Accounting & Investing Info for San Antonio A & M
Monday Oct 24, 2011
Meredith Whitney has predicted trouble in the municipal bond market. It may well start in
Rhode Island. Substitute Greece for RI in the article and it reads the same.
This will be the end of the defined benefit pension plan in America. Notice that the problem is the inability to determine just how great the total liability is or might be!
These are off balance sheet liabilities. The balance sheets for municipalities typically do not estimate pension liability – big mistake.
I believe that Rhode Island benefit pension plan cannot be completely ended or cut, but it can be reduce temporarily for today and in the next 20 years, and the rest of the funds must be owed sometime in the future. Rhode Island needs to create some type of IOU pay system for its former and future employees. Like in the movie, “It’s a Wonderful Life.” George Bailey made and convinced his customers to only take out of their accounts what they need to live with, but George Bailey said to his customer that your accounts would still remained open. I believe that is what Rhode Island needs and that is follows the George Bailey system of a cool and calm head when it comes to financial problems. Rhode Island has to ask its customers to only take what they can live with for now and to tell its customers that the rest of their benefits will be owed later, like an IOU. That is the only way for Rhode Island to solve its $14.8 billion pension disaster. Everybody needs to be flexible. I believe that this financial problem can be solved with patient and cool head. Rhode Island needs to keep its promise. (ACCT 3312, Student)
LikeLike
Professor Elam 
Leave a comment