Three months after lawmakers enacted public pension rollbacks, a new measure has surfaced that would exempt thousands of public transportation workers from the law.

The bill's author and its union sponsors say it's a necessary, narrow and reasonable tweak to the pension statute that will keep billions of federal dollars flowing into California.

But one of the state's leading pension reform advocates said it's another example of organized labor flexing its muscle to undo the retirement changes.

"If the Legislature does this," said Dan Pellissier, president of California Pension Reform, "they're selling out to the unions."

The Teamsters and two other unions sponsored the bill, which would exclude 20,000 local and regional mass transit workers statewide from the higher pension contributions and lower retirement benefits passed last year.

Another provision of the measure would exempt so-called "multiemployer pension funds," which are union-sponsored pension plans regulated by federal standards.

Trades workers participate in those funds, while few public employees do. The unions contend those plans cannot be put under state regulation and that the cost of closing them, which would entail paying for all the anticipated pensions up front, would be outrageously expensive.

Introduced by Watsonville Democrat Luis Alejo, Assembly Bill 160 assumes public pension changes that took effect Jan. 1 violate a condition of mass-transit federal grants requiring an agency to preserve whatever employees' collective bargaining rights are authorized in that state.

The U.S. Department of Labor certifies when a mass transit provider is following the rules – no certification, no money. Alejo declined to comment on his bill, but his office estimates the state receives about $2 billion annually from federal mass transit grants.

The pension law that took effect this year requires that all state and local employees pay at least half the normal cost of their pensions. Those hired on or after Jan. 1 will have to work longer to retire and receive less generous benefits, including a cap on their pensionable pay.

After Gov. Jerry Brown signed the measure last year, transit unions started filing objections with the Labor Department. Retirement benefits must be bargained, they argued, and mass transit agencies that follow the new law are violating terms to receive the federal money.

So far, the unions have filed 10 objections, said Teamsters lobbyist Barry Broad. "The plan is that we'll file them for every grant as they come up," Broad said.

The union's strategy is creating pressure for a solution. About $40 million for Sacramento Regional Transit District's light-rail extension into Elk Grove is in a "holding pattern," said Mike Wiley, the district's general manager and CEO.

The delay won't shut down work on the project yet because the district has cash on hand to keep it going for now.

"Until the Department of Labor has a path forward, it could affect any subsequent grants," Wiley said, including recurring federal funding for bus and rail maintenance.

The Labor Department has told employers and employee unions to talk it out.

For example, a Nov. 29 letter from J. Douglas Marchant, a Labor Department project manager, told Teamsters officials and the Orange County Transit Authority that the state pension law "may prevent the OCTA from continuing the collective bargaining rights of employees." He directed the union and the Southern California agency to bargain.

"We've been meeting with our labor unions about this issue, and we're trying to resolve it," said authority spokesman Joel Zlotnik.

Blocking federal mass transit money while pushing state lawmakers for a pension exemption has its limits for labor groups because it puts union jobs at risk, said Alison Neufeld, a San Francisco-based labor attorney with the Liebert Cassidy Whitmore law firm.

And there's not much potential for other unions to try the same tactic, because the federal law that ties grants to funding is specific to mass transit money, she said.

Legal experts split when asked what they think will happen next. Neufeld predicted a negotiated solution.

The Labor Department's directive for employers and employees to talk "demonstrates the expectation that the (new state law) can be harmonized with federal labor law," she said.

Mark Johnson, founder of ERISA Benefits Consulting Inc. in Grapevine, Texas, said that the Obama administration looks favorably on labor concerns and sees its position as tilting in that direction.

"This issue is difficult to predict," Johnson said, "but it's certainly going to take a while. It's something that's very likely to end up in some sort of dispute resolution, like arbitration."

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