In Battle Over Pensions, Federal Government Lets Unions Hold Transit Hostage

Labor unions weren’t happy when Governor Jerry Brown signed the Public Employees Pension Reform Act of 2012. The law, which applies to government workers across the state, allows government agencies more flexibility in extending the retirement age, increase employee contribution, and halt the practice of “pension spiking” for new employees. A full summary of the legislation is at the bottom of Brown’s press release from last September.

Brown rides on a BYD electric bus in April. Photo:## Street Journal##

In the battle over pension reform, the federal government has given transit unions a powerful hostage: federal appropriations to transit agencies. U.S. Secretary of Labor Thomas Perez decided that the new pension law runs afoul of the 1964 Urban Mass Transportation Act. Perez, and two of California’s more powerful unions, argue the state’s pension laws diminish the collective bargaining rights of unions.

Perez is threatening to withhold federal funds for state transit agencies that follow the state guidelines if and when transit unions object.

The Wall Street Journal argues that Perez is mis-interpreting the act and that Brown and state agencies are operating within the law. California Labor Secretary Marty Morgenstern agrees.

So either the state changes labor law for transit employees, the federal government backs down and sends the $2 billion in grants that were promised, or transit agencies throughout the state lose out on roughly $2 billion in expected, and budgeted, federal funds.

Potentially withheld funds include both capital and operating funds. Los Angeles Metro is first in-line to lose out on funding. The federal government will decide on a $268 million request on Friday. Next in line is the Orange County Transit Agency. Smaller agencies will be hit hard as well. Sacramento’s regional agency could lost $70 million, including funds needed for a new light rail line. Santa Barbara’s Metropolitan Transit District would have to reduce services by 30% and lay off 50 bus drivers without its federal grant.

Thus far, transit unions in the Bay Area have not formally protested to the Department of Labor over the pension plans despite their ongoing strike. While Streetsblog is certainly not privy to the internal negotiations, it’s hard to imagine that the unions aren’t threatening to do so at the bargaining table.

To make the issue more pressing, Moody’s Investor Services is considering downgrading the credit ratings of Metro and other state transit agencies because of the confusion over whether or not they will receive federal funding. A change in credit rating could cost agencies even more, as Moody’s ratings help determine the interest rate agencies will receive on loans that finance most major expansion projects.

Brown is desperate to avoid a lawsuit over Perez’s interpretation unless funding for state agencies is secured. The Governor’s office is floating a plan to quickly pass legislation temporarily restoring the former pension plans for future employees while California and the Federal Department of Labor duke it out. Whether or not that plan will pass muster with Perez, even if it is executed, remains to be seen.

The Teamsters and ATU argue for a different resolution. The unions support legislation by Assemblyman Luis Alejo, D-Watsonville, that basically  excludes  local and regional mass transit workers from last year’s pension law. That would impact 20,000 workers, and could open the door for every union in the state to carve out its own exemption. After all, why should one set of state workers get benefits not offered to others?

While the Sacramento Bee has loudly denounced the Alejo plan, it seems their is little reason to get excited. The bill has been bottled up in committee since its introduction this Spring. It seems unlikely to gain momentum now. Even if it did suddenly move and pass both houses, it’s hard to see the proud Governor Brown signing it into law to avoid a showdown.

Meanwhile, there is little that transit passengers and advocates can do at the moment other than wait and write letters (to Brown and your state legislators if you believe the state needs to act or President Obama and your federal legislators if you think the Labor Department needs to back off.)

  • Anonymous

    Just like Buy America provisions… federal transit policy seems to be concerned with just about everything except, you know, transit.

    (Also, nice that the Secretary of Labor can stand up for beleaguered and powerless public employee unions, but look the other way while places like Wal-Mart, Amazon, etc engage in blatantly illegal union-breaking tactics.)

  • Richard Mlynarik


    Transit in the USA is a pure welfare operation for the agency staffs, the transit-industrial consultant mafiosi, the trade-protected hopelessly cost-ineffective sheltered-workshop vendors, and the operating unions.

    If any services should happen to be delivered to the air-breathing and/or tax-paying public, that’s purely an accidental side effect of jobs for boys and grease for the palms.

    It’s hopeless, especially when “environmentalists” and bien-pensant voting burghers can be so transparently hoodwinked into greenwashing the most egregious waste because, after all, the Iraq War was really bad and transit is good, so really bad transit is OK.

    Expect the worst — rather, actively support the worst — and that’s what you get every time.

  • John Lloyd

    If the state government can arbitrarily change pension compensation for state workers that has been secured through a process of legal collective bargaining, then public workers effectively lose a collective bargaining right secured not only by state law but by federal law for the last half century. This seems to be the US Labor Department’s motive for urging withholding of funds. No question the consequences of this would be dire for bus riders like myself, but there’s also no question transit workers believe they are facing the kind of union-busting tactics that have been used to effectively eviscerate well-paying unionized jobs in the private sector over the past 30 years, and they’re probably right. The vast majority of transit workers are hardly getting rich or set up to live on easy street for their retirement. Many transit jobs, such as driving a bus, are demanding and stressful. These workers deserve decent pay and benefits. We apparently have enough money to bail out Wall Street banks, but expect working people in one of the most vital public jobs in a modern society to take the short end of the stick. For shame.

  • Erik Griswold

    Say is that #JerryBrowned riding on one of the PRC-built BYD buses which were apparently rejected from manditory-if-you-want-to-run-in-the-USA testing at Altoona, PA…allegedly?

  • Anonymous

    Honestly, to me, the “PRC-built” and “mandatory if you want to run in the USA” stuff comes off as China-hating. If these were rail vehicles, everyone would be talking about how much Buy America screws over transit riders, and how the FRA’s requirements are pointless and drive up the price. (Another honest question: does anyone know how the “Altoona tests” compare to FRA regs in terms of how they stack up against international requirements?)

    To be fair, it appears that there may be legitimate questions about the quality of BYD’s products, but that has nothing to do with parts being produced in China. Pretty much every electronic device we own has at least some components produced in China, and they all work pretty well.

  • Erik Griswold

    PRC is shorthand for People’s Republic of China. I use it to differentiate from Taiwan, which does still also hold claim to the name “China”. The first five “pilot” buses will be built in China.from what I have read. The bus sent to Altoona was built in China.

    Would I be Sweden-hating if I pointed out the same issues about Volvo buses?

    The Altoona tests are very difficult, and even some well made buses from many other parts of the world could not pass them, or did so only with major increase in production costs. Roads in the USA are very different (poorer quality) from those found in Europe and the industrialized parts of Asia.

    I am trying to temper all the enthusiasm there seems to be at the moment in Los Angeles County for the BYD buses because if they do not pass the Altoona tests, they will not be able to be put in service here or anywhere else in the USA. In fact, if BYD fails Altoona, I wonder if the demo bus that tours the USA will be allowed to remain. And I don’t think a number of the local decision makers who have climbed on the BYD bandwagon appreciate this.

    Finally, I’ll remind you that there are a number of established bus suppliers still remaining in the USA, at least two of whom are located in California (albeit not *in* Los Angeles County). Gillig and Eldorado National make dependable transit bus products (EN also assembles the Alexander Dennis Double Decker buses destined to the USA), sales that result in capital as well as R&D remaining *in* California. I am certain they could be open to creating an electric powered bus; Gillig already did for Seattle though I admit these were Electric Trolley Buses.

    Oh, but that wouldn’t mean any low-wage temporary widget-tightening jobs in Lancaster now would it?

  • Anonymous

    I think if you said “Sweden-built Volvo buses” it might sound weird, though most people would know Volvo is a Swedish corporation and many would not know BYD is a Chinese corporation. I guess I don’t see why it should matter all that much if they’re built in the US, or China, or Sweden.

    EN and Gillig could have bid on these contracts, right? Maybe they see the US market for electric buses as too small/variable to justify the investment, similar to the US rail vehicle market?

    I’m generally in agreement on Buy America. It is a blunt policy that attempts to reverse the results of a whole bunch of broad economic policies, and puts the burden on chronically underfunded transit agencies. There is plenty of debate to be had about those broad policies, but regardless of anyone’s feelings on the decline of US heavy industry, Buy America is a pretty strange and ineffective way of tackling that.

  • geili


  • Anonymous

    Yeah; My Union Boss down at the Town Hall emailed me yesterday and
    Told me that this article was hitting the Papers today, and He told Me
    to make it Look like I was Working till this Blows Over in a week. I
    know the routine !!! In a week, I’ll be back to my usual activity of
    Collecting A Paycheck for Doing Nothing !!! Hey, Private Sector
    Workers; You really gotta Pony Up more Taxes !!! I need at least a 10 %
    raise !!! My Cabin Cruiser at the Dock behind my Vacation House in
    Florida needs a New Engine. My wife has been after me for a new car.
    She wants a BMW X6 G-Power Typhoon S !!! I told her I can’t afford that
    car. So then she says she will accept a Mercedes-Benz CL-Class and
    Nothing else !!! I also got Private School Tuition of $ 40,000.00 due
    in September. I got Credit Card Expenses coming out my AXX !!! That
    new 3000 sq ft extension on my house raised my property taxes $ 15,000.
    The maid and the housekeeper want raises. The gardener also wants a
    raise. You see Bunky; It ain’t easy in the Public Sector !!! So come
    on Private Sector Worker; Pony Up and Pay More Taxes so I can afford to
    live here !!! You See; Life Is Not Fair, and the DemoRats will take
    care of Everything !!! HAPPY DAYS ARE HERE AGAIN !!!


Rev. Jackson Joins Labor, Enviro Groups in Call for Transit Funding

At a rally last week headlined by Rev. Jesse Jackson, a new coalition of labor unions and environmental organizations stood together to demand more funding for transit agencies across the country. With service cuts afflicting bus and train riders in dozens of major cities, the "Keep America Moving" coalition is focused on securing funds to […]

Move L.A. Interviews Incoming Metro CEO Phil Washington

Metro’s new CEO Phil Washington just started work this past Monday May 11. Below is a recent Phil Washington interview conducted by Gloria Ohland, who serves as Policy and Communications Director for Move L.A. At Move L.A.’s 7th Annual Transportation Conversation L.A. Mayor Eric Garcetti talked at some length about L.A.’s transformation into an example […]

Gov. Brown Vetoes Commuter Benefits Act, Cites Cost Agument

Sounding like a spokesperson for the Republican opposition to the bill, Governor Jerry Brown announced a veto of SB 582, citing the cost to small businesses.  From his veto statement: While I support the goal of reducing vehicle trips, this bill would impose a new mandate on small business at a time of economic uncertainty. There’s […]