A group supported by public employee unions criticized the report and said it was bankrolled by Texas billionaire John Arnold, a former Enron Corp. trader who made his fortune buying and selling natural gas.

"Whether it's been T. Boone Pickens or Valero, California voters have never taken kindly to out-of-state special interests or billionaires trying to influence our state's public policy," said Steve Maviglio, a spokesman for Californians for Retirement Security.

California voters previously rejected the Texas oil company's effort to suspend the state's landmark greenhouse gas emissions law and rebuffed Pickens' plan to promote the use of natural gas in vehicles, an initiative that would have benefited the Texas billionaire's business interests.

Maviglio said the best approach to reforming public pensions is at the bargaining table and through the Legislature.

Public pensions have come under scrutiny as the recession has eaten away at government budgets, eroded pension fund values and led to mass layoffs and benefit reductions in the private sector.

The system forces taxpayers to support guaranteed benefits for public workers, often at levels far more generous than those provided by the private-sector workers whose dollars support government workers.

Public pension reform was a main point of debate earlier this year as the Legislature negotiated a budget. When those negotiations failed, the Republicans' pension reforms died with them.

Gov. Jerry Brown proposed his own slate of pension reforms, but those so far have failed to gain traction in the Legislature.

The California Public Employees' Retirement System has $75 billion in unfunded future pension liabilities and the state is on the hook for an estimated $51.8 billion in unfunded retiree health care costs.

By law, public pensions must be paid out, meaning taxpayers make up the difference if the pension funds cannot cover their obligations.

As the state's main public-employee pension fund, CalPERS has lost at least $18 billion of its stock portfolio since July 1, about 7.5 percent of its $237.5 billion total asset value on June 30.

Brad Pacheco, a spokesman for CalPERS, said the study "promotes a race to the bottom" and advocates "the notion that no one — public or private — deserves a reasonable retirement."

Friday's report echoes past studies that have called for similar reforms. In February, the Little Hoover Commission recommended transferring current and future employees to a hybrid model.

Marcia Fritz, president of the California Foundation for Fiscal Responsibility, said the group's latest study demonstrates a need for serious change.

"The voters want something," she said.

The analysis tried to determine the savings of a pension reform that would require public employees to pay half the normal cost of their pension contribution, similar to the federal government.

The federal government began shifting employees from a defined-benefit plan known as the Civil Service Retirement System to a hybrid model in the mid-1980s. The hybrid provides a benefit and contribution plan known as the Federal Employees Retirement System.

The report looked at potential savings if state and local governments reduced pension benefits by half and replaced the other half with a 401(k)-style defined-contribution plan.

It predicted state government could save hundreds of millions immediately and generate billions of dollars of savings in the future.

By far the biggest savings would come from local governments — between $3 billion and $4 billion a year — because most cities and counties have not taken the same steps to reduce pension burdens as the state has in recent years.

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Associated Press writer Adam Weintraub contributed to this report.