Constitutional Limits on Public Pension Reform: New Directions in Law and Legal Reasoning

Abstract

Catastrophe cements a reputation, and the public pension crisis has been rapid and remarkable. Faced with alarming actuarial deficits, state and local legislatures are enacting comprehensive reforms to avoid insolvency. Government employees, however, are challenging these reforms under the Contract Clause. This Article collects the most important constitutional cases on public pension reform over the last six years. It adds a comprehensive study of recent state and federal court practice to the existing literature, including key U.S. Supreme Court decisions that have been missed. It takes stock of forty-eight decisions across twenty-two states, more than a dozen of which reached resolution in the highest courts. It offers a critical examination of key developments, an assessment of emerging challenges, and a new sustained account of the reforms that have succeeded and the grounds for that success. It also provides an appendix and various diagrams documenting our analysis and conclusions. The most surprising findings are that an overwhelming majority of barriers to pension reform are judge-made, meaning that changing case outcomes would not require a constitutional amendment. And that, in any event, reforms have generally been upheld even in those states in which existing doctrine is more protective of employee pensions. These results have practical implications by suggesting that governments can expand the scope of reforms. Clarifying the reasons and reasoning underlying these decisions also has jurisprudential significance. Courts in a number of jurisdictions have yet to rule on constitutional contract claims and, in those that have ruled, the decisional law is in flux and bordering on incoherence.