SACRAMENTO — The federal government says California is ineligible for about $12 billion in public transit funding because of a long-running dispute over changes to the state’s public pension law that the Biden administration recently determined are improper.

Federal law says state and local agencies must protect the interests of their employees to be eligible for federal public transit grants. A state law that took effect in 2013 made changes to California’s public pension system, including making pensions less generous for new employees.

The Sacramento Bee reports the U.S. Department of Labor recently determined those changes were improper because they were imposed by law instead of collectively bargained with public employee unions.

The federal government’s latest decision means the state would be ineligible for about $9.5 billion in money set aside for California public transit agencies in the infrastructure bill Congress approved last week. California would also forfeit about $2.5 billion in grants for public transit that were part of the most recent federal coronavirus relief legislation.

“This relief funding has served as a lifeline for them, and in the absence of these federal dollars flowing to California transit agencies, we will absolutely see a reduction in service and losses in our workforce, making it more difficult for agencies to rebound,” said Michael Pimentel, executive director of the California Transit Association, a nonprofit representing public transit agencies in the state.

Pension Law Change Long Disputed

State and federal officials have been arguing over this funding since the pension law was passed nearly a decade ago. After former President Barack Obama’s administration blocked grant funding for two California transit agencies, the state sued and won. But that decision only applied to the Sacramento Regional Transit District and Monterey-Salinas Transit.

In 2019, former Republican President Donald Trump’s administration ruled the state’s pension law did not make it ineligible for public transit grants. But Democratic President Joe Biden’s administration reversed that decision on Oct. 28.

California U.S. Sens. Dianne Feinstein and Alex Padilla, both Democrats, have urged the Biden administration to overturn the decision, saying it was “at odds with multiple state and federal court decisions and past Labor Department precedent.”

California Gov. Gavin Newsom, a Democrat, called the Labor Department’s decision “extremely concerning.” In a letter to U.S. Labor Secretary Marty Walsh on Wednesday, Newsom argued the pension changes did not impede labor unions’ collective bargaining rights, noting unions have negotiated new contracts since the 2013 state law took effect.

A letter from the U.S. Department of labor says the state pension law “continues to interfere with the collective bargaining process regardless of the specific terms of workers’ collective bargaining agreements now in existence.”