ANGELIDES CHALLENGES 401(K) PLAN.

Byline: Harrison Sheppard Sacramento Bureau

SACRAMENTO - State Treasurer Phil Angelides joined his counterparts from New York and North Carolina to blast Gov. Arnold Schwarzenegger's pension reform plan Wednesday, saying it would cost the state more and weaken public pension funds in their fight against corporate misbehavior.

``We want to say loudly and clearly that this plan by the governor is part of a broad counterattack against the corporate reform movement,'' Angelides said.

Angelides, viewed as a likely Democratic opponent against Republican Schwarzenegger in 2006, argued that if the governor succeeds in setting up 401(k)-style retirement plans for California public employees, the existing multibillion-dollar state pension investment funds would lose their leverage to force corporations to improve their practices.

Corporate scandals involving Enron, WorldCom and other companies have shown the funds' clout is needed, Angelides said.

Administration officials and others disputed Angelides' criticism, arguing that state 401(k) funds would have leverage, too, and the state's costs would be lower in the long run.

``The treasurer is giving hysteria and hyperbole a bad name,'' said H.D. Palmer, spokesman for Schwarzenegger's Department of Finance.

``The governor is taking the long view, so that for those people who will succeed this governor and this Legislature down the road, they won't be faced with a pension liability crisis that threatens not only the state budget, but threatens benefits for future state employees.''

Schwarzenegger's proposed constitutional amendment, one of several sweeping changes he has proposed, is co-authored by Assemblyman Keith Richman, R-Granada Hills. If the Legislature does not place the measure on the ballot in an expected special election this year, Schwarzenegger plans an effort to collect signatures to place it on the ballot.

Angelides enlisted support Wednesday from New York State Comptroller Alan Hevesi and North Carolina Treasurer Richard Moore.

He also argued that the proposal would cost the state more money, saying the California State Teachers' Retirement System calculated it would cost an additional $5.9 billion over 10 years.

However, the same report from CALSTRS that provided that figure showed that over the long-run the state would save money under the Schwarzenegger-Richman plan.

After paying $5.9 billion more over a 10-year period under the new plan, the state would then start saving and nearly make up for the losses after 20 years. It would ultimately save $22.7 billion over 30 years and $16.4 billion over 40 years, according to the study.

Administration officials and Richman also said the California Public Employees Retirement System could retain its leverage in the market under the new plan. Richman, a candidate for treasurer in 2006, said CalPERS should focus on managing its funds.

``I wish that CalPERS had been playing more of a watchdog role on public pensions and ensuring fiscal accountability rather than going off all around the world to address social issues.''

Harrison Sheppard, [phone]

harrison.sheppard(at)dailynews.com