AFTER YEARS of extravagant increases in pensions for public employees in state, county, local and special districts, at least some government leaders have come to understand such generosity with taxpayer money is unsustainable.

At the state level, Gov. Arnold Schwarzenegger is making another bid to cut back on retirement benefits that could save California taxpayers tens of billions of dollars over the long run.

He would create a two-tier system in which newly hired employees would have to wait until age 60 to collect, five years later than the current age.

They would receive 2 percent of their peak salary for each year they worked but would have to work 25 years before getting lifetime health benefits, up from the current 20 years. Also, retirees would have to pay some of their HMO premiums.

These changes would still leave state employees with pension and health benefits considerably in excess of those offered by most of the private sector, but they would be a significant step in reducing the huge unfunded liability now facing California.

Several counties in California also have moved to reduce pensions for their employees. Last November, Orange County voters passed a measure by better than a 3-1 margin to require public approval for pension increases.

Ventura County is considering a similar ballot measure for next year, following in the footsteps of the city of San Diego, which faced bankruptcy a few years ago in part because of huge pension obligations.

Contra Costa County and BART also have overly generous pension and other retirement benefits that need to be reined in.

That is especially true of BART, whose workers do not contribute anything to their pensions.

For too long, state, county and local government officials have acceded to union demands for ever-higher retirement and other benefits, far in excess of anything offered by the vast majority of private firms.

At one time, generous pensions were offered to public employees to compensate for more modest salaries that used to be less than those in the private sector. That situation is outdated today.

According to the Bureau of Labor Statistics, as of December 2008, the average yearly pay for state and local government employees was $53,800. That's $13,500 more than the average private-sector employee.

There also is a huge gap between public and private employees in benefit packages. The average annual benefits for government workers is $27,800. It's only $16,600 for private-sector workers.

Total compensation (salary, pensions and other benefits) for the average public worker is $81,600, far above the $56,900 for private-sector employees. That's difference of $24,700.

The argument that ever-higher pay and benefits are needed to retain public employees is bogus in most instances other than law enforcement.

There is little market demand for public employees, who generally are not seeking to leave their jobs, according to the Bureau of Labor Statistics, which says job turnover is tiny in the public sector compared with the private sector.

The fact is that especially during a weak economy, public employees could be retained and well-compensated with salary freezes and a two-tier pay and benefit system in which new hires would receive 401(k) plans or contribute substantially to their retirement benefits.

We do not intend to demean state and local public employees.

They offer valuable services that are essential to the well-being of society. But their total compensation has risen faster than the average private-sector taxpayer's ability to fund it.

Even with substantial reductions in benefits and/or increases in contribution toward pensions, public employees would still fare better than their counterparts in private business.

What is needed is a better sense of balance by state and local government officials regarding fair compensation for public employees and fairness toward taxpayers. It is not an easy task, but it is an essential one to prevent future fiscal crises and even bankruptcies.