(CN) - California may lose millions of federal dollars for trying to reform its chronically underfunded pension system, so Gov. Jerry Brown has proposed legislation to ensure that $1.6 billion continues to flow to the Golden State.
The U.S. Department of Labor on Wednesday told the Sacramento Regional Transit District that millions of dollars in transit grants will be withheld because parts of the California Public Employee Pension Reform Act provisions (PEPRA) conflict with federal labor law.
PEPRA, pushed by Brown and enacted this year, requires state and local employees, including transit workers, to contribute more to their retirement plans.
Brown said the new, proposed legislation will temporarily exempt local agencies' transit workers from PEPRA, and preserve California's ability to fight in court for its pension reforms.
The proposal also creates a $26 million state loan program to assist transit operators facing grant cuts.
"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 statement.
Brown wrote a letter about the issue to Labor Secretary Seth Harris in May.
"The driving force behind California's pension reforms is the need to protect the fiscal stability of public employee pensions at the state and local levels," Brown wrote. "There is a virtual consensus in this state that public pension systems are chronically underfunded, and last year's pension reform measures passed both houses of our Legislature with strong bipartisan support.
Brown said his pension reforms do not impair employees' bargaining rights, but "enhances retirement security for public employees by keeping pension plans from becoming unsustainable."
Pension reform will help prevent municipal bankruptcies tied "at least in part" to pension obligations, Brown wrote. He told the labor secretary that withholding federal transit grants "will do great harm and injustice to the people of California."
"This is very important to the people of California - both for jobs and pension reform!" Brown added in a handwritten postscript the letter.
The legislation, Assembly Bill 1222, will be introduced by Richard Bloom, D-Santa Monica, and Roger Dickinson, D-Sacramento. Ken Cooley, D-Rancho Cordova, will be a co-author.
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