Biden Helps Unions Attack California Pension Reform

Jerry Brown signed thousands of legislative bills during his two eight-year stints as California’s governor but two stand out as fundamental and potentially long-lasting alterations in the status quo.

One is the Local Control Funding Formula (LCFF), which changed how California public schools are financed to provide more money for improving the educations of poor and English-learner students.

The second is the California Public Employees’ Pension Reform Act (PEPRA), which reduced pension benefits for new state and local government employees in an effort to keep the California Public Employees Retirement System from sliding into insolvency.

Both were enacted nearly a decade ago in the first years of Brown’s second governorship but whether either will deliver the promised benefits is still uncertain.

Although 60% of California’s nearly 6 million K-12 students are deemed to be “at-risk” and needing the extra attention LCFF promised, the program has been criticized for its lack of oversight and the “achievement gap” it was supposed to narrow remains unacceptably wide.

Redefined Retirement Benefits

With PEPRA, as public employees retire and are replaced by new hires with redefined benefits, the gap between what the pension system has in assets and what it needs to pay out in future decades will narrow.

However, public employee unions have opposed Brown’s reform plan from the onset, have tried to undo parts of it through litigation and are enlisting the federal government’s help in challenging the plan’s legality.

Shortly after Brown signed the pension reform legislation, unions representing workers in public transit systems persuaded the federal Department of Labor, then part of former President Barack Obama’s administration, to declare that it violated a federal law.

The 1964 law prohibits agencies from receiving federal grants for mass transit unless the department certifies that the agencies are protecting the interests of affected employees. The Labor Department declared that PEPRA, by making pension changes without bargaining them with unions, violated the law and thus blocked federal aid to California transit systems.

Brown disputed the finding and the issue wound up in federal court, where a judge ruled that the Department of Labor’s “failure to consider the realities of the process of public sector bargaining renders its decision arbitrary and capricious.”

That decision, specifically affecting two local transit systems, kept federal funds flowing to California and former President Donald Trump’s administration rebuffed union efforts to have PEPRA overturned.

Newsom Petitioning Labor Department

However, Democrats are back in power with the election of President Joe Biden and once again the Department of Labor is threatening to cut off federal transit funds to all but the two systems affected by the previous federal court ruling. It potentially affects billions of dollars from the recently enacted infrastructure improvement program.

The transit agencies are raising the alarm and Gov. Gavin Newsom is emulating predecessor Jerry Brown in opposing the Biden administration’s attack on PEPRA. Newsom, in a letter to Labor Secretary Marty Walsh, asks for a reversal of its declaration, saying it’s legally flawed and would harm transit agencies and their passengers.

“Public transit agencies rely more than ever on these federal grants just to keep trains and buses running and their workforces employed,” Newsom said in the letter. “The grants being withheld also help provide vital mobility to low-income seniors, individuals with disabilities, and other transit-dependent riders.”

Were California’s transit workers to be exempted from PEPRA, it would put Newsom and the Legislature in a bind. Politically, they are joined at the hip with public employee unions, which would then demand that millions of other workers should also be exempted, thereby gutting pension reform.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of them working for California newspapers. He now writes for CalMatters, a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters.  For more columns by Dan Walters, go to calmatters.org/commentary.