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Judicial Intervention In Public Pension Crisis: An Institutionalist Critique

Dec 2013
Working Paper
By  Peter Conti-Brown, Ronald Gilson
Legal scholars have long debated the role for courts in with respect to governmental action in response to crisis. Most of those crises, however, are exogenous to the political process. The courts’ role in response to politically endogenous crises is more complicated. We evaluate the role of the judiciary in those endogenous crises, looking most closely at the judicial treatment of public pensions. Assessing institutional competence schematically with reference to an institution’s democratic accountability and fact-finding ability, we argue that, where institutions function properly, judicial intervention in politically endogenous economic crises should be close to nonexistent. But because parties invoke the courts’ jurisdiction to resolve fiscal disputes, and that jurisdiction is not otherwise barred, judicial determinations will continue to occur. We argue that, in those circumstances where the judiciary must intervene, that intervention should respect the judiciary’s comparative institutional incompetence by treading lightly, constitutionally speaking: where the legal question leaves the court room, and where a non-constitutional determination is possible, courts addressing the state’s fiscal policy-making apparatus should avoid constitutional pronouncements entirely. We then apply this framework to two areas where courts have or might breach it: the out-of-bankruptcy application of the Contracts Clause to public pensions (in favor of public employees), and the in-bankruptcy application of the Supremacy Clause (against those employees). The critique, then, is an institutionalist one: the point is not to promote or demote the interests of a single class or faction active within the fiscal policy-making process—whether bondholders, public unions, taxpayers, or the government—but to locate that policy-making process within the most democratically responsive and empirically competent institutions.