ARNOLD BACKS DOWN GOVERNOR WON'T SEEK PENSION-REFORM BALLOT.

Byline: David M. Drucker and Harrison Sheppard Sacramento Bureau

SACRAMENTO - Faced with fierce opposition from organized labor and weakening public support, Gov. Arnold Schwarzenegger backed down Thursday on his plan to put public-employee pension reform before voters in a special election.

While denying that the pressure he was under affected his decision to retreat, the governor raised the possibility he might cancel plans to force a November election on the issues that have put him in sharp conflict with the Democrat-controlled Legislature.

Schwarzenegger acknowledged the pension measure was flawed, saying its failure to preserve death and disability benefits for police officers and firefighters was never his intention.

``I'm hopeful that refining the language to protect the death and disability benefits will spark a whole new fresh start in the Legislature,'' Schwarzenegger said at a Capitol news conference. ``But should we not be able to reach an agreement in this building, then they should understand that our pension-reform proposal will go on the ballot in June 2006, and we will win.''

Democrats and their labor allies claimed victory and made clear that their next step is defeating his remaining reform proposals - adding a spending restraint to the state budget, implementing merit pay for public- school teachers and changing political redistricting.

Assembly Speaker Fabian Nuez beamed as he expressed hope that this was the beginning of the end of the combative tone the Republican governor has taken with the Democrat-led Legislature since January.

``We welcome his retreat,'' Nuez, D-Los Angeles, said during a joint news conference with state Senate President Pro Tem Don Perata, D-Oakland. ``Many folks now feel that the gun has been unloaded where the pension initiative is concerned, but the gun still has three bullets in it.''

Administration sources insisted that Schwarzenegger still intends to put his other proposals to voters this year.

But Schwarzenegger was pushed three times by reporters to say he will go ahead with the special election and refused to commit to that each time.

``This is up to the legislators. We would rather solve problems here in this building, but if we can't, because they just don't want to do anything, then we have to go the initiative route, and we have to call a special election.''

Flanked by several public-safety union officials and groups representing families of slain police officers, Schwarzenegger announced he wanted to cooperate with police and firefighters to rewrite his pension overhaul to their satisfaction, with plans to put it on the June 2006 ballot - with their support - if Democrats fail to negotiate with him in the coming months.

The governor said polls showing his ratings slipping below 50 percent and union protests did not affect his decision.

``The protesters or poll numbers have absolutely no impact on what I do, because I'm very focused and I shoot for what needs to be fixed,'' Schwarzenegger said.

The groups joining Schwarzenegger on Thursday effusively praised his willingness to change course, and pledged to work with him and Assemblyman Keith Richman, R-Granada Hills, to fashion legislation and a ballot initiative that protects their interest while curtailing the escalation in pension costs that have soared from $160 million in 2000 to $2.6 billion this year.

``The (California Police) Chiefs Association particularly calls out to the members of the Legislature to accept the governor's invitation to come in and to engage on this issue,'' said Lompoc Police Chief Bill Brown, the group's president.

Since he unveiled plans for a special election in his January State of the State address, Schwarzenegger has pushed a pension overhaul that would replace guaranteed retirement benefits for state and local government employees with 401(k) investment accounts, in which payouts are determined by the performance of each account's investments.

The plan's failure to explicitly preserve death and disability benefits for fallen police officers and firefighters had proved to be a growing distraction to the administration and Schwarzenegger's supporters as they campaigned for his entire overhaul agenda.

Growing crowds of union protesters were turning out at the governor's fundraisers and campaign events, with polls showing the disaffection had spread from labor to rank-and-file voters.

A poll released Thursday by the Survey and Policy Research Institute at San Jose State University showed that his job-approval rating has dropped to 43 percent among all Californians, 49 percent among registered voters.

``He stirred up a coalition that the Democrats themselves could never put together,'' said institute director Philip Trounstine, a former aide to Democratic Gov. Gray Davis. ``You've got to give the man credit, he's a very savvy guy, but something isn't working. The numbers suggest people aren't buying his shtick.''

Joel Fox, a business advocate who co-chairs a political committee that has collected 400,000 signatures for the governor's current pension-overhaul measure, said the governor was right to back down.

``If we had a plan that wasn't going to be successful and it was defeated, then the issue goes away for a number of years,'' said Fox, a Granada Hills resident. ``I think we have to do it right. If it's going to take us an additional six months to get it right, then it's probably a wise decision.''

The Los Angeles Police Protective League, which represents 9,000 Los Angeles Police Department officers and had started an aggressive radio- advertising campaign against the pension proposal, was among the powerful unions that want to see the special-election plan defeated altogether.

In a press release headlined ``Hasta la vista, baby'' to a bad pension-plan proposal, union President Bob Baker said: ``We wish the Governor would also admit his mistake in pushing a $70 million special election. We hope he focuses on his job of working with legislative leaders to fix the state's $8 billion budget deficit.''

David M. Drucker, [phone]

david.drucker(at)dailybulletin.com