Whether Rhode Island’s landmark pension law passes a court challenge is still up in the air, but one thing’s certain: Judge Sarah Taft-Carter intends to hear the case.

Taft-Carter on Friday, in Rhode Island Superior Court in Providence, dismissed a motion by the state -- which noted New York litigator David Boies is representing --  to recuse herself, saying that being in the pension system and having relatives who are likewise does not compromise her neutrality.

She has yet to rule on the motion by five public-sector unions to overturn the law. Friday’s hearing lasted two hours.

According to WPRI.com, Taft-Carter promised be “fair and impartial in hearing and deciding these cases.” On Thursday, the state Supreme Court said it would not intervene regarding Taft-Carter’s involvement.

The Rhode Island Retirement Security Act , passed late in 2011, created a hybrid plan merging conventional public defined-benefit pension plans with 401(k)-style plans. It also included a suspension of cost-of-living adjustment increases for retirees and raises the retirement age for employees not yet eligible for retirement.

Union attorneys say the state is breaking a contract, while Boies and others on Rhode Island’s legal team say the law is not a contract and even if it were, the state has the right, given its financial strains, to adjust the pension benefit package.

State officials have maintained that the new law will enable Rhode Island to trim its $7 billion unfunded pension liability by roughly $3 billion over 20 years.

The Rhode Island case is generating national attention. “This is an issue that is playing out across the country,” said Anthony Figliola, vice president of Empire Government Strategies and former deputy supervisor of Brookhaven, N.Y., on Long Island. “Long-term, you can create different tiers, such as what New York [State] is doing with Tier VI, but what about the pot of people you’ve told are always going to get 100%? You can only pander to a particular group for so long.”

Boies, who represented then-Vice President Al Gore in the 2000 presidential election dispute in Florida and two years earlier litigated the Microsoft Corp. antitrust case, is representing Rhode Island at $50 per hour, way less than his standard rate of $1,250 per hour.

“If we do not reform these liabilities in a sensible, balanced way that tries to protect  as much as possible all the interests of  all the stakeholders, we will have insolvencies,” Boies told WPRI. “Insolvencies are going to be bad for everybody. Nobody wants their employer to go insolvent, and that’s exactly what’s going to happen if we can’t find a way to solve this financial crisis.”

Gov. Lincoln Chafee has suggested the state begin settlement talks with labor leaders, while General Treasurer Gina Raimondo, who championed the pension bill, wants the legal process to play out.

Moody’s Investors Service rates Rhode Island’s general obligation bonds Aa2, while Fitch Ratings and Standard & Poor’s each assign AA ratings.

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