States Barred From Quitting Social Security

The Supreme Court said Thursday that state and local governments may no longer withdraw their employees from Social Security, a ruling that will save the system up to $1 billion a year.

In rejecting appeals from nearly 200 government units in California, the high court said Congress had the right to declare in 1983 that state and local agencies, once in, may not leave the nation’s pension and disability insurance system.

Last year, a federal District Court in Sacramento ruled that that law violated the “contract rights” of municipalities that had voluntarily entered the system.

Unanimous Ruling

But, on Thursday, the justices ruled unanimously that Congress may revise the voluntary “agreements” signed by the states when they entered the program.

In the original Social Security Act of 1935, “Congress anticipated the need to respond to changing conditions . . . (and) expressly reserved the right to alter, amend or repeal any provision” of the law, Justice Lewis F. Powell wrote for the court.

What changed in the last decade was that Social Security became less attractive to workers, both because of higher costs and the fear that the system in the future could not provide all of its promised benefits. As a result, government workers were pulling out in greater numbers.

L.A. County Withdrew

Los Angeles County, with its 54,000 employees, withdrew from the system in 1982. In 1983, 634 state and local entities employing 237,000 workers filed notice that they intended to pull out.

“After studying the trend toward termination of agreements, Congress determined that the increasing rate of withdrawals was threatening the integrity of the system,” Powell noted. Because of this threat to the system and to 105 million Americans now covered by it, Congress was justified in revoking the states’ right to withdraw, the court said.

“This means that everything is cast in concrete,” said N. Eugene Hill, an assistant attorney general for California.

Government units that are not in Social Security need not join, he said, but those that are in may not pull out.

Attorneys noted that only 34,000 of about 511,000 state and other governmental employees in California were seeking to withdraw. The state had no plans to withdraw its more than 100,000 employees. Five states--Alaska, Nevada, Maine, Massachusetts and Ohio--have not enrolled their employees in the system.

By contrast, workers in the private sector have been required to pay in to Social Security since 1935. Federal employees had been excluded, but the 1983 law said that newly hired federal workers must enroll in Social Security.

Parties to Suit

In Southern California, the cities of Redondo Beach and San Clemente, library districts in Placentia and Yorba Linda, a municipal water district in Big Bear and recreation and park districts in Rancho Simi and North Bakersfield were among 21 government units that filed the original suit against the law.

“What they had found out was that they could provide more benefits through the private sector at a lower cost,” said Sacramento attorney Ernest Schulzke, who represented the 21 units under the name of Public Agencies Opposed to Social Security Entrapment (POSSE).

In every unit, a majority of the employees had voted in favor of withdrawing before a notice was filed with the Social Security Administration, he said. The withdrawals were pending when Congress changed the law.

“I guess this means Congress can do whatever it pleases. It can even abrogate contractual provisions,” Schulzke said.

Financial Impact Cited

The decision was a victory for the Reagan Administration, which had argued before the court that allowing state government workers to withdraw would have an “immense . . . financial impact on the system” of between $500 million and $1 billion per year. (Bowen vs. POSSE, 85-521.)

In another case, the court ruled that, if convicted, persons accused of carrying a gun while committing a crime may be sentenced to a stiff minimum term without proof beyond a “reasonable doubt” that they had a weapon in their possession. The 5-4 opinion written by Justice William H. Rehnquist upheld a Pennsylvania law requiring at least a five-year term for such crimes. (McMillan vs. Pennsylvania, 85-215.)