This is the fifth of a six-part series on the constitutionality of the state’s budget guardrails. Here are Parts One, Two, Three and Four. The “bond lock” is the most important budget guardrail. It was designed as the iron fist enforcement mechanism to meld the individual budget statutes into a unified package intended to bind future legislatures from making any revisions except by a supermajority three-fifths vote for up to ten years. Enacted in 2017 and re-enacted in 2023, the bond lock requires the state treasurer to include a pledge to bond purchasers that for ten years the state will not enact any laws that change the state’s obligation to comply with the state spending cap or statutory guardrails. That’s the case unless the governor were to issue an emergency declaration and three-fifths of the members of the House and Senate approve the waiver, and the waiver is limited to the current fiscal year. Remarks made during the Senate floor debate made clear that the bond lock was incorporated into the 2017 guardrails because– in the absence of a constitutional provision– a quasi-legal device was needed to bind future legislatures and to require supermajority votes. A Shipman & Goodwin 2018 legal memo to the state treasurer described how the purported enforcement mechanism of a bond covenant would “vest” or secure rights in the bondholders to prevent future alterations of the guardrail statutes. The anti-delegation rule But the emperor has no clothes: by purporting to delegate to private bond purchasers the power to interpose a legal objection or to veto any changes in the guardrail statutes, the bond lock violates the third “bedrock rule” of legislative governance known as the “legislative anti-delegation rule.” Alex Knopp The “legislative anti-delegation rule” mandates that a legislative body absent constitutional authority cannot delegate or transfer its lawmaking powers to another entity, except in extremely limited circumstances. This rule has been invoked several times in recent years by the Connecticut Supreme Court and has two basic constitutional roots. The first is the “separation of powers” doctrine established in article Two of the Connecticut Constitution. As held by the Connecticut Supreme Court in 1986 (emphasis added), “The Constitution of this state provides for the separation of the governmental functions …. since the law-making function is vested exclusively in the legislative department, […] the legislature cannot delegate the lawmaking power to any other department or agency.” The second root is the democracy principle, explained in Part Four of this series. It posits that the reason a legislature may not delegate its exclusive lawmaking powers is because the voters elected the legislature to make the discretionary decisions that govern the state. Delegating law-making authority elsewhere may negate the wishes of the voters and make any kind of democratic accountability of elected representatives impossible. This fundamental legislative rule of non-delegation is also enshrined in Mason’s Legislative Manual, Sec. 519(a), which serves as a source of rules for the General Assembly: “The power of any legislative body to enact legislation or to do any act requiring the use of discretion cannot be delegated to a minority, to a committee, to officers or members or to another body.” The state constitution determines the extent of permissible delegation of legislative authority to enumerated public entities. Amendment XVIII, for example, states: “The legislative department may delegate regulatory authority to the executive department” but reserves to the General Assembly the final authority to approve or reject regulations drafted by executive agencies. Similarly, a legislature “may assign ministerial or administrative duties to one of its committees to act on behalf of the body itself.” [Mason’s, Sec. 519(2).] There are many examples of this limited type of permissible delegation by statute or legislative rule. Although many observers simply assumed without investigation that the bond lock could be effective in shooting down future legislative efforts to revise the guardrails, in reality it was equipped only to fire blanks. The bond lock guardrail is fatally defective for two main reasons. The bond lock delegates legislative acts First, the bond lock violates the prohibition against unauthorized legislative delegation by using a “covenant” to transfer or delegate budget-making powers to private purchasers of state bonds that are exclusively legislative. As bond counsel Shipman & Goodwin explained in its 2018 legal memo (emphasis added): “Leaving aside whether or not this [i.e. issuing a bond covenant to bind future legislatures] is a permissible exercise of legislative authority, there is no question that the target of this restriction is the legislature and that the acts being restrained are legislative acts.” The ”legislative acts” being restrained are the discretionary acts concerning revenue, appropriation, bonding, debt payments, etc. of the budget process. The bond lock purports to empower private nongovernmental bondholders to interpose an objection or veto in the form of a declaratory judgement action in a Connecticut court against the state challenging the validity of a legislative budget action as an alleged violation of the bond covenant. A conventional bond covenant, in which the state promises its full faith and credit to pay debt service consisting of principal and interest on a specific bond, is a standard feature of all public bond transactions. The covenant or promise to pay is rooted in and is closely related to the terms of the bond transaction itself. Secured by the constitution’s contract clause, this standard covenant makes bonds marketable. But the bond lock is by no means a conventional bond covenant. Rather, because of its extraordinary reach into the legislative budget process, it is a legal oddity. It takes away from the General Assembly the ability to perform legislative acts and delegates such power to bondholders. As bond counsel’s careful language in 2018 made clear, there is “no question” that the bond lock is an impermissible attempt to delegate the power to make legislative acts to bondholders. As summarized previously, it is as if Major League Baseball passed a rule delegating to ticket holders sitting in the stadium the umpire’s discretion to call balls and strikes. It would be, in effect, issuing fans a covenant giving them the authority to decide the outcome of games. Supporters for keeping the bond lock may argue for a contract-based defense of vested rights. Yes, the bond lock involves the language of contract, but the covenant is not shielded by the constitution’s contract clause because the General Assembly was never authorized by the Connecticut Constitution to delegate its legislative powers by covenant, contract, deed or by any other legal instrument. No rights vested because the General Assembly had no right to delegate its legislative acts. Moreover, dissolving the covenant on the basis of unconstitutionality would appear to be consistent with the U.S. Supreme Court’s 1977 landmark test announced in the United States Trust Co. decision upholding dissolution under the federal Contracts Clause where the state is a contracting party. The dissolution of a covenant may be based on a showing of necessity and reasonableness in serving an important public policy purpose, especially in cases like the bond lock where the dissolution would not decrease the state’s debt obligations to the bondholders. The bond lock is an invalid device because there is no explicit text or implied provision in the state constitution that authorizes the legislature to delegate budgeting power to other entities. The bond lock is, in the language of the law, an ultra vires act or an act beyond the powers of the General Assembly conferred on it by the state constitution for any purpose or under any circumstances. The bond lock delegates to private entities The second fatal flaw in the bond lock is that it attempts to delegate legislative powers to private entities—the individual and institutional purchasers of state bonds. The general prohibition against legislative delegation reaches its most restrictive application when the effort is made to delegate legislative power to a private entity. An obvious corollary of the legislative anti-delegation rule is that if the General Assembly cannot delegate any final law-making power involving discretion to its own committee or members, it certainly cannot delegate such powers to a private entity such as a bond purchaser. As an example of the application of this rule, a Massachusetts law was held invalid by the U.S. Supreme Court in 1982 because it delegated via a zoning ordinance the power to veto the application of a tavern for a liquor license to any church– a private, nongovernmental entity—rather than to a governmental agency. The exceptionally narrow “private delegation doctrine” found in a few other states has never been adopted in Connecticut. Private entities have no public mandate whatsoever to participate in the legislative budget process merely because they purchased Connecticut bonds. Before opening the narrow window of allowable delegations of authority from the legislative to the executive branch, courts require that the legislature must set forth a clear set of standards or guidelines for executive agencies to follow for purposes of accountability. Private bondholders, on the other hand, are not required to follow any such standards nor to obey any public agency ethical guidelines. Unlike an accountable public entity that is delegated some limited authority, there is no safeguard test against delegation to private entities that could be corrupt or behave lawlessly. For example, a corrupt purchaser engaged in a dispute with a state agency could sue under the covenant in an attempt to coerce the state into a settlement of a pending private matter. It makes no governing sense to delegate an out-of-state purchaser of a single state bond the authority to bring a declaratory judgment action against a change in the guardrails, especially when that same right to challenge budget actions is denied to millions of voting Connecticut citizens who may not have purchased bonds but are affected by state budget outcomes. As the United States Supreme Court held in 1936: A delegation to a private party without sufficient government oversight, is “legislative delegation in its most obnoxious form.” The bond lock is unconstitutional because it attempts to do indirectly via a covenant or promise to bondholders what the constitution forbids the General Assembly from doing directly– delegating exclusively legislative powers to private entities. The unprecedented, extreme and nearly limitless reach of the bond lock may explain why no other state legislature in the country has adopted a similar budget device. The General Assembly should no longer leave aside the question posed by private bond counsel in 2018: the answer to that question is that the bond lock covenant is not a permissible exercise of legislative authority. Tomorrow: What could happen if the guardrails are determined to be unconstitutional. Alex Knopp served in the General Assembly from 1987 to 2001 and was Mayor of Norwalk from 2001 until 2005. He co-taught the Legislative Advocacy Clinic at Yale Law School and is a member of the CT Law Tribune Editorial Board. He can be reached at [email protected].