(a) The state may, in any public or special act, modify a contract to which it is a party (1) if any impairment to the contract is not substantial, or (2) (A) if any impairment to the contract is substantial, the public or special act serves a legitimate public purpose such as remedying a general social or economic problem, and (B) if such purpose is demonstrated, the means chosen to accomplish such purpose are reasonable and necessary.

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(b) Any such impairment of a contract as described in subsection (a) of this section may be considered reasonable and necessary if (1) the state did not consider such impairment on par with other policy alternatives, (2) the state did not impose a drastic impairment when an evident and more moderate course of action would serve its purpose equally well, and (3) the state did not act unreasonably in light of the surrounding circumstances.

(c) Subsections (a) and (b) of this section shall not be construed to apply to (1) investments by the State Treasurer or administered by the State Treasurer or any contracts related thereto, or (2) bonds, notes, evidences of indebtedness or other direct or contingent obligations of the state for borrowed money or any contracts related thereto.