Facing massive investment losses, the board of California's giant pension fund voted Tuesday to make the state increase its contributions to employee retirement benefits by $600 million in the coming fiscal year.
The increase comes as California grapples with a $19 billion budget deficit and a threat by Gov. Arnold Schwarzenegger to eliminate its welfare program.
The contribution increase would be for one year starting in July, but the board is likely to require similar increases in future years. Local school districts, already facing their own budget struggles, also will see their pension contribution rates grow.
The development is driven largely by huge investment losses by the California Public Employees Retirement System, but also because people are living longer and retiring earlier.
CalPERS, the nation's largest public pension fund, lost $55.2 billion, or a quarter of its value, during the 2008-09 fiscal year.
"The biggest reason why we need increases is the investment losses," said Alan Milligan, interim chief actuary for CalPERS. "Quite frankly, there's more to come."
CalPERS sets a state contribution rate every year, which the state is required to pay. Milligan said the investment losses will continue to affect the state contribution rate in coming years because of the "smoothing methods" the board adopted to spread the losses over a longer period.
The governor says the pension system is unsustainable and drains money from other state programs. A Republican lawmaker has introduced legislation to reform the system, in part by reducing benefits to newly hired state workers.
CalPERS provides retirement and health benefits to more than 1.6 million public employees, retirees and families. The fund's value was $205 billion as of Friday.
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