The new law requires teachers, state and county workers and some city employees to contribute 3 percent of their salaries to the Florida Retirement System.

At a hearing Thursday, teachers union lawyer Ron Meyer argued that the contributions should be segregated to ensure employees would get their money back if they won the lawsuit. Fulford scheduled a trial for Oct. 26, but the case is expected to wind up in the Florida Supreme Court regardless of how she rules.

Fulford wrote that she had to assume the state would comply with a court order to return the contributions if the law is struck down although there is no statutory mechanism for such a refund.

She noted that Blaine Winship, a special counsel in the attorney general's office, argued Thursday that it's not a question of whether the state would refund the money if it lost but whether those funds would come from the retirement system or other state and local government revenue sources.

As a result, the employees' claim that they would suffer irreparable harm fails, Fulford wrote.

Winship also had argued against the set-aside on grounds that it's unlikely the unions will prevail in the lawsuit, but Fulford took no stand on that issue.

The unions contend the new law violates public employees' contract, property and collective bargaining rights under the Florida Constitution.

As a result of Fulford's decision, the pension fund Friday began deducting 3 percent from the pay of 560,000 public employees. The contributions are expected to save the state and local governments $806 million in the first year as their payments into the retirement system have been reduced. Some local governments are using their savings to give their workers raises to offset their contributions.

Scott had urged the Legislature to require even bigger employee contributions of 5 percent. He argued it's a matter of fairness because employees in the private sector and in other states are required to contribute toward their pensions.

The unions say they have gone to work for lower pay in exchange for better benefits including pensions fully funded by taxpayers although they don't object to requiring new employees to contribute.

They cite a 1974 law that did away with employee contributions and declared pension rights are "contractual in nature." Meyer acknowledged that the Legislature can change the law for new hires but argued it still applies to existing employees.

The lawsuit names Scott as a defendant in his role as chairman of the State Board of Administration, which oversees the $131.5 billion pension system's investments. The board's other two members, Attorney General Pam Bondi and Chief Financial Officer Jeff Atwater, also are defendants.

"While we are disappointed that the court didn't take action to ensure the availability of funds to pay back to employees if we prevail in the lawsuit, this is a minor setback and cannot be viewed as a determination that our claims are not just," Meyer said.