By CHARLES E. BEGGS
Associated Press Writer

SALEM, Ore. (AP) - The Oregon Supreme Court on Tuesday upheld some of the Legislature's cost-cutting reforms of the Public Employees Retirement System, but struck down others.

In what could have the greatest financial impact, the court unanimously overturned a legislative change that had ended guaranteed minimum earnings for government workers who joined the pension system before 1996.

The earlier guarantee had assured about 110,000 workers that the portion of their accounts invested in stocks gets returns of at least 8 percent annually, even when stock values plunge.

Legislators changed the law to ensure that PERS members would get an average 8 percent earnings on their stock investments over their careers, reducing that benefit.

The court said the change illegally impaired an "unconditional" contract right of employees to the minimum earnings level.

The court also struck down a change that had halted annual benefit cost-of-living adjustments for about 22,000 workers who retired between April 1, 2000, and April 1, 2004.

The court said that move also violated retirees' contract rights.

In both cases, the pension system may have to restore money to retirees' accounts. The financial impact of the rulings was not immediately known, however.

Legislative changes upheld by the Supreme Court include one that shifted future employee contributions to their pensions - 6 percent of their salaries - to separate accounts outside of PERS.

That will decrease some workers' ultimate pensions by reducing the amount the retirement system matches in their PERS accounts when they retire.

The court also said the Legislature had authority to direct PERS to use updated life expectancy tables in determining benefits when a worker retires.

Outdated tables that had been used since the 1970s didn't reflect today's longer average life expectancies. That meant many employees' pension accounts didn't stretch long enough to last until their death, and taxpayers had to make up the difference so PERS could pay the added amount.

The 2003 Legislature passed the reforms at the urging of Democratic Gov. Ted Kulongoski to shave a projected deficit once estimated to be as high as $17 billion. The changes trimmed about $9 billion from the estimate.