The unanimous vote by a committee of the California Public Employees' Retirement System is expected to be upheld Wednesday when considered by the full board.
Staff members had proposed the board reduce the annualized forecast of investment returns from 7.75 percent to 7.5 percent.
Had that been approved, it would have increased payments required from state and local governments by roughly $400 million. Most of that amount would have come from California's general fund, which has a $26.6 billion deficit.
Board members say governments cannot afford such higher costs at a time of steep budget deficits. They say leaving the rate unchanged still meets accounting guidelines.
"This is not the time for this kind of adverse change," said board member Tony Oliveira.
State and local governments already have made deep spending cuts, he said, and "this could be a job-killer at a time when we don't need it."
Under questioning by the Benefits and Program Administration Committee, CalPERS chief actuary Alan Milligan said the lower "discount rate assumption" would account for lower returns expected over the next 10 years yet maintain the same financial cushion the pension fund has assumed for years.
"A 7.75 percent discount rate is still reasonable and prudent" under accounting standards, he said, but the board can make a policy decision to reduce that cushion.
Critics have said the 7.75 percent projection of annualized returns is too rosy and will contribute to unfunded pensions liabilities if CalPERS cannot meet that return.
Local officials and retirees spoke out for keeping the rate unchanged. Governments already face higher contributions next year to make up for recession-related investment losses in 2008, they said.
The discount rate change would have boosted costs for the city of Orange by $2.5 million a year on top of the increased contribution for losses, said Richard Jacobs, the city's finance director.
The committee voted 7-0 to keep the rate unchanged, with member Richard Costigan abstaining. The full CalPERS board will consider the rate Wednesday. If no committee members change their votes, the measure to leave the rate unchanged has enough votes for approval.
The state Finance Department had built the lower assumptions into Gov. Jerry Brown's budget proposal for next year; leaving it unchanged would free up about $200 million from the state's general fund.