3 Part Test:
1. Threshold inquiry: Whether the state law has, in fact, operated as a substantial impairment of a contractual relationship.
- Does not have to be a total destruction of contractual obligations.
- Has this particular industry been regulated in the past.
2. legitimate public purpose: if the state law substantially impairs, then the state must have a significant and legitimate public purpose behind the regulation.
- Such as remedying broad & general social or economic problems.
- Identifying a legitimate state interest guarantees that the State is exercising its police power, rather than providing a benefit to special interests.
3. Once a legitimate public purpose has been identified: Whether the means to the end are reasonable and appropriate.
Unless the State is a contracting party, the court will defer to legislative judgment as to the necessity & reasonableness of a particular measure.
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