With a state budget deficit of $9.1 billion, California needs to adopt more cost-saving measures. Governor Schwarzenegger's plan to reform the state's pension system is an excellent place to start.

California's Public Employee Retirement System or CalPERS provides pensions to 1.4 million former state employees. These retirees receive benefits under a "defined benefit" plan, where pension amounts are guaranteed by the state based on a combination of salary and years of service.

While these benefits are attractive to state employees, the taxpayers are left with the bill. CalPERS' funding comes from payroll contributions by both the employee and the state. Those funds are then invested in the stock market. Ideally, the returns on the invested funds should cover the promised benefits to retirees, leaving taxpayer dollars untouched. Within the last few years, CalPERS suffered severe shortfalls, forcing taxpayers to pick up the tab.

That's why Schwarzenegger backs a constitutional amendment to change how California's public pension system operates. His plan would limit all new employees hired after July 1, 2007 to a "defined contribution" pension plan. This 401k like plan would require the public agency to match an employee's contribution up to a specified amount. Rather than have the funds managed by the government, the individual employee would be able to invest these funds however they wish.

A defined contribution pension system allows for fiscal stability. With the success of the investments placed squarely on the employee, the public no longer has to foot the bill during under-performing years. The state would be unchained from pension deficit obligations, freeing up dollars to balance the budget.

With a state budget deficit of $9.1 billion, reform must occur if California is ever going to dig out of its fiscal hole. The public pension system is an excellent place to begin.

With a perspective, I'm Anthony Archie.