SACRAMENTO -- Republicans have yet to emerge with an official set of demands they'd want met before considering Gov. Jerry Brown's budget proposal, but pension reform will top the list once they do.
Sen. Mimi Walters, R-Laguna Hills, is preparing a package of pension reform bills she said must be addressed before taking up taxes. Among her reforms is legislation requiring all new state employees to enter 401(k)-style benefit plans.
"We want reforms in place before there's any discussion about tax increases," said Walters, the GOP's nominee in the fall for state treasurer who was trounced by incumbent Bill Lockyer. "I do know there's not support at all to even put it on the ballot without significant pension reforms."
Brown has proposed cutting $12.5 billion in expenditures and asking voters to extend for five years temporary taxes on personal income, sales and autos in an attempt to solve a $25.4 billion deficit.
Brown said last week he intends to unveil his own pension proposal "in the coming weeks," but does not want to tie it to budget negotiations with Republicans.
"I don't want to put too much on the table (and have) the whole thing collapse," Brown said. "But people are concerned about that and I said I'd have various proposals. I intend to follow through on that."
Though pension reform may help attract Republican support, it could be vital to Brown's hopes of gaining voter approval for his tax extension, said
"If Brown doesn't show real reform, not just a little, I think his (tax plan) is dead," said Fritz, a Democrat who said she voted for Brown. "Just calling for taxes and keeping the pension problem unresolved is madness. I think the two go hand in hand."
Soaring pension liabilities -- at $6 billion a year and as much as $700 billion in future years -- have become a central issue for voters, many of whom see it as a primary reason the state is in decline. Brown's own pollster, Jim Moore, documented the depth of frustration over pension costs that crosses party lines in a poll of 1,000 likely voters late last year.
Public employee pensions are a very serious issue for 62 percent of those polled, with another 23 percent saying it's somewhat serious.
Nearly three-fourths of the voters said they would support limiting public employee pensions and salaries.
During the fall campaign, Brown proposed a two-tier system in which newly hired public employees would be required to work longer and to a later retirement age before earning full benefits.
He also proposed requiring all employees to contribute more to their pensions and he wants to halt pension spiking, the practice of inflating pension benefits by including special bonuses, last minute promotions, excessive overtime and what he called "other gimmicks."
But Brown has also spoken of the importance of honoring past agreements and isn't likely to pick a fight with the same labor groups that helped elect him and who will be critical players in a special election campaign.
Labor groups fought Gov. Arnold Schwarzenegger's many pension reform attempts, forcing him to withdraw a measure from the 2005 ballot fight he led.
Still, most of the large public employee labor organizations have agreed to contracts in which they rolled back previous gains, and have said they are willing to look at more changes.
But coupling pension re form with the budget is a nonstarter for them.
"Republicans are trying to game the system for their own benefit," said Steve Smith, a spokesman for the California Labor Federation. "People see through that Republican scam. They understand this is a problem that needs to be dealt with on its own merits. The governor is making painful choices on cuts, but he wants to have a discussion with voters on what sort of programs they want to fund. That's what the special election should be about."
If Brown succeeds in getting a tax measure on the June special election ballot, he will be looking at a far more conservative electorate than typical -- all the more reason to offer pension reform, said Jon Coupal, president of the Howard Jarvis Taxpayers Association, a conservative anti-tax group that opposes placing taxes on the ballot.
Typical Democratic turnout advantages over Republicans in California disappear in special elections, political observers say, primarily because there is no major party candidate at the top of the ticket. And Republicans come out in larger force on fights over taxes.
"If you're looking to build any goodwill with voters, a number of reforms are needed, and pension reform is at the top of the list," Coupal said. "The question is: How far does he go with it? With full defined contributions for new hires? Anything short of that, and people will wonder if that's real reform."
Fritz, the pension reform advocate, doesn't agree with a straight 401(k)-style pension, but said there are several easy fixes that would start to cut into the costs. She has sought meetings with Brown but has not heard back from him.
"This is low-hanging fruit," Fritz said. "When I see Brown isn't even picking the low-hanging fruit, I wonder how in the world is he going to get behind pension reform of any significance?"
But labor groups say concessions they've already made will be worth billions of dollars in future savings, said Dave Low, a pension expert and lobbyist for the California School Employees Association.
Most public employee groups returned to three-year averaging of salaries to determine pensions, and agreed to double the amount they contribute of their paycheck -- to 10 percent -- to their pensions. They also want to put an end to spiking and other abuses, he said.
"If there are other reasonable proposals, our ears are open," Low said. "And if it's a set of pension reforms that make sense that would help the ballot (measure on taxes), we're open to that discussion.
"But if Republicans' proposals are a bunch of poison pills that will dump public employees' pensions and force them onto the market, there's no support for that."