EDITORIAL BACK TO REALITY PENSION DEBACLE CALLS FOR AN END TO SACRAMENTO'S FOOLISHNESS.

FIVE years ago, state lawmakers did something remarkably foolish, and we're paying for it dearly today.

For that matter, we'll be paying dearly for it for decades to come.

The year was 1999, and the stock market, fueled by a rash of dot-com IPOs, was on fire. Day traders were becoming millionaires, and some dim-witted souls thought the boom would last forever.

Unfortunately, a high concentration of those dim-witted souls happened to be in Sacramento. They were politicians, and, looking at the exploding portfolio of the state's retirement system, they concluded that the state could afford to be even more generous with its employee pensions.

So, urged on by the public-employee unions that bankroll their campaigns, the legislators approved a plan that would allow cops and firefighters to retire at age 50 and get 90 percent of their final salary, for life.

That's a marked improvement from the old plan, under which employees could retire with 75 percent of their income at age 60.

It's a sweet deal, especially compared to the private sector, where pensions of any kind - let alone those paying 90 percent - are becoming extinct.

Gov. Gray Davis signed on. For that matter, do did most of the state's Republicans. Then dim-witted city councils and county boards of supervisors across the state extended the benefits to their employees.

Now, almost five years later, we're ruing the day.

Public employees with the fat pensions have begun to retire. Meanwhile, the dot-com crash and the sluggish market have left those portfolios short on cash. The result is that taxpayers are forced to make up the difference, and the payments are helping to bleed both state and local treasuries dry.

And it's going to get worse in years to come. In some cities, pension expenses already account for as much as 40 percent of public payroll costs.

Gov. Arnold Schwarzenegger, who has the unenviable job of restoring fiscal sanity to the state, has come up with a reasonable plan for containing the crisis, one that doesn't break the state's promises to its employees.

Schwarzenegger proposes a two-tiered system, wherein current employees would get to keep their sweetheart deals, but new hires would go back to the old arrangement. They would also have to pay 6 percent of their salary toward the fund, instead of the current 5 percent.

It's a compromise that could save the state and local governments a fortune, but the unions are expected to fight it bitterly, forcing a showdown between special interests and the interests of all Californians.

The choice is up to the Democrats who run the Legislature. Will they learn from their past mistake, or, in the interest of satisfying their deep- pocketed political contributors, will they perpetuate their errors forever?

It's a choice between responsible governance - or more foolishness.