SEIU may be linked to ultimatum on withholding stimulus funds


Officials in the governor’s office say a politically powerful union may have had inappropriate influence over the Obama administration’s decision to withhold billions of dollars in federal stimulus money from California if the state does not reverse a scheduled wage cut for the labor group’s workers.

The officials say they are particularly troubled that the Service Employees International Union, which lobbied the federal government to step in, was included in a conference call in which state and federal officials reviewed the wage cut and the terms of the stimulus package.

California Secretary of Health and Human Services Kim Belshe said she could not recall another instance in which the federal government invited a significant stakeholder group into such government-to-government negotiations.


“The involvement of a stakeholder in this kind of state-federal deliberative process is unusual at best,” she said. “This was really atypical and outside any norm I am familiar with.”

In addition to several state and federal officials, participants in the April 15 conference call included an SEIU associate general counsel in Washington, a lobbyist for SEIU in California and a representative from SEIU’s policy staff in California, according to a list provided by the Schwarzenegger administration.

SEIU spokeswoman Michelle Ringuette called suggestions that the union’s involvement was inappropriate “absurd.”

“We lobbied the Obama administration to get the stimulus money to California as quickly as possible, and we pointed out when the state considered action in violation” of the terms for receiving those funds, she said. “We make no apology . . . for expecting the Schwarzenegger administration to obey the law.”

White House representatives did not respond to requests for comment.

During the conference call, state officials say, they were asked to defend the $74-million cut scheduled to take effect July 1. The cut lowers the state’s maximum contribution to home health workers’ pay from $12.10 per hour to $10.10.

The California officials on the call, who requested anonymity for fear of antagonizing the Obama administration, said they needed the savings to help balance the state budget.


The wages go to some 300,000 people who care for the elderly and ill in their homes. Those workers collectively pay millions of dollars in dues each month to SEIU and another union.

SEIU was among the biggest donors to President Obama’s campaign, contributing $33 million. The union is also consistently among the biggest donors to Democrats in Sacramento and had aggressively fought the wage cut during state budget negotiations.

But Democratic lawmakers voted for the reduction in February as part of a budget deal they struck with Republicans, who have repeatedly targeted the multibillion-dollar home-care program.

The rapidly expanding program is intended to keep low-income elderly and disabled Californians out of nursing homes. People who qualify for the program can hire anyone they choose to take care of them, including relatives and friends.

The Obama administration has ruled that California must revoke the wage cut -- which would require a two-thirds vote of the Legislature and thus would need GOP support -- or lose $6.8 billion in federal stimulus funds.

The administration says the cut violates the terms of the stimulus money because it forces strapped local governments to make up the lost pay.


Belshe said the California program, called In Home Supportive Services, allows local governments to reduce caregiver wages if the state cuts funding.

At the direction of the state, she said, counties negotiated clauses into their labor agreements that allow them to change pay rates if state funding is reduced.

The union argues otherwise, pointing to contracts negotiated with various counties that labor leaders say prevent those counties from cutting salaries.

State Health and Human Services staffers who participated in the call said the Obama administration requested that SEIU representatives be included. The state officials said federal representatives sided with the state during the call.

But on April 30, California officials received a letter from the federal Center for Medicare and Medicaid Services informing them the wage cut must be rescinded.

Gov. Arnold Schwarzenegger has appealed to U.S. Secretary of Health and Human Services Kathleen Sebelius to overturn the ruling. The state is awaiting her decision.



Peter Nicholas in Washington contributed to this report.