That pullback led some Democratic politicians and union officials to predict the death of the controversial proposal. But their comments were greatly tempered after the governor made clear in subsequent remarks that the proposal definitely would return.
"He is still holding a gun to our head," said Dave Low, assistant director, governmental relations, for the California School Employees Association, Sacramento.
Supporters of the proposal said the governor has not given up. "It was more of a clerical error than him (Schwarzenegger) turning his back on defined contribution plans," said Daniel Clifton, executive director of the American Shareholders Association, Washington, an affiliate of Americans for Tax Reform, a coalition of taxpayer groups.
Opponents agreed the governor has not thrown in the towel.
Said Chuck Idelson, a spokesman for the California Nurses Association, Oakland: "This is a retreat by this governor in the face of massive opposition, but he hasn't abandoned his dreams of privatizing retirement security for Californians. There's a reason for that: He's spent so much time raising cash from corporate donors, they expect to get a windfall…"
CalPERS spokeswoman Patricia Macht said, "If you read the governor's announcement closely, you see he's called more of a timeout than to abandon his ideological concepts, which is to reduce for all time any risk and reward to the taxpayer."
Mr. Low said the unions will not negotiate with the governor until he backs off other proposals affecting education and redistricting still slated for the November ballot: "Our view is that all that stuff has to come off the table." Even then, Mr. Low rules out replacing defined benefit with defined contribution plans.
However, some observers think the Democrats will have to negotiate. "Everybody's saying, ‘We beat him, we beat him.' Nobody's beat this guy," said Milbrey "Casey" Jones, president of the State Association of County Retirement Systems, Sacramento.
While the California issue has been moved off center stage, the Alaska Senate's bill would create a new defined contribution for future employees and would raise the amount current state workers pay into their retirement plans.
The bill also would combine three state retirement boards into one new entity called the Alaska Retirement Management Board. The boards of the $8 billion Public Employees' Retirement Board and the $3.8 billion Teachers Retirement Board, Juneau, would be merged into the Alaska State Pension Investment Board, which already invests the assets that those boards oversee. All of those boards are based in Juneau.
Workers in the public systems now contribute about 6.8% of their salaries to the pension plan. Under the changes, the rate would gradually be increased to 9.8%. The employer's contribution, now at 9.8%, would not change.
Under the new defined contribution plan, future employees would contribute 8% of their salary to an individual account, which would be invested like a 401(k) plan. The employer would contribute 4.5% of the person's salary to the account and an additional 1.75% for medical insurance and 2% to a new health reimbursement fund.
Miles Baker, an aide to state Sen. Bert Stedman, said the bill will go to the House State Affairs Committee. "Based on our conversations, we expect them to take our bill and make some modifications to it and put it out to the full House," Mr. Baker said.
Janet Seitz, an aide to State Rep. Norman Rokeberg, chairman of the House Rules Committee, said there is likely to be considerable contention in the House. "The comments I've heard indicate there is some concern over the bill."
Unions remain opposed to the bill. "We're opposed to the departure of defined benefit plans, which, for years, have been the mainstay of public employee retirement systems," said Jim Gasper, general counsel of the Alaska Public Safety Employees Association, Anchorage.