JUST THINKING

Mitch McConnell says he favors allowing states to file for bankruptcy. One thing that states and localities face similar to the US airline industry in the aftermath of 9/11 are obligations to employees covered by Defined Benefit Plans.

Remember. Interest rates dropped thus reducing the discount rate used to determine the amount of cash required to be paid into the plan. Market underperformance versus expected performance compounded the issue. At the time, wages were increasing because of big contracts won just prior requiring even more cash. The airline industry faced declining revenues. States and localities face declining tax revenues.

Like the airline industry, cash contributions required to keep Defined Benefit Plans fully funded are a heavy burden. Pensions are just one issue confronting states and localities. Albeit significant.

Bloomberg writes that the current economic contraction may leave states facing an even worse fiscal crisis than they did a decade ago. How to make up for the taxes lost by the nationwide shutdown? Governors have requested $500 billion and cities and counties $250 billion. Another round?

Many people know more than I, but do we begin talking/thinking about airport privatizations as a source of capital? Just thinking.