Calif. pension fund approves rate increase to pay retirees as state faces $19 billion deficit

Calif. pension fund approves state rate increase

SACRAMENTO, Calif. — The board of the nation’s largest public pension system voted Wednesday to demand a higher contribution from California’s cash-strapped general fund to pay for government employee pensions.

The board of the California Public Employees Retirement System made the decision on a voice vote. No members voted against it, although one expressed frustration at what he called an attack on pension benefits.

“I believe that the low funding is temporary and that the fund will recover,” said board member J.J. Jelincic, who formerly worked in the CalPERS investment office and was past president of the California State Employees Association. “I recognize that there is an attack on secure benefits for all workers, not just public employees.”

The board’s action has been criticized because the state faces a $19 billion deficit in its general fund, but others say delaying the increase would cost the state more money later.

CalPERS does not need legislative approval to enact an increase in the state’s pension contribution rate. The fund’s investments lost $55.2 billion during the 2008-09 fiscal year.

The proposal calls for a $600 million increase in the next fiscal year, but legislative analysts say it likely will end up being about $480 million. They say about $184 million of that will come from the general fund, with the rest coming from agencies such as the Department of Fish and Game that are funded in part by license fees.

David Crane, economic adviser to Gov. Arnold Schwarzenegger and board member of the California State Teachers’ Retirement System, praised the board’s decision.

“It’s painful, but in a way, it’s owning up to the truth,” Crane said in an interview. “Pension promises are debt, and the longer their payment is deferred, the more costly they become.”

Two years ago, California’s two major pension funds estimated their combined unfunded liabilities at $61 billion. A recent Stanford University study commissioned by Schwarzenegger estimated that the unfunded liabilities for the main pension fund, the teachers’ fund and the University of California is closer to $500 billion.

CalPERS was valued at $201.9 billion as of Tuesday and serves more than 1.6 million public employees, retirees and their families.