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Court sides with California in dispute over federal transit funding

The Department of Labor had been trying to block $12 billion in federal money earmarked for local transit agencies.

(CN) – A federal judge handed California another win Wednesday in the state's long-running dispute with the U.S. Department of Labor over federal transit money.

In 2021, President Joe Biden — famously a longtime lover of trains — signed into law a $1.2 trillion infrastructure bill which included what he called a "historic" investment into public transit, mostly via grants given to local transit agencies. What followed got less attention: a decision by the Department of Labor to block $12 billion — about $2.5 billion from an emergency Covid relief package, the rest from the infrastructure bill — in federal money earmarked for California's transit agencies.

"Withholding billions of dollars in crucial funding on the basis of a nine- year-old state law, while California wrestles with the Covid-19 pandemic, does great harm and injustice to the people of California," Governor Gavin Newsom wrote in a stern letter to the U.S. Secretary of Labor.

Why block federal money to a heavily democratic, heavily car-dependent state struggling to lower its carbon footprint? It was all part of an on-again, off-again feud between unions and California that began in 2012, when then-Governor Jerry Brown signed a sweeping, bipartisan public employee pension reform bill. The law, which applied to state and local government employees, raised retirement ages, capped benefits, and forced workers to contribute more to their retirement plans.

Transit unions argued the controversial reform ran afoul of the Urban Mass Transportation Act of 1970, which states that transit agencies applying for federal money must prove to the Department of Labor that they have "fair and equitable" labor agreements with their employees.

Shortly after California passed its pension reform law, a pair of local agencies applied for federal funding. The Amalgamated Transit Union (ATU), which represents transit workers, objected to the applications. The Department of Labor agreed and moved to block the grants, arguing the new pension reform bill barred employees from bargaining “over the full panoply of pension rights.”

The two transit agencies sued in federal court and won, though the case went on for nearly six years, with the department denying applications using slightly different reasoning and the transit agencies suing, until a 2018 ruling permanently enjoined the Department of Labor from using the pension reform as justification for blocking transit funding.

But the ruling was narrowly tailored, and it applied only to the two transit agencies which sued — although in the months following the ruling, the Department of Labor approved numerous public transit grants over the ATU's objections.

In 2019, the Department of Labor under President Donald Trump decided not to challenge any funding request. But two years later, the department, now under Biden, reversed course yet again.

As U.S. District Judge Kimberly Mueller, a Barack Obama appointee, wrote in her 67-page decision, the Department of Labor "expressly embraced the reasoning behind its 2013 and 2015 decisions, the same reasoning this court had rejected twice."

The department, she wrote, "had no authority to issue the broad, prospective decision it did in 2021." She called the department's reasoning "unconvincing and arbitrary."

"Its positions have changed abruptly, for a second time and without regard for this court’s prior orders," she wrote. "It has rejected directly relevant evidence, overlooked important nuances and made assumptions that lack support in the record."

Her decision made permanent a temporary injunction she had put in place in 2021.

"The court rightly recognized the enormous harm to California from the U.S. Department of Labor’s deeply flawed determination," said a spokesman for Governor Newsom. "The court’s decision ensures that billions of dollars of federal transit and infrastructure funds will continue to flow to California, just as Congress intended."

Neither representatives from the ATU nor the Department of Labor office responded to requests for comment by press time.

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