The state can continue collecting higher pension contributions from part-time government workers earning less than $20,000 a year, the New Mexico Supreme Court ruled Wednesday.

The court unanimously rejected a legal challenge to part of a pension contribution change that's helping the state save more than $40 million a year to plug a budget shortfall.

Starting in July, most state workers had to contribute an extra 1.5 percent of their salaries to pension programs, and the state reduced what it contributed by a similar amount. The shift reduced state spending but it reduced the take-home pay of more than 70,000 state and educational workers. The higher pension payments will remain in effect through the next budget year, which ends June 30, 2011.

At issue before the court was an exemption from the higher contributions, which the Legislature provided for workers earning less than $20,000 a year.

But a budget provision states that workers will be considered to have a salary of more than $20,000 if "the employee's base hourly wage" is greater than $9.579. The state's payroll system is administered using hourly wages, and $9.579 translates into a yearly salary of $20,000 or more for full-time employees.

A part-time state district court worker from Santa Fe, Joan Chernock, filed a lawsuit contending that the Legislature improperly included that provision to narrow who qualified for the exemption. The lawsuit asked the court to stop the higher pension deductions for workers paid less than $20,000 annually, regardless of their hourly pay.

The court rejected that argument and ruled unanimously that the budget provision was constitutional.

Chernock's lawyer, Stephanie Zorie, argued that the budget provision effectively nullified the pension legislation and was unconstitutional because the budget must only deal with appropriations.

Chernock earns about $15,000 a year. She's paid $14.35 an hour and works 20 hours a week. The higher payroll contributions are costing her almost $224 a year.

The lawsuit said there were nearly 500 part-time workers similar to Chernock who are paying more into their pension programs.

Assistant Attorney General Nan Erdman said the budget provision did not change the pension law but only gave directions to payroll agencies on how to apply the retirement contributions. About 700 state workers and 11,000 educational employees have been exempted, she said.