So what Gov. Arnold Schwarzenegger proposes is unprecedented. He wants the state to kick in more next year than the people who run California's retirement system are asking for. CalPERS board members must now decide to accept the $4.8 billion the governor offered instead of the $1.5 billion its staff has said is sufficient. It's a tough choice.

The board's constitutional and fiduciary responsibility is to the financial interest of the pension fund. Under normal circumstances, that should lead it to side with the governor. Politically, however, the board is dominated by public employee unions. By paying an extra $3.3 billion into the pension fund, the governor puts an additional financial burden on state government, which already faces a $21 billion deficit. If layoffs are required to close the gap, state workers, nearly all of them union members, risk big job losses.

Faced with the biggest market drop in fund history, CalPERS had to raise contribution rates for state and local government employers to keep its pension fund healthy. To give financially ailing government employers a break, CalPERS acted to isolate its massive losses over the last two years, phase them in slowly over the next three years with moderately higher contribution rates and then pay the losses down over 30 years – a controversial financial maneuver known as smoothing.

The pension fund's financing scheme will reduce governments' costs today but raise them for decades to come. Hoping the economy will rebound, most local governments are willing to accept that risk to get through the current fiscal crisis with as little additional pain as possible. The city of Sacramento, for example, will pay $4 million in 2011, when its latest CalPERS assessment comes due, instead of $8 million.

But the governor argues persuasively that delay burdens future generations unfairly.

Another worrisome and potentially more serious issue looming is earnings assumptions. To keep the pension fund financially healthy, at least on paper, CalPERS forecasts a 7.75 percent return on investments in perpetuity, a return that many financial experts say is overly optimistic. If CalPERS fails to earn that much, over time state and local governments are in for even bigger contribution hikes into the distant future.

Machinations over contribution rates take place as critics of government pensions work to qualify a measure for the ballot to substantially reduce retirement benefits for new government hires. The critics have shined a spotlight on thousands of government retirees in California who earn more than $100,000 in pension annually.

The governor, too, has been critical of overly generous pensions and it's likely his decision to pay more in retirement contributions than CalPERS requires is designed to boost pension reform efforts. So be it.

Schwarzenegger is right when he argues that those who benefited from the service of public employees should pay the full cost of that service, including pension obligations. The alternative is to foist those costs on generations who haven't been born yet, as the CalPERS financing scheme would do. In the future, benefits need to be rolled back to levels that are both fair and affordable.