Money that could have been used to boost the salaries of teachers and other government workers is now needed to help make up a $22 million shortfall in the state's retirement fund.

House Republicans got the bad news during their caucus Wednesday. The Utah State Retirement Board's request for more money is one of a growing list of strains on next year's budget.Although the retirement shortfall means there may be less money to spend on salary increases, the state is likely to pick up the entire cost of the retirement board shortfall rather than passing any of it along to employees.

Legislative Fiscal Analyst Leo Memmott told the caucus the retirement system wants a 1.62 percent increase in the amount the state contributes toward the pensions of state workers.

Memmott said that increase, which adds up to $22 million annually, is needed to cover a loss caused by errors in calculating the actuarial used to set rates that have compounded during the past five years.

The loss was actually $60 million, but actions taken by the retirement board have reduced it by nearly $40 million. Those actions include increasing the anticipated earnings of the retirement fund from 7.5 percent to 8 percent.

The state may only need to come up with about $16 million of the $22 million, Memmott said, because federal and other funds may be used to make up the difference.

Bud Scruggs, Gov. Norm Bangerter's chief of staff, said the money needed to restore the retirement fund will be included in the budget the governor is now preparing for presentation to the Legislature next month.

"The aggravation is, it's going to cost the state millions of dollars to guarantee a benefit we thought we had already guaranteed," Scruggs said. "And it's going to come out of money we could have used for compensation."

On Tuesday, the Utah Public Employees Association met with the governor and pitched a $42 million pay package that would raise the salaries of state employees by as much as 14 percent.

"We just took a percent and a half off the table for state employees and education," acknowledged Kevin Howard, a consultant and legal adviser to the retirement system. "We don't feel good about that."

The retirement system's deputy executive director, Robert Newman, said only a small percentage of the shortfall should be attributed to error. The rest, he said, was due to differences in the methods used to calculate the rates.

The San Francisco-based firm that had served as the retirement systems' actuary for more than 20 years has been replaced by a company in Seattle that will be assisted by a local company.

Retirement system officials said actuarial studies will be checked annually now to make sure such problems do not occur again. The actuarials were not included in a sweeping review by the legislative auditor general last year that cited a number of problems.