EDITORIAL STRIKING A BALANCE STATE EMPLOYEES CONTRACT MUST NOT ENDANGER LONG-TERM FISCAL HEALTH.

THE economy is strong, pumping in huge revenues for state tax collectors, and that means two things:

Sacramento is awash in money, and the special interests want their cut.

That's why we now see California's largest state employees union, representing some 87,000 government workers, threatening a strike unless it gets a new contract complete with a significant pay hike. SEIU Local 1000 complains that it's been working on an expired contract for nearly a year, and its pay scales haven't been bumped up in nearly three.

Mindful of the fat times in Sacramento, and with the Legislature hammering out a budget for the next fiscal year, the union has seized the moment to demand more for its members.

That's its right, but it's the responsibility of state officials to protect the interests of citizens, which means keeping in mind two key factors: The times won't always be this good, and public-employee pensions -- the great ignored, looming crisis in California government -- threaten to bankrupt the state sooner or later.

California learned the hard way during the dot-com bust that assuming that temporary surges in revenue will continue forever is a recipe for fiscal disaster. And with the state legislative analyst predicting that liability for unfunded retiree health care ranges from $40 billion to $70 billion, it ought to be clear to all that Sacramento can't continue to give its unions whatever they ask for.

Last year, Gov. Arnold Schwarzenegger briefly flirted with the idea of pension reform, but then flawed legal language forced him to yank the proposition from the ballot. And since getting trounced in last year's special election, Schwarzenegger has seemed understandably weary about confronting any issue likely to inflame the state's public-employee unions.

But the enormity of the impending pension liability -- which could be much worse were the stock market to sour -- ought to have everyone worried. And in striking a deal with the state's biggest union, it's incumbent on Sacramento to demand that the terms improve, not further compromise, California's long-term fiscal health.