Governor’s Plan for Using Pension Funds Called Dead

A plan backed by Gov. George Deukmejian to use $300 million in state pension funds to help balance the proposed new state budget and avoid massive cuts in the spending plan apparently died Monday when it lost strong bipartisan support in the Legislature.

In rapid-fire order, Republicans in the Assembly refused to support the Deukmejian-sponsored proposal when it came up for a vote in an extraordinary session of the Ways and Means Committee--one of the few times GOP members in the lower house have turned their backs on the governor.

Then, in the Senate, President Pro Tem David A. Roberti (D-Los Angeles) pronounced the proposal dead after Democrats expressed near unanimous opposition to the measure in a closed-door meeting of party members.

“I would say the proposal is dead,” said Roberti, who like other members of the Legislature had agreed earlier to the shift of pension funds when they voted to pass the budget. His remarks came after the Senate adjourned without taking any action on the measure.

Deukmejian, however, indicated through a spokesman that he considered the proposal still alive and expressed hope that the Legislature would approve it today. Kevin Brett, the governor’s assistant press secretary, warned that if it is not passed, “the governor will have to veto” an additional $300 million in legislative spending proposals.

This would be in addition to $300 million the governor previously said he would have to cut from the $37.4-billion budget sent to him by the Legislature. The list of specific cuts is expected to be announced Wednesday.

The legislative developments reflected a change in positions by both the Assembly Republicans and Senate Democrats.

Less than two weeks ago they supported reducing state contributions to the Public Employees’ Retirement System by a total of $300 million when it was presented to them as a way of paying for spending programs they put into the proposed budget.

Rejection of the hastily fashioned bill in the Ways and Means Committee represented a victory for state employee unions, who angrily opposed what they described as a “raid” on their pension fund and threatened retaliation against any lawmakers, especially Democrats, who supported it.

‘Surplus’ Funds

The $300 million would come from so-called “surplus” funds accruing from income earned by the pension fund’s healthy stock and bond investments. Deukmejian Administration officials said spending the surplus would not affect retirement benefits.

But the unions, led by the politically influential California State Employees’ Assn., called it an outright “raid” on the retirement program and feared legislators and governors would get in the habit of reaching into the pension plan any time they ran short of cash.

Deukmejian began pressing the Legislature for the bill Thursday, sending his chief of staff, Steven A. Merksamer, to the Senate to warn lawmakers that unless they pass the measure they will face deep cuts in spending programs they wanted.

Argument Backfires

But the argument backfired. Conservative Republicans in the Assembly decided they liked the idea of budget cuts and declared that defeating the measure would be an easy way to force the governor to make them.

Assemblyman Frank Hill (R-Whittier), a member of the Ways and Means Committee who voted against the measure, said, “I think it’s a rip-off. I think the governor should go ahead and veto an extra $300 million.”

Two Democrats and one Republican on the 23-member Ways and Means Committee voted for the bill when it came up during a hastily called hearing. Nine Democrats and Republicans opposed the measure, while other members abstained.