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Entrenching is What Compacts Do

The Compact for a Balanced Budget permits withdrawal by Member States through the enactment of an appropriate statute up until the 38th state joins the Compact. After the 38th state joins, however, withdrawal requires unanimous consent of all Member States. The contractual entrenchment of the Compact continues thereafter until the job is done or the Compact sunsets-seven years after its first enactment.

Significantly, the requirement of unanimous consent of all Member States for withdrawal from the Compact is actually the normal default rule for Compacts. This is because Compacts are binding sovereign contracts under Article I, Section 10 of the U.S. Constitution (the Contracts Clause), which prohibits states from impairing the obligation of contract. Green v. Biddle, 21 U.S. 1 (1823) (“[A] state has no more power to impair an obligation into which she herself has entered than she can the contracts of individuals”).

Under well-established law, in the absence of the withdrawal provision in the Compact, a Member State would not have the constitutional power to repeal entry unilaterally or otherwise withdraw unilaterally from the Compact for a Balanced Budget until the Compact was fully performed or terminated by its own terms. Dyer v. Sims, 341 U.S. 22, 28 (1951) (“It requires no elaborate argument to reject the suggestion that an agreement solemnly entered into between states by those who alone have political authority to speak for a state can be unilaterally nullified, or given final meaning by an organ of one of the contracting States”).

Only if a state reserves the right to alter or withdraw unilaterally from a Compact it has joined, can the state do so without violating the U.S. Constitution’s Contracts Clause. See, e.g., Seattle Master Builders v. Pacific Northwest Electric, 786 F.2d 1359, 1371 (9th Cir. 1986) (“state can impose state law on a compact organization only if the compact specifically reserves the right to do so”); C.T. Hellmuth & Assoc. v. Washington Metro. Area Transit Auth., 414 F. Supp. 408 (D. Md 1976) (“[A] compact constitutes not only law, but a contract which may not be amended, modified, or otherwise altered without the consent of the parties”); Aveline v. Penn. Bd. of Probation & Parole, 729 A.2d 1254, 1257 n10 (Pa. Commw. Ct. 1999) (“[A compact] takes precedence over the subsequent statutes of signatory states and, as such, a state may not unilaterally nullify, revoke or amend one of its compacts if the compact does not so provide.”).

Thus, by allowing free unilateral statutory withdrawal until the 38th state joins, the Compact's withdrawal procedure actually reduces the extent to which the Compact for a Balanced Budget would otherwise be entrenched from subsequent legislative action under the U.S. Constitution’s Contracts Clause.

In fact, most compacts are far more restrictive on the ability of states to withdraw unilaterally than is proposed in the Compact for a Balanced Budget.

Perhaps most famously, the Colorado River Compact may only be terminated upon unanimous agreement (Article X) and it even entrenches the rights established by it after termination. This is a very robust form of entrenchment—even if you unanimously terminate the Compact, the rights it created and vested will remain enforceable. It basically means that the Compact cannot, in substance, be freely terminated ever!

Similarly, an existing compact dealing with radioactive waste (of which Michigan and many other states are members, M.C.L.A. 3.751, 3.722) provides at Article VIII(e): “no withdrawal may take effect until five years after the governor of the withdrawing state gives notice in writing of the withdrawal to the Commission and to the governor of each party state."

Likewise, a crime prevention compact (of which Michigan and many other states are members, M.C.L.S. §§ 3.1051 – 3.1053), which allows renunciation but only under specific terms and after the expiration of a period of time of 180 days (Article IX (a) and (c)).

These two Compacts alone essentially bar unilateral withdrawal for a period of 180 days to 5 years. By contrast, the Compact for a Balanced Budget has a far more limited degree of contractual entrenchment. The Compact for a Balanced Budget would only bar unilateral withdrawal after 38 states join the Compact and, mostly likely, for no more than 60 days because of the default time frame in which a convention must be organized and adjourned once the 38th state joins the Compact and Congress calls the convention. Moreover, in any event, the contractual entrenchment cannot possibly last longer than the seven year sunset imposed from the first enactment date (April 12, 2014), which ensures the Compact will self-repeal if it is not fully performed by that time.

The extended period of time in which unilateral withdrawal is freely permitted (until the 38th state joins) ensures that the Member States will have plenty of opportunity to reconsider entry into the Compact and withdraw if circumstances materially change from the date of adoption. The modicum of contractual entrenchment furnished by the Compact for a Balanced Budget is very carefully tailored to ensure that the Member States respect their agreement not to participate in a “runaway convention” and do not unilaterally disregard the Compact’s rules that require the convention it organizes to be limited to a 24 hour up-or-down vote on the contemplated federal Balanced Budget Amendment.

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