Regional Transit, Labor Department clash over federal aid

Already struggling to strengthen its shaky finances, Sacramento Regional Transit says its financial woes will deepen if the U.S. Department of Labor succeeds in a court bid to withhold tens of millions of dollars in federal aid.

The federal government cut off grants to RT and other transit agencies in California after the state adopted a pension reform measure in 2012 that requires public employees statewide to pay at least half the cost of their pensions.

Those hired on or after Jan. 1, 2013 – the day the law took effect – have to work longer to retire and receive fewer benefits, and there is a cap on employees’ pay for pension purposes. At the time of its passage, the statute was projected to save the state up to $60 billion over 30 years.

The Labor Department says the reform act stripped transit workers of the right to negotiate these matters in collective bargaining with management, and that runs counter to federal law. The workers cannot be denied that right by the Legislature and the governor, the department contends.

The state and RT hotly dispute the department’s arguments and sued it for the funding.

It’s unlikely there will be a resolution of the dispute anytime soon, but an interim arrangement with the Labor Department protects the transit agency’s budget for the duration of RT’s lawsuit. The local agency has thus far prevailed in court, but the department has left no doubt that, sooner or later, it will take its case to the 9th U.S. Circuit Court of Appeals.

Federal officials cut off aid in 2012, then last year resumed approving grants, but only to transit agencies that agreed to restore pre-reform-act pension benefits and bargaining rights if the Labor Department’s position prevails in court.

While RT agreed to those terms, it warns that, if the department is ultimately victorious, RT will be forced to reduce service by 30 percent – cuts that it says would “devastate the mobility and economy of the Sacramento region.” Further, RT says in court papers, it would “be forced to reduce all areas of maintenance ... to the minimum levels required by law, lay off more than one-third of its staff, and put its planned capital projects on hold indefinitely and possibly permanently.”

In fiscal year 2014, according to court papers, the Sacramento district budgeted $28 million from federal grants, 19.6 percent of its operating budget of $142 million.

Under the terms of a 1964 federal law specific to mass transit, the Labor Department must certify that an agency has preserved bargaining and pension rights for transit workers before agencies can qualify for federal grants that are counted on to maintain and expand public transportation at the local level. The department has refused certification to RT since 2012 because of the provisions of the California Public Employees Pension Reform Act.

U.S. District Judge Kimberly J. Mueller has twice ruled that the department’s actions are unlawful – the second time last week.

RT general counsel Tim Spangler said he feels Mueller’s ruling last week “vindicates our position. Now we’ll see what the judge’s remedy will be. I’m optimistic.” One of Mueller’s options may be to declare the grants approved, he added.

It is unlikely the judge will fashion a remedy before next year.

Mueller first ruled against the Labor Department in December 2014, and sent the dispute back to the department to reconsider its position consistent with her ruling.

The department started to appeal but abandoned that course and, instead, issued a new decision last year again denying certification for RT. So, the state and the transit district went back to Mueller seeking enforcement of her order.

But the department wouldn’t budge, again arguing that state law has to be changed or there can be no aid.

Once again last week, Mueller came down on the side of the plaintiffs, calling the department’s 2015 decision “arbitrary.”

“At most,” she wrote in last week’s 52-page order, “the authorities on which DOL relies show (federal law) prevents certification if a state passes laws that substantially clash with federal labor policy. It is not possible to conclude on this record that (the state’s reform act) substantially clashes with federal labor policy.”

To the extent the department’s position is based on one part of federal transit law that the judge cites, “it acted arbitrarily, and its decision must be set aside,” she said.

She noted that in her earlier order she found the Department of Labor exceeded its authority when it redefined the scope of a collective bargaining agreement so as to provide protections for future employees.

“The DOL believed this conclusion was erroneous,” she wrote in last week’s order, “but rather than requesting reconsideration or a modification of the judgment ... and instead of obtaining relief from the 9th Circuit Court of Appeals, the DOL dismissed its appeal voluntarily and again denied certification to SacRT for the same reason.”

Denny Walsh: 916-321-1189