Bill Gates: States’ public employee pensions are completely unsustainable; action must be taken

“I’m giving my third TED talk in three years,” Bill Gates blogs for The Bill & Melinda Gates Foundation. “This time, I wanted to share some of what I’ve been learning about state budgets. I got interested in them because states supply most of the money for public education in the United States. What I’ve been learning, though, is that states are under increasingly intense budget pressure, and not just because of the aftereffects of the economic recession, although that has made things worse.”

“There are long-term problems with state budgets that a return to economic growth won’t solve,” Gates writes. “Health-care costs and pension obligations are projected to grow at rates that look to be completely unsustainable, unless something is done. But so far, many states aren’t doing much to deal with their fundamental problems. Instead they’re building budgets on tricks – selling off assets, creative accounting – and fictions, like assuming that pension fund investments will produce much higher gains than anyone should reasonably expect.”

Gates writes, “Eventually they’ll have to make some hard decisions about priorities, and I’m worried that education will suffer, even more than it is suffering already because of budget cuts. The issues are complicated and obscured by the complexities of accounting, so most people don’t fully understand what’s going on. More people need to investigate their state’s budget and get involved in helping to make the right choices. My TED talk is sort of a call to action for citizens, taxpayers, parents, everyone.”

Read more in the full article here.

[Thanks to MacDailyNews readers too numerous to mention individually for the heads up.]


  1. Steve Jobs takes $1/year. Right?

    This is symbolic to me. His pay is based upon performance. The more he distances Apple from the competition, the better the stock performs, the more he gets paid.

    Systems that reward people based upon something other than merit rob them of their full potential and self-worth.

    Of course there are many other factors including greed, corrupt politicians, etc. But the above principle is correct.

        1. Your assumption is that stock price is a direct reflection of actual performance. This is far from accurate. And even if it was true, there is not always such an easy parameter on which to base performance evaluations.

          How do you measure teacher performance? A teacher in an inner city school has a much greater challenge than one in an upper class neighborhood school. A teacher teaching honors students has an easier time than one teaching English language learners. How do you compare a teacher teaching algebra versus one teaching wood shop or music? It is a very nuanced thing, and reducing it to test scores, graduation rates, or other “measurables” is idiocy. It gives the illusion of accountability, but more often than not it does more to harm students than to benefit them (teaching to the test, low standards, elimination of performing and industrial arts, etc). Instead of politicians and lay people trying to impose BS benchmarks, everyone should get out of the way and let the teachers teach!

          1. This is an insane argument. Are you telling me that our public school teachers and school administrators who are well educated are not smart enough to come up with a reasonable way to evaluate teacher performance?

            This is the myth propagated by the unions to insulate their members from accountability.

            And yes, test scores can be a huge indicator that there is a problem. Is it classroom discipline? Is the teacher boring and not engaging the students? Does the teacher display attitudes that challenge students or is the teacher passing time? Are there a lot of student complaints about unfair teacher practices?

            For the rest of the private school teachers (the majority of whom are not teaching trust fund babies), I guess they must be the smart ones because they have a system already figured out.

            1. Can they come up with a system of evaluating teachers? Sure. Can they come up with a system of evaluating teachers that right wing politicians (who are just using this as an excuse to hamstring the unions anyway so they have more money to give to their fat cat contributors) will be satisfied with? Probably not.

          2. Yes the teachers should teach – and stop demanding job security without earning it. Job security comes from working in a way that you make yourself unreplaceable. Not some mantle of tenure, which amounts to entitlements.

            The notion of entitlements comes from poor leaders behaving badly, monarchies, and dictators.

            Employment is not a right. It’s a privilege.

        2. Jobs is a billionaire because he was in the right place at the right time, and had the right people push him in the right direction. Don’t give me that billionaire crap. Apple is more than just one man. I don’t care WHO you are, no one man is worth a million times more “financially” than another man.

          NO ONE. Just because Steve gets to make the decision (being at the top) doesn’t mean that there aren’t equally gifted individuals who could do just as good a job but haven’t been given the opportunity.

          1. “in the right place at the right time”

            Listen buddy, we are not all created equal. Some people are smarter than others. Some people are lazy. Some people are go-getters. Some have rich parents, some live in the projects.

            You are what you make yourself. Steve Jobs is just a hell of a lot better at it than you are.

    1. Steven Jobs has no pay beyond $1.

      Last stock options he was offered was long time ago and he did not execute options.

      So all that Jobs has now is shares from older times. Since Apple does not pay dividends, Steven does not receive any revenue from being at Apple — neither as salary (you can not call $1 a “pay” ) nor as shareholder.

      Jobs can receive money from Apply only by selling his shares — for value, which, indeed, depend on how well he has worked.

  2. Billy, Billy you’re barking up the wrong tree – the people and the parents can’t fix it – it’s people like you Billy, the overpaid CEOs, traders, and financial sector that took all the money out of our casino “economy”. Is your way of admitting, we “Sort of’ have to coerce more taxation and funds from the masses?

    1. No, the people who take money out of our economy are the politicians who tax and spend and tax and spend and tax and spend.

      Get your facts straight!

  3. Anytime a career criminal like Gates, who brought the P.R.O.M.I.S. monitoring technology and its spin-off, the CommonName parasite, into our lives (for the sole purpose of stealing personal data from home computers and profiting thereby). . . shows “concern” for our retirement pensions, we’d better be VERY afraid.

  4. Action must be taken like making multi-national corporations actually pay their taxes? Yep I agree. Bill Gates? We’re agreeing with Bill Gates now? Interesting.

  5. Gee, if only everyone could be a Gates-style robber baron, pensions would be no problem.

    On the other hand, the current fad of balancing state budgets by savaging public employees is also unsustainable. First, the good ones leave, then the system collapses under its own weight. Oh, I forgot — that’s the plan — it was well outlined in the (in)famous “Starve the Beast”.

    1. The public employees got no to blame but their leadership. Their leadership pays for politicians that promised them everything plus the kitchen sink at the expense of the rest of the workers. When anyone attempts to negotiate a better and more financial resposible benefits plan, they immediately take to the streets, have goons bussed in from out of the area and people are to feel sorry for them?
      I also believe that the politicians should be next in this anger toward government largess. For people that have to work 2-3 jobs and pay a huge tax bill, enough is enough.

      1. Quit swallowing the hype whole. The public employees and their unions are not the problem. It’s the politicians who agreed to decent packages and then underfunded pension plans and intentionally overestimated investment returns. Look at the benefit packages most public employees actually have before you talk trash about them. Most public health plans aren’t as good as in the private sector and require more copays and higher matches.

        Fact: New Jersey has over 200,000 millionaires and just under 113,000 teachers. Cutting pay and benefits for teachers so they can cut taxes for the millionaires is what’s really going on. The rest is just political theater for the gullible and those who are to lazy to dig up the facts.

        Fact: While NJ raised taxes over the last five years, the number of millionaires in NJ went up, so they’re now the state with the most millionaires in the US.

        Fact: Texas and North Carolina have had laws for many decades forbidding collective bargaining for public employees, yet both of those states are in the top 10 for worst budget deficits now. If this “collective bargaining and evil union” problem is so critical, then why aren’t those states among the ones in the best financial shape?

        1. Thank You.
          Much of our MSM is criminally lazy and does not wish to bite the hand that feeds it. The problem is not unions or public workers but the Rethugnicans have a hard on for destroying anything that benefits ordinary working people (S.O.P. for them).

      2. And in some cases (Houston is a great example), the local government contracted a study on pensions and benefits that ended up recommending substantial increases based upon flawed assumptions regarding future returns. Just a few years later the system was facing deficits at the same time that city revenues began dropping. The pressure to defer pension plan payments rather than cut services resulted in even greater imbalance.

        Our local, state, and (especially) federal government has insufficient restraint with respect to the expenditure of public funds. That has to change. It may already be too late to avert a very painful day of reckoning.

  6. Yeah sure Bill. Good idea. Let us let Joe and Jane Average work all their life, pay into a pension fund and plan properly for the future so they won’t be dependent (drain) on the welfare of the State and then when it is time to collect, screw’em where it hurts.

    Spoken like a true filthy rich guy.

      1. Okay, MDN, in that case, can we please ask that you discuss your right wing philosophy somewhere else and keep this to Apple news? I know many of us would appreciate that.

  7. Bottom line is people like Gates, and Jobs are wealthy. They have every right to be wealthy. They are, however, taxed at 15% on what amounts to income (income is allowed to be shifted to capital gains or dividends). IMHO these folks, who have every right to be wealthy do not have the right to be taxed at a lower rate on the money they make than say- Steve’s liver transplant surgeon. Why is it the these guys accumulate wealth, as they cash in they are taxed at 15 % while the transplant surgeon is paying 45%.

    Further, a lot of our elites, mostly on the right, would like to eliminate defined benefit plans (pensions) for defined contribution plans (401K). There are definitely advantages to the nation as well as the individual to a defined benefit plan. When the economy goes bust thanks to our undertaxed bankers, those with a pension continue to spend, helping the economy out of the rut. Those w/ the 401 hunker down and weather the storm, a drag on the economy. Further, a pension provides stability, and a 401 provides volatility. Pensions are better. The problem w/ public pensions (some of them not ALL of them) is they (politicians) estimated 8% returns rather than 4% returns. Fix the estimates- this doesn’t mean you throw out the baby w/ the bath water.

    1. This is why the current tax laws need to be revamped or better be eliminated. The elites as you put it are just from the left, look at George Soros, Tom Kerry, Al Sharpton, Jesse Jackson, etc. These people have many tax free estates and complicated tax shelter mutual funds that employ lawyers and accountant that the common man could not even pay 10 minutes of their time. I think that whether the person is from the right or left, they have one thing in common: Power hungry has driven them mad with power. Especially when they arrive in Washington DC and have all those lobbyists start paying for their favors. Unfortunately people still believe in that increasingly out dated notion of Democrat=for the little people=good guys or Republican+smaller government=good guys depending what political party you identify yourself.

  8. Bill Gates asks,
    “Instead of working at a career your whole life and then getting a pension so that you don’t spend your twilight years on a piece of cardboard near a hot air duct, why doesn’t everyone just get rich off stolen IP, criminal monopoly business activity, and selling sorta-almost-good-enough products to a captive market?”

  9. Bill Gates TED Talk;
    “Instead of working at a career your whole life and then getting a pension so that you don’t spend your twilight years on a piece of cardboard near a hot air duct, why doesn’t everyone just get rich off stolen IP, criminal monopoly business activity, and selling sorta-almost-good-enough products to a captive market?”

    1. You can’t lump all public unions into one. State and local employees get a lot less benefits than federal employees do. I’ve seen state employees take all kinds of cuts over the years that it gets to a point where they can’t afford there bills either. Just like everyone is struggling many union members are too and they are always the scapegoats. I’m actually happy I’m not in a public union right now. Just like any job you get benefits, I don’t like it when I have to pay more for mine, why should they just accept it…?

      1. where did you get your facts. I just retired from 39 years of federal service and paid 50% of my health insurance premium and 7.5% of my base pay into a defined benefit plan that was matched at the treasury level with an real time distribution by my agency. My retirement is not a drain on the future budget because the federal plan is not an unfunded liability like most state and local retirements are. The would be the first step in reform. States and local govt would have to budget for that cost in the annual budget, forcing an additional 7-8% deficit over what they already have. This one thing could be magical in unveiling the mysterious/voodoo budgets the states and local govt have today. I call it budgeting on drugs.

        The federal workers don’t have better benefits. Their entitlement program is just better designed. Kind of like an apple product.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.