The Twenty-seventh Amendment provides that any change in Congressional salaries may only take effect after the beginning of the next term of office for Representatives begins. Sometimes called the "Congressional Compensation Amendment of 1789", the "Congressional Pay Amendment", and the "Madison Amendment", it was intended to serve as a restraint on the power of Congress to set its own salary—an obvious potential for conflict-of-interest. However, since its 1992 adoption this amendment has not hindered members of Congress from receiving nearly annual pay raises, known as "cost-of-living adjustments" (COLAs), rather than as pay raises in the traditional sense of the term. The federal courts have ruled in cases brought under the amendment that a COLA is not the same thing as a pay raise. Hence members of Congress have been able to obtain increases in compensation without triggering the restrictions which this amendment seeks to impose. In the case of Schaffer v. Clinton (2001), the United States Court of Appeals for the District of Columbia Circuit ruled that the Twenty-seventh Amendment does not affect annual COLAs. The Supreme Court has never ruled on this specific issue.
This amendment was actually suggested by a number of states. During the 1788 North Carolina convention, assembled to consider the original Constitution itself, the following amendment, among others, was requested of Congress:
The laws ascertaining the compensation of senators and representatives, for their services, shall be postponed in their operation until after the election of representatives immediately succeeding the passing thereof; that excepted which shall first be passed on the subject.
Virginia in its 1788 ratification convention recommended the identical language that North Carolina had suggested. New York in its 1788 ratification convention also urged Congress to consider this wording:
That the Compensation for the Senators and Representatives be ascertained by standing law; and that no alteration of the existing rate of Compensation shall operate for the Benefit of the Representatives, until after a subsequent Election shall have been had.
In 1816 more than a quarter century after Congress had officially submitted the amendment (and eleven others) to the state legislatures for consideration the Massachusetts General Court expressed its desire for an amendment to the Constitution worded almost exactly as it was offered by Congress in 1789. The legislation embodying the recommendation was reportedly approved by the Massachusetts House of Representatives on a vote of 138 to 29. Sometime in December 1816 or early 1817 the Kentucky General Assembly did the same thing; and in 1817 or January 1818 Tennessee's lawmakers followed suit.
Presented in the United States House of Representatives by Representative James Madison of Virginia—future fourth President of the United States—this amendment was the second of the twelve Constitutional amendments originally submitted to the state legislatures for ratification by the 1st Congress on September 25, 1789, the last ten of which became the United States Bill of Rights by December 15, 1791.
From 1789 to 1791, the compensation proposal was ratified by legislators in only six states—Maryland, North Carolina, South Carolina, Delaware, Vermont and Virginia—out of the ten then required. As more states entered the Union, the ratification threshold increased. In 1873, more than 80 years after Congress offered it to the nation's state lawmakers, the Ohio General Assembly ratified the compensation amendment as a means of protest against the "Salary Grab Act". The "Salary Grab Act" not only provided for a Congressional pay raise, but made that raise retroactive.
The proposed amendment was again largely forgotten until 1982, when University of Texas at Austin student Gregory Watson rediscovered it. The push for ratification began in earnest and the amendment was finally ratified a decade later on May 5, 1992, when it was approved by the legislature of Alabama, the 38th state to assent, there being 50 states in the Union at the time. At that point, it became the Constitution's Twenty-seventh Amendment. Under the 1939 ruling of the U.S. Supreme Court in the landmark case of Coleman v. Miller, any proposed amendment for which Congress does not specify a ratification deadline remains pending business before the states and the states may continue to consider that amendment regardless of that amendment's age. In Coleman, the Supreme Court further ruled that the ratification of a constitutional amendment is political in nature—and not a matter properly assigned to the judiciary.
For quite some time, it had been erroneously believed that ratification on May 7, 1992, by the Michigan Legislature added the Twenty-seventh Amendment to the U.S. Constitution. However, when the June 1792 ratification of all twelve amendments by the Kentucky General Assembly during that commonwealth's initial month of statehood later came to light, it was quickly realized that the Twenty-seventh Amendment's incorporation into the Constitution was actually finalized two days earlier than previously thought—and by the state (Alabama) whose legislature had acted immediately before Michigan's. Possibly unaware of the ratification actions taken in 1792, Kentucky lawmakers ceremonially approved the amendment a second time, nearly 204 years later in 1996, and almost four years after the amendment had already been made part of the Constitution. In 1989, the North Carolina General Assembly likewise re-ratified the amendment, having first adopted it two centuries earlier in 1789.
On May 18, 1992, the Amendment was officially certified by Archivist of the United States Don W. Wilson. On May 19, 1992, it was printed in the Federal Register, together with the certificate of ratification.
Notwithstanding the Coleman v. Miller decision, Speaker of the House Tom Foley and others called for a legal challenge to the amendment's irregular ratification. However, the Coleman ruling made clear that only the Congress has the authority to determine whether an amendment has—or has not—been properly made part of the Constitution. The courts would not involve themselves in such a "political question", the justices asserted. Because Congressional opposition to ratification would be perceived as little more than self-interest, reaction on Capitol Hill was silenced.
In certifying that the amendment had been validly ratified, the Archivist of the United States had acted under statutory authority granted to his office by the Congress under Title 1, section 106b of the United States Code. Title 1, section 106b of the United States Code reads:
"Whenever official notice is received at the National Archives and Records Administration that any amendment proposed to the Constitution of the United States has been adopted, according to the provisions of the Constitution, the Archivist of the United States shall forthwith cause the amendment to be published, with his certificate, specifying the States by which the same may have been adopted, and that the same has become valid, to all intents and purposes, as a part of the Constitution of the United States".
Despite that, Senator Robert Byrd of West Virginia scolded Wilson for having certified the amendment without Congressional approval. Although Byrd supported Congressional acceptance of the amendment, he contended that Wilson had deviated from "historic tradition" by not waiting for Congress to consider the validity of the ratification, given the 202½ year lapse since the Amendment had been proposed.
In accordance with the Coleman ruling—and in keeping with the precedent first established in the 1868 ratification of the Fourteenth Amendment—both houses of the 102nd Congress, on May 20, 1992, acting separately, adopted concurrent resolutions agreeing that the amendment was indeed validly ratified, despite the unorthodox period of 202½ years for the completion of the task. Neither body, however, adopted the concurrent resolution of the other.