Earlier Thursday, McNamara heard arguments in another lawsuit over the new law. A coalition representing New Hampshire public employees asked McNamara to stop the state from charging workers more for their pensions.

The two issues are related. The employees' higher contributions are intended to replace a subsidy the state paid to communities to cover part of their workers' retirement costs. Lawmakers said the goal was to prevent spikes in local property taxes to pay rising retirement costs. The state also saved money under the new law by no longer subsidizing communities.

McNamara asked both sides to make more legal arguments on the issue. He said he was not able to decide if the increase in rates — roughly 2 percent — met the legal test for the immediate relief the coalition had requested.

The New Hampshire Retirement Security Coalition, which comprises state and municipal employees, including teachers, police and firefighters, wants McNamara to stop the Legislature from interfering with the pension system board's ability to set employers' rates. In the coalition hearing, McNamara limited the discussion to the increase in employee contributions.

Starting July 1, teachers, state and municipal workers began paying 7 percent instead of 5 percent. Firefighters' contributions rose from 9.3 percent to 11.8 percent. Police pay 11.55 percent, up from 9.3 percent.

Coalition lawyer Stephen Pincus said lawmakers can change rates for new workers but not for existing workers unless they get a commensurate increase in benefits. He said lawmakers raised employees' contributions simply so they could reduce what employers paid into the pension fund.

"This is a permanent 2 percent decrease in their salary," he said.

He also argued New Hampshire's Supreme Court has held that the state's need to deal with budget problems isn't sufficient to break a contract, especially one providing for pension benefits.

"You can raise rates, but you have to give something in return," he said.

Associate Attorney General Richard Head asked the judge to dismiss the lawsuit. He argued the state can do whatever it wants to the pension system, including raising employee rates or abolishing the system completely. Head said the state's law establishing the retirement system does not create a contract protected by the constitution.

McNamara asked him if his position was that someone could work for government for 20 years, pay into the system and then the state could abolish the system.

Head replied that the state could eliminate the system at any time. Head later also said the state is free to change workers' benefits.

"I, as a state employee, can say it's worth it to me or not worth it to me (to stay)," he said.

The state and coalition also differ on when public employees are vested in the pension system. The new law treats employees as being vested at 10 years, but a New Hampshire court said employees are vested when they become permanent, generally at one year after a probationary period.

Head said the issue is important if the court decides the retirement law does establish a contract with employees.

The public pension system covers more than 50,000 active and nearly 26,000 retired state and municipal workers, teachers, police and firefighters. Contributions from employers — the state and local governments — and employees plus money earned through investments make up the pension fund.