SPECIAL PANEL TO SEEK SOLUTION TO PENSION COST.

Byline: STEVEN HARMON MediaNews Sacramento Bureau

SACRAMENTO -- Gov. Arnold Schwarzenegger waded back into public pension politics Thursday when he announced that he has established a new commission to tackle soaring costs of pensions and health care for retired public employees and teachers.

The California Public Employee Retirement System and the California State Teachers' Retirement System are now on the hook for $49 billion in unfunded pension liabilities. In addition, unfunded retiree health benefits have soared to an estimated $40 billion to $70 billion -- and much of that must be paid by cities and counties.

Schwarzenegger wants the new 12-member commission to recommend a plan to the Legislature by Jan. 1, 2008, to reduce or at least contain those costs, which have soared in great part because of the staggering increase in health care costs combined with contracts that lock in employee contributions.

``Soaring obligations of this type,'' Schwarzenegger said as he signed the executive order from his hospital bed while recovering from a broken leg, ``remain one of the biggest problems facing governments everywhere for the simple reason that rising pension and retiree health care costs mean less money for other government programs such as education, public safety, environmental protection and health care.''

Labor groups and their Democratic allies in the Legislature immediately cautioned Schwarzenegger to not overreach as he did in 2005, when he considered pushing for a ballot measure, but backed off when public safety unions aired commercials arguing his plan would take money from the widows of firefighters and police.

Assembly Speaker Fabian Nunez, D-Los Angeles, and Senate President Pro Tem Don Perata, D-Oakland, will select three commission members apiece. Schwarzenegger will pick the remaining six.