Document: 477 U.S. 41 106 S.Ct. 2390 91 L.Ed.2d 35 Otis R. BOWEN, Secretary of Health and Human Services, et al., Appellantsv.PUBLIC AGENCIES OPPOSED TO SOCIAL SECURITY ENTRAPMENT al. No. 85-521. Argued April 28, 1986. Decided June 19, Syllabus In 1950, Congress amended the Social Security Act to authorize voluntary participation by States in System with respect old age, disability, death benefits. Under 42 U.S.C. § 418(a) (1982 ed. Supp.), may obtain coverage for employees State its political subdivisions executing an agreement (§ 418 Agreement) Services (Secretary) that is required be "not inconsistent provisions of" 418. As originally enacted, 418(g) permitted terminate their Agreements upon giving at least two years' advance notice writing Secretary. However, because increasing rate state withdrawals was threatening integrity System, 1983 provide no Agreement "may terminated, either entirety or any group, on after 20, 1983." The amendment expressly prevents from withdrawing even if a termination had been filed prior amendment's enactment. 1951, California entered into covered subdivisions. recited were "in conformity with" 418, included clause mirroring then effect. When prevented notices previously taking effect, proceedings instituted Federal District Court attacking validity 418(g). court held unconstitutional, reasoning created "contractual right" favor withdraw such right constituted "private property" within meaning Just Compensation Clause Fifth Amendment. Although concluded effected property without providing requisite just compensation, it damages award would contrary Congress' will accordingly simply declared unconstitutional. Held: Amended does not effect Pp. 51-56. (a) enacting 1935, anticipated need respond changing conditions, therefore 1304, which reserves "[t]he alter, amend, repeal provision" Act. itself, including original version 418(g), contractual rights, power amend section. view Act's purpose structure, express reservation authority alter provisions, courts should extremely reluctant construe manner forecloses exercise authority. 51-53. (b) conclusion reserved only but also supported precedent. Cf. Sinking-Fund Cases, 99 (9 Otto) 700, 25 L.Ed. 496; National Railroad Passenger Corp. v. Atchison, T. & S.F.R. Co., 470 451, 105 1441, 84 432. language 1304's notified retained law under executed amending itself. 53-54. (c) issue this case bears little, any, resemblance rights constitute "property" provision exactly tracked statute, conferring beyond contained California's did rise level "property," thus 54-56. 613 F.Supp. 558 (E.D.Cal.1985), reversed remanded. POWELL, J., delivered opinion unanimous Court. Richard K. Willard, Washington, D.C., appellants. Andrew D. Hurwitz, Phoenix, Ariz., appellees. Justice POWELL 1 On appeal we review decision Eastern 103 Amendments 1983, 97 Stat. 71, ed., Supp. II), Amendment preventing local government System. 2 * A. 3 49 620, as amended, 301 seq. established insurance program "persons working industry commerce long-run safeguard against occurrence old-age dependency." H.R.Rep. 1300, 81st Cong., 1st Sess., (1949), U.S.Code Cong.Serv. pp. 3287, 3289. From relatively humble beginning, has expanded benefits "insured worker his age," ibid., "individuals families when workers retire, become disabled, die." S.Rep. 98-13 vol. 2, p. 78 (1983).1 "basic idea" "is that, while they are working, employers pay earmarked social security contributions (FICA taxes). . Then, earnings stop, reduced retirement oldage, death, cash paid partially replace lost." Ibid. operates "pay you go" basis, current "largely out benefits," ibid. words Congress, now functions "as Nation's basic program." 98-25, 19 (1983), Cong. Admin.News 143, 236. To ensure important could evolve economic conditions changed, itself 1304.2 4 more than 90% employees, total 115 million people, participated 13.3 Participation is, since inception, "basically mandatory." Id., 19. Therefore, most have choice whether participate. adopted, faced questions compel include System.4 time excluded coverage. See 410(a)(7). Responding subsequent pressure sought 1950 enacted heart controversy case. 5 Section authorizes System.5 418(a), subdivisions, enrolling all specified "coverage groups" workers. 418(a)(1) II); see 418(b)(5) (defining group).6 enter "an agreement" (Secretary).7 While gives some over content Agreements, i.e., identify 418(a)(1). enactment through "[u]pon [Secretary]." 418(g)(1). Once exercised option withdraw, thereafter reenter 418(g)(3). 6 Following adoption 50 own both.8 "By early 1960's made agreements," 18, 235 percentage enrolled increased 11% 1951 70% 1970, H.R.Comm. Print 97-34, 25. Since "[c]overage remained fairly constant 70-72 percent." "some 9.4 approximately 13.2 employees" 17, 235. 7 For first 20 years participation, "very few" 18. Until mid-1970's, number "leaving system always greatly exceeded newly-covered employees—in years, 50,000 more." Ibid.9 Starting 1976, however, trend reversed, "numbers positions being terminated coverage" began exceed "the numbers positions." 1977 1981, "termination activity greater previous ten years," "terminated 96,000 employees." 1982, 595 entities employing 190,000 workers." Finally, "for two-year period 1983-84, terminations [were] pending 634 227,000 8 After studying towards reasons it,10 determined respects. initial matter, observed cost between $500 $1 billion annually. 13-14. further States' ability "inequitable both who lose vast majority nation's workforce continue system." 18-19, terminating often so course designing benefit packages attract long-term workers, believed sound policy protection move job job. Moreover, shifting tax burden those remain entitled future based past earnings," resentment part whose mandatory.11 Accordingly, decided repealing provision. provides amendment.12 B 9 March 9, Agreement, effective January 1, parties agreed extend authorized modify additional groups "such modification consistent particular groups. terms mirrored statutory embodied 418(g).13 10 behalf 71 34,000 persons.14 appellees commenced lawsuits underlying appeal, naming defendants United Undersecretary Department Services. lawsuit brought several public agencies California, taxpayers, organization calling Public Agencies Opposed Entrapment. These alleged, among other claims, deprived them "contract rights" compensation violation Amendment.15 second lawsuit, enjoin enforcement well declaration section claimed federal acted excess constitutional violated Tenth breaching contract impairing State's "ability structure relationships employees."16 App. 26-27. 11 Ruling cross-motions summary judgment, Entrapment Heckler, (ED Cal.1985).17 ran agencies. This existed independently provision, derived 130418 opposed 12 reasoned Court, compensation. court's view, "only rational reimbursement agencies, amount money currently participation" Program. F.Supp., 575. solve "financial crisis," order awarding measure "simply clearly Congress." We noted probable jurisdiction, 474 1004, 521, 88 454 (1985), reverse. II 13 American protecting age disability "has necessity called forth highly complicated interrelated structure." Flemming Nestor, 363 603, 610, 80 1367, 1372, 1435 (1960). designed protect future, present, generations inevitable necessary response evolving unforeseeable 1935. "ever-changing conditions" "flexibility boldness," "a reserving '[t]he provision' 1104, 648, 1304. That makes what implicit institutional needs 611, S.Ct., 1373. must concede, rights. supra, 608-611, 1371-73; Corporation 465-470, 1451-1454, 432 (1985). there doubt 14 Act, Government, sovereign, contracts confer vested concomitant duty honor Perry States, 294 330, 350-354, 55 432, 434-36, 79 912 (1935); Lynch 292 571, 54 840, 1434 (1934), declined context commercial find "sovereign forever waives one sovereign powers unless in" contract. Merrion Jicarilla Apache Tribe, 455 130, 148, 102 894, 907, 21 (1982). Rather, emphasized "[w]ithout regard source, power, unexercised, enduring presence governs subject sovereign's intact surrendered unmistakable terms." arrangements, party, "remain legislation" sovereign. 147, 907. 15 principles form backdrop consider Court's effectively forbid heeded none often-repeated admonitions construed, possible, avoid foreclosing Those take added force arrangement pursuant Government serves implement comprehensive welfare affecting millions individuals throughout our Nation. 16 Venerable precedent supports last Term, considered statute " 'expressly reserved' 'repeal, amend' time," Corporation, 456, 1453, "effect these few simple words" settled 496 (1879). U.S., 467-468, n. 22, 1452, 22. Cases involved statutes governed railroads' obligations subsidy bonds. question repeal, them, requiring railroads set aside income sinking fund meet debts came due. due process improperly interfered 719, 496. rejecting arguments, explained reservation, "Congress retains, given special intention retain, full complete make alterations amendments come scope legislative power." 720, construction granting corporate charter change stipulations subsequently statute. Whatever limits "safe say" whatever rules might "have prescribed charter" governing "performance already into." 721, 17 disposes appellees' contention lacked Agreement. accepted reservation. itself.19 provided electing participation. falls performance Agreements. C 18 incorporated fully amendment. Appellees nonetheless insist valuable "taken" observe limit" rely "take away acquired operation charter, deprive corporation fruits actually possession lawfully made." Similarly, decisions repudiate debts, lender, save money. 350-351, 434-35; 576-577, 842. But neither debt nor obligation obligee monetary premium, supra. unique Agreement; term bargaining independent consideration. regulatory general welfare. circumstances, conclude "property." cannot viewed sort "vested face concerning agreements containing clause, III judgment remanded decision. It ordered. According Senate Special Committee Aging, "much more" "retirement older family security, loss retirement, disability." Termination Coverage: Impact Local Employees, 94th 2d (Comm. 1976) (hereinafter Report Aging). ever since. 610-611, 1372-73, "The percent [in 1983] include[d] civilian (2.4 2.7 million), about 30 (approximately 10-15 nonprofit organizations (up million)." 13, 231. 1935 employment localities, primarily constitutionality levy employer localities." Subcommittee House Ways Means, Coverage Employees Governments Nonprofit Groups, 97th Ser. WMCP:97-34, (Comm.Print 1982) H.R.Comm.Print 97-34). At challenged case, governments result congressional desire quickly little difficulty possible needed most." therefore, decide receive 418(d)(3) creates exception rule. Where members program, requires agree participate II). purposes conciseness, use "Secretary" refer official responsible administration versions Alaska, system, Maine, Massachusetts, Nevada, Ohio, never chose system," Security. Each party employees. During "many caused consolidation jurisdictions, rather withdrawal Aging found offered following Agreements: wanted take-home reduction payroll deductions; cut costs dropping coverage; news reports projected exhaustion trust funds 1980's" led believe cease; taxes rise, means "to achieve static budgetable expenditures"; favored perceived longer System; alternative plans higher levels 6-8; 6-7. "many" absence "[i]nformation informed judgments." 8. regarded governments, anomaly otherwise mandatory program. fundamental principle compulsory responsibility paying risks borne society whole extent possible." 4. Mandatory sustain 'pay-as-you-go' financing structure," particularly retain "regardless how many times jobs lifetime." ensures minimum event catastrophe foresee plan for. was, "inconsistent equal treatment citizens." 5. amendment, Pub.L. 98-21, 103, 71-72 provides: "(a) [42 ] read follows: 'Duration "(g) No date 1983.' "(b) subsection shall apply [§ 418] date, thereof date." stated: State, [Secretary], agreement, end calendar quarter notice, provided, less five receipt group notice." Reprinted, 31. If withdrawn "approximately $33.7 millio[n] lost 1984." 61. Plaintiffs alleged denied process, attempt regulate 'essential functions,' Amendment," specific Government's breach 558, 565 Cal.1985). Though press claim Amendment, rested ground, finding unnecessary reach arguments raised State. before us. Before reaching merits, plaintiffs suits, here, standing challenge With certain individuals, injury sufficient third-party beneficiaries 567-570. individual protection. 571. suit, judicially cognizable interest preservation sovereignty, diminishment sovereignty interference relations 567. appellants suggest properly agree, bring action. plainly resolve controversy, do we. Title 1304 chapter hereby support conclusion. section," mirror section, power. render "inconsistent" conformity" logical legal

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