By Christopher Cadelago
Saturday, February 19, 2011 at 10:38 p.m.

San Diego County will have to contribute $296 million to its retirement fund in the fiscal year that begins in July — the largest-ever payment coming on the heels of an economic downturn that devastated investments.

The latest report from the retirement association indicates the county has 84 percent of the money needed to cover promised pensions, down from 91 percent in 2009.

Changes in assumptions about future interest income and losses of $2.2 billion in the pension fund — being spread over several years — nearly doubled the shortfall in money needed to cover future obligations. It has grown to $1.6 billion as of June 2010, up from $786 million in June 2009.

Contribution rates for county employees will increase in July to help with the shortfall.

The city of San Diego, by comparison, has 67.1 percent of the money it needs to cover pensions, with an unfunded liability of $2.14 billion. It will contribute $231.2 million to its retirement fund next fiscal year.

Slumping local tax revenues and state budget shortfalls have contributed to the pain for governments, county Supervisor Dianne Jacob said.

“It’s a problem,” said Jacob, who sits on the county retirement board. “But the primary reason for the increase in the county’s contribution is the losses on Wall Street.”

She has set her sights on appropriating $113.5 million, which is used to help certain retirees cover the costs of health care — a benefit once covered for them by the county. Jacob says the payments, $175 to $350 per retiree per month, should stop.

Supervisor Bill Horn agreed, saying the money should pay down the unfunded liability or cover retirement health benefits for certain classes of workers who still get them.

The amount the county lacks to meet its long-term pension liabilities has fluctuated since a 2002 decision to increase benefits, including lowering the retirement age to 50 from 55 and increasing the multiplier used to determine pensions.

Retirements doubled to nearly 750 in one year following the change. Still, the county weathered the expense in part because of the robust economy.

In 2009, Jacob warned that the county’s pension contribution would increase significantly and that current benefits were not sustainable. Since then, she said, the county has tackled the problem head-on.

The decision to reduce retiree health benefits along with lower benefits for recent hires will save an estimated $2.2 billion over two decades. New labor contracts with employees will have them pay more into their pensions for a savings of tens of millions of dollars.

“Is this raising pension cost going to bring the county to its knees?” Chief Financial Officer Don Steuer said. “The answer is ‘no,’ because we’ve been planning for this.”

To read entire story, click here.