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Oregon pension ruling will hurt state, city budgets, Moody's says

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(Reuters) — A recent decision by the Oregon Supreme Court overturning cuts to public pensions is a "credit negative" that will hurt the budgets of both the state and its cities, Moody's Investors Service Inc. said in a report Tuesday.

Last month, the Oregon Supreme Court ruled that reductions in cost-of-living adjustments for retirees and current employees passed in 2013 were unconstitutional.

Moody's said the ruling wiped out roughly $5 billion in pension savings and eliminated ongoing savings already incorporated into state and local budgets, including $131 million, or about 1%, of Oregon's current state budget.

The ruling will also increase pension contribution rates, Moody's said. The state will have to raise employer contributions to 17.1% of payroll from roughly 10.6%, starting in 2017, while local governments' contribution will rise to an average of 16% from 11%.

"Many of Oregon's local governments have outsized pension burdens," Moody's said.

The ratings agency said its "credit negative" declaration does not connote a rating or outlook change, but rather indicates a distinct event among many credit factors affecting the debt issuer.

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