Capitol Alert: Schwarzenegger targets pensions in budget press conference

Gov. Arnold Schwarzenegger left little doubt today that cutting state employee pensions remains one of his top priorities in budget negotiations. He is demanding that lawmakers roll back pension guarantees for future state hires as a condition to signing the budget.

The state is scheduled to pay $2.1 billion in general fund dollars (and $3.8 billion overall) for state pensions in 2010-11, while the general fund deficit is $19 billion. Any pension reductions would have minimal impact on the current budget deficit, since most savings would come in future years. But it has become a signature issue for Schwarzenegger, who believes pension costs will crowd out other state expenditures in the future.

"The question we have to ask ourselves is, is it pensions or is it parks?" he said today in a budget press conference. "Is it pensions or higher education? Is it pensions or child care? And the list goes on and on, because that's where the money comes from. Those are the areas where we are taking this money because of the pensions."

When asked about a separate issue, his proposed elimination of welfare-to-work, Schwarzenegger responded with an answer about pensions.

"First of all, again, let me make a correction," Schwarzenegger said. "We are not doing anything. We are not saying that we shouldn't give the money to CalWORKs."

"They are giving it to pensions, to the public employee unions," he said, apparently referring to Democrats. "They are taking the money away from those poor people. They are taking away the money from higher education. They are taking away the money from parks, from all of those things, so we have to make those cuts."

Democrats want Schwarzenegger to negotiate pension reductions with labor unions and say he already has the ability to cut future pension costs, as he has done with six bargaining units.

"It's just getting old listening to the governor blame the Legislature for his inadequacies," said Nathan Barankin, spokesman for Senate President Pro Tem Darrell Steinberg. "The law gives him and him alone the authority to negotiate new pension deals with public employees. He ought to just do his job."

Schwarzenegger told reporters that he and legislative leaders "are very close" on solving the budget, which is now 63 days late. The governor held his press conference as a response to failed budget votes yesterday in the Legislature.

The governor said he has "considerably" reduced his initial demand for $12.4 billion in spending cuts. When asked where or how he has reduced that demand, the governor did not offer specifics, saying he was negotiating it with legislative leaders.

Steinberg may have shed some light last month on where the governor has softened his demands, noting that Schwarzenegger sought only partial cuts in CalWORKs and state-subsidized child care rather than the full eliminations called for in his May budget. It is unclear where the governor would find the money to make up for smaller cuts.

Update (1:08 p.m.): Added comment from Steinberg's spokesman.

PHOTO CREDIT: Gov. Arnold Schwarzenegger talks about the budget stalemate at a Sept. 1 press conference. Torey Van Oot/SacBee.