The Associated Press

PORTLAND - The Legislative Emergency Board on Friday approved tapping a public pension reserve fund for a nearly $1 million payment to lawyers representing local governments in a lawsuit against the fund.

Paul Cleary, director of the Public Employees Retirement System, told lawmakers a day earlier that he expects the system's legal bills could climb to $4 million by mid-2005 because of other pending legal challenges.

The payment approved by the E-Board, which handles budget matters between legislative sessions, is part of the settlement of a lawsuit brought by Portland and seven other local governments.

Both sides reached agreement to end the case earlier this year after Marion County Judge Paul Lipscomb ruled for the local governments.

He said the pension system board had used outdated life expectancy tables and improperly boosted members' earnings instead of increasing the system's reserves during the height of the stock market boom.

The settlement included having PERS pay the plaintiffs' legal fees. The bulk of the payment - $725,000 - goes to the Eugene firm of Harrang, Long, Gary and Rudnick.

Cleary told lawmakers he plans to pay from the current system budget the legal costs for defending the system against ongoing lawsuits challenging pension reforms adopted by the 2003 Legislature.

The system board has hired Orrick, Herrington & Sutcliffe, an international law firm that has been paid about $650,000 so far to defend the system against union challenges to the reforms.

That case is pending in the Oregon Supreme Court.

Jim Baker, of the law firm's San Francisco office bills $500 an hour for litigation and $400 for consultation. Cleary said such high fees are not uncommon for the kind of expertise that complex cases require.

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Information from: The Oregonian