SSR 87-10c: SECTIONS 218 AND 1104 OF THE SOCIAL SECURITY ACT (42 U.S.C. 418 AND 1304) STATE AND LOCAL EMPLOYMENT -- NONTERMINABILITY OF COVERAGE AGREEMENTS -- CONSTITUTIONALITY

20 CFR 404.1201

SSR 87-10c

Bowen et. al. v. Public Agencies Opposed to Social Security Entrapment et

al., _____ U.S. _____, 54 U.S.L.W. 4699 (6/19/86)

POWELL, Supreme Court Justice:

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. , 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., p. 3

(1949). 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-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). 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]

t 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). 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 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

g 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 government employees, or

both. [8] "By the early 1960's

most States had made coverage agreements," H. R. Rep. No. 98-25, at 18,

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. 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.

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

em. 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 entities employing 190,000

workers." Ibid . Finally, "for the two-year period of 1983-84,

terminations [were] pending for 634 State and local entities employing

227,000 workers." Ibid .

After studying the trend towards termination of § 418 Agreements and the

reasons for it, [10] Congress

determined that the increasing rate of withdrawals was threatening the

integrity of the System in a number of important respects. As an initial

matter, Congress observed that the current rate of withdrawals would cost

the System between $500 million and $1 billion annually. H. R. Comm. Print

97-34, at 13-14. Congress further concluded that States' ability to

withdraw was "inequitable both for the employees who lose coverage and for

the vast majority of the nation's workforce who continue to pay into the

system." H. R. Rep. No. 98-25, at 18-19. While States terminating § 418

Agreements often did so in the course of designing benefits packages that

would attract long-term workers, Congress believed that sound social

policy also required protection of employees who move from job to job. Id. , at 19. Moreover, "the shifting of the tax burden of social

security from those workers who withdraw, but who remain entitled to

future benefits based on their past earnings," created resentment on the

part of workers whose participation in the System was

mandatory. [11] Ibid .

Congress believed that sound social

policy also required protection of employees who move from job to job. Id. , at 19. Moreover, "the shifting of the tax burden of social

security from those workers who withdraw, but who remain entitled to

future benefits based on their past earnings," created resentment on the

part of workers whose participation in the System was

mandatory. [11] Ibid .

Accordingly, Congress decided to amend § 418(g) by repealing the

termination provision. As amended, § 418(g) provides 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 enactment of the

amendment. [12]

B

On March 9, 1951, California and the Secretary entered into a § 418

Agreement, effective as of January 1, 1951, under which the parties agreed

to extend Social Security coverage to employees of the State and its

political subdivisions. The Agreement recited that its provisions were "in

conformity with" § 418, and authorized the State to modify the Agreement

to include additional groups of employees, "such modification to be

consistent with the provisions of" § 418. The Agreement also included a

clause that permitted the State to terminate the Agreement either in its

entirety or with respect to particular coverage groups. The terms of the

clause exactly mirrored the statutory termination provision embodied in §

418(g). [13]

y the Agreement

to include additional groups of employees, "such modification to be

consistent with the provisions of" § 418. The Agreement also included a

clause that permitted the State to terminate the Agreement either in its

entirety or with respect to particular coverage groups. The terms of the

clause exactly mirrored the statutory termination provision embodied in §

418(g). [13]

When Congress amended § 418(g) in 1983, California had filed termination

notices on behalf of 71 of its political subdivisions, employing

approximately 34,000

persons. [14] When the

amendment prevented the termination notices from taking effect, appellees

commenced the lawsuits underlying this appeal, naming as defendants the

United States, and the Secretary and Undersecretary of the Department of

Health and Human Services. The first lawsuit was brought by several public

agencies of California, their employees and taxpayers, and by an

organization calling itself Public Agencies Opposed to Social Security

Entrapment. These parties alleged, among other claims, that amended §

418(g) had deprived them of their "contract rights" without just

compensation in violation of the Fifth

Amendment. [15] In the second

lawsuit, the State of California sought to enjoin enforcement of § 418(g)

as well as a declaration that the section was unconstitutional. The State

claimed that the federal defendants had acted in excess of their

constitutional authority and had violated the Tenth Amendment by breaching

their contract with the State and by impairing the State's "ability . . .

to structure its relationships with its

employees." [16] App. 26-27.

enjoin enforcement of § 418(g)

as well as a declaration that the section was unconstitutional. The State

claimed that the federal defendants had acted in excess of their

constitutional authority and had violated the Tenth Amendment by breaching

their contract with the State and by impairing the State's "ability . . .

to structure its relationships with its

employees." [16] App. 26-27.

Ruling on cross-motions for summary judgment, the District Court held

that § 418(g) was unconstitutional. Public Agencies Opposed to Soc.

Sec. Entrapment v. Heckler , 613 F. Supp. 558 (ED Cal.

1985). [17] The court decided

that the § 418 Agreement created a "contractual right" to withdraw from

the Social Security System that ran in favor of both the State and its

public agencies. This contractual right existed independently of the

statutory termination provision, and Congress derived no authority from §

1304 [18] to amend the § 418

Agreement, as opposed to § 418.

The contractual right to withdraw, reasoned the District Court,

constituted "private property" within the meaning of the Just Compensation

Clause of the Fifth Amendment. Amended § 418(g) effected a taking of that

property without providing the requisite just compensation. In the court's

view, the "only rational compensation would be reimbursement by the United

States to the State or public agencies, of the amount of money they

currently pay to the United States for their participation" in the Social

Security Program. 613 F. Supp., at 575. Since amended § 418(g) was enacted

to solve the Social Security "financial crisis," however, the District

Court concluded that an order awarding this measure of damages would be

"simply and clearly contrary to the will of Congress." Ibid .

Accordingly, the District Court simply declared § 418(g) unconstitutional. Ibid . We noted probable jurisdiction, 474 U.S. (1985), and

now reverse.

II

A

e amended § 418(g) was enacted

to solve the Social Security "financial crisis," however, the District

Court concluded that an order awarding this measure of damages would be

"simply and clearly contrary to the will of Congress." Ibid .

Accordingly, the District Court simply declared § 418(g) unconstitutional. Ibid . We noted probable jurisdiction, 474 U.S. (1985), and

now reverse.

II

A

Congress' decision that American workers need a federal program of social

insurance protecting them in old age and disability "has of necessary

called forth a highly complicated and interrelated statutory structure." Flemming v. Nestor , 363 U.S. 603, 610 (1960). Since the Act was

designed to protect future, as well as present, generations of workers, it

was inevitable that amendment of its provisions would be necessary in

response to evolving social and economic conditions unforeseeable in 1935. Ibid . Congress anticipated that it would be necessary to respond to

"ever-changing conditions" with "flexibility and boldness," ibid. ,

and therefore included in the Act "a clause expressly reserving to it

'[t]he right to alter, amend, or repeal any provision' of the Act. § 1104,

49 Stat. 648, 42 U.S.C. § 1304. That provision makes express what is

implicit in the institutional needs of the program." Id. , at 611.

As appellees must concede, the Act itself, including the original version

of § 418(g), created no contractual rights. Cf. Flemming v. Nestor,

supra , at 608-611; see also National Railroad Passenger Corp. v.

Atchison, T&S.F.R. Co. , 470 U.S. _____, _____ (1985). Therefore,

there is no doubt that Congress had the power to amend the section.

stitutional needs of the program." Id. , at 611.

As appellees must concede, the Act itself, including the original version

of § 418(g), created no contractual rights. Cf. Flemming v. Nestor,

supra , at 608-611; see also National Railroad Passenger Corp. v.

Atchison, T&S.F.R. Co. , 470 U.S. _____, _____ (1985). Therefore,

there is no doubt that Congress had the power to amend the section.

In view of the purpose and structure of the Act, 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. While the Federal

Government, as sovereign, has the power to enter contracts that confer

vested rights, and the concomitant duty to honor those rights, see Perry v. United States , 294 U.S. 330, 350-354 (1935); Lynch v.

United States , 292 U.S. 571 (1934), we have declined in the context of

commercial contracts to find that a "sovereign forever waives the right to

exercise one of its sovereign powers unless it expressly reserves the

right to exercise that power in" the contract. Merrion v. Jicarilla

Apache Tribe , 455 U.S. 130, 148 (1982). Rather, we have emphasized

that "[w]ithout regard to its source, sovereign power, even when

unexercised, is an enduring presence that governs all contracts subject to

the sovereign's jurisdiction, and will remain intact unless surrendered in

unmistakable terms." Ibid . Therefore, contractual arrangements,

including those to which a sovereign itself is party, "remain subject to

subsequent legislation" by the sovereign. Id. , at 147.

gard to its source, sovereign power, even when

unexercised, is an enduring presence that governs all contracts subject to

the sovereign's jurisdiction, and will remain intact unless surrendered in

unmistakable terms." Ibid . Therefore, contractual arrangements,

including those to which a sovereign itself is party, "remain subject to

subsequent legislation" by the sovereign. Id. , at 147.

These principles form the backdrop against which we must consider the

District Court's decision effectively to forbid Congress to amend a

provision of the Social Security Act. That decision heeded none of this

Court's often-repeated admonitions that contracts should be construed, if

possible, to avoid foreclosing exercise of sovereign authority. Those

admonitions take on added force when the arrangement pursuant to which the

Government is claimed to have surrendered a sovereign power is one that

serves to implement a comprehensive social welfare program affecting

millions of individuals throughout our Nation.

B

Venerable precedent supports our conclusion that Congress reserved the

authority to amend not only § 418 but also Agreements entered into "in

conformity with" that section. Just last term, we considered a statute in

which Congress had "expressly reserved its right to repeal, alter, or

amend the Act at any time," National Railroad Passenger Corp.,

supra , at _____, and we noted that the "effect of these few simple

words" has been settled since the Sinking-Fund Cases , 99 U.S. 700

nly § 418 but also Agreements entered into "in

conformity with" that section. Just last term, we considered a statute in

which Congress had "expressly reserved its right to repeal, alter, or

amend the Act at any time," National Railroad Passenger Corp.,

supra , at _____, and we noted that the "effect of these few simple

words" has been settled since the Sinking-Fund Cases , 99 U.S. 700

(1879). Id. , at _____. The Sinking-Fund Cases involved

federal statutes that governed railroads' obligations to the United States

on subsidy bonds. The statutes in question expressly reserved Congress'

authority to repeal, alter, or amend them, and Congress exercised that

power by requiring the railroads to set aside part of their current income

as a sinking fund to meet their debts to the Government as those debts

came due. The railroads claimed that this amendment deprived them of

property without due process and improperly interfered with their vested

rights. Id. , at 719. In rejecting those arguments, the Court

explained that through the language of reservation, "Congress not only

retains, but has given special notice of its intention to retain, full and

complete power to make such alterations and amendments as come within the

just scope of legislative power." Id. , at 720. The effect of the

Court's construction of the reservation was to authorize Congress not only

to amend the statute granting the railroads' corporate charter but also to

change the stipulations of a contract made under that charter subsequent

to and independently of the original statute. Whatever the limits of the

reserved power, it was "safe to say" that Congress had the authority to

provide by amendment whatever rules it might "have prescribed in the

original charter" and terms governing the "performance of contracts

already entered into." Id. , at 721.

hange the stipulations of a contract made under that charter subsequent

to and independently of the original statute. Whatever the limits of the

reserved power, it was "safe to say" that Congress had the authority to

provide by amendment whatever rules it might "have prescribed in the

original charter" and terms governing the "performance of contracts

already entered into." Id. , at 721.

This reasoning disposes of appellees' contention that Congress lacked

authority to amend California's § 418 Agreement. The State accepted the

Agreement under an Act that contained the language of reservation. That

language expressly notified the State 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. [19] We have no doubt

that in 1950 Congress could have provided that States electing to enter

the Social Security System would not have authority to terminate their

participation. Therefore, amended § 418(g) falls well within the limits of

Congress' reserved power to alter the law governing performance of § 418

Agreements.

C

The § 418 Agreement provided that its terms were "in conformity with" §

418. Therefore, the Agreement expressly incorporated § 418, which of

course was fully subject to Congress' reserved power of amendment.

Appellees nonetheless insist that the termination provision embodied in

the Agreement constituted a valuable property right that was "taken" when

Congress enacted amended § 418(g). In the Sinking-Fund Cases , the

Court did observe that Congress' exercise of the reserved power "has a

limit" in that Congress could not rely on that power to "take away

property already acquired under the operation of the charter, or to

deprive the corporation of the fruits actually reduced to possession of

contracts lawfully made." 99 U.S., at 720

n

Congress enacted amended § 418(g). In the Sinking-Fund Cases , the

Court did observe that Congress' exercise of the reserved power "has a

limit" in that Congress could not rely on that power to "take away

property already acquired under the operation of the charter, or to

deprive the corporation of the fruits actually reduced to possession of

contracts lawfully made." 99 U.S., at 720. Similarly, other decisions have

held that Congress does not have the power to repudiate its own debts,

which constitute "property" to the lender, simply in order to save money. Perry v. United States , 294 U.S. at 350-351; see Lynch v. United

States , 292 U.S., at 576-577.

But 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 Agreement exactly

tracked the language of the statute, conferring no right on the State

beyond that contained in § 418 itself. The provision constituted neither a

debt of the United States, see Perry v. United States, supra , nor

an obligation of the United States to provide benefits under a contract

for which the obligee paid a monetary premium, see Lynch v. United

States, supra . The termination clause was not unique to this

Agreement; nor was it a term over which the State had any bargaining power

or for which the State provided independent consideration. Rather, the

provision simply was part of a regulatory program over which Congress

retained authority to amend in the exercise of its power to provide for

the general welfare. Under these circumstances, we conclude that the

termination provision in California's § 418 Agreement did not rise to the

level of "property." The provision simply cannot be viewed as conferring

any sort of "vested right" in the face of precedent concerning the effect

of Congress' reserved power on agreements entered into under a statute

containing the language of reservation

al welfare. Under these circumstances, we conclude that the

termination provision in California's § 418 Agreement did not rise to the

level of "property." The provision simply cannot be viewed as conferring

any sort of "vested right" in the face of precedent concerning the effect

of Congress' reserved power on agreements entered into under a statute

containing the language of reservation. Since appellees had no property

right in the termination clause, amended § 418 did not effect a taking

within the meaning of the Fifth Amendment.

III

The judgment of the District Court is reversed, and the case is remanded

for further proceedings consistent with this decision.

It is so ordered .

[1] According to the Senate

Special Committee on Aging, the Social Security System is "much more" than

a "retirement program for older workers . . . . Social security is also

family security, protecting workers and their families from loss of

earnings because of death, retirement, or disability." Senate Special

Committee on Aging, Termination of Social Security Coverage: The Impact on

State and Local Government Employees, 94th Cong., 2d Sess., p. 9 (Comm.

Print 1976) (hereinafter Senate Report on Aging).

[2] Congress included this

provision in the original Act, and has retained it ever since. See Flemming v. Nestor , 363 U.S. 603, 610-611 (1960).

[3] "The ten percent of workers

not . . . covered by social security [in 1983] include[d] most Federal

civilian workers (2.4 out of 2.7 million), about 30 percent of State and

local employees (approximately 3 million), and 10-15 percent of employees

of nonprofit organizations (up to 1 million)." H. R. Rep. No. 98-25, at

13.

r since. See Flemming v. Nestor , 363 U.S. 603, 610-611 (1960).

[3] "The ten percent of workers

not . . . covered by social security [in 1983] include[d] most Federal

civilian workers (2.4 out of 2.7 million), about 30 percent of State and

local employees (approximately 3 million), and 10-15 percent of employees

of nonprofit organizations (up to 1 million)." H. R. Rep. No. 98-25, at

13.

[4] As Congress explained when

it was studying the reasons underlying States' decisions to withdraw

employees from the System, "[t]he Social Security Act of 1935 excluded

from coverage all employment for States and localities, primarily because

of the question of the constitutionality of any general levy of the

employer tax on States and localities." Subcommittee on Social Security of

House Committee on Ways and Means, Termination of Social Security Coverage

for Employees of State and Local Governments and Nonprofit Groups, 97th

Cong., 2d Sess., ser. no. WMCP:97-34, p. 20 (Comm. Print 1982)

(hereinafter H. R. Comm. Print 97-34).

[5] At the time Congress enacted

the amendment challenged in this case, it explained that provision for

voluntary participation by employees of State and local governments was

"the result of congressional desire to extend coverage as quickly and with

as little difficulty as possible to those employees who needed it most."

H. R. Rep. No. 98-25, at 19.

[6] Under the Act, therefore,

States decide which groups of employees will receive Social Security

coverage. Section 418(d)(3) creates an exception to this rule. Where state

employees already are members of a retirement program, that section

requires that a majority of such employees agree to participate in the

Social Security System. 42 U.S.C. § 418(d)(3) (1982 ed., Supp. II).

[7] For purposes of conciseness,

we use the term "Secretary" to refer to the federal official responsible

for administration of the System both under the current and prior versions

of the Social Security Act.

ers of a retirement program, that section

requires that a majority of such employees agree to participate in the

Social Security System. 42 U.S.C. § 418(d)(3) (1982 ed., Supp. II).

[7] For purposes of conciseness,

we use the term "Secretary" to refer to the federal official responsible

for administration of the System both under the current and prior versions

of the Social Security Act.

[8] As of 1983, the employees of

Alaska, "the only State to withdraw from the system, and of Maine,

Massachusetts, Nevada, and Ohio, which never chose to participate in the

system, "were not covered by Social Security. H. R. Rep. No. 98-25, at 17.

Each of those States, however, was party to a § 418 Agreement that

provided coverage to local government employees.

[9] During these years, "many

terminations were caused by consolidation of local jurisdictions, rather

than by withdrawal from the social security system." Id. , at 18.

[10] The Senate Special

Committee on Aging found that States offered the following reasons for

terminating their § 418 Agreements: employees wanted more take-home pay

through a reduction in payroll deductions; state and local governments

sought to cut costs by dropping Social Security coverage; news reports

concerning "the projected exhaustion of social security trust funds in the

1980's" led employees to believe that benefits would cease; state and

local governments believed that Social Security taxes would continue to

rise, and thus viewed termination as a means "to achieve more static and

budgetable expenditures;" some employees favored termination because they

perceived that they would receive Social Security benefits even if they

were no longer required to pay into the System; and alternative retirement

plans were believed to pay higher levels of benefits. Senate Report on

Aging, pp.6-8; see also H. R. Comm. Print 97-34, at 6-7

ion as a means "to achieve more static and

budgetable expenditures;" some employees favored termination because they

perceived that they would receive Social Security benefits even if they

were no longer required to pay into the System; and alternative retirement

plans were believed to pay higher levels of benefits. Senate Report on

Aging, pp.6-8; see also H. R. Comm. Print 97-34, at 6-7. The Committee

also found that "many" decisions to withdraw from the System were made in

the absence of "[i]nformation necessary for informed judgments." Senate

Report on Aging, at 8.

[11] Congress regarded

voluntary participation by some employees, such as those of state and

local governments, as an anomaly in an otherwise mandatory program. "The

fundamental principle underlying compulsory coverage for most workers is

that responsibility for paying for insurance against such risks should be

borne by the society as a whole to the extent possible." H. R. Comm. Print

97-34, at 4. Mandatory participation is necessary to sustain the

"'pay-as-you-go' financing structure," particularly since workers retain

coverage "regardless of how many times they change their jobs in a

lifetime." Ibid . Mandatory participation ensures workers that they

will obtain a minimum level of benefits in the event of a catastrophe that

the worker did not foresee or plan for. Ibid . In the context of a

mandatory system, voluntary participation for some employees was, in

Congress' view, "inconsistent with the principle of equal treatment of all

citizens." Id. , at 5.

[12] The amendment, set out in

Pub. L. 98-21, § 103, 97 Stat. 71-72 provides:

[13] The termination provision

in California's § 418 Agreement stated:

[14] If these employees were

withdrawn from the System, "approximately $33.7 millio[n] would be lost to

the social security trust funds in 1984." Id. , at 61.

nconsistent with the principle of equal treatment of all

citizens." Id. , at 5.

[12] The amendment, set out in

Pub. L. 98-21, § 103, 97 Stat. 71-72 provides:

[13] The termination provision

in California's § 418 Agreement stated:

[14] If these employees were

withdrawn from the System, "approximately $33.7 millio[n] would be lost to

the social security trust funds in 1984." Id. , at 61.

[15] Plaintiffs in this

lawsuit also alleged that the enactment denied them their contract rights

without due process, that it constituted an attempt to regulate

"'essential state and local government functions,' in violation of the

Tenth Amendment," and that they were entitled to specific performance for

the Government's breach of contract. 613 F. Supp., at 565.

[16] Though the State did not

press any claim that amended § 418(g) effected a taking of its property

without the compensation required by the Fifth Amendment, the District

Court rested its decision on that ground, finding it unnecessary to reach

any of the arguments raised by the State. Therefore, none of those

arguments is before us.

[17] Before reaching the

merits, the District Court determined that the plaintiffs in both suits,

appellees here, had standing to challenge the validity of the enactment.

With respect to the first lawsuit, brought by the public agencies and

certain individuals, the court concluded that the agencies alleged an

injury sufficient to confer standing because they claimed that amended §

418(g) deprived them of their contractual rights as third party

beneficiaries of the State's § 418 Agreement. Id. , at 567-570. The

individual plaintiffs had standing because they claimed that the federal

defendants had denied them equal protection. Id. , at 571

uals, the court concluded that the agencies alleged an

injury sufficient to confer standing because they claimed that amended §

418(g) deprived them of their contractual rights as third party

beneficiaries of the State's § 418 Agreement. Id. , at 567-570. The

individual plaintiffs had standing because they claimed that the federal

defendants had denied them equal protection. Id. , at 571. With

respect to the second suit, the court found that the State had standing

because it alleged "a judicially cognizable interest in the preservation

of its own sovereignty, and a diminishment of that sovereignty by the

alleged interference in its employment relations with its public

employees." Id. , at 567. While appellants suggest in this Court

that none of the plaintiffs in the lawsuit brought by the public agencies

was properly before the District Court, they concede, and we agree, that

there is no question concerning the State's standing to bring the action.

Therefore, the District Court plainly had authority to resolve this

controversy, as do we.

[18] Title 42 U.S.C. § 1304

provides: "The right to alter, amend, or repeal any provision of this

chapter is hereby reserved to the Congress."

[19] The language of § 418 and

of California's § 418 Agreement provides further support for this

conclusion. Section 418(a)(1) requires that the provisions of § 418

Agreements be "not inconsistent with the provisions of this section," 42

U.S.C. § 418(a)(1), and the Agreement provided that it was "in conformity

with" § 418. The State was thus on notice that the terms of its Agreement

must mirror the provisions of the section, which could be amended under

the reserved power. If Congress amended § 418 in such a manner as to

render a provision of an Agreement "inconsistent" or no longer "in

conformity" with the section, then the logical conclusion is that the

inconsistent provision no longer was to be given legal effect.