California Gov.Arnold Schwarzenegger roiled the institutional pension plan markets by vowing to terminate access to state pension plans for newly hired workers, Bloomberg reports.

As part of a broader cost-cutting package to control California's ballooning $8 billion deficit, Schwarzenegger proposed shifting nearly $300 billion of state retirement assets to privately managed accounts, like 401(k) plans.

Retirement plan providers including The Vanguard Group and T. Rowe Price stand to gain significant new blocks of business if Schwarzenegger's plan succeeds.

The governor's remarks have already prompted outcries from area union leaders and officials at the California Public Employees' Retirement System (CalPERS), the nation's largest public pension fund. Schwarzenegger also underscored his resolve to privatize the state's retirement savings with a backup plan to seek approval from voters in a special election if lawmakers oppose the idea.

Investment experts say the governor's plan would diminish leverage from state pension groups that have established a track record of standing up to corporate titans like Walt Disney Co. and pushed for securities industry reforms.

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