WASHINGTON -- The Supreme Court yesterday let stand a lower court ruling that upheld the District of Columbia in mandating furloughs and eliminating pay increases for city workers.

The furloughs and pay freeze were part of efforts to keep the city's $3.3 billion fiscal 1993 budget in balance. Fiscal 1993 ended Sept. 30.

Labor unions representing city workers argued that the furloughs and pay freeze violated the U.S. Constitution's contracts clause. The clause prohibits states from passing laws "impairing the obligation of contracts."

The high court gave no reason for its decision not to review the case.

In seeking review of the District of Columbia appeals court ruling that upheld the furloughs and pay freeze, labor unions warned that the issue had implications for those who buy the district's debt.

"Although the question arises in the context of collective bargaining agreements, it is vitally important to financial institutions and investors who lend money to the district and purchase its bonds, as well as those who contract to provide it goods and services," the labor unions said in their petition to the Supreme Court. "Until now, those parties were assured that the contract clause did apply to the district."

The case was complicated by the fact that the city's budget must be approved by Congress. The contracts clause refers to states, not the federal government, leaving it unclear whether the clause applied when the unions first filed suit in early 1992.

The District of Columbia Superior Court on Oct. 22, 1992, answered in the affirmative, and issued an injunction barring the district from imposing the freeze and furloughs measures.

The superior court first found that although the district is not a state, it is covered by the Constitution's ban on impairment of contracts. The court went on to find that the furloughs and pay freeze were an impairment of the collective bargaining agreements between the labor unions and district government.

But the district government immediately appealed the decision to the District of Columbia Court of Appeals, and won a delay of the injunction pending the court's review of the case.

On Jan. 15, the appeals court tossed out the injunction and ruled that Congress is not subject to the contracts clause when enacting legislation for the district. The appeals court said, in essence, that Congress may ratify legislation enacted by the district that repudiates its contracts.

In seeking review by the U.S. Supreme Court, the labor unions said federal lawmakers did not intend for their approval of the plan to close off debate over the measure.

In a report accompanying the legislation setting the city's budget, members of Congress said the city "takes many actions with which individual members of Congress, and citizens of the district, may disagree."

The lawmakers went on to say that because of the "unique, and sometimes awkward, role the Congress plays" in the city's affairs, Congress often is called upon to ratify district government actions. They expressed the hope that the furlough and pay freeze issue would be resolved "on its own merits" and "not be viewed through the prism of congressional action or inaction."

In deciding not to review the case, the justices may have felt that the issue was not a national concern since the district government's relationship with the federal government is so unique. No other state or local government, for example, has its budgets approved by Congress.

Left unclear is whether the court would have examined the case further if Congress did not review and approve the city's budget. Top city officials and some members of Congress have advocated the notion of allowing the city's budget to become law without congressional scrutiny.

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