Pension Study Could Derail County Budget Plan : Government: Retirement fund’s deficit has grown by $362 million, report finds. A proposal to shift up to $150 million to pay for other programs may be jeopardized.

A key source of funds for the precariously balanced Los Angeles County budget is now in jeopardy, as the result of a new study that shows a surprise weakening in the finances of the county’s giant retirement fund.

According to a financial study obtained by The Times, the deficit at the pension fund grew by $362 million during the past year.

That finding, scheduled to be presented to the Los Angeles County Retirement Assn. next week, could dash plans to siphon as much as $150 million from the pension fund to pay for other county programs and bring the budget into balance.

County officials had hoped the report by an independent consultant would show that the pension fund’s finances had improved enough during the year to provide excess earnings that could be used for other purposes. Without those funds, the budget writers could be forced to slash programs.

“I thought the (deficit) would have come down,” said County Chief Administrative Officer Sally Reed. “This is not what I had hoped for.”

The pension fund did earn about $150 million more on its investments in the past year than had been expected, the study showed.

But, according to the report, the county is still paying a high price for controversial changes to the pension system that spiked the retirement pay for the highest-ranking county officials by 20%. The maneuver cost the pension fund $500 million. That was part of the reason the pension fund’s finances declined in the past year.

The county Board of Supervisors took steps to pare back the unusually generous pension benefits, but it was unable to undo most of the damage, the report shows.

Reed said that the disappointing figures do not eliminate the possibility of the county getting all or part of the $150 million it was counting on, but they will certainly make it much more difficult.

Marsha D. Richter, chief executive of the retirement system, was out of town Friday and could not be reached for comment on the report. The Board of Retirement and the Board of Investment, which govern the retirement system and which will make the decision to release or withhold the $150 million, are scheduled to hear a presentation on the report on Wednesday.

Retirement system officials stated earlier that they are opposed to pumping $150 million into the county budget, and the findings of the actuary are expected to harden their position.