ABC and others report that the Obama administration has invited union representatives to participate in conference calls with state and local officials, which have been held to set guidelines for how ‘stimulus’ money is spent.

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…”

According to the LA Times, federal officials sided with the state during the April 15 call. But on April 30, California authorities received a letter from the U.S. Department of Health’s Center for Medicare and Medicaid Services informing them the wage cut must be rescinded.

In one sense, the State of California is learning the same lesson that TARP recipients have learned: that if you take federal money, Uncle Barack may want to dictate how you spend it. That’s more or less what’s happening here – except that the Obama administration has decided to farm out some of the decision-making authority to state employees, through their union. Thus HHS sided with the state initially, but two weeks later – when an official decision was made – the unions had managed to reverse the decision.

If the Obama administration is not content to simply let states decide how to spend the money, there are many ways to wade into the decisionmaking process. A good approach might be to take the side of the patients affected by potential cuts. Or they might work with the state and the unions to deliver these services in a less-costly way – so everyone wins. Or they might attempt to prioritize among state programs, and offer assistance for those they consider the most valuable or important.

All these things they might have done, but instead they overrode the state (forcing them to make cuts elsewhere), and gave an exclusive and unprecedented seat at the table to the unions. And you can be certain that if the unions are helping to set policy on what California does with health care stimulus money, they are certainly being involved elsewhere.

Union bosses deciding public policy? That may be change, but it doesn’t leave much hope.