The CalPERS board approved a proposal to spread out over three years an increase in contributions from schools and local agencies, according to spokesman Edward Fong.
The board deferred a vote on applying the proposal to state agencies pending further discussion.
Without the vote, the entities would have had to carry the full increase in one year.
Despite objections by Gov. Arnold Schwarzenegger, the board will limit rate increases for the next three years that public schools and local public agencies which include cities, counties and special districts must pay as a percentage of their payrolls as part of their CalPERS contributions.
The rates are set each year based on CalPERS investment gains and losses. Because the $184.6 billion California Public Employees Retirement System, Sacramento, expects to post a significant loss for the fiscal year ended June 30, Mr. Fong said rates will rise accordingly.
Under a worst-case scenario of a 30% loss, schools would have seen their rates increase to 14.2% of payroll next year from 9.7%, according to Mr. Fong. Under the proposal, schools would instead see an 11.3% increase. Rates for local public agencies vary but they too would see a smaller increase.
The proposal also allows the pension funds investment losses to be amortized and paid off over a fixed 30-year period instead of a rolling 30-year period.
Mr. Schwarzenegger voiced his opposition to the proposal. By deferring pension contributions, CalPERS would not only be gambling that its investment earnings in this economy would grow faster than its pension obligations, but it would also be using our kids' money to do so because they will be the ones stuck footing the bill, he said in a statement.
Mr. Fong said the board will discuss the state agency increases with Mr. Schwarzeneggers administration in the next few months and expects to make a decision at its September meeting.