By trying to pay off as much of the unfunded liabilities up front, the state could collectively save about $14.6 billion over 30 years. That's because unfunded liabilities grow at the same rate as the pensions' expected investment returns, which compensates the funds for gains they would have received if the money had been used to buy stocks and other assets.

Newsom, in a Sacramento briefing four days after assuming office, called the additional funding an historic step. His predecessor, Jerry Brown, was the first in 2017 to propose an extra CalPERS payment, though his $6 billion infusion relied on a loan from an internal investment account, not on general-fund budget dollars.

Yield penalty shrinks for California. (Chart: Bloomberg)

California's finances are prone to booms and busts because of its reliance on taxing the wealthy, and the “key” to dealing with the volatility is to “stack away as much money as you can and pay off as much debt as you can,” Newsom told reporters. “That's about building resiliency.”

The moves continue the work under Brown to curb the growth in California's prodigious pension and retiree health liabilities, which tally $256 billion, budget documents show.

Even as California enjoys rising revenue and surpluses amid an economic boom, pressures to meet promises made years ago continue to mount. The required CalPERS payment for the next fiscal year is more than double the amount a decade ago.

The Democrat would also give school districts relief from their pension payments– $3 billion. This would provide “immediate relief” and reduce their contribution rates by half a percentage point, according to budget documents. California school districts face significant financial obstacles partly because of rising retirement costs, Moody's Investors Service said.

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