The California Public Employees’ Retirement System said the state’s annual pension contribution needs to jump by 12 percent because of payroll growth, salary increases and the longer lives of retirees.
The payment to the pension fund would increase by $487 million to $4.7 billion during the fiscal year beginning in July, according to recommendations approved by the fund’s finance and administration committee Tuesday. School districts would have to pay $1.3 billion, an increase of $111 million.
The $304 billion fund, the biggest in the U.S., has about 77 percent of the money it needs to cover retirement benefits promised to employees. When investment returns fall short of its 7.5 percent target rate, taxpayers need to make up the difference.
State and local retirement plans are short at least $1.3 trillion because of investment losses triggered by the recession that ended in 2009 and inadequate contributions, according to Federal Reserve data.
California’s payments are set to increase as the pension assumes longer life spans for public employees, spreads out investment gains and losses over a 30-year period and accounts for a 7 percent increase in the state’s payroll.
The schools’ contribution is also increasing because of the new accounting policies and an 8 percent increase in payrolls.
The full Calpers board will vote on the proposed payment increase Wednesday.