Public pension plans threaten the financial health of U.S. cities and states more than taxpayers realize, billionaire investor Warren Buffett said.
“Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made,” Buffett wrote in his annual report to shareholders of Berkshire Hathaway Inc. released on March 1. “During the next decade, you will read a lot of news—bad news—about public pension plans.”
As Berkshire’s chairman and CEO for more than four decades, Buffett has used his annual letter to shareholders to opine on matters of public policy, corporate governance, and investing. In media appearances and op-eds, he’s argued for increased taxes on the wealthy and an end to political brinkmanship over the U.S.’s borrowing authority.
Buffett may have called attention to public pensions because they will influence the business climate in which his company operates, said Tom Russo, a partner at Gardner Russo & Gardner. The U.S. is the largest market for Berkshire subsidiaries from utility owner MidAmerican Energy to auto insurer Geico. The cost to meet retiree benefits could cause governments to raise taxes, said Russo, whose firm invests in Buffett’s company.