What's Arnold Really Doing?

The California budget deal was singlehandedly stopped by Arnold Schwarzenegger's insistence that he would veto any bill that did not

1. close the entire deficit
   
2. with no new taxes, and that
3. meet all his other non-budget demands as well.

What are those other demands? Paragraph 16 of the LAT story states the following:

Schwarzenegger has repeatedly vowed to veto any budget package that includes new taxes or fails to close the entire shortfall. He is simultaneously pressing lawmakers to adopt sweeping changes to government involving public employee pensions, welfare programs and in-home healthcare.

What does that mean, "sweeping changes to government" including public employee pensions? Didn't Arnold lose big on getting rid of pensions when he put it to the voters in November 2005?

Yes he did. But he is using the budget crisis to insist on a two-tiered pension scheme, with different rules and payouts for new workers.

The Governor's insistence on all three points sent the state into issuing IOUs, and has also just increased the deficit by $3.6 billion.