The rising cost of public employee pensions represents one of the biggest fiscal challenges for California governments over the long term. The state took an important step to rein in those costs last year when the Legislature adopted a pension reform law pushed by Gov. Jerry Brown. Transit unions complained about the law to U.S. Labor Secretary Thomas E. Perez, however, and he's threatening to withhold billions of dollars in grants for California mass-transit projects in response. Perez is wrong on the issue, and state officials should keep pressing to change his mind.
The secretary's authority over transit grants comes from the 1964 Urban Mass Transportation Act, which sought to preserve collective bargaining rights for transit workers as private bus and train lines were being taken over by public agencies. The law calls on the secretary to withhold grants as needed to assure "the preservation of rights, privileges and benefits (including continuation of pension rights and benefits) under existing collective bargaining agreements or otherwise."
Los Angeles County Metropolitan Transit Authority workers claimed in November that the new state Public Employee Pension Reform Act violated that stricture, and the Labor Department has since refused to release the grants that would otherwise have flowed to California transit agencies. The impasse has cost Metro more than $250 million so far; the agency fears that $3.6 billion in grants could be lost, most slated for the so-called subway to the sea project.
But the state pension law doesn't eliminate current workers' right to bargain over wages, terms of employment or provisions of their existing pensions. It would eliminate some techniques used to artificially inflate pensions, but such practices hardly seem to be the sort of thing Congress was trying to protect in 1964.
The Labor Department seems to object mainly to changes that make pensions less generous for workers hired after the new state law's enactment, such as raising the retirement age and requiring larger pension contributions. That's a specious complaint. Under long-standing state rules, "prospective employees have no vested right to any benefits prior to accepting employment."
By Perez's reading of the law, states could alter the terms of employment for transit workers only at the negotiating table, even for people and positions not yet on the books. That's a warped and shortsighted view, considering the role pension obligations have played in driving cities such as Stockton into bankruptcy. As Brown wrote to the Labor Department in May: "Bargaining rights are a moot point if you do not have a job in which to exercise them." Just as the state has left current workers' pensions to collective bargaining, Perez should respect the state's right to alter the terms of future workers' benefits.