Senate budget committee sets up bill repealing prevailing wage for school construction for floor vote
01/12/2016 01:22 PM
FRANKFORT — Legislation exempting public school projects from the state’s prevailing wage law cleared the Senate Appropriations and Revenue Committee in a 10-1 vote Tuesday.
Senate Bill 9, sponsored by Sen. Wil Schroder, is one of the GOP-controlled Senate’s priority bills in this year’s legislative session but faces an unlikely future if it reaches the Democrat-led House. Sen. Morgan McGarvey, D-Louisville, was the lone dissenting vote.
Schroder, noting that the state had previously exempted school projects from the prevailing wage law from 1982 to 1996, said the bill “would greatly save the commonwealth money.” He cited a study by the Legislative Research Commission that found labor costs in sampled school construction projects were 51 percent higher compared to private construction.
“While the study found that costs went up for labor, there was no indication that the quality of the construction was improving,” said Schroder, R-Wilder. “Schools are paying more for construction with absolutely no guarantee for better quality.
Tom Shelton, executive director of the Kentucky Association of School Superintendents, offered his personal experience with the state’s prevailing wage law, saying he worked at a school district that built three new elementary schools in 1997.
The projects were bid before and after the state re-enacted prevailing wage for school construction, he said.
“We saw a 34 percent hard-dollar increase in the cost, and on a $17 million project, you can see that that was over $5 million impact that we had to endure,” Shelton said.
State prevailing wages are base pay rates for contractors and subcontractors on public works projects set by the Kentucky Labor Cabinet.
Labor groups disputed much of Schroder’s and Shelton’s testimony, relying on a study by the University of Utah’s Peter Phillips that found estimated economic impact wasn’t as rosy as predicted by Schroder.
Bill Finn, state director of the Kentucky State Building and Construction Trades Council, said 51 percent savings could not be achieved by repealing the prevailing wage on school projects since wages and benefits total less than 21 percent of overall construction costs.
“There’s no way that you can save 51 percent of a construction project when only 21 percent makes up what the workers make,” Finn said. “No way.”
He added that other states that have eliminated prevailing wage requirements on school projects “saw no savings to taxpayers because quality, timeliness and availability of a skilled workforce suffered,” and changing those laws did not result in an increase in school construction.
A portion of the meeting turned personal.
Sen. Chris McDaniel, chairman of the budget committee, questioned the objectivity of the study cited by Finn and Bill Londrigan, president of the Kentucky State AFL-CIO.
McDaniel, a Taylor Mill Republican who operates a concrete business in northern Kentucky, didn’t raise issues with the study’s findings, but rather an entire section that was dedicated to him personally. He called that portion of the study “fairly insulting.”
“It says Sen. McDaniel thinks this is not fair,” McDaniel said. “He thinks all blue-collar construction workers on public construction regardless of their training, regardless of their skills, regardless of the unemployment they must endure, regardless of the dangers on their job, regardless of the fact that their bodies will wear out long before most other workers should get paid no more than 70 percent of the average family income in this county. Does Sen. McDaniel believe that average income in his district is to good for construction workers and their families?
“That’s a pretty interesting academic statement for Dr. Phillips to make about me, my family, my company, how I provide for my children, how my father provided for me. I’m just interested, what kind of academic study is this?”
Londrigan and Finn said they understood McDaniel’s personal concerns with the study, but they defended Doctor Phillips’s research.
They also said the state had good reason to put school construction projects back under the prevailing wage umbrella in 1996.
“What really happened was we had less competition in the industry, and we had lower wages, and we had less quality, and that’s why in ’96 we went back to the drawing board and actually re-instituted this onto school and educational facilities, recognizing that it was better public policy for us to have a skilled supply of workers in this state to building buildings in a safe and efficient manner,” Londrigan said.
McDaniel disagreed with that line of thinking.
He also expressed his hopes that the state’s Democrat-led House of Representatives would consider the legislation. The Senate could take up the legislation in a floor vote this week, he said.
“We know the problems that we have in the teachers’ retirement system right now, which is funded through the SEEK formula, which is the same way that capital construction budgets, or a portion of capital construction budgets, are funded,” McDaniel said.
“I hope that the House will see the wisdom. If they want to invest in our educational system, this is a way to make a change in the law that will invest in that system and also invest in our ability to build more structures because of the savings that we’ll realize.”
Londrigan said he expects the bill will die in the House as it has in recent sessions.
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