BATTLE VS. ARNOLD BROADENS INTEREST GROUPS OUTSIDE STATE FEAR CALIFORNIA RESULTS WILL AFFECT NATION.

Byline: David M. Drucker Sacramento Bureau

Gov. Arnold Schwarzenegger's move to dramatically overhaul state government has placed California at center stage of a national battle over merit pay for teachers and the scaling back of public-employee pensions, with concerned groups preparing to head west to join the fray.

Opponents and supporters of Schwarzenegger's plans are poised to parachute into California, believing the success or failure of his proposals in the special election he is likely to call for November will affect their ability to spread across the nation.

``We're going to put into California whatever it takes to defeat his initiatives,'' said Richard Ferlauto, director of pension and benefit policy for the Association of Federal, State, County and Municipal Employees labor union.

Ferlauto, based in Washington, D.C., arrived in Los Angeles on Friday to hold weekend training sessions focused on teaching union members how to oppose the Republican governor's proposals - especially his plan to revamp the public-employee-pension system.

Ferlauto said California is going to be ground zero for Republican attempts to overhaul Social Security and ``privatize'' pensions in other states.

``We're fully committing union resources to defeat whatever Schwarzenegger (pushes),'' he said. ``The lines have been drawn in California around all of the governor's initiatives.''

Schwarzenegger wants to amend the state constitution to change the way Sacramento manages money, pays public-school teachers, draws political districts and provides for the retirement of state and local government workers.

His opponents, ranging from labor unions to education advocates to Democratic lawmakers both in Sacramento and Washington, say his plans are the centerpiece of a ``Republican, Bush-Schwarzenegger'' agenda.

``Take a look at his plan to restructure the pension system,'' said Assembly Speaker Fabian Nuez, D-Los Angeles, a former union official. ``I see it as a Bush-Schwarzenegger reform, and the Bush-Schwarzenegger effort to change the way we do pensions doesn't solve the problem.''

Amending the state constitution requires voter approval, and Schwarzenegger has said he will call a special election to do so this year, bypassing the Democrat-led Legislature and going directly to voters via the initiative process if lawmakers don't vote his proposals onto the ballot.

The governor wants to add a ``spending control'' mechanism to the budget process and convert the state-employee pension system from one that guarantees the level of benefits to the market-based 401(k) system common in private industry.

Schwarzenegger also wants to pay public-school teachers on merit rather than seniority, and take the power to draw legislative and congressional districts away from the Legislature.

``Anything that happens in California is a big deal,'' said Gaynor McCown, executive director of the Teaching Commission, a New York-based organization that favors paying teachers according to student performance. ``To the extent that something happens in California, it will have an impact on what happens in other states.''

Billing his group as an ``action tank'' rather than just a think tank, McCown said the Teaching Commission is considering how it can help Schwarzenegger push for merit pay in the upcoming campaign.

Democratic lawmakers and union officials are comparing Schwarzenegger's pension overhaul to President George W. Bush's move to add personal investment accounts to Social Security.

Meanwhile, Schwarzenegger's proposal to put a panel of retired judges in charge of drawing political districts has been likened to a redistricting plan implemented in Texas that benefited Republicans.

Bill Patterson, director of the Office of Investment for the AFL-CIO in Washington, said Schwarzenegger's proposal to overhaul California's pension system in particular is seen nationally as a companion measure to the president's plan to partially ``privatize'' Social Security.

Schwarzenegger predicts that unions across the country will pour manpower and up to $200 million into California this year to defeat his initiatives. The governor's campaign could begin as early as this week, some say, as he and his supporters try to collect the 600,000 voters' signatures needed to place his measures on the ballot.

David M. Drucker, [phone]

david.drucker(at)dailybulletin.com