US – California governor Arnold Schwarzenegger has said the state’s pension system – which includes the California Public Employees Retirement System - is “out of control” and should shift to defined contribution.

“Like the budget itself, our state pension system is another financial train on another track to disaster,” Schwarzenegger said in his annual State of the State address.

“California’s pension obligations have risen from $160m in 2000 to $2.6bn this year. Another government program out of control, threatening our state. Accordingly, we must do what business has been doing.

“For new employees, we must move from a defined benefit to a defined contribution system. We need a public pension system that is fair to employees and to taxpayers.”

CalPERS – which offers a defined benefit plan for state, public agency, and school participating members - last month issued a paper outlining the “myths” of DC. It said: “Dollar for dollar, DC plans cost more.” It offers a DC plan as an optional “supplemental” savings choice.

Schwarzenegger said his aim was to solve the budget’s continued structural deficit by reforming the way the government spends its money and the way it operates. “We don’t have a revenue problem. We have a spending problem,” he said. “I have a responsibility for the fiscal health of this state and for the honesty of its finances.”

Separately, CalPERS said its board has voted to officially oppose privatizing the US Social Security System. It said: “Board members said Social Security needs reform, but privatizing it would increase the national budget deficit, raise costs for investors and taxpayers, shift risk to workers, lead to higher interest rates on treasury bonds, corporate bonds and mortgages, and destabilize Americans’ retirement.”

And it has named Sherry Johnstone as chief compliance officer and Donna Lum as chief of its new benefit services division Chief.