Leaders of 4 California employee unions agree to pension rollback

Gov. Arnold Schwarzenegger won a major victory Wednesday in his push to rein in state worker retirement benefits when leaders of four unions, including those representing state firefighters and California Highway Patrol officers, agreed to a substantial and rare pension rollback.

It has been years since any of the state’s powerful public employee unions have consented to trimming their hard-fought retirement packages. The tentative contracts now face votes by union members and the Legislature.

Among the concessions: The retirement age would rise by five years for new hires, and current workers must immediately begin contributing more — at least 10% of their salary — to their retirement.

The compromises give Schwarzenegger momentum as he demands that other unions cut similar deals. A pension overhaul has been the centerpiece of his final-year agenda.

“This is [a] huge change,” said Debbie Endsley, director of the governor’s Department of Personnel Administration. “We’re obviously hopeful that other unions will see this as a reasonable pension reform.”

The four unions represent a combined 23,000 state workers. The contracts, if ratified, will save California an estimated $72 million in the coming fiscal year. Savings would grow to $2.2 billion if the other 170,000 unionized state workers adopted similar contracts, said Ana Matosantos, director of the governor’s Department of Finance.

Schwarzenegger has long sought to reel in state worker benefit packages; this summer he has threatened not to sign a budget without a pension overhaul. The governor argues that the state’s pension investments won’t cover all the obligations that have been promised under existing contracts, leaving taxpayers on the hook to pay the extra costs.

CalPERS, the state’s biggest public pension fund, ordered the state government Wednesday to boost its contribution to worker pensions by roughly $600 million per year. The move means that the state will have less money for schools, healthcare and other programs.

Democrats who control the Legislature have been cool to the governor’s pension plans. Earlier this week, they stalled his main proposal in committee. They have instead called for the governor to negotiate directly with unions.

Now that he has, Senate President Pro Tem Darrell Steinberg (D- Sacramento) congratulated Schwarzenegger on the labor accords, saying they prove “that collective bargaining works.”

Terry McHale, policy director for the state firefighters union, said Wednesday’s agreements mark “significant” if controversial changes. The retirement age for new firefighters would rise from 50 to 55. The same is true for future Highway Patrol officers.

“People in the union will be upset that we’ve taken a step back,” he said. “But this shows that we want to be part of the solution.”

In exchange for the concessions, the unions received a promised end to the three days per month of unpaid furloughs they have endured since last summer. With California still grappling with an enormous $19.1-billion deficit, the specter of more furloughs — or Schwarzenegger ordering state workers be paid minimum wage until a budget deal is struck — loomed large.

“The unions basically are getting the security of the known,” Endsley said.

The unions agreeing to the rollback are the California Assn. of Highway Patrolmen, the California Department of Forestry Firefighters, the California Assn. of Psychiatric Technicians and one of two units of the American Federation of State, County and Municipal Employees.

They also each agreed that pension sizes would be determined by future workers’ three highest years of pay — instead of one — to discourage efforts to rig higher payouts. In addition to the retirement rollbacks, members of AFSCME and the psychiatric technicians agreed to accept one day of unpaid personal leave per month in the coming fiscal year, which amounts to a nearly 5% pay cut.

shane.goldmacher@latimes.com

Times staff writer Marc Lifsher contributed to this report.