Limitations on the States
At a time when the relationship between the states and the proposed federal government was still very much in dispute, the inclusion of Article I, Section 10 within the text of the Constitution did much to clarify the issue. In severely limiting the power of the states, Section 10 not only molded the relationship between the states and the national government, but among the states themselves.
In fact, Section 10 imposes upon the states many of the same limitations placed on Congress in Section 9, such as a ban on bills of attainder and ex post facto laws; laws impairing the obligations of a contract; and measures granting titles of nobility. In addition, this section provides that no state may enter into any treaty or alliance, grant letters of marque, coin money, issue paper currency or make it legal tender.
The first portion of Section 10, which deals with all of these issues, was cited by the Supreme Court in holding that the Confederation formed by the seceding states at the time of the Civil War could not be recognized as having any legal existence. Today, the ban against treaties, alliances and confederations remains relevant through the limitations it imposes upon the states in regard to matters affecting international relations.
The strict ban on state issuance of either coinage or paper money is easily understandable, given the chaos which had resulted from the many monetary systems in existence under the Articles of Confederation. An early court test of this prohibition came as the result of a Missouri case. In that case, Craig v. Missouri (1830), the court ruled that interest bearing certificates issued by loan offices established by the state of Missouri were, in fact, bills of credit whose issuance was banned by this section of the Constitution. The certificates were made receivable in payment of taxes or other monies due to the state, and in payment of the state officers.
Decisions such as this did not, however, result in a ban upon all state issuances. For example, the states may issue coupons receivable for taxes or fees and salaries of executive instruments binding them to pay money at a future date for services rendered or money borrowed. Also, bills issued by state banks are not considered to be bills of credit within the constitutional prohibition.
The ban on passage of any state laws impairing the obligation of contracts has generally been construed to include statutes, state constitutional provisions, municipal ordinances, administrative regulations and other actions having the force and operation of statutes. This limitation does not extend to courts, which technically do not "pass" laws. This theory has been backed by Supreme Court decisions holding that this section of the Constitution does not apply to judicial decisions -- with some exceptions --however erroneous, or whatever their effect on existing contract rights. The protection is not violated, for example, when a court issues a ruling which allegedly impairs a contract's obligation.
While such activities as these are completely banned from state prerogative, the states are given some autonomy -- albeit under the watchful eyes of Congress. In fact, the states may do a number of things -- including the keeping of a militia, the taxing of imports and exports and other measures -- but only upon approval from Congress.
Under this portion of Section 10, no state may, unless Congress approves, place duties on exports or imports from foreign countries. Indeed, property brought into the United States from abroad is immune from taxation so long as it retains its character as import. To determine how long imported goods remain under this protection, the Supreme Court developed the "package doctrine" in the landmark case of Brown v. Maryland (1827): "When the importer has so acted an upon the thing imported that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the state; but while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports, to escape the prohibition in the Constitution."
While decisions such as this have made it clear that imports may not be taxed, other rulings have cleared the way for state taxation of the proceeds from the sale of imports, whether in the form of money or notes.
Another exception to the general ban on taxation of imports is the ability to charge a fee in order to carry out state inspection laws. Inspection laws, the Supreme Court ruled in Bowman v. Chicago &c. Railway Co. (1888), "are confined to such particulars as, in the estimation of the legislature and according to the customs of trade, are deemed necessary to fit the inspected article for the market, by giving the purchaser public assurance that the article is in that condition, and of that quality, which makes it merchantable and fit for use or consumption."
That same case resulted in another ruling that state inspection laws could never be construed to forbid the importation of items such as intoxicating liquors, since "it has never been regarded as within the legitimate scope of inspection laws to forbid trade in respect to any known article of commerce, irrespective of its condition and quality, merely on account of its intrinsic nature and the injurious consequences of its use or abuse."
Section 10 of the Constitution also bans the imposition of taxes under the name of "tonnage duties," which are no more than charges for using a particular port. But it does not extend to state charges, even if graduated according to tonnage, for special services rendered to a vessel, such as pilotage, towage, loading and unloading of cargoes and wharfage or storage.
Indeed, the states have little practical motivation for imposing any sort of taxation beyond that allowed, since Section 10 mandates that any such revenues be turned over not to the state's coffers, but to the U.S. Treasury.
Goods brought from another state are not included within these provisions of Section 10, as they are banned from taxation by virtue of Congress' right to regulate interstate commerce (Article I, Section 8).
This section's language preventing any state from maintaining troops in time of peace without the consent of Congress has been held inapplicable to the organization and maintenance of state militia.
In fact, except for the required congressional consent, the original sovereign rights of the states are preserved in many portions of Section 10. This applies to compacts among states, also.
The earliest compacts among the states, under both British rule and the Articles of Confederation, resulted from the settling of border disputes. This continued under the Constitution, becoming so commonplace that the Supreme Court, in the 1893 case of Virginia v. Tennessee, held that the unqualified prohibition of compacts and agreements between states without the consent of Congress did not apply to agreements concerning such minor matters as adjustments of boundaries. The court ruled that these settlements had no tendency to increase the political powers of the states involved, or encroach upon the just supremacy of the United States government.
Border disputes among the states have become extremely rare, but the interstate compact has found greater use. Since the beginning of this century, the interstate compact has been used, with congressional approval, as a legitimate instrument for state cooperation in carrying out affirmative programs for solving common problems. States have drafted compacts dealing with flood control, the prevention of pollution, the conservation and allocation of water supplied by interstate streams, the control of crime, the production of tobacco, the conservation of natural gas, the regulation of fishing in inland waters, highway safety, hazardous waste disposal and the framing of uniform state legislation for dealing with some of these issues.
While the Constitution makes no provision as to the time when the consent of Congress shall be given to such agreements among the states, practice has established that the approval usually precedes the agreement. Congressional approval has occasionally been given subsequently, particularly where the agreements relate to a matter which cannot be considered until its nature is fully developed. Regardless of when congressional consent is received, the implementation of an interstate compact carries the same effect as a treaty between sovereign powers.
All of these restraints upon the power of the states, whether unequivocally prohibited or subject to congressional approval, were considered necessary by the drafters of the Constitution in order to guarantee the successful operation of the new federal government. Through the provisions of Section 10, they gave their countrymen and generations of Americans to come a workable division of authority between the national and state governments.