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Schwarzenegger, California Lawmakers Cancel Planned Round of Budget Talks

California Governor Arnold Schwarzenegger and top lawmakers canceled scheduled talks over how to close a $19.1 billion budget deficit as a compromise on easing state pension costs remains out of reach.

The governor and the Democratic and Republican leaders of the Senate and the Assembly, known as the Big Five, had planned to meet today after breaking from closed-door talks yesterday without reaching an agreement. Senate President Pro Tem Darrell Steinberg, a Democrat, Assembly Republican Leader Martin Garrick and Senate Republican leader Dennis Hollingsworth all said pensions remain a sticking point holding up a final agreement.

“All sides recognize that some pension reforms have to be put in place and that the budget can’t be balanced without the necessary pension reform,” Garrick said after leaving Schwarzenegger’s office yesterday.

Schwarzenegger and the lawmakers announced Sept. 24 that they had agreed to a framework to end a stalemate over the deficit that has left the state without a budget since its fiscal year began July 1, the longest it’s ever gone without a spending plan. They said they aimed to complete the details of the agreement by yesterday. Schwarzenegger has said he won’t sign any spending plan unless lawmakers agree to roll back pension benefits for state workers to 1999 levels.

Pension Issues

The governor has suggested limiting state pension costs by requiring workers to contribute 5 percent more from their pay, pushing back retirement age, and basing benefits on the three years of highest wages instead of one.

Democrats, including Assembly Speaker John Perez, a former labor organizer from Los Angeles, have resisted Schwarzenegger’s demands. They have insisted such changes be made through contract negotiations with unions.

“We still believe that collective bargaining is the appropriate and important way to finalize agreements with the representatives of the state employees,” Steinberg, from Sacramento, said after leaving the governor’s office yesterday.

Schwarzenegger, a Republican nearing the end of his term, has already brokered similar concessions from unions for 35,000 California workers and is talks with the largest, the Service Employees International Union.

To contact the reporters on this story: Michael Marois in Sacramento at mmarois@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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