Gov. Jerry Brown and Democrats in the state Assembly announced Wednesday that they have drafted legislation they hope will help California keep about $1.6 billion in federal transportation money that was put in jeopardy after the state scaled back some public employee pension benefits.
The legislation, AB1222, comes after transportation unions complained that the pension changes the Legislature approved last year violated a federal law that requires any changes to pensions be made during collective bargaining.
The U.S. Department of Labor agreed and stopped certifying that the state was protecting workers' rights. That decision froze federal money to public transit agencies.
On Wednesday, both the Department of Labor and Amalgamated Transit Union said they supported the deal.
Brown's office said he will also pursue a lawsuit to protect the pension changes after the Labor Department on Wednesday refused to certify millions of dollars in transit grants to the Sacramento Regional Transit District.
"Federal transit money creates jobs and this legislation keeps those funds flowing while allowing the state to defend in court our landmark pension reforms," Brown said in a written statement.
The proposed legislation, which is jointly authored by three Assembly Democrats, would temporarily exempt local transit agency workers from California's pension changes while the state fights the issue in court. It also would create a $26 million loan program to help transit operators in the meantime.
The California Public Employee Pension Reform Act was pushed by Brown and approved in the Legislature on a bipartisan basis. It requires state and local employees, including transit workers, to contribute more to their retirement funds.
Unions objected in November, arguing that federal law specifically protects their pensions against changes made outside of collective bargaining.
With dozens of mass transit projects affected and Democrats in control of the White House and California Legislature, it seemed likely that a deal would be struck to keep the money coming to the state.
Still, top managers at the Los Angeles County Metropolitan Transportation Authority were not taking chances. MTA, the state's largest transit agency, is in the midst of a construction binge spurred by voter-approved sales tax hikes — projects that heavily rely on federal money.
MTA Chief Executive Arthur Leahy told legislative leaders during a visit to Sacramento last month that his agency could lose at least $2 billion in federal money if the problem is not solved before the Legislature adjourns in mid-September. Some 42,000 jobs are at stake, he said.
Leahy cited two major projects slated to go out to bid in coming months: the long-discussed extension of the subway to Los Angeles' west side and an underground light rail to connect several existing subway stops downtown.
In August, Moody's Investors Service put 15 California transit agencies, from San Diego to Sacramento and the San Francisco Bay Area, "under review" for a downgraded credit rating as a result of the disagreement. Such a downgrade increases their borrowing costs.