Calif. Pension Reform Plan Put Aside in Budget Talks

July 17, 2009 ( - California officials have apparently decided against a proposal by Governor Arnold Schwarzenegger to institute a two-tier pension system that would include lower benefits to new hires, according to a news media report.

The Sacramento Bee said the Schwarzenegger plan was rejected during talks between the governor and lawmakers over how the Golden State should close its $26.3-billion budget gap.

Schwarzenegger unveiled the proposal June 27 (see Schwarzenegger Proposes Pension, Retiree Health Care Cutbacks ), but it was ultimately opposed by Democratic leaders and eventually tabled, according to multiple sources familiar with the negotiations, quoted by the Bee.

Creation of a two-tier system as part of the state’s fiscal belt-tightening was not expected to save money immediately, but was praised by Schwarzenegger as a way of generating about $95 billion in savings over 30 years, the Bee said.

“Everyone knows the sooner we reform pensions, the sooner we can save resources for other programs,” declared Schwarzenegger spokesman Aaron McLear, according to the Bee. “The governor is not demanding that pension reform be part of negotiations, but the longer we wait, the worse it will be for the programs that Democrats are trying to protect.”

A Fiscal Gun

Carroll Wills, of California Professional Firefighters, applauded the decision to move more slowly on pension reform, telling the newspaper it made no sense to jam a proposal through the Legislature with “a fiscal gun pointed to its head.”

Jim Zamora, spokesman for Service Employees International Union Local 1000, told the Bee the union has “never thought a two-tiered pension system was the solution to California’s budget problems.” “We’re gratified that this (proposal) seems to be on hold for now, but we’re cautious because this budget process is unpredictable,” Zamora told the Bee. The union local represents 95,000 state workers ranging from nurses to custodians.