Obama Administration Sides With Union on California’s Proposed Wage Cuts

May 8, 2009 - 8:27 AM
In a victory for its labor union friends, the Obama administration has ruled that budget-strapped California cannot cut the wages of in-home caregivers since it is accepting federal stimulus funds.

President Barack Obama signs the economic stimulus bill, Tuesday, Feb. 17, 2009, at the Museum of Nature and Science in Denver. (AP Photo/Ed Andrieski)

(CNSNews.com) - In a victory for its labor union friends, the Obama administration has ruled that budget-strapped California cannot cut the wages of in-home care givers since it is accepting federal stimulus funds.
 
The stimulus money is intended to prevent such cuts, President Barack Obama has said.
 
This week's ruling -- from Obama’s Health and Human Services Department -- involves the 250,000 workers who belong to the Service Employees International Union.
 
Those 250,000 In-Home Supportive Service workers provide daily in-home care for some 440,000 California seniors and people with disabilities who otherwise might require nursing home care.
 
The ruling came after the Service Employees International Union and its California affiliates requested an opinion on whether California’s proposed wage cuts for IHSS workers violate the “maintenance of effort clause” in Obama’s stimulus program.
 
“Maintenance of effort” is a federal requirement that says grant recipients must maintain a certain level of state and local spending to be eligible for full participation in federal grant funding. 
 
The California Legislature – now grappling with a multi-billion budget deficit -- voted for a 20-percent reduction in the state’s contribution to homecare workers’ wages as part of the state’s budget package.
 
The SEIU called the proposed 20-percent cut “staggering,” saying it would lower the state’s contribution to workers’ wages to $9.50 an hour from $11.50.
 
According to The Los Angeles Times, Schwarzenegger's office was advised this week that the wage reduction -- which would save California $74 million – could cost California $6.8 billion in stimulus money.
 
The wage cut was supposed to take effect on July 1, 2009. (The wages of IHSS workers are paid with a combination of federal, state and county funds.)
 
The SEIU argued that under the American Recovery and Reinvestment Act (the stimulus package), states may not reduce funding for existing services. The Centers for Medicare and Medicaid Services – part of Health and Human Services Department – agreed.
 
"The Obama Administration has made it clear that the state cannot cut the homecare workers' wages. Now we need our counties to follow suit and take all the cuts off the table," said Eliseo Medina, an SEIU executive vice president.
 
The SEIU news release includes a comment from a homecare worker in Fresno County, who thanked President Obama for standing up for him and other homecare workers.
 
President Obama’s stimulus package provides financial assistance for counties struggling with budget deficits. California so far has received $1.99 billion in federal stimulus money to help cover the cost of its Medicaid program.
 
"This plan will also help ensure that you don’t need to make cuts to essential services Americans rely on now more than ever," the president told the Nation’s Governors at a White House meeting in February.
 
Labor unions argue that homecare programs are far more cost-effective than sending the elderly and inform to institutions that would cost taxpayers much more money than in-home programs do.