April 8, 2005, New York Times

Schwarzenegger, for Now, Shelves Pension Initiative

By MARY WILLIAMS WALSH

Coming under fire from public employees' unions, Gov. Arnold Schwarzenegger of California said yesterday that he would drop, for now, a high-priority plan to bring about the restructuring of California's big public pension funds through a ballot initiative.

Instead of pushing forward with the statewide vote, Mr. Schwarzenegger said, he will work with legislators and local police and fire officials to refine his pension proposal and clear up what he called "misconceptions" about it. He left open the possibility of reviving the ballot initiative for next year if the talks are unproductive.

"Let's pull it back and do it better," Mr. Schwarzenegger said, appearing at a news conference with police chiefs, fire chiefs and local elected officials.

But leaders of the unions that represent public safety workers, who had been invited to the event, stayed away, suggesting that they did not want to involve themselves with the governor's pension changes, even if he promised to soften them. The postponement was the first big blow dealt to Mr. Schwarzenegger by organized labor since he took office in October 2003 in a recall election.

Many cities and counties in California have had great difficulty keeping up with their contributions to the state pension system in recent years.

Last January, amid rising concerns about pension costs, Mr. Schwarzenegger began to push aggressively to restructure the systems, calling pensions "another government program out of control."

The governor said he wanted to make the pension system more like a 401(k) plan, in which workers bear the investment risk. As the system is now structured, most public employees in the state get a predetermined benefit at retirement. The workers make contributions to the system, as do local governments, but their contributions remain constant even if financial markets sour. Governments must pay in more if there are losses.

Opinion polls in the state showed at first that the public was interested, but enthusiasm has lately been dwindling. Things went against the governor in March, when the state attorney general, Bill Lockyer, issued the language that would have appeared on the ballots. As worded by Mr. Lockyer, the referendum would have asked people whether they approved changes including the elimination of death and disability benefits for police and firefighters.

Proponents of the pension overhaul said the attorney general had mischaracterized the governor's idea.

"We said absolutely nothing about death and disability benefits," said Dan Pellessier, chief of staff for Keith S. Richman, a Republican member of the California Legislature who introduced a pension-overhaul bill last December.


Copyright 2005 The New York Times Company