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After making pension reform a yearlong priority, Gov. Arnold Schwarzenegger vetoed key legislation Thursday designed to reduce pension spiking by public employees, which is the final-year boosting of compensation to boost retirement pay.

Schwarzenegger said Assembly Bill 1987 did not go far enough in restricting severance, settlement, multiyear vacation time and various other compensation from being considered in calculating retirement pay.

"The taxpayers of California deserve better," Schwarzenegger said in his veto message.

The governor called pension spiking a serious problem and said there are numerous examples of employees receiving more pay as retirees than they did while working.

"California does need a consistent standard that is transparent, understandable and implementable throughout the state," Schwarzenegger said.

"While this bill purports to address this issue by segregating out some of the factors that have allowed pension spiking, in some instances it still allows local pension boards to determine what is ultimately counted in an employee's pension calculation," he said. "This does not provide a consistent treatment of all employees."

Schwarzenegger's veto message of the bill by Assemblywoman Fiona Ma, D-San Francisco, concluded by saying that he remains "hopeful that the Legislature can send me acceptable pension reform legislation."

AB 1987 also would have prohibited public employees who retire after Jan. 1, 2012 from returning as retired annuitants within six months, a practice known as "double dipping."

Ma, in a written statement, criticized Schwarzenegger for killing AB 1987 and said it would have "put us on a path to real pension reform and restoring taxpayer trust."

"Sadly, contrary to his supposed commitment to pension reform, the governor's veto of AB 1987 sends a message that pension spiking and double dipping is acceptable," Ma said.

Schwarzenegger also vetoed a companion pension-spiking measure, SB 1425, Democratic Sen. Joe Simitian of Palo Alto.

Assemblyman Alberto Torrico, a Newark Democrat who chairs the Assembly committee overseeing state worker issues, said that he has no intention of negotiating with the lame duck governor on pension reform in weeks to come because of the vetoes on AB 1987 and other retirement legislation.

"He had his chance," Torrico said. "His legacy can be that he failed."

Updated 1:19 p.m. with quotes from Assemblyman Alberto Torrico



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