Bill Gates gave a talk at TED this week that has generated quite a bit of buzz. The video is below. According to Gates, the major issue driving the underfunding of education is state pension obligations. Adding to the mix are governmental accounting standards which allow states to use unrealistic rates of return to discount the liability. Two University of Chicago economists have estimated that if more realistic rates were used the total unfunded pension liability for all US states changes from $310 billion to $2 trillion. States are aware of this and have intentionally not used actuaries who would suggest they book the higher amount. Gates argues this has obscured the issue and states should follow the same accounting standards as private companies in regards to retiree benefits. I can’t say I disagree. While he doesn’t give much in the way of solutions, Gates at least frames the issue well. Now we just need to do something about it.