Pension Reform Derailed Transit Funds, CA Says

     SACRAMENTO (CN) - California sued the U.S. Department of Labor over its denial of federal transit grants because of the state's new public pension reform law, Gov. Jerry Brown announced Friday.
     The federal suit stems from the Labor Department's Sept. 4 decision to cut off grant money to the Sacramento Regional Transit District and the California Department of Transportation, known as CalTrans, through the Federal Transit Administration.
     CalTrans says in the lawsuit that before the FTA can issue grants to local transit agencies, federal law requires that the Labor Department determine that transit workers enjoy fair and equitable protection. In this case, however, the department found that California's new pension reform law diminishes workers' collective bargaining rights and denied the grants.
     "In its determination letters, the department takes the position that any change in state law affecting a mandatory subject of collective bargaining precludes grant certification, notwithstanding the continued ability of the transit agencies to bargain over pension and retirement issues," CalTrans states in the complaint.
     Brown signed the public employee pension reform bill into law last year in an effort to prop up California's chronically underfunded pension plan. The scheme rolls back benefits to 1974 levels - the first time Brown governed the state - and forces government employees to fund half of their own pensions.
     But while the law known as PEPRA affects only new and future public employees, the Labor Department determined because of it Sacramento RTD and CalTrans cannot possibly comply with labor and collective bargaining rules laid out in the federal Transit Act.
     "If allowed to stand, the practical effect of the Labor Department's conclusion (that PEPRA abridges collective bargaining rights and that the only valid pension changes are those made at the bargaining table) would be to prevent state legislatures from amending any law that affects the employment terms of transit workers," CalTrans says in its complaint. "The department's decision violates federal law. It will result in the loss of billions of dollars in federal funding to California transit providers and constitutes an arbitrary, capricious and unconstitutional effort to coerce California to alter a pension reform law adopted for the benefit of California's citizens and public employees. The court should invalidate and overturn the department's determinations." (Parentheses in complaint.)
     In the meantime, Brown also signed a stop-gap measure Friday to keep the $1.6 billion in federal funds flowing to CalTrans and other transit agencies.
     That bill, AB 1222, temporarily exempts transit workers from PEPRA while the state pursues its action against the Labor Department. It also earmarks $26 million in loans to keep local transit agencies running in the meantime according to Brown, who reiterated his support for the desperately needed pension reform plan.
     "Bringing this lawsuit is just another step to ensure that our pension system is viable long into the future," Brown said.
     Sacramento RTD joined CalTrans in the suit, which was filed in U.S. District Court in Sacramento. Besides the Department of Labor, Secretary Thomas Perez is also a named defendant.
     The state wants a judge to overturn the Labor Department's decision, as well as declarations that the pension reform package does not impair transit agencies to meet labor obligations and that the department exceeded its constitutional authority.
     The state is being represented in the action by Mitchell Reinis of the firm Thompson Coburn in Los Angeles.