Schwarzenegger Abandons Plan to Reform Pension System

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California Gov. Arnold Schwarzenegger on Thursday abandoned plans for a ballot initiative this year that would eliminate the state’s costly public pension system, bowing to pressure from law-enforcement groups who complained that the proposal would deny benefits to the spouses of public-safety personnel who die in the line of duty.


Schwarzenegger held open the possibility of putting the measure on the June 2006 ballot, with revised language guaranteeing death and disability benefits. But the governor said he would prefer to work with legislators on pension reform rather than mount a new ballot campaign.


Schwarzenegger said the issue of death benefits which public-safety unions used to attack the reform plan in radio and television ads had diverted attention from his larger goal of reducing the state’s pension costs. The costs have ballooned in recent years due to changes that allowed public-safety workers to retire earlier and collect higher pensions, as well as the faltering performance of pension investments in the stock market.


“Clearly our costs are out of control and that diverts money from vital programs like transportation, education, health care and fighting crime,” Schwarzenegger said at a Sacramento press conference.


Schwarzenegger and state Assembly member Keith Richman, a Northridge Republican, have pushed to convert state pensions into 401(k)-style private accounts for new employees. Last month, Schwarzenegger launched a signature drive for the measure, claiming that the Democratic-controlled Legislature was trying to thwart the reform.


Schwarzenegger allies have accused the California Public Employees Retirement System and the California State Teachers Retirement System of attempting to force liberal agendas on the corporations in which the retirement funds hold significant stock.


The withdrawal of the pension initiative marks the first major defeat for the Republican Schwarzenegger, who has used the threat of ballot initiatives as a way to extract concessions from a largely Democratic state Legislature.


Schwarzenegger insisted he was not admitting defeat but ensuring death benefits for spouses of slain law-enforcement workers. He said he would continue to push for pension reform, either with the cooperation of the Legislature or without it.


“It’s not my preference (do launch another ballot campaign) because it costs a lot of money and it takes a lot of time and effort,” said the governor, who had vowed to raise up to $50 million for a ballot campaign this year.

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