Bone up for those cocktail party conversations about the Detroit bankruptcy by remembering everything you learned in law school about the Contract Clause of the U.S. Constitution. In a long piece at the Reason Foundation, Sasha Volokh explains why:
The future of pension
reform ... depends heavily on this constitutional issue. On the one hand, it
seems right that a state shouldn’t be able to violate its contracts whenever
they seem too expensive, even if the contracts were ill-advised to begin with, and
even if this will cost the taxpayers. After all, the state can’t take private
property without paying for it (obviously, at taxpayers’ expense); why should
it be able to “take” a contract right for free? If public employment is really
so expensive, perhaps state officials will learn next time not to make promises
that are too generous. On the other hand, in most states, a great many
pension-related promises aren’t contractual, especially ones that only relate
to future periods of work. This seems to give states substantial leeway in
crafting pension-reform bills that will withstand constitutional scrutiny.
The
future of pension reform thus depends heavily on this constitutional
issue. On the one hand, it seems right that a state shouldn’t be able to
violate its contracts whenever they seem too expensive, even if the
contracts were ill-advised to begin with, and even if this will cost the
taxpayers. After all, the state can’t take private property without
paying for it (obviously, at taxpayers’ expense); why should it be able
to “take” a contract right for free? If public employment is really so
expensive, perhaps state officials will learn next time not to make
promises that are too generous. On the other hand, in most states, a
great many pension-related promises aren’t contractual, especially ones
that only relate to future periods of work. This seems to give states
substantial leeway in crafting pension-reform bills that will withstand
constitutional scrutiny. - See more at:
http://reason.org/news/show/pensions-contract-clause#sthash.Lr5tfWPJ.dpuf
The
future of pension reform thus depends heavily on this constitutional
issue. On the one hand, it seems right that a state shouldn’t be able to
violate its contracts whenever they seem too expensive, even if the
contracts were ill-advised to begin with, and even if this will cost the
taxpayers. After all, the state can’t take private property without
paying for it (obviously, at taxpayers’ expense); why should it be able
to “take” a contract right for free? If public employment is really so
expensive, perhaps state officials will learn next time not to make
promises that are too generous. On the other hand, in most states, a
great many pension-related promises aren’t contractual, especially ones
that only relate to future periods of work. This seems to give states
substantial leeway in crafting pension-reform bills that will withstand
constitutional scrutiny. - See more at:
http://reason.org/news/show/pensions-contract-clause#sthash.Lr5tfWPJ.dpuf
