As state and local governments fight off potential bankruptcy, some officials are taking a new look at scaling back billions of dollars in pension benefits for public employees.

The issue has daunted government officials in California for years, as the state's powerful public unions have consistently quashed efforts at major reform.

But with the state facing its worst budget crisis in decades, politicians from gubernatorial candidates down to county and city officials are saying pension reform may be one of the most effective ways to avoid drastic losses in government service and employee layoffs.

"Pensions ... are going to be the next 800-pound gorilla that local governments will be facing along with the state," said Los Angeles County Supervisor Michael D. Antonovich, who is pushing for the county to rein in pension costs.

The three major candidates for governor have all talked about pension reform, with Republicans calling for a radical shift to 401(k)-style plans while the leading Democrat looks at more moderate changes.

Officials with Los Angeles city and county governments have also renewed calls for pension reform recently, looking at such changes as raising the retirement age and increasing the amounts that employees contribute to the pension system. Also, county supervisors in Orange County are pushing a lawsuit that could roll back billions of dollars in pension benefits that have been granted in the past decade.

Last week, Antonovich directed county Chief Executive Officer Bill Fujioka to prepare a report on how to address rising pension costs. Even as the county faces a massive budget shortfall, its contribution to its pension system is expected to increase from $804 million now to $1.27 billion by 2012-13.

Similarly, the city of Los Angeles' contribution to its pension system is expected to double from $653million now to $1.3 billion in four years. The city makes that contribution from its general fund, which already faces a deficit of almost $700 million over the next 16months.

"The current system is not sustainable," Los Angeles City Administrative Officer Miguel Santana said. "It's our pension costs that are in particular contributing to the deficit that we're facing.

"If our objective is to rein in our deficits, pension reforms have to be part of the long-term plan."

Rosendahl pushes reform

Los Angeles City Councilman Bill Rosendahl said he has tried to push for pension reform at the local level, but hasn't gained much traction with other city officials.

He suggested the city look at reducing pension costs by increasing the amount employees contribute to the pension system and raising the age of retirement.

Such efforts, however, face sharp opposition from the state's powerful public employee unions, which can muster votes and campaign contributions to fight any politician who promotes reform that will lower benefits.

Terry Brennand, senior government relations advocate for the California State Council of Service Employees International Union, said the union representing 700,000 workers does not support "dramatic and drastic reforms" such as 401(k)-style plans.

But Brennand also said many SEIU locals throughout the state have already agreed to increases in employee contributions and other changes.

"We're all for anything that shores up the retirement system and makes sure we can guarantee the promises we made to employees," Brennand said.

Another reform effort involves a pending lawsuit filed by Orange County that seeks to overturn a 1999 state law that gave retroactive boosts in pension benefits to public employees.

Senate Bill 400 essentially lowered the retirement age for public employees leading to a formula under which some workers could retire as early as age 50 with a pension of up to 90 percent of their salary.

Orange County claims that pension increases based on that law and approved in 2001 by the then-county Board of Supervisors were an "enormous pension giveaway" that violated the state constitution's requirements of seeking voter approval to incur new debt.

The county lost its initial Los Angeles Superior Court case, filed against the Association of Orange County Deputy Sheriffs in 2008, but it is now appealing to the Second Appellate District.

Officials say the case could result in a rollback in retroactive pension benefits statewide, saving taxpayers billions of dollars.

"If we prevail, everything up and down the state on retroactivity for pensions would be reevaluated," Orange County Supervisor John Moorlach said. "It would be a most interesting cataclysmic event."

But George Urch, spokesman for the 1,800-member deputy sheriff's association, said Moorlach is "dreaming."

"The case has been thrown out of court twice," Urch said. "Three different firms told them they could not win the case. They brought in a fourth firm and they told them, 'Well, you ought to give it a shot.' There isn't an attorney in the state who thinks they have a shot."

The debate comes as governments throughout the state are facing unprecedented budget deficits. Sacramento is trying to close a $20billion budget gap, while the Los Angeles Unified School District may have to lay off thousands of teachers next year to tackle a $640million shortfall.

Pension tab increasing

Already, California taxpayers are spending $17-18 billion a year to pay for public employee pensions and retiree health care costs and the Legislative Analyst's Office says the tab is increasing at a rate of "several billion dollars a year."

A Stanford University study estimates that California taxpayers may ultimately be on the hook for up to half a trillion dollars in combined debt from bonds, unfunded public pensions and retiree health liabilities over the next three decades.

Howard Jarvis Taxpayers Association Executive Director Kris Vosburgh said the state is rapidly running out of time to reverse the momentum toward insolvency.

"Even if we institute reforms today, we'd still be lucky to not find ourselves in a position where public services are cut to the bone and taxes are raised to support these unfunded obligations," Vosburgh said. "We need courageous leadership in Sacramento that basically tells the public employee unions that either they agree to take less ... or face massive layoffs."

The three major candidates for governor have also called for pension reforms. Republican gubernatorial candidate Meg Whitman proposes to raise the retirement age for most state workers from 55 to 65, require longer vesting periods and require state employees to contribute more to their pensions. She also favors a two-tier pension system in which new workers are given 401(k)-style plans.

"She believes it's wrong to ask workers in the private sector to pay higher taxes to fund more lavish retirement benefits for state workers," Whitman press secretary Sarah Pompei said.

Republican gubernatorial candidate Steve Poizner has proposed to move new employees to a 401(k)-style plan and increase employee contributions for existing employees.

"Because all but one of the current state worker memoranda of understanding have expired, there is an opportunity to work with current employees to seek a more sustainable retirement system," Poizner press secretary Bettina Inclan said.

Despite opponents' criticisms that he helped create the current crisis by permitting collective bargaining rights for state workers while governor in the 1970s, Democratic gubernatorial candidate Jerry Brown has also proposed overhauling public pensions.

"I think we have to look at the whole pension system," Brown told The Sacramento Bee last week. "Particularly, the health benefits are of even bigger concern."

He said he supports pension reform, but would not want to move to a privatized system or a 401(k)-style plan.

A recent policy brief by the Stanford Institute for Economic Policy Research conservatively estimated the state's collective debt, including bonds, pensions and health care for retirees, at $237 billion, but said in the end it could work out to "more than double that amount."

The institute expects to release a final figure soon, said Joe Nation, author of the brief and director of the graduate student practicum in public policy at Stanford University.

"The question ... is how in the world are we going to find a way to meet these contractual obligations?" Nation said.