State Suggests Union May Have Tried to Block Federal Funds

May 13, 2009— -- Federal authorities this week bristled at a suggestion by California officials that an influential union may be pushing the Obama administration to withhold billions of federal stimulus dollars from the state if Gov. Arnold Schwarzenegger follows through on a plan to cut home health-care workers' wages.

As first reported in the Los Angeles Times, California officials have said that representatives of the Service Employees International Union were given unprecedented access to an April 15 conference call between federal and state officials in which the state was made to justify its plan to slash $74 million from its budget by cutting health aids' maximum salaries by $2 an hour.

State officials, speaking on background, said the cuts were essential to balancing the budget and were surprised that representatives of the SEIU -- one of the country's largest labor unions, and one of President Obama's biggest campaign contributors -- were present on the call.

Sources from all three parties said much of the conference call revolved around the legalities of whether the state could force counties to change their wage rules and still be eligible for the $6.8 billion California wants from Washington.

"This is an unusual situation," said Amy Palmer, spokeswoman for the California Department of Health and Human Services, about having a third party present on an intergovernmental call. "It is incredibly unusual in our experience to have stakeholders on a call like this."

The union's $33 million contribution to the president's campaign and their access to the call led to an LA Times headline that read the "SEIU may be linked to [an] ultimatum on withholding stimulus funds."

A federal official with information about the call, speaking on background, said there was no quid pro quo with the SEIU and no ultimatum.

The union, the official said, was included for practical reasons and "[the call] brought together stakeholders in the interest of time and efficiency."

A representative for the U.S. Department of Health and Human Services said everything about the call was legal and above board. He said a decision had yet to be made about allocating the stimulus money.