SACRAMENTO — Gov. Arnold Schwarzenegger on Wednesday called for fundamental change in pensions for all government workers in California -- schoolteachers and garbage collectors, police and policy analysts -- a step that over time would reduce retirement security in the public sector, which employs one in eight California workers.
Schwarzenegger said the changes were needed to reduce costs for state and local governments. The state legislative analyst's office says California's public employee pensions are among the most generous in the nation.
Public employees unions and many Democratic lawmakers denounced Schwarzenegger's plan, saying it would cut benefits for government retirees and make government service less attractive for new workers. They said it would not produce the savings Schwarzenegger claimed.
During the late 1990s and the beginning of this decade, when the booming stock market made pension accounts fat, many cities and counties boosted pension benefits. Police, firefighters, prison guards and other public safety employees benefited.
Now, with the market lower, the bills are coming due, and in some cases, pensions are threatening to cost so much that public services are being cut to pay the bills.
Orange County and the city of San Diego are among the local governments struggling to cover huge deficits in their pension plans. In Contra Costa County, more than 12% of the general fund budget goes to pension plan payments for its workers.
The current pension system is "out of control, threatening our state," Schwarzenegger said, calling it "another train on another track headed for disaster."
Although he mentioned his proposal only briefly in Wednesday's speech, it may portend a dramatic political battle with government employees unions. In taking on that fight, his advisors hope he can tap into a voter backlash against well-financed public benefit plans.
The governor's plan would replace pension packages for all new employees with private plans similar to the 401(k) plans offered by private companies.
Instead of being guaranteed a fixed benefit when they retire, new employees, starting in 2007, would contribute money into a retirement account with a choice of funds. The state would also put money into the account. The payments retirees received would be based on how well their investments performed.
