The board of Calpers, the biggest U.S. public pension fund, voted on Wednesday to ask California's government for an additional $600 million in funding to bolster its finances.

The vote by the board of the $202 billion California Public Employees' Retirement System comes as Governor Arnold Schwarzenegger and lawmakers face the arduous task of balancing the state government's books, which requires closing a budget gap of more than $19 billion.

The request by Calpers for more money will increase the state government's contribution to the retirement system for its next fiscal year, which begins July 1, by 18 percent to $3.9 billion.

The cost of California's public pensions has become a top political issue in the state -- so much so that Schwarzenegger has said he will not sign a budget plan unless it has provisions to reduce those costs.

Calpers has said it requires more state money because its members are retiring earlier and living longer, and because of investment losses during the recession.

Calpers President Rob Feckner acknowledged the fund's request would come at a difficult time, but said the board's fiduciary duty requires it.

Whether it's a hard political sell or not, it's our job, Feckner told Reuters.

Calpers' board also voted to raise health-care premiums by an average 9.1 percent for the fund's nearly 1.3 million health program members starting in January 2011

Separately, Calpers Chief Investment Officer Joseph Dear said he sees recent turmoil in financial markets arising from Europe's financial woes underscoring fragile nerves among investors.

We're concerned, but this downturn and volatility seems to be an overreaction, Dear told Reuters.

Dear also said he has struck deals with Calpers' outside money managers to reduce their fees.

Ares Management and Relational Investors agreed to lower fees, totaling savings to Calpers of $40 million over five years, Dear said.

The two managers had agreed not to hire placement agents for business they may seek to sell Calpers, Dear added.

Placement agents are middle-men used primarily by private equity companies to market investments to pension funds. Calpers has been trying to distance itself from placement agents amid a controversy over one of its former board members who became one of the middle-men. He is being sued by California's attorney general's office, which claims he improperly influenced investment decisions at Calpers.

Ares said in a statement that it wanted to ensure increased transparency in fund raising determinations and lower fees.

The statement said that its relationship with Calpers goes far beyond any use of placement agents inasmuch as Ares only used a placement agent in connection with a Calpers investment one time when it launched its initial private equity fund in 2003.

In the seven years since, the statement said, Calpers has made four significant investments in other Ares funds.

(Reporting by Jim Christie, additional reporting by Grant McCool in New York; Editing by Dan Grebler and Carol Bishopric)