The Oracle of Omaha doled out more of his patented financial wisdom on Saturday, and honed in on the country’s underfunded public pension plans that, according to Buffett, are even unhealthier than we realize.
In a letter to Berkshire Hathaway shareholders, Warren Buffett gave an undeniably gloomy forecast for pension plans’ health down the road:
“Local and state financial problems are accelerating, in large part because public entities promised pensions they couldn’t afford. Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them.”
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“During the next decade, you will read a lot of news – bad news – about public pension plans. I hope my memo is helpful to you in understanding the necessity for prompt remedial action where problems exist.”
His letter mirrors a similar memo he wrote nearly 40 years ago, to then-chairman of the Washington Post Company Katharine Graham, where he warned of the pitfalls of pension promises.
From the 1975 memo:
“There probably is more managerial ignorance on pension costs than any other cost item of remotely similar magnitude. And, as will become so expensively clear to citizens in future decades, there has been even greater electorate ignorance of governmental pension costs.”