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Feds block billions in transit funds over CA pension law

The federal government determined California is ineligible for about $12 billion in funds for public transit due to changes to the state’s public pension law, provoking demands from several state officials urging the U.S. Department of Labor to reconsider.

The Office of Labor-Management Standards (OLMS) declared that the state was ineligible for billions in transit funds due to a 2013 pension law that the department said “significantly interferes” with transit employees’ ability to negotiate pension rights.

The law, called the 2013 Public Employees’ Pension Reform Act, changed the way retirement and health benefits were applied, while also placing compensation limits on California Public Employees’ Retirement System (CalPERS) members. According to CalPERS, the greatest impact was felt among new members who were hired after Jan. 1, 2013.

The Labor Department asserted that the state’s restriction on pension benefits for new employees was in violation of a 1964 federal law that requires state and local agencies to protect employees’ interests to be eligible for federal transit grants. The department also deemed that changes to pension law in 2013 were improper because they were imposed by law instead of collective bargaining with unions, according to the Sacramento Bee.

This decision to withhold funds means California would not be eligible for about $9.5 billion in transit funds set aside for public transit in the infrastructure bill passed by Congress last week. The state would also lose out on about $2.5 billion in American Rescue Plan Act funds earmarked for public transit in the state.

The decision provoked a strongly-worded response from Gov. Gavin Newsom on Wednesday, who called the decision to withhold funds from transit agencies “extremely concerning.” In a letter written to Secretary of Labor Marty Walsh, Newsom urged the agency to restore the state’s access to these funds, arguing that withholding these funds as the state still battles the pandemic “does great harm and injustice to the people of California.”

“OLMS’s decision deprives financially beleaguered California public transit agencies that serve essential workers and our most vulnerable residents of critical support, including American Rescue Plan Act funds that those agencies need to survive through the pandemic,” the governor wrote. “Because of a dramatic decline in ridership, public transit agencies rely more than ever on these federal grants just to keep trains and buses running and their workforces employed.”

The governor also argued that the pension changes did not impair labor unions’ collective bargaining rights, though the Labor Department said the state law “substantially interferes with the scope of permissible collective bargaining by transit workers and transit agencies” in its decision on Oct. 28.

This instance is not the first time federal officials have questioned the state’s pension law. The Obama administration blocked grant funding for two California transit agencies during his presidency, but the state sued and won, according to the Associated Press.

In addition, the pension law was reviewed once again in 2019 under the Trump administration, and the Department of Labor determined that the 2013 pension law did not make the state ineligible for public transit funds. The latest decision from the department reverses this prior position.

Senators Alex Padilla and Dianne Feinstein supported the governor’s stance in a letter sent to the Labor Department Wednesday, calling on the agency to immediately reinstate eligibility for federal transit funds. The senators argued that the last two presidential administrations allowed California to receive transit grants, and claimed they were “not aware” of new court action that would lead the department to reverse its prior decision.

“We have serious concerns that the Department of Labor’s new determination will put billions of dollars in transit grants, as well as continued emission reductions, for California at risk,” the senators wrote. “Further, the Department’s determination was made just after Congress passed major COVID economic relief and infrastructure legislation to fund billions of dollars in new transit grants. We have grave concerns with such a determination that puts California transit agencies and millions of Californians at such a disadvantage.”

The Labor Department’s decision is still pending federal judicial review, but if the decision is not overturned, Newsom warned that the state will be forced to ask its Congressional delegation to “remedy this situation as a matter of highest priority.”

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