By the time he'd finished his first term in the Tennessee legislature, says State Rep. John Bragg, he'd learned two things: 1) where the men's room was and 2) that there was something wrong with Tennessee's state and local pension systems.

So, Bragg related at the recent Detroit meeting of the National Conference of State Legislatures, he proposed a study of Tennessee's government pensions. "When the results came out, I wished I hadn't learned what I learned."

Like almost every other state, Tennessee has built up huge unfunded pension liabilities. Politicians were receiving the accolades and votes for approving generous special-interest benefit packages. Fund investment practices were sloppy and "the hired help" - pension-plan trustees and administrators - "were employees who benefitted from the higher benefits and abuse of the systems. They weren't about to tell what was wrong because of their own vested interest.

Tennessee began broadscale reform under Bragg's leadership. Now, as chairman of the NCSL's public-pension task force, Bragg offers a checklist of six basic steps any state legislature can undertake to pull its state and local pension plans out of the trough of poor management, poor funding and political expediency:

1. Appoint a committee or council on pensions, made up of "hard-headed, thick-skinned legislators - preferably from safe districts, so they don't have to play to special interests - who are willing to work and learn about pensions and ger some control of these programs." Without that first step, says Bragg, "you're dead - because nobody else cares."

Every proposed pension change must then be forced to run the gauntlet of that committee, Bragg says, so that it can be exposed to full actuarial analysis and the true costs revealed.

2. Eliminate pension hopping. Under this popular loophole, an employee may work years as a ditch digger, then get appointed to a higher-paying job just before he retires and get all his years at ditch digging credited at high salary to give him an inflated pension benefit. The most notorious example is New York's practice of using only an employee's last year of work - including overtime - to determine his pension base.

Now in Tennessee (and a few other states) a worker gets a pension based exclusively on the money he paid into the fund, plus the state or local government's matching contribution to the pension fund.

3. Eliminate double-dipping. The most notorious examples are federal laws that permit a person receiving a full military pension to go back to work for Uncle Sam drawing a full civilian salary at the same time. There are currently 150,000 double-dippers on federal payrolls, drawing $1 billion annually in pensions plus their current salaries.

Double-dipping is also a chronic problem in the states - highway patrolmen, for instance, who retire with pensions at 55 and then get elected local judges.

4. Examine disability procedures and rolls. It's generally much easier to qualify for a disability pension in government than private business, and the area is rife with abuses.

A favorite gambit of government administrators who want to reduce work forces or get rid of an employee they don't like is to discover he or she has some kind of disability and must be pensioned immediately. While drawing government pensions, "disabled" workers often go off and get jobs, so that society pays for them twice.

Tennessee tackled the problem with a bill requiring examination of disabled government workers every five years by two physicians.

5. Insist on front-end funding. That means that when any new benefit is added, it's funded immediately on an actuarial basis. When Tennessee was asked to institute a 3 per cent annual cost-of-living allowance on its pensions, advocates said it would cost less than $500,000. But Bragg's committee found workers are now covered by Social Security, but most pension experts agree with Bragg that coverage should be universal and mandatory. It's short-sighted, Bragg says, for any state or local government to withdraw from Social Security - as several have in recent years.

Bragg says his NCSL pensions task force "will try to get these six reform points instituted in every state."

Other reforms, however, are likely to join the list. Minnesota State Rep. Donald Moe would prohibit collective bargaining on public pensions - a source of some of the worst abuses of recent years. Many legislators are interested in reversing the trend toward early retirements, which balloon pension costs at alarming rates.

Other are pushing for consolidation of myriad local pension plan into consolidated state plans, where the legislature and taxpayer groups can monitor them more easily and better management can increase investment yields. Interest is growing in the computerized data bank on all of a state's pension systems pioneered by Massachusetts.

Bragg reserves, however, the most revolutionary idea of all for himself. "Eventually," he says, "all federal, state and local plans will have to be combined in a single national system, on one master computer. You work for the taxpayer, and he's the ultimate employer."