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Brooks Wilson's Economics Blog: California Wins Standoff with Obama Administration

Monday, May 25, 2009

California Wins Standoff with Obama Administration

Peter Nicholas writes in the Los Angeles Times ("U.S. backs off threat to withhold California stimulus money," May 20, 2009),
Reporting from Washington -- The Obama administration has backed off its threat to withhold billions of dollars in stimulus money from California, telling Gov. Arnold Schwarzenegger the state did not violate federal law in cutting pay for home healthcare workers in a bid to help balance the budget.

In a letter that was given to the governor this morning, the U.S. Department of Health and Human Services said the state remains eligible to receive another $8 billion in stimulus money for its Medicaid program, a ruling that may offer some solace for state officials coping with the resounding voter defeat Tuesday of five ballot measures aimed at closing California's huge budget shortfall.

The decision resolves a bitter standoff between the Obama and Schwarzenegger administrations, in which California officials questioned the involvement of an influential union -- the Service Employees International Union. The Obama administration set up a conference call on April 15 to discuss whether the state had violated the new stimulus law by cutting the pay of unionized home healthcare workers from a maximum of $12.10 an hour to a maximum of $10.10. California officials took the step to save $74 million and move closer to narrowing the state's multibillion-dollar budget gap.
This is a good outcome.


  1. Lori Hodges12/3/11 7:40 PM

    I believe unions were originally formed to protect workers from unsafe working conditions and to be sure that workers were being paid a fair wage. When unions cause a higher labor rate for workers this passes a greater financial burden to the employers. Thus, passing it on to the consumers. Sometimes things have to be done to help the overall economy.

  2. Hi there and thanks for this interesting and important post.

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