THE END OF STATE PENSIONS? CALIFORNIA IS REFORM CENTRAL FOR SOCIAL SECURITY, CALPERS.

Byline: Noel Sheppard

THIS past December, outgoing California Public Employees' Retirement System President Sean Harrigan, along with many of his fellow trustees, voted to aggressively oppose President Bush's Social Security reform. A few weeks later, Gov. Arnold Schwarzenegger announced his own proposal to enact a somewhat similar overhaul of the very program that these folks oversee.

As one looks closely at these events, as well as the battle lines drawn over revamping the nation's two largest retirement systems, it is quite obvious that they are inextricably linked. As California typically leads the nation in all manner of cultural, societal and legislative trends, the success or failure of Schwarzenegger's plan might presage the outcome of the president's.

As New York Times columnist John Broder recently put it, ``The outcome of the vote in California, pension experts and political analysts say, will not only have an impact on the state pension system, but will also provide an important marker of public opinion on proposed changes to Social Security.''

With that as a pretext, it is clear that Schwarzenegger's proposal has strong Republican support in Sacramento. The day after his announcement, Assemblyman Keith Richman, R-Northridge, introduced legislation that would require state and local workers hired after July 1, 2007, to only be eligible for 401(k) plans. In addition, the Howard Jarvis Taxpayers Association is crafting an initiative that would bring this matter to a statewide vote.

Without question, the thought of this issue being put on the ballot, thereby allowing Californians to actually dictate the future of the state's pension plan without the Legislature running interference, must be keeping CalPERS officials awake at night. Surely, none of them wants to battle the highly popular and charismatic Governator at the polls, where he has been hugely successful in his brief stint in office.

As a result, CalPERS quickly created a Web site opposing privatization, even though doing so might be against state laws governing the use of public funds for campaign issues. To counter these efforts, Richman has filed a complaint with acting CalPERS President Rob Feckner, asking for the site's closure. He's also threatening to bring the matter up for an investigation to Attorney General Bill Lockyer.

All of which leads one to ponder the possibility that this entire script was written months ago by Bush and Schwarzenegger when the latter agreed to campaign for the re-election of the former. Such an alliance might have formulated a strategy whereby these public pension changes would be addressed concurrently, maximizing state and federal Republican finances and efforts to get both proposals passed. In return, not only would the Governator save billions of dollars in future CalPERS expenditures, which would assist him in balancing budgets to come, but he would also grease the wheels for the transfer of federal funds that California desperately needs.

Given all the discussion recently concerning the 77 cents that California receives from the federal government for each dollar of taxes it sends to Washington, it is quite conceivable that in exchange for the governor's buy-in to further the president's aggressive Social Security agenda, Schwarzenegger has been promised a greater amount of federal assistance with his gubernatorial fiscal difficulties.

As a state that hasn't voted for a Republican presidential candidate since Bush 41 defeated Dukakis in 1988 - as well as possessing two of the most staunch opponents to the current Bush agenda in Sen. Barbara Boxer and House Minority Leader Nancy Pelosi - California has not been high on the national Republican party's list of financial recipients. To be sure, a successful CalPERS privatization that leads to Social Security reform could change all that.

As a result, the attainment of a restructured CalPERS could have much more sweeping effects on the future of California and our nation than is currently apparent. This suggests that we should anticipate a massive campaign on this issue in the months to come, with both parties funneling unseemly sums of money from federal coffers to promote their respective positions, thereby making California Pension Reform Central.