If there was one moment that foreshadowed California's long, sad descent from multibillion-dollar surpluses to deficits as far as the eye can see, it was that day in 1999 when the Senate approved legislation to increase pensions for state workers and opened the door for even bigger retirement checks for local employees.

The discussion on the floor of the Senate took less than one minute, and it was tragically myopic, focusing not on how the bill would affect employees generally or on what it would cost the taxpayers but on the goodies the measure would grant to the Legislature's own security force.

The few lawmakers who cared were told that the bill, SB 400, would essentially be free. The bigger benefits, the experts said, would be paid for by a surplus in the retirement fund. With that assurance, the bill passed on a vote of 39-0 and was sent to Gov. Gray Davis, who promptly signed it.

Now Gov. Arnold Schwarzenegger is asking the Legislature to return pension formulas for newly hired state workers to where they were before that bill was enacted. The governor's proposal, because it cannot apply to current workers, won't help balance next year's budget. But it is still a good idea.

SB 400 was a mistake. It was based on the fallacy that a short-term surplus in the pension fund could be earmarked for bigger retirement benefits, including retroactive increases for workers about to retire, without putting the taxpayers at risk. But pensions in a defined-benefit plan are guaranteed, so the taxpayers are always at risk, responsible for making up any shortfall in the investment fund. And that is exactly what has happened.

The benefit increases authorized that day turned out to be more expensive than originally projected, especially for law enforcement officers, who now receive pensions equal to 90 percent of their final salary after 30 years on the job. If they start young enough, they can retire with those pensions as early as age 50. Combined with two crashes in the stock market – one after the dot-com boom and another after the housing bubble – the benefits increases are now weighing on jurisdictions from Eureka to San Diego.

To make matters worse, the more generous public pensions were granted just as private sector workers were seeing the idea of guaranteed retirements disappear. Over the past decade, more and more companies have shifted to 401(k) plans, where each employee owns his or her account, and the ultimate size of their retirement depends on the value of the investments in their fund. Today, only about 10 percent of companies offer guaranteed pensions, covering about 20 percent of private-sector workers.

Even if Schwarzenegger's proposal is adopted, most newly hired state workers retiring at age 60 would still qualify for pensions equal to 2 percent of their final salary for every year of service. That's 60 percent for an employee who works 30 years. Public safety workers would get more.

Those benefits are still generous, but the change, combined with other changes to health care benefits, could save an estimated $95 billion over the next 30 years.

Rolling back the benefit hikes granted in SB 400, then, would be an excellent place to begin the task of restructuring state government to live within the realities of California's new economic conditions.