Public transit workers in California will not be subject to new pension rules imposed on state and local government employees under a plan proposed by California Gov. Edmund. G. “Jerry” Brown, aimed at preventing the loss of billions of dollars in federal funding to transit districts throughout the state.

Gov. Brown's proposal will be introduced in a bill by Democratic Assemblyman Richard Bloom, who heads the budget subcommittee on transportation. The Assembly and Senate are expected to approve the legislation before the close of the legislative session next week.

The governor's proposal is to resolve a dispute between California officials and U.S. Labor Secretary Thomas E. Perez over whether California was violating a 1964 Labor Department rule that calls for unions representing transit workers to be allowed to collectively bargain wage and benefit issues.

Gov. Brown's pension reform legislation last year required state, local and transit workers to contribute more of their salary towards their pension and reduced benefits for new employees.

Mr. Perez had begun to withhold earlier this year the first allocation of the $1.5 billion in transit money that was earmarked for public transit operators in California until the state rescinded the rule.

“Federal transit money creates jobs, and this legislation keeps those funds flowing while allowing the state to defend in court our landmark pension reforms,” the governor said in a statement Wednesday.

Gov. Brown said, however, he will challenge in federal court the 50-year-old federal law that prohibits states from reducing pension benefits for transit workers outside of collective bargaining.

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Mike Trupo, a spokesman for the DOL, said in a statement: “We are gratified that our work with the state will result in legislation being introduced. While each grant application must be reviewed individually, if legislation along the lines of what we have discussed with the governor's office is enacted, it will temporarily resolve the conflict. … This would allow the Department of Labor to certify federal transit grants so that funds can flow to local transit agencies as quickly as possible.”

Randy Diamond writes for Pensions & Investments, a sister publication of Business Insurance.