California's public employee pension plans face long-term shortfalls as high as $500 billion as costs skyrocket each day, a Stanford University-based economic think tank said Tuesday in a report that critics assailed as relying on faulty data to support the group's political agenda.

The Stanford Institute for Economic Policy Research said the shortfall in the plans that cover 2.6 million California teachers, state workers and university employees is too large to be solved only by cutting future payouts.

Lawmakers were urged to consider cutting benefits and increasing contributions for current state employees — a move that is legally questionable.

Economist and former state Assemblyman Joe Nation, the report's author, said it costs the state $3.4 million for each day that lawmakers fail to change the pension benefits and contribution levels for public employees. Nation, a Democrat, released the report with a privately funded student-led group, California Common Sense.

Later Tuesday, state Treasurer Bill Lockyer resigned from the institute's pension advisory panel, saying the authors of the study had not listened to serious concerns raised about its methodology before the report was released.

Lockyer, who is also a Democrat, said the group relied on an overly low rate of return of 6 percent to estimate that the state's three largest pension plans face $300 billion in unfunded liabilities, and used an inappropriate "risk free" or low-discount rate to come up with the most eye-popping $500 billion shortfall estimate.

"While Nation may have listened selectively to certain advisers, Lockyer certainly wasn't one of them, and his concerns about methodology and other issues were ignored," said Joe DeAnda, a spokesman for the state treasurer. The institute "clearly has a public pension agenda, and it doesn't include legitimate research."

Californians for Retirement Security, a group that represents public employee unions who stand to lose millions in future payouts because of pension reform, also called the study irresponsible and said it used faulty data to support a political agenda.

"They might as well have just made (the figures) up, which is essentially what they seem to have done," said Dave Low, the group's president. "They're not based on any sort of legitimate financial information. They're just assumptions."

Nation later responded to the criticism, saying that even under the rosiest — and unlikely — revenue assumptions of 9.5 percent annual return on investments, the pension funds would be unable to meet obligations.

"Just as we saw with Lehman, AGI, Bear Sterns and others, understating debt and betting our financial future on unrealistic assumptions will only make the problem worse," Nation said in a statement.

At least one group has already filed language for a ballot initiative that would ask Californians next November to dramatically scale back public employee pensions. Gov. Jerry Brown, a Democrat, also has proposed changes to the system, but Republicans say they do not go far enough or save California enough money.

The report covers the California Public Employees' Retirement System, California State Teachers' Retirement System and the University of California Retirement Plan.

Nation said the cost to fund the state's portion of public employee pensions is expected to rise from about 5 percent spending as a share of California's general fund to more than 17 percent in a few years. He could not provide a specific estimate on how many years.