Bowen v. Public Agencies Opposed To Social Security Entrapment, No. 85-521

CourtUnited States Supreme Court
Writing for the CourtPOWELL
Citation91 L.Ed.2d 35,106 S.Ct. 2390,477 U.S. 41
Docket NumberNo. 85-521
Decision Date19 June 1986
PartiesOtis R. BOWEN, Secretary of Health and Human Services, et al., Appellants v. PUBLIC AGENCIES OPPOSED TO SOCIAL SECURITY ENTRAPMENT et al

477 U.S. 41
106 S.Ct. 2390
91 L.Ed.2d 35
Otis R. BOWEN, Secretary of Health and Human Services, et al., Appellants

v.

PUBLIC AGENCIES OPPOSED TO SOCIAL SECURITY ENTRAPMENT et al.

No. 85-521.
Argued April 28, 1986.
Decided June 19, 1986.
Syllabus

In 1950, Congress amended the Social Security Act to authorize voluntary participation by States in the Social Security System with respect to old age, disability, and death benefits. Under 42 U.S.C. § 418(a) (1982 ed. and Supp.), States may obtain coverage for employees of the State and its political subdivisions by executing an agreement (§ 418 Agreement) with the Secretary of Health and Human Services (Secretary) that is required to be "not inconsistent with the provisions of" § 418. As originally enacted, § 418(g) permitted States to terminate their § 418 Agreements upon giving at least two years' advance notice in writing to the Secretary. However, because the increasing rate of state withdrawals was threatening the integrity of the System, Congress amended § 418(g) in 1983 to provide that no § 418 Agreement "may be terminated, either in its entirety or with respect to any coverage group, on or after April 20, 1983." The amendment expressly prevents States from withdrawing employees from the System even if a termination notice had been filed prior to the amendment's enactment. In 1951, California and the Secretary entered into a § 418 Agreement that covered employees of the State and its political subdivisions. The Agreement recited that its provisions were "in conformity with" § 418, and included a termination clause mirroring the provisions of § 418(g) then in effect. When the 1983 amendment of § 418(g) prevented termination notices that California previously had filed from taking effect, proceedings were instituted in the Federal District Court attacking the validity of amended § 418(g). The court held that § 418(g) was unconstitutional, reasoning that the § 418 Agreement created a "contractual right" in favor of the State and its subdivisions to withdraw from the Social Security System, and that such right constituted "private property" within the meaning of the Just Compensation Clause of the Fifth Amendment. Although the court concluded that amended § 418(g) effected a taking of that property without providing the requisite just compensation, it held that a damages award would be contrary to Congress' will and accordingly simply declared § 418(g) unconstitutional.

Page 42

Held: Amended § 418(g) does not effect a taking of property within the meaning of the Fifth Amendment. Pp. 51-56.

(a) In enacting the Social Security Act in 1935, Congress anticipated the need to respond to changing conditions, and therefore included § 1304, which expressly reserves to it "[t]he right to alter, amend, or repeal any provision" of the Act. The Act itself, including the original version of § 418(g), created no contractual rights, and therefore Congress had the power to amend that section. In view of the Act's purpose and structure, and of Congress' express reservation of authority to alter its provisions, courts should be extremely reluctant to construe § 418 Agreements in a manner that forecloses Congress' exercise of that authority. Pp. 51-53.

(b) The conclusion that Congress reserved the authority to amend not only § 418 but also § 418 Agreements entered into "in conformity with" § 418 is supported by precedent. Cf. Sinking-Fund Cases, 99 U.S. (9 Otto) 700, 25 L.Ed. 496; National Railroad Passenger Corp. v. Atchison, T. & S.F.R. Co., 470 U.S. 451, 105 S.Ct. 1441, 84 L.Ed.2d 432. The language of § 1304's reservation expressly notified California that Congress retained the power to amend the law under which the Agreement was executed and by amending that law to alter the Agreement itself. Pp. 53-54.

(c) The "contractual right" at issue in this case bears little, if any, resemblance to rights held to constitute "property" within the meaning of the Fifth Amendment. The termination provision in the § 418 Agreement exactly tracked the language of the statute, conferring no right on California beyond that contained in § 418 itself. The termination provision in California's § 418 Agreement did not rise to the level of "property," and thus amended § 418 did not effect a taking within the meaning of the Fifth Amendment. Pp. 54-56.

613 F.Supp. 558 (E.D.Cal.1985), reversed and remanded.

POWELL, J., delivered the opinion for a unanimous Court.

Richard K. Willard, Washington, D.C., for appellants.

Andrew D. Hurwitz, Phoenix, Ariz., for appellees.

Page 43

Justice POWELL delivered the opinion of the Court.

On this appeal we review a decision of the District Court for the Eastern District of California that § 103 of the Social Security Amendments Act of 1983, 97 Stat. 71, 42 U.S.C. § 418(g) (1982 ed., Supp. II), effected a taking of property within the meaning of the Fifth Amendment by preventing States from withdrawing state and local government employees from the Social Security System.

I
A.

The Social Security Act of 1935, 49 Stat. 620, as amended, 42 U.S.C. § 301 et seq. (1982 ed. and Supp. II), established an insurance program for "persons working in industry and commerce as a long-run safeguard against the occurrence of old-age dependency." H.R.Rep. No. 1300, 81st Cong., 1st Sess., 3 (1949), U.S.Code Cong.Serv. 1950, pp. 3287, 3289. From that relatively humble beginning, the coverage of the Act has been expanded to provide benefits not only to the "insured worker in his old age," ibid., but also to "individuals and families when workers retire, become disabled, or die." S.Rep. No. 98-13 vol. 2, p. 78 (1983).1 The "basic idea" of Social Security "is that, while they are working, employees and their employers pay earmarked social security contributions (FICA taxes). . . . Then, when earnings stop, or are reduced because of retirement in old-

Page 44

age, death, or disability, cash benefits are paid to partially replace the earnings that were lost." Ibid. The System operates on a "pay as you go" basis, with current contributions "largely paid out in current benefits," ibid. In the words of Congress, the System now functions "as the Nation's basic social insurance program." H.R.Rep. No. 98-25, p. 19 (1983), U.S.Code Cong. & Admin.News 1983, pp. 143, 236. To ensure that this important program could evolve as economic and social conditions changed, Congress expressly reserved to itself "[t]he right to alter, amend, or repeal any provision of" the Act. 42 U.S.C. § 1304.2

As of 1983, more than 90% of the Nation's paid employees, a total of more than 115 million people, participated in the Social Security System. H.R.Rep. No. 98-25, at 13.3 Participation in the System is, and has been since its inception, "basically mandatory." Id., at 19. Therefore, most workers covered by the System and their employers have no choice whether or not to participate. In 1935, when the Act was adopted, Congress faced questions as to whether it could compel the States and their political subdivisions to include their employees in the System.4 Therefore, the Act at that time excluded such employees from its coverage. See 42 U.S.C. § 410(a)(7). Responding to subsequent pressure

Page 45

from States that sought Social Security coverage for their employees, in 1950 Congress enacted § 418, the provision at the heart of the controversy in this case.

Section 418 authorizes voluntary participation by States in the Social Security System.5 Under § 418(a), States may obtain coverage for their employees and employees of their political subdivisions, enrolling all or only specified "coverage groups" of workers. 42 U.S.C. § 418(a)(1) (1982 ed., Supp. II); see § 418(b)(5) (defining coverage group).6 States enter the System by executing "an agreement" (§ 418 Agreement) with the Secretary of Health and Human Services (Secretary).7 While § 418 gives States some authority over the content of the Agreements, i.e., States may identify the covered employees, the provisions of a § 418 Agreement are required to be "not inconsistent with the provisions of" § 418. § 418(a)(1). From its enactment in 1950 through 1983, § 418 permitted States to terminate their § 418 Agreements "[u]pon giving at least two years' advance notice in writing to the [Secretary]." § 418(g)(1). Once a State exercised its option to withdraw, it could not thereafter reenter the System. § 418(g)(3).

Following adoption of § 418, all 50 States entered into § 418 Agreements with respect to their own employees, local gov-

Page 46

ernment employees, or both.8 "By the early 1960's most States had made coverage agreements," H.R.Rep. No. 98-25, at 18, U.S.Code Cong. & Admin.News 1983, p. 235 and the percentage of state and local employees enrolled in the System increased from 11% in 1951 to 70% in 1970, H.R.Comm. Print 97-34, at 25. Since 1970, "[c]overage of State and local employees has remained fairly constant at 70-72 percent." H.R.Rep. No. 98-25, at 18, U.S.Code Cong. & Admin.News 1983, p. 236. As of 1983, "some 9.4 million out of the approximately 13.2 million State and local employees" participated in the Social Security System. Id., at 17, U.S.Code Cong. & Admin.News 1983, p. 235.

For the first 20 years of their participation, "very few" States exercised their option under § 418(g) to withdraw from the System. Id., at 18. Until the mid-1970's, the number of state and local employees "leaving the system was always greatly exceeded by the number of newly-covered employees—in most years, by 50,000 or more." Ibid.9 Starting in 1976, however, this trend reversed, and the "numbers of positions being terminated from coverage" began to exceed "the numbers of newly-covered positions." Ibid. From 1977 through 1981, "termination activity was greater than in the previous ten years," with coverage "terminated for 96,000 State and local government employees." Ibid. As of 1982, coverage was "terminated for 595 State...

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163 practice notes
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    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • November 24, 1992
    ...Congress cannot impair accrued contract rights or repudiate its debts. Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 55, 106 S.Ct. 2390, Page 867 [298 U.S.App.D.C. 318] 2398, 91 L.Ed.2d 35 (1986) ("PAOTSSE "); Perry v. United States, 294 U.S. 330, 350-54, 55 S......
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    ...challenge interference with its operational and governance decisions.”); see also Bowen v. Pub. Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 50 n.17 (1986) (holding that “there is no question concerning the State's standing” where federal law “diminish[es] . . . [the State's] sove......
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    ...right to exercise its sovereignty as to the matter in "unmistakable terms." See Bowen v. Public Agencies Opposed to Social Security, 477 U.S. 41, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986). In their reply brief, Federal Defendants concede that Plaintiffs' contract claims cannot be dismissed under......
  • Westlands Water Dist. v. US Dept. of Interior, No. CV-F-93-5327 OWW SSH.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • March 3, 1994
    ...terms.'" Madera Irrig. Dist., 985 F.2d at 1401, (emphasis added), (quoting Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52, 106 S.Ct. 2390, 2396, 91 L.Ed.2d 35 (1986) ("Bowen"). The "unmistakable terms" requirement is based on the principle that under the usu......
  • Request a trial to view additional results
158 cases
  • Association of Accredited Cosmetology Schools v. Alexander, No. 91-5332
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • November 24, 1992
    ...Congress cannot impair accrued contract rights or repudiate its debts. Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 55, 106 S.Ct. 2390, Page 867 [298 U.S.App.D.C. 318] 2398, 91 L.Ed.2d 35 (1986) ("PAOTSSE "); Perry v. United States, 294 U.S. 330, 350-54, 55 S......
  • Brnovich v. Biden, CV-21-01568-PHX-MTL
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • January 27, 2022
    ...challenge interference with its operational and governance decisions.”); see also Bowen v. Pub. Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 50 n.17 (1986) (holding that “there is no question concerning the State's standing” where federal law “diminish[es] . . . [the State's] sove......
  • Sumner Peck Ranch, Inc. v. Bureau of Reclamation, No. CV-F-91-048 OWW.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • May 28, 1993
    ...right to exercise its sovereignty as to the matter in "unmistakable terms." See Bowen v. Public Agencies Opposed to Social Security, 477 U.S. 41, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986). In their reply brief, Federal Defendants concede that Plaintiffs' contract claims cannot be dismissed under......
  • Westlands Water Dist. v. US Dept. of Interior, No. CV-F-93-5327 OWW SSH.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • March 3, 1994
    ...terms.'" Madera Irrig. Dist., 985 F.2d at 1401, (emphasis added), (quoting Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52, 106 S.Ct. 2390, 2396, 91 L.Ed.2d 35 (1986) ("Bowen"). The "unmistakable terms" requirement is based on the principle that under the usu......
  • Request a trial to view additional results
1 books & journal articles
  • “Without Which Nothing”: Public Law As the Sine Qua Non of Public Administration
    • United States
    • Administration & Society Nbr. 49-5, May 2017
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    ...put States on notice that the Act “created no contractual rights.” Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 51-52 (1986). (National Federation of Independent Business v. Sebelius, 2012, pp. 2638-2639)Roberts’s suggestion to the contrary is problematic now......

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