A federal judge has ruled that the U.S. Department of Labor is unlawfully withholding millions of dollars in aid to the Sacramento Regional Transit District and other local transit agencies in California.
The department’s denials of grant applications are based on its conclusion that the agencies lost their eligibility because California’s Pension Reform Act of 2013 strips public employees, including transit workers, of collective bargaining rights that federal law says must remain undisturbed.
The Sacramento transit district and the state sued Labor Secretary Thomas Perez and his department in October 2013, claiming the department “prejudged the merits of the issues before it,” resulting in “arbitrary and capricious” action that exceeds the department’s authority.
In her ruling, U.S. District Judge Kimberly J. Mueller found that the Labor Department badly misinterpreted applicable law, and she sent the matter back to the department “for further proceedings consistent with this order.”
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Mike Wiley, general manager and chief executive officer of the Sacramento transit agency, expressed delight Friday with Mueller’s opinion.
“This allows the state to implement public employee pension reform without worrying about violating federal law,” he said.
Wiley said the parties to the lawsuit have a verbal agreement to abide by Mueller’s ruling, unless and until a higher court reverses her. Consequently, he said, his expectation is that California transit agencies “will see all of our grants flow,” pending the outcome of the Labor Department’s appeal.
Federal attorneys filed a notice Friday that Perez and the department have appealed Mueller’s judgment against them to the 9th U.S. Circuit Court of Appeals.
The complaint filed by state Department of Transportation and the Sacramento transit district states that California’s public transit network and operations would not be self-sustaining without federal funds. In fiscal year 2013, according to the complaint, the available federal transit funding for the state totaled nearly $2 billion; the state’s total spending on transit for that period was about $8.5 billion.
In fiscal 2014, the Sacramento district budgeted $28 million from federal grant funding, 19.6 percent of its operating budget of $142 million, the complaint says.
Without the federal money, it says, the district would be “forced to reduce ... services by approximately 38 percent, reduce all levels of maintenance to the minimum required by law, lay off one-third of its staff and put planned capital improvements on hold indefinitely, which ultimately could put SacRT in default of its contractual obligations.”
Perez notified Gov. Jerry Brown on Aug. 1, 2013, that $1.6 billion in federal transit grants to California – almost 80 percent of such funds for which the state was otherwise eligible – would be withheld because the state’s Public Employees Pension Reform Act prevented the Department of Labor from complying with federal law. Specifically, the Urban Mass Transit Act requires state and local transit authorities to “ensure the preservation and continuation of collective bargaining rights” for transit workers as a condition of federal funding for mass transit projects.
In September 2013, the department issued a final determination that “the effects of PEPRA render it legally impermissible ... for the department to certify fair and equitable employee protective conditions for grants to SacRTD.”
The department said the new reform law imposes a dramatic shift from past practice on public employees hired after Jan. 1, 2013. As to those employees, the law controls the definition of compensation used to determine the pension benefit and the minimum age for receipt of a pension. Those employees are also subject to a cap on the compensation used to compute their pensions, they are required to pay half of the pension costs and they are not eligible for supplemental benefits.
But Mueller wrote in her 32-page order that, in withholding funds based on its evaluation of the reform act’s impact on comparatively recent hires, “DOL misrepresented the law and did not consider all relevant factors.”
Federal lawyers relied heavily on a 1985 ruling by the U.S. Court of Appeals for the District of Columbia Circuit in arguing that a union’s reduced ability to bargain for pension benefits means that the continuation of collective bargaining has been undercut.
But Mueller said the lawyers’ reliance on the 1985 case was misplaced due to significant factual differences between that case and the one before her. Nothing in California’s law prevents bargaining over pensions, and the department’s finding to the contrary exceeds its authority, she added.
“DOL’s failure to consider the realities of ... public sector bargaining renders its decision arbitrary and capricious,” Mueller declared.
Brown signed a bill in October 2013 that temporarily exempted transit workers’ pension plans from the reform act in order to allow critical work to continue on affected projects while the legal challenge was pending. The exemption expired Dec. 30.
The Department of Labor had no immediate comment about Mueller’s order.
Call The Bee’s Denny Walsh, (916) 321-1189.