How Public Pension Contracts Violate the U.S. Constitution

Public sector pension contracts have started to bankrupt communities and threaten the economic viability of states such as Illinois. Taxpayers are entitled to a conversation as to whether or not these contracts violate the U.S. Constitution. 

In many states, public sector pension contracts are protected by clauses in that state’s constitution. The words usually used are that public sector pension contracts are contractual agreements that “cannot be diminished or impaired.”

An argument against these would take the position that under the Fourteenth Amendment all persons are guaranteed equal protection under state laws. No state can pass a law, for example, which clearly specifies that the minimum wage for a man must be four dollars an hour more than the minimum wage paid to a woman.

No one would defend such a law because it clearly classifies persons into two groups. But this is exactly what state constitutions do with regard to pension contracts. These clauses clearly state that only government workers’ contracts are binding contractual agreements that cannot be diminished or impaired. 

One way to understand the principle involved is to understand it as specifying a group. What if these clauses of state constitutions said that only contractual agreements entered into with men cannot be diminished or impaired. Or white residents of the state. This would be considered so outrageous that states would never contemplate even proposing such a clause in their state constitutions. 

But these clauses clearly do specify only one type of contract to be protected; only those contracts made with one group of people, government employees. Those who do not have government contracts are not protected. While the Fourteenth Amendment was originally directed toward the southern states’ treatment of freed slaves after the Civil War, it has since been expanded to protect other groups of persons such as women and those desiring same-sex marriage. If one cannot discriminate based on race, sex, age, ethnic origin, gender identity, and other group identifiers, it becomes difficult to defend the idea that a group identifier that defines one’s employer can withstand constitutional scrutiny. Illinois’ constitution actually specifies that government workers have their own “Pension and Retirement Rights,” rights denied to everyone else. These unequal rights are enforced by state government.

The Supreme Court only ruled last year that persons who desire to be married and happen to be of the same sex are entitled to equal protection of the law. Then how can anyone defend the idea that those who “happen to be” employees of a school district, state, county or government agency, are entitled to contractual protection while those who “happen to be” employed in the private sector are not? 

In the past the Supreme Court has accepted arguments that proved discrimination based on the consequences of the actions. For example, if a police policy results in a disproportionate arrest of blacks over whites, then it can be seen as discrimination based on race. To this day the ACLU argues that blacks are disproportionately arrested and incarcerated based on their race alone. 

It is a demonstrable fact that not only do these clauses of state constitutions violate equal protection but they lead to, and in fact create, violations of free speech. Public sector unions that are protected by these clauses are the biggest campaign contributors to political campaigns. One can then argue that since the Supreme Court has already ruled that campaign donations are a form of speech, then these clauses give more weight to, and enable, more public sector speech. And when one considers that the power of the state is used to force all residents, through taxation, to subsidize the speech of this small group of people who are protected by the state’s constitution, then the effect is for the state to use its governmental powers to tax to promote the speech of only a select group of people, those who belong to public unions. This also violates the one person one vote mandate.

That these clauses promote discriminatory speech is easy to prove. In Illinois when the state income tax was raised from three to five percent, 89% of this extra revenue went only to pay public sector pensions. 

Government cannot force taxpayers to fund the campaigns of only one political party, yet in states dominated by Democrat Party public unions, taxpayers of all parties are forced to support the political speech only of Democrats.

This happens at the national level as well. Of the six biggest campaign contributors over twenty years, four are national public sector unions and this give virtually all of their national campaign contributions to only one political party, Democrats. Federal Election Commission records compiled by the Center for Responsive Politics prove this. 

And in Illinois the two biggest campaign contributors are the Chicago Teachers’ Union and the Illinois Teachers Federation. Since these unions are in turn supported by property and other taxes -- in Cook County, Illinois, 90% of the recent sales tax increase goes to public pensions -- then every person in the state is forced to subsidize the Democrat Party. If this is legal then we are back in the middle ages, Democrats are the nobility, and everyone else a serf.

Federal workers also have collective bargaining powers, are immune to Federal laws such as ObamaCare, social security contributions, and so on. In fact, of those IRS lawyers who made campaign contributions, 95% gave money only to Democrats, including Barack Obama’s 2012 campaign. In effect the Democrat Party has slowly transformed the U.S. into an oligarchy where all persons are forced to support only their party. And if anyone sues a state for this clause they will go before Federal Judges who may belong to a union. If everyone involved in this issue is part of a public union there can be no protection under the constitution. This also provides another reason why these clauses are unconstitutional.

Another violation results from the fact that these pension contracts are in force for decades. There is no constitutional basis to force voters who live thirty years from now to support appropriations contracted today. 

Anyone who does not see this as unconstitutional should imagine a situation in which all the oil companies of a state were the biggest campaign contributors to only one political party, with the party then giving them 0.9% of every dollar spent by consumers, alomg with most of the money from property taxes, and then protected this arrangement with a clause in the state constitution that specified: “all contracts with oil companies cannot be diminished or impaired.” Most Americans see that when states give contracts to lobbyist groups who have made campaign contributions, there is a potential for corruption. And while this arrangement is widely accepted as corruption, these contracts are not protected by state constitutions or persist indefinitely. 

Some may argue that oil companies don’t perform public service. But there’s nothing in the U.S. Constitution that says public servants are entitled to immunity from the Fourteenth Amendment. The primary function of the Constitution is to limit the power of government. If SCOTUS ever upholds these contract clauses, equality is over.