22,105 May Face Layoff, State Warns : Budget: Job losses could occur if pension money isn’t used to ease deficit, Wilson aide tells a Senate panel.

SACRAMENTO —  The Wilson Administration warned Monday that up to 22,105 state employees could face layoffs if the Legislature refuses to allow the use of public employee pension money to help balance the state’s deficit-ridden budget.

Steven A. Olsen, deputy director of finance, and other Administration officials said the layoffs would result if the governor is prevented from obtaining up to $1.6 billion in California Public Employees’ Retirement System funds and fails to win support for reducing employee pay and other benefits.

The Wilson Administration already had disclosed the likelihood of layoffs and pay cuts resulting from the spending plan approved last week by the Legislature. But the warning, which came during a Senate hearing, was the most detailed account to date of the numbers of employees who would be affected. The Administration said those employees account for up to 25% of the work force paid from the general fund.

There are about 86,000 state employees excluding those who work for state colleges, the University of California and a variety of departments, including the Department of Motor Vehicles and Caltrans, that are financed out of special funds. The state colleges and universities already are considering budget cuts and layoffs of their own.

Because the critical nature of some state services--such as guarding prisoners, fighting forest fires, collecting taxes or caring for the mentally ill and disabled--make them a high priority for funding, as many as half of the jobs in the rest of the state bureaucracy could be “at risk,” officials said. Those affected could include hospital inspectors and public health nurses, Medi-Cal program employees, agricultural inspectors and a variety of secretaries, clerks, analysts and accountants, officials said.

Administration officials say the governor is working for an agreement to avoid issuing pink slips in such large numbers. But they are calculating that the threat of layoffs would convince lawmakers of the seriousness of the situation.

State employees have criticized Gov. Pete Wilson’s budget-balancing plan as a raid on their pensions and have similarly protested a companion proposal that would allow Wilson to gain majority control over the board that runs the vast public retirement system--the nation’s largest.

On Monday, the dispute over control of the 13-member CalPERS Board of Directors emerged as a key obstacle to an overall agreement to close the projected $14.3-billion budget deficit. After showing progress last week, legislators had clearly lost momentum.

Both houses of the Legislature met but did not take up any budget bills. Wilson and legislative leaders met privately for 2 1/2 hours but, among other difficulties, it appeared they could not overcome strong differences that have developed over the future of the pension board.

Wilson has proposed replacing the current board with a nine-member body and handpicking five of the members, including the chairman. But the plan got nowhere in the Legislature and Senate President Pro Tem David A. Roberti (D-Los Angeles) said after the meeting that the governor was backing down from the attempt.

“I think he’s off his earlier proposal,” Roberti told reporters.

Earlier in the day, Wilson and Senate leaders were roundly attacked by lawmakers and employee organizations during the special hearing before the Senate Committee on Public Employment and Retirement.

But as legislators and others examined alternatives to laying off workers or tapping retirement reserves, it became clear that there was no simple alternative that does not also carry long-term costs for taxpayers.

Sen. Cecil N. Green (D-Norwalk), chairman of the committee, acknowledged that laying off employees could save money, but said it also would hurt California’s economy because of the increase in unemployment.

He and other lawmakers complained that the agreement to use pension money to help balance the budget had been worked out in private, without a full review by the Legislature. The funds being targeted by the Administration are to be used to supplement the pensions of retirees to protect their purchasing power against inflation.

This sort of change, Green said, “should not be rammed down the throats of this Legislature, it should not be held hostage” to the budget. The proposal, part of the agreement worked out by Wilson and Senate leaders to raise the $56.4 billion needed for the coming year, was “a last-minute compromise not fully thought out, not fully factualized, not fully analyzed,” Green said.

Administration officials say that they want to avoid layoffs. Responding to Green, Olsen, the deputy finance director, said: “I agree with you completely. It is not in the interests of the state to have these large numbers of layoffs.”

However, Olsen gave the committee tables showing that the state needs to cut $708 million from state operations to balance the budget that will go into effect July 1.

To save $230 million, the Administration proposes to cut non-employee operation expenses, have employees pay an additional $40 to $120 a month of health insurance costs, eliminate merit-pay increases and force all newly hired state workers to accept a less generous pension plan.

The state could save an additional $478 million by laying off 9,380 workers or by cutting spending in other ways. For example, the Department of Personnel Administration is proposing a 5% cut in state salaries, which would save the state $213 million. Another possibility is ordering workers in many departments to take up to two days off each month without pay, which could save hundreds of millions of dollars.

Which scenario comes to pass largely will be determined by the outcome of collective bargaining between the Wilson Administration and employee unions.

The budget passed last week also assumes that lawmakers would agree to changes in statutes including taking money from the $62.4-billion state pension system.

Without those savings, Olsen said, the state would have to lay off an additional 12,275 workers.

But the CalPERS Board of Directors argues that the money can legally be taken only in return for a comparable benefit.

Public employee unions are already threatening to sue if their pension fund is used or if the Wilson Administration engineers a takeover of the retirement system’s board.

All of the unions say any cuts in their pensions, salaries and benefits are subject to bargaining. The state is now negotiating a new contract with its employees.

“We are taking the layoff numbers seriously,” said Pat McConahay, spokeswoman for the California State Employees Assn., the largest of the state employee unions. She said that a coalition of unions is willing to negotiate a way to give the state the pension fund money, but only if there is a comparable benefit in return.

“We feel we are in for a long battle,” she said.

Times staff writer Douglas P. Shuit contributed to this story.