California's public employee pension fund lost nearly a third of its value in the recent stock market crash, but the state's local governments have just been given permission to hide those massive losses by pushing them off the books and trying to recoup them over the next generation.

This is funny accounting designed to make the pension funds look healthier than they really are in the hopes that citizens will not rise up and demand changes to retirement benefits that have grown too rich and too dependent on perpetual stock market gains.

It is also just the kind of delay and denial that put California governments in the sorry condition they are in today.

Thanks to an $80 billion decline in the California Public Employees' Retirement System investment fund, from $260 billion in October 2007 to $180 billion today, CalPERS actuaries say 50 percent increases in contribution rates are needed to return the fund to solvency.

For the city of Sacramento, that's an extra $21 million on top of the $42 million in pension costs it paid this year. The state of California would pay an additional $1.6 billion on top of the $3.3 billion it will pay this year.

CalPERS, though, has approved a change in the way contributions are assessed that will allow jurisdictions to isolate the extraordinary losses of the past two years, phase those higher extra payments in over three years and then pay them off over the next 30 years.

David Crane, who advises the governor on the economy and jobs, rightly calls the CalPERS plan "at best imprudent and at worst dangerous to future generations."

The plan is built on the hope that future investment gains will reduce the need to raise contribution rates so steeply.

But, for that to happen, CalPERS assumes the pension fund will earn a 7.75 percent return indefinitely, a rate Crane calls overly optimistic. He notes that the legendary Warren Buffett, one of the most successful investors in the country, assumes a 6.9 percent return for his company's pension fund.

Even CalPERS' own analysis of its plan includes a cautionary passage: "It is important to note that unless the investment markets recover, delaying increases in contribution rates only means that more money will have to be collected in the future."

CalPERS has been wrong in the past. In 1999, when the pension board endorsed sweeping benefit increases approved by the Legislature, its actuaries assumed investment earnings of 8.25 percent. That prediction turned out to be wildly optimistic, especially in the face of today's catastrophic downturn.

While understandable given the current budget crisis, CalPERS' attempt to save local and state governments short-term economic pain merely heaps huge additional risk on future generations.

It also hides the folly of lavish pension increases and the economic burden those increases have imposed not just on taxpayers but on current government employees as well. Some of those workers will have to be laid off so that their city, state and county employers can continue to fund extraordinarily rich pensions for their more senior colleagues.

Local governments should resist this overture from CalPERS, and Gov. Arnold Schwarzenegger is right to insist that the retirement system not also give state government the chance to engage in the same chicanery.