Bowen v. PAOSSE,
477 U.S. 41 (1986)

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U.S. Supreme Court

Bowen v. PAOSSE, 477 U.S. 41 (1986)

Bowen v. Public Agencies Opposed to Social Security Entrapment

No. 85-521

Argued April 28, 1986

Decided June 19, 1986

477 U.S. 41


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. II), 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 As originally enacted, § 418(g) permitted States to terminate their § 418 Agreements upon giving at least two years' advance notice in writing to the Secretary.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 477 U. S. 42

Held: Amended § 418(g) does not effect a taking of property within the meaning of the Fifth Amendment. Pp. 477 U. S. 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. 477 U. S. 61-53.

(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. 700; National Railroad Passenger Corp. v. Atchison, T. & S. F. R. Co., 470 U. S. 451. 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. 477 U. S. 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. 477 U. S. 54-56.

613 F.Supp. 558, reversed and remanded.

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

Page 477 U. S. 43

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