amount of social contributions and the amount of pension did not facilitate the making of social contribution payments. Creating a new social insurance system, the Saeima chose the State social insurance model from several alternatives. For such a system, the law prescribed the basic principles of insurance, the range of insured persons, the insurance risks and the procedure for accruing the funds, and this insurance was mandatory. This system was included in the Law on State Pensions adopted on 2 November 1995. With the adoption of this law, the principles of State mandatory pension insurance system based on insurance contributions were implemented in Latvia. The Law on State Pensions stipulates that old-age pension is granted for life. Although the granted pension can be recalculated and indexed, it cannot be granted anew. In particular, the condition that the amount of pension depends on the amount of contributions (the accrued capital) and the number of years when a person is entitled to receive pension ensures the long-term stability of the pension system. The first level of pension is designed as a redistribution scheme working on the basis of the principle of solidarity between generations, which means that the money contributed by younger, currently employed persons is distributed for disbursements to pensioners. This system finances all pensions, including the pensions of those persons who had been employed before Latvia regained independence and who were unable to make social insurance contributions or otherwise accrue their pension capital. The Constitutional Court has adjudicated that only the funds available in the State pension special budget can be used for the old-age pension disbursements. Thus, it is in the interests of one part of society – the recipients of pension – to balance the pension budget expenditures with revenues and to preclude the excess expenditure of the funds of this budget (cf. Clause 3.1.3 of the Concluding Part of the Constitutional Court Judgment in the Case No. 2001-12-01 passed on 19 March 2002). It means that all contributions to the social insurance budget can be used only for the purposes established by the law – for pensions, allowances as well as system administration costs. Therefore, the economic situation in the State, especially employment and migration, is closely related to the amount of funds in the social insurance special budget. 34