Schwarzenegger tries to change conversation on deficit

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As budget discussions heat up inside the Capitol, Gov. Arnold Schwarzenegger’s administration is doing its best to bring an overhaul of the state’s pension system into this year’s budget talks. Schwarzenegger said Friday that he would not sign a budget plan without pension reform legislation. On Monday, his press office released a statement blaming increased state pension payments for California’s current deficit.

Democrats are calling for a delay in implementing new tax breaks for corporations scheduled to go into effect during the next budget year. But on Monday, Schwarzenegger spokesman Aaron McLear sent an e-mail to reporters pointing a finger at the state’s pension system.

“While Democrats continue to argue for increased taxes on employers, which would keep them from creating jobs, they neglect to mention the single largest reason for budget cuts this year: Fast-rising government employee benefit costs,” McLear wrote.

The e-mail highlights increases of more than $6 billion in state costs for pensions and retiree healthcare.

McLear’s e-mail received some push back from CalPERS spokesman Brad Pacheco, who took issue with the administration’s numbers. Pacheco sent some statistics of his own to reporters, noting that the state is now paying a smaller portion of total state payroll to cover pension costs than it was 30 years ago.

Democrats have said they would be reluctant to pass pension reform legislation this year, and have instead encouraged Schwarzenegger to seek pension concessions from public employee unions through the bargaining process.

--Anthony York in Sacramento