SAN FRANCISCO - In a state plagued by budget deficits, the bad news from California's pension fund for municipal employees in November was like rubbing salt in a wound.

The California Public Employees Retirement System notified public officials throughout the state that because of investment losses it might have to impose an increase of as much as 5% in their required contributions to the fund, a hit that would be the roughest for public employers since the dot-com bust. That estimate was based on a worst-case scenario in which the fund's investment returns for the 2008-09 fiscal year declined by 20%.

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