SAN FRANCISCO (Reuters) – Big changes may be in store for public pension funds in California, where prominent public officials are increasingly anxious about their growing burden on government finances.

At the state level, Attorney General Jerry Brown, a Democrat, says he would consider overhauling public pensions if elected governor in November. Republican Governor Arnold Schwarzenegger — in has last term — says state pension finances are in crisis.

He has even conditioned signing a state budget on lawmakers agreeing to overhaul the system to reduce its cost to the state’s government.

With that demand, Schwarzenegger has put one of the state government’s most important long-term fiscal challenges front and center at a time when Californians are acutely aware of how recession, financial and property market slumps, skittish consumers and high unemployment have slashed the state’s revenue and sent its overall finances reeling.

Key mayors are likewise concerned about pensions.

Los Angeles Mayor Antonio Villaraigosa, for instance, says the pension system of the second largest U.S. city is not sustainable, and San Francisco Mayor Gavin Newsom is backing a measure on his city’s June ballot that would shift more of the funding of San Francisco’s pension fund onto city employees.

In an interview with Reuters on Friday, Mayor Chuck Reed said San Jose — California’s third largest city and the biggest city in Silicon Valley — faces a daunting challenge from its pension funds.

STANFORD, California (Reuters) – Europe’s debt crisis shows the risks for the United States if it does not get its budget deficits under control, former Federal Reserve Chairman Paul Volcker said on Tuesday.

“If we need any further illustration of the potential threats to our own economy from uncontrolled borrowing, we have only to look to the struggle to maintain the common European currency, to rebalance the European economy, and to sustain political cohesion of Europe,” Volcker said.

Volcker, a special adviser to President Barack Obama, said many well-developed economies were becoming aware of the hazards of running “unprecedented levels of public debts” as they emerge from the global recession.

The U.S. budget deficit hit $1.4 trillion in 2009, roughly 10 percent of the economy. The White House projects the deficit this year will reach $1.6 trillion.

The large deficits have evoked comparisons to Greece.

But in a speech to the Stanford Institute for Economic Policy Research in California, Volcker said the United States differs from that country and other small European countries whose credit markets have come under speculative attack.

Unlike those countries, the United States benefits from well-established currency and credit markets that are considered safe havens in times of financial turmoil.

SAN FRANCISCO, May 18 (Reuters) – Home sales in Southern California in April ticked down from a year earlier while median home prices jumped more than 15 percent over the same period as the area’s housing market made more small steps toward recovery, a report by MDA DataQuick said on Tuesday.

Sales of new and resale homes totaled 20,299 in Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties last month, down 0.9 percent from March and down 1.0 percent from a year earlier, the report by the real estate information service said.

The median price paid for a home in April in California’s most populous region was $285,000, the same as in March and up 15.4 percent from a year earlier, the report added.

MDA DataQuick’s report noted that slightly lower sales activity in April from March and a year earlier along with a higher median price reflected a shift from “bargain” inland areas, including some with the nation’s highest foreclosure rates, to more expensive markets closer to the region’s coast.

“Last month 19.3 percent of all sales were for $500,000 or more, compared with 14.8 percent a year ago. Viewed a different way, zip codes in the top one-third of the Southland housing market, based on historical prices, accounted for 28.6 percent of existing single-family house sales last month, compared with 23.2 percent a year ago,” the report said.

Sales of higher-end homes would be stronger and the regional housing market’s recovery more robust if adjustable-rate and so-called “jumbo” mortgages were easier to get, the report said.

Both forms of home financing have become much more difficult to find since the credit crisis of mid-2007. California’s double-digit unemployment rate also is curbing the housing market in the southern part of the state.

SACRAMENTO (Reuters) – California Governor Arnold Schwarzenegger on Friday compared the state’s predicament to that of weaker euro zone economies and called for scrapping the state welfare system to close a $19.1 billion budget gap.

The movie star turned governor said California, the most populous U.S. state with an economy that would be the eighth largest in the world, faced the same dilemma of dismal growth and budget gaps as Greece, Spain and Ireland.

California’s government has been living beyond its means and has little choice but to cut $12.4 billion in spending over the remainder of this fiscal year and the next, Schwarzenegger told a press conference in Sacramento.

“You see what is happening in Greece, you see what is happening in Ireland, you see what is happening in Spain now,” Schwarzenegger said, referring to swelling deficits and austerity measures that have concerned investors worldwide. “We are left with nothing but tough choices.”

Democrats and Republicans, who must muster a two-thirds majority to pass a budget, are likely to ignore many of his suggestions in a debate which, if it follows recent history, could drag on for months.

Democratic State Senate President Darrell Steinberg told Reuters that lawmakers in his party, who control both chambers of the legislature, could not support Schwarzenegger.

“The cuts are absolutely unacceptable,” Steinberg said, adding that instead of slashing spending Schwarzenegger should help Democrats delay business tax breaks.

SAN FRANCISCO (Reuters) – Austerity measures in play in Europe may spur serious talks in California between Governor Arnold Schwarzenegger and lawmakers over paring the state’s pension costs, one of his top aides said on Thursday.

As countries like Greece and Spain tackle deficit concerns roiling the euro zone, Schwarzenegger is preparing to present a revised state budget plan on Friday on how he wants to close a fiscal shortfall of nearly $20 billion, or about 20 percent of state general fund spending.

The Republican governor has already signaled drastic spending cuts — and no tax increases — to balance the books of a state that would be the world’s eighth largest economy if it were a country.

Schwarzenegger’s austerity proposals are sure to anger Democrats who control the legislature and want to boost income through higher taxation.

They can also expect him to warn of deeper cuts by his successors if they do not act quickly to overhaul state pension plans, aide David Crane told Reuters.

Unlike Greece’s pension system, the California Public Employees’ Retirement System, Calpers, and the California State Teachers’ Retirement System, Calstrs, are not on the edge of financial collapse.

Unlike Greece, investors do not fear the fiscal deficit in the Golden State could force it to default on its debt.

SAN FRANCISCO (Reuters) – Californian farmer Joseph Pezzini says orders for his artichokes are rising.

For Pezzini, it’s a clear sign consumer spending is picking up in the Golden State following a deep economic slump.

The recovery could not come too soon to ease the state’s estimated $20 billion fiscal deficit as the battle over balancing California’s 2010-2011 budget nears.

The fight pits cost-cutting Republican Governor Arnold Schwarzenegger against Democrat rivals who want tax hikes.

The governor on Friday updates the budget plan he presented in January and will offer a revised version to guide talks.

For Schwarzenegger, tax hikes could crush the kind of consumer spending Pezzini began to notice last year.

It was around the November Thanksgiving holiday when California’s shoppers began reopening their wallets to buy pricier produce like artichokes, says Pezzini, chief operating officer of Ocean Mist Farms in Castroville, California

SAN FRANCISCO (Reuters) – California’s attorney general has sued two former top officials of the biggest public pension fund, charging them with taking part in fraudulent broker-dealer activities involving fund investments worth billions of dollars..

The complaint, filed in state court on Wednesday, claims Alfred Villalobos, a former board member of the California Public Employees’ Retirement System (Calpers) who served as a placement agent for investment companies, cultivated a former Calpers chief executive with gifts, gratuities and promises of future employment to help influence investment decisions at the fund.

Federico Buenrostro Jr, who was Calpers’ CEO from 2002 to 2008, is charged with helping Villalobos and his firm, ARVCO Capital Research, win investment work at the fund.

Buenrostro played a “key role in assisting Villalobos and ARVCO in their fraudulent activities,” according to the complaint, which seeks to recover at least $70 million.

Villalobos, a former deputy mayor of Los Angeles, served on the board of Calpers, a $212 billion fund, from 1992 to 1995.

Placement agents act as middlemen to help private equity funds promote themselves to potential investors.

The investments, made from 2005 to 2009, were worth about $4.8 billion of Calpers money and earned ARVCO more than $47 million in unlawful commissions, according to the civil complaint by Attorney General Edmund G. “Jerry” Brown Jr’s office.

BEVERLY HILLS (Reuters) – The chief investment officer of Calpers, the biggest U.S. public pension fund, warned on Monday that U.S. stock investors may have gotten overly optimistic and the economy still faced serious challenges.

Joseph Dear of Calpers, the $213 billion California Public Employees’ Retirement System, also said financial reform was needed now. An investigation into whether Goldman Sachs <GS.N> hid crucial information from investors about a subprime mortgage-linked security underscored public concern about Wall Street, he said.

“Goldman Sachs is clearly working hard to maintain trust, that’s the key for them, will their counterparties and investors maintain trust with them,” Dear said on the sidelines of the Milken Institute Global Conference.

Asked what Calpers reaction would be if Goldman was found to be guilty, he said the pension fund would “certainly step up the governance effort about what happened in the governance of the corporation”.

“But it’s a big hypothetical,” Dear added. He said that Goldman doesn’t manage a lot of money for Calpers.

On Monday, fellow pension fund Calstrs’ chief investment officer, Christopher Ailman, said his fund was monitoring the situation but was not altering its business relationship with the Wall Street titan for now.

“I wonder if the market is ahead of itself,” Calpers’ Dear told Reuters in an interview on Monday. “Memories do tend to be short.”

FREMONT, California (Reuters) – As he filled out forms in a re-employment center in the parking lot of his union hall, 61-year-old repairman Albert Hinojosa spoke about his uncertain future after losing a job he held for almost a quarter of a century.

“I’ve applied at several places. No luck,” said Hinojosa, one of the 4,700 workers laid off by the New United Motor Manufacturing Inc (NUMMI) auto plant. “I’d hate to move my son from a private school but I’d like to keep my house.”

Hinojosa’s financial worries are being felt across the state, and are adding to an already massive debt California owes the U.S. government.

The Golden State has borrowed $8.8 billion so far to cover jobless benefits during a recession where the national unemployment rate crested above 10 percent. It is not alone. More than 30 states have had to take out similar, albeit smaller, federal loans to keep their unemployment benefit systems afloat.

Their combined debt tops $40 billion and the U.S. Labor Department expects 40 states to be in debt to the federal government by year’s end, underscoring the labor market’s problems in the deepest recession since World War Two.

To give cash-strapped states a break, the federal economic stimulus program enacted last year suspended interest on the loans to states for two years. Without an extension, interest payments resume next year and Washington could raise payroll taxes on employers in delinquent states if loan balances remain outstanding.

State leaders fear that would derail a jobs recovery which they need so employers replenish bare state coffers and enable states to repay the unemployment loans.

SAN FRANCISCO, April 8 (Reuters) – A gradual U.S. economic recovery marked by high unemployment and tame inflation will require interest rates to remain very low for an “extended period,” Federal Reserve Vice Chairman Donald Kohn said on Thursday.

The Fed’s promise to keep rates low, however, is contingent on economic conditions, such as an absence of strong private demand and a reluctance by businesses to hire, Kohn indicated.

“We cannot provide a precise timetable for when short-term interest rates will begin to return to normal because that depends on the evolution of actual and projected activity and inflation,” Kohn said in prepared remarks to a luncheon sponsored by the Federal Reserve Bank of San Francisco.

For now, Kohn said conditions do appear to warrant the central bank’s highly accommodative stance, undertaken as a response to the worst financial crisis since the Great Depression.

In particular, Kohn focused on the labor market, which he characterized as “extremely weak.”

“The most likely scenario is a gradual pickup in economic activity,” he said.

Against that backdrop, Kohn believes inflation will not become a problem any time soon. He said the high jobless rate, which came in at 9.7 percent in March, suggested the economy was not operating anywhere near its maximum productive capacity.