A Rhode Island Superior Court judge rejected a motion by state officials to dismiss a lawsuit that challenged the 2011 pension overhaul law.

"This court finds that there is an enforceable implied-in-fact contract between the plaintiffs and the state. Furthermore, our Supreme Court's jurisprudence supports a finding that plaintiffs possess contractual rights in receiving a pension and a [cost-of-living adjustment]," Sarah Taft-Carter wrote Wednesday in a preliminary ruling that allowed the suit by public-sector unions to proceed.

Taft-Carter ruled similarly three years ago in an earlier pension lawsuit.

Last week, the state received another blow when a police union rejected a proposed settlement that Gov. Lincoln Chafee, General Treasurer Gina Raimondo and public sector unions had announced in February.

Bond rating agencies at the time praised the move. Moody's Investors Service rates the state's general obligation bonds Aa2, while Fitch Ratings and Standard & Poor's rate them AA.

It called for scaling back some provisions of the Rhode Island Retirement Security Act, a much-debated 2011 law that reduced benefits for active employees by shifting them to a hybrid system combining defined-benefit and defined-contribution plans, and limiting cost of living adjustments for retirees, among other changes.

Chafee, a Democrat and former Republican-turned-independent, will not seek re-election. Raimondo is running for governor as a Democrat.

The police union was the smallest of the six groups that had to approve the proposal. The unions, state lawmakers and Taft-Carter had signed off on the deal

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