* Pension reform a top priority for California Republicans
* Democratic governor needs GOP votes for tax measure
* Public pension costs, obligations of national concern
By Jim Christie
SAN FRANCISCO (Reuters) - California Republicans,
who could hold hostage a state budget proposed by its new
Democratic governor, are drafting demands for supporting it,
including the controversial issue of public pension reform.
Governor Jerry Brown needs at least a handful of
Republicans to vote for the cornerstone of his budget plan, a
ballot measure to extend tax increases that expire this year.
Mass protests by Wisconsin government workers were sparked
in part by plans to raise employee contributions to pensions,
and state, city and county governments nationwide are
struggling with financing retirement systems.
California, the most populous U.S. state, faces tens or
even hundreds of billions of dollars of unfunded pension
liabilities in future decades.
Republicans, who are the minority in California's
legislature, intend in coming days in private meetings to firm
up their conditions for cooperation on the tax measure. One
demand will be an overhaul of funding arrangements for the
state's public pensions to reduce the burden on its finances.
"Almost everybody's wish list has some form of pension
reform," Republican state Senator Tony Strickland told Reuters
Strickland said it is unclear when Republicans will reach
consensus on pension reforms to put before Brown, who wants
lawmakers to reach a budget deal by March 10 and prepare a tax
measure for the June ballot.
Under Brown's proposed budget, revenue from tax extensions
combined with more than $12 billion in spending cuts would help
cover a deficit topping $25 billion through mid-2012. His plan
is advancing in the legislature after committee approvals last
California's pension politics are gaining steam as
Republicans in Congress consider a bill to require
more pension obligation disclosure and discuss whether to let
states declare bankruptcy. That could allow states to renege on
Meanwhile, Fitch Ratings last week joined Moody's Investors
Service and Standard & Poor's Ratings Services in saying it
would heighten scrutiny of pensions and their costs to public
MENU OF PENSION OPTIONS
Brown, sworn in last month, has said California's pensions
must be fair to both public employees and taxpayers, which
Republican lawmakers have interpreted as a willingness to
negotiate pension reforms.
Even before he took office, top Democrats had conceded the
states's public pensions were unsustainable, helping former
Republican Governor Arnold Schwarzenegger win pension
concessions from some state workers late last year.
The concessions included less generous formulas for pension
payouts, requiring increased contributions from workers toward
their retirement accounts, and higher retirement ages.
Some Republicans would settle for similar changes across
the state's work force. Others, however, want to replace
traditional pensions with retirement accounts similar to 401(k)
plans common in the private sector.
The activist group California Pension Reform has another
option -- capping how much public agency employers could
contribute toward existing and new employees' future pensions.
Dan Pellissier, the group's president, said he hopes to
find a Republican to tout in caucus a constitutional amendment
to cap employer contributions to pensions for most public
employees at 5 percent of their salaries. Contributions for
public safety workers would be capped at 7 percent.
Under Pellissier's plan, public employees would match their
employers' contribution but could boost individual
contributions above it if they choose.
"This week is when you'll see the issues put on the table,"
Pellissier said. "It's a matter of bringing things to a head.
(Reporting by Jim Christie; Editing by Andrew Hay and Eric
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