WHEN IT comes to public employee pensions, we keep running the state's credit card higher and higher.

This week, the board of CalPERS, the state's largest pension system, postponed, at least temporarily, a needed rate hike that would have driven up the state's annual pension costs by 18 percent, to $3.88 billion. That would be another $600 million hit to the state budget as the governor and the Legislature are already struggling to make up a $19.1 million shortfall.

State Treasurer Bill Lockyer, a member of the CalPERS board, pushed for the postponement. At a time when the state seems on the verge of having to decimate services for the state's neediest, his short-term concerns are understandable. But this deferral of financial obligations can't go on. It's either pay now or pay more later — and public employee pension costs are already out of control.

To understand how bad the situation is at CalPERS, consider the following: For state employees, the retirement system has only 60 percent of the money its supposed to have now to help pay future retirement benefits.

That number would be even worse shape if not for the accounting change the board adopted last year that spread out recent investment losses over the next 30 years. And it would be worse if not for the pension system's inflated projections that assume a future annual 7.75 percent rate of return on investments, a goal that many experts now say is wildly optimistic.

In other words, CalPERS' numbers understate the severity of the situation. The 18 percent rate hike is desperately needed. On the other hand, the state cannot afford it. If the retirement board delays the increase, it will mean even greater rate increases in the future, pushing more pension costs onto future generations.

That's unacceptable. The system must be fixed. Yes, the system has been seriously hurt by the stock market downturns. But the fundamentals underlying the system are flawed. The benefits are simply too generous. And for too many years when investment returns were good, governments were allowed to avoid making annual payments under the fantasy that the stock market would only go up. This was a predictable disaster.

The question now is whether the state Legislature — especially the union-controlled Democratic majority — will get serious about reform.

Benefits for new workers must be reduced. Contributions from current employees to the retirement must be increased. And government agencies, including the state, must not be allowed ever again to forego annual contributions if we are lucky enough to see the day when the pension fund is once again fully funded.

Lockyer seems to want to give the state a break this year on its pension contributions. We would be more willing to accept that if we had a sense that our legislators understood the seriousness of the situation and were willing to act. Unfortunately, all we see these days is lip service and no action.