematician. Starting. Louisiana's for public pension system. In the -- systems are school employees' retirement. Louisiana State employees' retirement. Whose against the police retirement. And -- unit teachers'. Retirement. Current. And equally and all four programs. This funding is not there. And according to the actual rule have some. Total unfunded. Liability. Eight teen -- billions. In other words so that Louisiana. Has promise to -- -- -- employer requirement and opened -- but he short. But almost. Third T 30. Building. And that shortfall. That is based on optimistic. Actuarial projections. Into the future. -- revenues. -- to me if this is true. -- -- -- Being sheltered from memory had learned in Louisiana television newspapers were not so our government at its opener when it's part of the Clinton. So I got John Kennedy coming on. In the next hour and ask him about 22 billion dollar deficit that we can. Wringing our hands over an entry Kabila. Did chromium and whether or not this report as -- -- -- Mike in Alexandria and -- Alexandra you're inevitably -- British tobacco. The question was round and it great pleasure -- -- you can and I'd like social which will emerge from bring initiative scripted like it's well who understand sort. Straight employee ER RR word. -- my job reportedly years. And I'll retire or I had the opportunity to returners are -- it would cover it up I have some back problems and everybody would. Want to know published or. -- -- interest there -- -- to -- everything I can -- what I understand. There's. The money get frustrated or you put into their retirement it was supposed to be met. Interstate. Did not match the Monique. Now the majors -- you know what could put Republican conditioning Jerry you know there have been Puerto butchered that grew gingerly emotionally. The exact conversation. We just -- deal before. Obama or every aspect so security is saying things you this was your money that you put in there you were required to mandated right. But I expect correctional and hit the report is true. Person you're gonna say is I don't care of the money's not there you forced me to put -- -- woman money. I don't know in kind of partial notably their garlic and instituted the program would -- you have reason -- -- -- -- -- -- -- One thing the one thing that I've thrown for one do you have found out about politics. The one they have found out about conservatives and liberals -- -- they have found out about the media you've got a question everything. Until people on the show all the time. If you hear me say I don't believe it did bother you go and verify that or. Soon maybe improve mission to -- this is a -- Kenya tank. But I'm telling. Look at the Middle East. We're not there or not they're by a longshot. But if this is true. How many firemen state police teachers. Policeman. Do you think we're going to say women. A live in Alexandria where 33 years you require me to put him -- don't have the money what do you think a bond traders are gonna say. Please say who way to. We're a little concerned about your two billion dollar budget everybody's you got a 10215 billion dollar -- but. Budget crises. In America in all the states. But did you say a minimum. Eleven Bill Weir. Did you say a maximum thirty billion based on optimistic figures are you kidding me. You wanna see your bond rating now. -- -- I do we just call. I can grow and the I've seen this story initially reported extensively in the morning African Baton Rouge really been covered -- into other areas but he's -- really never did us. Gave it to extend to a party -- they get -- story on this news. Headlines but it was a -- special trust what debit. The report on it but I don't know with a special piece on the topic maybe in the Sunday paper onetime. Talking about that that debt issues. To order pertain to. Banking crisis and also the state coming out of Katrina and that recovery -- did talk about it's like to discipline and a growing issue. I would state a lot of the overall budget. And also part of it is the way that standard import Moody's. It calculates the budget gaps that were a lot of these things that are off the books are not calculated in the the current -- -- ratings and you know. The latest report I saw that Rhode Island is the most likely to default in the entire country. But you know I was do we hear about the biggest numbers coming out of Illinois California. At some of those states where they have the best of budget deficits of the New Jersey with with Kristi what he's doing to address these issues. But behind my question is real I think this summer road we go when the blood that high as my own readings in the country. Org or bond readers aware of that's. From what I can -- they are but the way they calculate it if you put all of the off budget debt. Onto the books there and gave it would be a much technical problem nationwide however plunged in most states have been. Playing -- -- games that put some of these steps off the books so that it doesn't show up in the air and looked -- So when you look at been people look -- -- -- the bond payments and that they have the revenues coming -- to support to -- on the current. On an annual basis and that's where most of the bond rating being calculated from so. You know keep the matter of not just Louisiana but many states it cued including the budget items Jolie baby -- bigger -- than they already. Okay let's currently assume the bond investor. Home when the U state control over their fiscal year reported. There's nothing about unfunded liabilities. Lot of these unfortunate liabilities with the pensions are not included in the annual -- -- think that's what -- it to -- simple yes. So every look at -- a lot of these things are carried over in the that they don't show up on your annual bet that a book have been just like you're talking about now I think we need to put Belmont. But having an argument that many they -- breeders and that people in the finance industry would tell you is that. Well yes but it sort of generally accepted accounting practices. And other states don't put them on the books are they're so therefore it's not. -- a bit anyone person who's doing -- always point the finger at the other guy -- -- that we got us into the mortgage. The mortgage crisis. With the CD that was sincere most -- that people were saying -- we know they're really not triple A rated. Like everybody else is -- in this way so therefore sort of -- practiced. And it went into early entire -- -- to blow up that people had to acknowledge yes we will mistakenly. Are rigging these English or -- credit. Well there have been if you're right two thoughts one phrase comes a month kicking the can down the road. And second. If bond investors or sophisticated. -- understood enough to -- understand what you're saying and obviously. They were not when he came to your mortgage crisis. Did get out of municipal bonds very quickly. It's sort of a collective belief that its orbital work itself out -- -- up until July of 2007. You can -- -- people at Merrill Lynch JPMorgan and all the major firms and ask them all our mortgage backed insurance burns shape and they say -- -- they are that AAA rated. The president to a year later we're almost triple A rating -- up being. District policy and more and boot it instead import aren't -- -- on rating agency also. Came into fall -- -- they were doing that everybody realized this just that this system was flawed. And that's where a lot of people begin to say now is that this pension. Unfunded pensions and that this system is flawed -- that they can get should be included on the books and keep it at that weight he realized that Louisiana and many other states. -- facing a huge -- And blueberry. I always -- a disorder or guns that all appear. To its its own one of the best charter school boards we've gone. And he says they have to really use a million dollars this fiscal year. In order to fund. The teachers. Broke retirement program. Which means they'll have to lay off teachers. Are funded. The retirement program. I'm gonna tell you. Again and as soon you. Or writing a mindless -- when I was doing my studies. Turner -- lose that. And I entitled it's strange and musings and I assume this is not a blog. Don't put her on the web site that -- -- crazy thoughts -- and what you think. And I want a -- Tune in in the morning I didn't seem that crazy. Because of everything we've talked about. Over the last hour and 45 minutes. I think about it is this guy is writing -- has shown Kennedy. -- heard the rating agencies that we base our financial future on. I've relied. Only incompetent do in the banking crisis mortgage crisis they were wrong. And wouldn't -- Now if David is right. And they're lying again. Because these are unfunded liabilities. Would you know you even suggest to way to pay. We're being lied to again. So if you get a chance to what can we closest region let's raise your music because. I don't think it's a stranger anymore. -- a think tank on WWL AM have -- dot com. The news talking sports leader 50426018748668890. Wait seventy. In my career continued our conversation unknown. A report to how to blow something called Republican institute. You can Wikipedia I couldn't find anything on -- other then. The gentleman came and I do remember and now you've been enough. Number of months ago talking about food bank seem very reasonable window. They're basing their reporter an actual war -- reports its thing for a public pension funds in Louisiana imports completes. Who retired teachers. Louisiana State employees. And school employees. Unfunded normally there to the tune of anywhere between eighteen. And thirty. Billion -- I don't removed these -- -- report is accurate. I don't know of pelicans report is accurate. And gentlemen the call and say that bill because in Baton Rouge apparently has touched on this. Our series reports from the states for the school and situation. But I haven't seen any blaring headlines. Because it is this is true. I can't imagine it affecting our bond rating -- and all that said. Everything I -- suddenly be wrong and we're gonna have glossy treasurer. John Kennedy on in just a moment and hopefully get all the straightened out. Sleeve or others do rather and home welcome to the show. Yes there are guarding great show out of orbit burn -- -- It was all over the Internet yesterday and to make matters worse should get every single stage ballistic and all statistics. And Malaysia was right from banks worse stayed independent nation has caused tension. And what it -- and yes and what it amounts to look you have all these people have state police game wardens teachers. You know would put an -- point five years and retired at 4748. And in late in the big semi truck company you know all the money's just not there instantly more has been. It's being played out that the most commonly -- And yeah as not really been -- potential it's a major problem. And an older you. Your arms and it sort of current element I'm in my sixties to power our generation. Current. They're the ones who were mandated. To -- me. Into that retirement on. We were mandated. To pay into Social Security. When we're told. The money being there you what we sent. You forced me to -- I want my money right but it would they're. In the end that's that's my my whole. Confusion lately of yeah everything's. Right lip conservative liberal Democrat Republican. -- your -- and on and I've demanded. But more and more like to meet. It feels like we were not even rich -- -- middle class. Daddy came in and said were busted. You you got a drop out your private school we're gonna -- smaller house future have to mow lawns and him and give me the money. And you mowed lawns and given the money the -- comes under buy your car. He says well spend the money. And you're so while worked hard for that money you demanded -- given to I want my money. It makes that much I mean understand the anger I was sort of frustration. What we refuse to hear. That I'm not talking to anybody that's got an answer do you. Well I don't know what the answer is serving us like he can't squeeze blood but -- -- what -- -- And you know it's like a lot of people say about no such good friends and teachers -- aren't guaranteed. Well I think his guarantee you don't pay -- bit Somalia Khmer where's it gonna -- I have this conversation -- the or Boone my best friends really. His wife I'm Joseph when he teacher retired. Comfortable. And considers this two billion dollar deficit in effect here now the retirement funds opponent well. Pelican institute may be world we're gonna find out hopefully from John Kennedy say well there's you know Ben Nelson is -- A whole lot more in pursuing. Or we're gonna get educated to afford that ten million. Some of the bigger problem and that's the big problem at all -- Ford Lincoln. In this thing thank. As New Orleans is the French Quarter the big day 71053. FM and WWL dot com. Are coming -- we're gonna talk to John Kennedy. About. Everything we've been talking about forced them. Our state budget deficits. Drug's use -- April. Higher education so. We're -- with the think tank it's a big point seven million more reply three of them. So -- this lots more coming up.