A state apparently has to go to great lengths to piss off the federal government enough for it to deny sending over previously approved transportation funds, but California found a way to do it—and then found a way to undo it.

The feds prepared to unfreeze $1.6 billion for a wide range of state transit projects last week after a deal was reached to end a months-long dispute over pensions. U.S. Department of Labor spokesman Mike Trupo told the San Francisco Chronicle that it was the first time in 15 years and 28,000 grant applications that his department had denied funding at this stage.

The dispute arose after the California Legislature passed reforms in 2012 that required, among other things, that public employees contribute more money to their pensions. That ran afoul of a 50-year-old federal law that says changes to transportation worker pensions can’t be made outside of collective bargaining.

The state refused to back down, so the Labor Department refused to certify that California agencies were complying with federal law, blocking the release of the money. Dozens of mass transit projects from San Francisco to San Diego were put in limbo,  including light rail and subway work in Los Angeles, while the two sides negotiated.  

Governor Jerry Brown wrote a letter (pdf) to the Labor Department that argued the pension reform did not circumvent the collective bargaining process, which wasn’t true. In almost the next sentence, though, he laid out why it didn’t matter. “Bargaining rights are a moot point if you do not have a job in which to exercise them.”  

.The two sides finally reached an agreement to temporarily exclude transportation workers from the new pension law pending a court ruling on its legality. In the meantime, the state is supposed to pass legislation that would extend the transit worker exemption until the end of 2014. If the state wins in court, the exemption goes away permanently.

The California pension reforms raised the retirement age from 55 to 67 for most workers to receive a full pension. It also limited the size of pensions for new hires and required workers to contribute more toward them. The reforms were passed in response to financial difficulties faced by the state and counties, which were exacerbated by the Great Recession in 2008.

Portions of the reforms are already being challenged in court.

–Ken Broder

To Learn More:

California Fights off Federal Funding Cuts (by Jonny Bonner, Courthouse News Service)

Feds to Resume Sending Transit Money to Calif. (by Justin Pritchard, Associated Press)

Gov. Brown Plan Exempts Transportation Workers from Pension Limits (by Anthony York, Los Angeles Times)

Letter to the U.S. Secretary of Labor (Governor Jerry Brown) (pdf)

Assembly Bill 1222 (California Legislative Information)