A lawsuit by a good-government group seeking the names and annual pensions of New York City Police Pension Fund retirees was quashed by a panel of three Appellate Division judges yesterday, setting up a battle in the state’s highest court.

“If allowed to stand, this decision will be a massive blow to open government and transparency in New York,” said Timothy Hoefer, director of the Albany-based Empire Center.

Last year, the Empire Center, part of the Manhattan Institute for Policy Research, sued the pension fund after the fund denied a Freedom of Information Law request for the data — even though the names and annual pensions of its 44,000 retirees had been routinely released for years.

Other pension funds, including the New York City Employees Retirement System and teachers pension fund, followed suit and began withholding the names of their members.

“Given mounting public concern over public pensions, this couldn’t come at a worse time,” Hoefer said of the decision. “As taxpayer costs for public pensions continue to skyrocket, the Appellate Division is reversing decades of precedent by saying the taxpayers have no right to know who is collecting pension benefits.”

Hoefer said Empire Center will appeal to the Court of Appeals, the state’s highest court.

The police pension fund declined to comment.

The Empire Center had been using the information for an online database — seethroughny.net — which documents public spending on salaries, contracts and other expenditures.

Academic researchers, members of the public and the press have used the data compiled by the Empire Center to highlight incidents of excessively high pensions, wasteful spending and abuse.

Pension reform has been a divisive issue around the state, especially as public-sector pensions take up a larger share of local governments’ budgets.

For instance, New York City contributed $2.2 billion to the police pension fund alone in fiscal year 2011 and is projected to spend $2.7 billion next year.

Watchdog groups and the media have also focused on the growing number of retirees receiving six-figure pensions and seemingly healthy individuals with disability pensions…..

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