SEIU May Have Pressured White House into Withholding Stimulus Funds for California

SEIU logoWith about one-eighth of the nation’s population, it is to be expected that California would receive a substantial share of the $787 billion federal fiscal “stimulus” package recently passed by Congress and signed into law by President Obama. But the Service Employees International Union (SEIU), in exercising political leverage, reportedly is playing a major behind-the-scenes role in holding up billions of dollars set for distribution to that state. The dubious merit of the stimulus plan is a separate issue. Of primary concern here is the 2-million-member labor organization functioning as a de facto government agency under Obama. 

State officials accuse the SEIU of successfully pressuring the Obama administration into holding up $6.8 billion in stimulus money as an act of retribution for the state’s failure to rescind a scheduled wage cut affecting unionized employees in the home-care industry. “The involvement of a stakeholder in this kind of state-federal deliberative process is unusual at best,” remarked California Secretary of Health and Human Services Kim Belshe. “This was really atypical and outside any norm I am familiar with.” She was referring to an April 15 conference call between federal and state officials; invited outside participants included an SEIU associate general counsel at the union’s Washington, D.C. headquarters, a lobbyist for the union in California, and a representative from the union’s policy staff in that state.

Service Employees spokeswoman Michelle Ringuette terms “absurd” any suggestions the union led an effort to cut off federal funds. “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. Ringuette, however, added: “We make no apology for…expecting the Schwarzenegger administration to obey the law.” The White House offered no comment.

At issue is a cut in the State of California’s maximum contribution to the wages of some 300,000 home health workers from $12.10/hr. to $10.10/hr. This reduction is set to take effect July 1. To some observers, this may seem a heartless move. But in fact, it is rooted in common sense and accountability. A few facts should put the issue in perspective.

First, California is going through an unprecedented and ever-worsening budget crisis. It has an estimated current deficit of $21 billion, despite an already high tax burden relative to other states. GOP Gov. Arnold Schwarzenegger, upon taking office less than six years ago, pledged to get the state’s fiscal house in order. Yet California’s debt-service ratio since has tripled. Declining recession-driven revenues, an exodus to other states among the well-off, and rising immigrant-driven demand for public services are a triple whammy making it highly unlikely that the state will climb out of this mess anytime soon. By an average margin of nearly two to one, state voters this past Tuesday turned down five ballot initiatives that would have raised taxes to make up the budget shortfall, while approving by a roughly three-to-one margin a measure to freeze salaries of state employees. Anyone can read the tea leaves: The state must make spending cuts, however loudly unions and other interest groups oppose such action.

Second, there is every reason to believe that when the SEIU speaks, the White House listens. The union was among the largest donors to the Obama presidential campaign, contributing $33 million during the 2007-08 election cycle and $60.7 million since 2005. The union also has been a consistently generous donor to state Democrats. Its California affiliates were highly conspicuous in fighting the wage reductions during budget negotiations. What’s more, various ranking SEIU officials have taken high-level positions with the new Obama administration. Patrick Gaspard came over from SEIU to become White House political affairs director, while T. Michael Kerr, former Service Employees financial chieftain, now holds a sub-cabinet post at the Labor Department. The SEIU from the start has had it in for Schwarzenegger. Back during the recall campaign of 2003 the union paid about 200 operatives to take time off from their jobs and campaign against him. It makes political sense for the White House to do the union’s bidding if it means putting a Democrat back in the driver’s seat in Sacramento.

Third, and most importantly, the state’s In Home Supportive Services program, which employs the affected SEIU members, is riddled with inefficiency and fraud. If ever a state program was ripe for fiscal discipline, it is this one. The Los Angeles Times this April published an expose on how the program, now budgeted at $5.42 billion, operates as a scam. The purpose seems noble: to allow low-income and elderly residents in the state to remain in their homes rather than be moved to long-term institutional care. Some 440,000 persons currently benefit. Unfortunately, numerous con artists are using the program as an opportunity to rip off taxpayers. Here are a few observations from the Times investigation:

Loose oversight and bureaucratic inertia have allowed fraud to fester in a rapidly expanding multibillion-dollar state program that provides personal caregivers to the impoverished elderly and disabled. Hundreds of reports of scams and swindles are going without investigation.

Prosecutors and programs administrators across the state say they are alarmed by the ease with which people are taking advantage of the program…

(G)overnment funds are flowing in so quickly, with such limited oversight, that prosecutors say it is common for the state to send paychecks to scam artists claiming to be caring for someone who is dead. Or claiming to be caring for a relative or friend faking a disability. Or claiming to be providing care during the same hours they are working elsewhere.

“This program is very easy to abuse,” said Michael Ramsey, the district attorney in Butte County in Northern California, which disbanded its In Home Supportive Services fraud unit in 2007 because of budget cuts. “It invites chicanery and fraud.”

So why hasn’t the State of California done more to combat program fraud, if not cancel the program outright? A major reason is union pressure. The SEIU, along with another union, the United Domestic Workers of America, enjoy a steady stream of revenues from workers employed under the program. More workers mean more dues collections. Another likely reason is that fighting medical fraud will lead to speaking out against mass immigration, the latter of which the SEIU aggressively supports. Medicare fraud long has been a major reason why many elderly foreign-born migrate to the state. There is every reason to believe that In Home Supportive Services has functioned much the same way. The Service Employees appears willing to drive California into insolvency so long as the union can replenish its coffers. Such an attitude has contributed to the current recession and the highly expensive stimulus plan. (Los Angeles Times, 4/13/09, 5/11/09; SFGate, 4/17/05; other sources).