SALEM – Their pension accounts buoyed by the skyrocketing stock market of the 1990s, thousands of Oregon public workers checked the math and decided that, yes, they could afford to retire.

But after an Oregon Supreme Court decision last week, many retirees are now glumly looking at subtraction signs.

Some 36,000 government workers are facing the prospect of downsized pension checks – and being ordered to repay between $400 and $9,000 apiece to the state retirement system, depending on the size of their pensions and when they left work.

The jarring news comes because the court let stand a landmark case won by the city of Eugene and other governments against the Public Employees Retirement System.

In that case, a Marion County judge ruled that, in 1999, the former board of directors of PERS wrongly steered too much money into individual pension accounts and too little into reserves as a hedge against a market downturn.

Nobody knows yet what the financial impact will be to individual workers because their portfolios vary, but the possibilities are sending ripples of angst across the state.

Retirees could see their checks shrink by as much as 10 percent, plus could be mailed invoices to repay money they’ve already received.

Retirees could see their checks shrink by as much as 10 percent, plus they could be mailed invoices to repay money they’ve already received.

Those still employed, meanwhile, would see their retirement portfolios reduced to make up for the overpayments. However, their losses would be modest because they would be largely offset by a separate ruling that overturned some of the PERS-related reforms made by the 2003 Legislature.

”At this point we don’t know what will come down the pike, but every time I turn around they’re taking more away,” said Darold Pedersen, 51, of Prineville, who retired in 2004 after 27 years with the Oregon Youth Authority.

”I have a fixed income and I can’t afford to lose more money,” he said. ”You plan your life on the promise of retirement and then you get to the end of your career and the rules change. It doesn’t seem fair.”

For now, all eyes will turn to the PERS board, which will decide on Sept. 23 how to proceed in light of the ruling.

Until then, nobody’s checks will be reduced, said spokesman David Crosley.

”The settlement says we need to recover the overpayment, but how to do that is still up in the air,” he said. ”It’s fair to say the board will look at a number of options.”

An analysis posted on the PERS Web site shows the potential impact to retirees if each repays a proportional share. Those who retired in 2000 and 2001 – because they have been collecting pension checks for longer – would pay the biggest sums.

Another scenario might tap PERS reserves instead of asking workers to pay back any of their gains.

Tim Knopp, a former legislator from Bend who was chairman of the House PERS Committee in 2003, said it’s unfortunate that some public workers and retirees could see their pensions decline – but it would be even more unfair for taxpayers to be forced to cover the expense.

”The PERS board at that time was dominated by public employee union appointees, and unfortunately in this case public workers are going to have to blame their own appointees for improperly managing PERS funds,” he said.

Greg Hartman, an attorney who represented public employee unions in the PERS case, said he expects new lawsuits could be filed if the state demands repayments or tries to reduce the money retirees now receive.

”That came as a surprise to a lot of people,” he said.

Attorneys and labor unions will be studying the decision and considering alternatives before the PERS board meeting in September, he said.

The case and the fallout is just the latest episode in what has been a political and emotional tug-of-war over the state’s public pension system.

The generous benefits of the PERS – primarily to so-called ”Tier One” workers, who were hired before 1996 – are demanding an ever-growing share of tax dollars, and that means less is available for classrooms and other public services.

The pension system became a major issue in the governor’s race in 2002 and – based on early rumblings from likely Republican candidates – it will again next year.

Last week’s ruling affects only Tier One employees, who are guaranteed an 8 percent annual growth rate. In addition, it will not affect workers who retired before 2000.

In 1999, the PERS board – then dominated by representatives of public workers – credited Tier One workers with a 20 percent gain in their accounts.

But governments sued, arguing that the rising costs of PERS guarantees were forcing them to cut back on other services.

After Marion County Judge Paul Lipscomb ruled in favor of the governments, a subsequent settlement determined that workers should have seen their accounts grow by 11.33 percent that year – not 20 percent.

The repayments that could be required by the PERS board represent that improper, one-year gain of 8.67 percent, Crosley said.

After the stock market tanked in the early 2000s, the long-term ”unfunded liability” of PERS reached $17 billion. That liability is the extra money that would be needed to pay all the promised benefits over 25 years.

Taxpayers were on the hook for that jaw-dropping deficit, and that spurred the 2003 Legislature and Gov. Ted Kulongoski to pass a series of cost-cutting reforms.

The unfunded liability of PERS has fallen to less than $8 billion thanks to those changes and the turnaround in the stock market.

Last week’s court decision shrank the long-term debt by another $1.6 billion.