Prevailing Wage

We've mentioned many times that the real party controlling the Pennsylvania legislature is not the Republican Party, but rather the Union Party.

Today, in a story by the Pittsburgh Post-Gazette's Tom Barnes, the Union Party "Republicans" lay their cards on the table for all to see.

Republican Rep. Gene DiGirolamo, a Bucks County Union Party member, has formed his own political action committee (PAC) called Good Jobs PA—primarily funded by union PACs—to funnel money to Republicans who will vote against high priority items like prevailing wage reform or liquor store privatization.  As Barnes notes:

He has created a political action committee, called GoodJobsPa, which gets donations, mostly from labor unions, and gives the money to liberal-leaning House Republicans, such as Mr. Marshall ($5,000) and Reps. Tom Murt of Montgomery ($2,500), Rep. Bob Godshall of Montgomery ($500) and Rep. Joe Hackett of Delaware County ($2,500).

DiGirolamo reads straight from the union's talking points when trying to explain why he is working to thwart reforms that will save taxpayer dollars. On prevailing wage—a mandate that local governments pay state-established wages on construction projects, regardless of the going market wage—he claims that identified savings won't benefit taxpayers, but will only increase "profits" for contractors.  This, of course, is untrue as the lower costs of public projects on the front end would reduce taxpayer outlays to these very same contractors at the back end.

Furthermore, DiGirolamo conveniently overlooks the fact that contractors make a profit off of government projects now, and he intentionally ignores real-world examples of savings identified by local governments. Indeed, a broad coalition, including local government officials from townships to boroughs to counties to school boards across Pennsylvania, has called for prevailing wage reform.

DiGirolamo also criticizes plans to let the private sector run liquor stores, claiming that privatization will lead to more alcohol abuse, and repeats myths about liquor store "profits". Of course, these talking points have long been debunked, but union money trumps facts and evidence.

Republican Rep. Jim Marshall, one of the key recipients of Good Jobs PA PAC money, backs up DiGirolamo, taking the union side against taxpayers. Marshall claims that paying construction workers market wages—freeing up money for additional projects, or for tax reductions—represents an "attack" on jobs. Marshall adds that he doesn't see a "glaring problem" with government-run liquor stores—a claim that has 70 percent of voters scratching their heads.

The Pennsylvania House of Representatives may soon vote on legislation that will update the half-century-old Prevailing Wage Law that adds zero value to the taxpayers but costs us a bundle -- upwards of $900 per year for the typical family of four.

Today, we joined with a broad goup of organizations representing business, taxpayers, and local government officials working for a minimal improvement of the law -- indexing the threshold to inflation.

Will the Union Party prevail once again on Prevailing Wage?  For the sake of the taxpayers and local governments trying not to raise taxes, we hope not!

Take action NOW to encourage your Representative to vote for the Taxpayers!

April 3, 2012

To the Honorable Members of the Pennsylvania State House:

The undersigned organizations representing local governments, the business community, taxpayers and others write to urge your support for H.B. 1329 as written, which would raise the threshold for a public project to be subject to the PA Prevailing Wage Act. This bill will help ease financial burdens for counties, municipalities and school districts, mitigate property tax increases and create jobs. 

Our organizations support repealing the PA Prevailing Wage Act, which mandates that workers on public projects be paid anywhere from 30 to 75 percent above the market rate. The Commonwealth, counties, municipalities and school districts are operating with increasingly limited funding and this mandate is one more obstacle impeding efforts to balance local budgets while still providing essential services and important public works projects.

This premium provides no benefit to the public while adding billions of dollars in extra costs for those most unable to afford it: Pennsylvania taxpayers. Based on estimates of the amount spent on labor costs for public projects and the disparity between average wages and "prevailing" wages, in 2010 this mandate costs a typical Pennsylvania family of four up to $900. This extra cost for taxpayers does not buy a bigger building, better materials or a safer structure and it is simply wrong to ask Pennsylvania residents to incur this expense when they get nothing in return.

H.B. 1329 would raise the threshold from $25,000 to $185,000 to account for inflation over the 50 years since the original threshold was set. Even prevailing wage supporters cannot deny that the original legislators who facilitated passage and implementation of this Act must have had some concept of the type and scale of project to which prevailing wage should apply, or why include a threshold at all? Clearly, $25,000 does not buy in 2012 what it did in the early 1960s.

That is why hundreds of local governing bodies from all over the Commonwealth have expressed support for this bill, and prevailing wage reform in general, through resolutions, outreach to the media and contact with their local state legislators. Their message is clear: this legislation will create jobs by allowing local governments to use taxpayer dollars more efficiently, allow them to carry out long-overdue maintenance such as road repairs, and initiate more public projects.

We urge you to support H.B. 1329.

Sincerely,

 

This week, the Pennsylvania House is set (yet again) to consider basic reforms to Pennsylvania's outdated prevailing wage law, which mandates that union-scale wages be paid on taxpayer-funded construction projects above $25,000.

We've noted before how the prevailing wage is on average 51 percent higher than the market wage—and for construction that is no better in quality. In 2010, Pennsylvania spent $12.7 billion on government construction projects subject to prevailing wage, such as roads, bridges and school buildings. Without prevailing wage, taxpayers could have saved between $1.3 billion and $2.5 billion. That's an extra $400 to $900 in needless taxes for the average family of four.

Trade and construction unions often argue that prevailing wage barely raises construction costs, and  doesn't hit taxpayers hard. But across the commonwealth, township and borough supervisors and county and municipal officials beg to differ. From Butler to Bucks, officials with strained local budgets are pleading with lawmakers to reform the prevailing wage mandate. From experience, they offer proof of how prevailing wage raise taxpayers' building costs:

• Carroll Valley Borough in Adams County reported that they had road/storm water damage in April 2011. Their engineer's estimate to repair the damage was $45,000, with prevailing wage. Instead of using outside contractors, the borough decided to use in-house workers, thus avoiding prevailing wage requirements. The cost then? $6,958. (From the Pennsylvania State Association of Township Supervisors, PSATS).

• Franklin Township in Adams County reports that their 2008-09 Cashtown/McKnightstown sewer project was $8 million...the township contributed $1.2 million towards the project. This project serves 261 households, 26 businesses, and an elementary school. According to the township, if it did not have to comply with prevailing wage, the total cost would have been $2 million less (from PSATS).

• A proposal for a roof repair project in South Western School District in York County initially came in at $84,504, without factoring in prevailing wage rates. The contractor resubmitted his proposal for the exact same scope of work and included the payment of prevailing wages and the total cost of the project increased from $84,504 to $126,825—an increase of $42,321 or 50 percent, which was footed by local taxpayers (from the Pennsylvania School Boards Association).

When it comes to road repairs, the prevailing wage law could well be Pennsylvania's "Pothole Mandate." Many local governments can no longer afford to pave their roads because prevailing wage hikes costs too high. More examples from PSATS:

• Morgan Township in Greene County has not bid out a paving job since the Youngwood decision (a 2008 PA Supreme Court ruling that subjected more maintenance work to the prevailing wage law). Instead, the township has resorted to using tar and chip, sealcoating, and other pavement maintenance methods from 30 to 40 years ago to extend the life of their roads because the preferred maintenance method, paving, is no longer affordable.
  
  
• Frenchcreek Township in Venango County may return its roads to a gravel surface as they deteriorate, because the township simply cannot afford to maintain hard-surfaced roads.
  
  
• In 2009, Rose Township in Jefferson County oiled and chipped a road that is a high-traffic major route to a neighboring township and another road used as a short cut between two state highways. The township was able to oil and chip these two roads for $36,000. The township would have liked to have paved them both, but the total estimated cost, including prevailing wage, was more than the township could afford.

Our local governments are fighting to provide essential services, and giving them prevailing wage relief would allow them to do more with less. House members will vote on a bill this week that simply adjusts the prevailing wage thresholdfor inflation, from its early 1960s level of $25,000 to $185,000.

Click here to contact your lawmaker about passing the reform.

No sooner did we release research documenting the iron grip of Pennsylvania's labor unions on the commonwealth's taxpayers than they obliged us with a case-in-point on union bullying tactics. Some 40 "concerned taxpayers"—disgruntled construction workers—turned up outside House Majority Whip Stan Saylor's office in York protesting very basic reforms to state law that would allow local governments to use taxpayer funds more efficiently.

One of the reforms?  Raising the threshold for "prevailing wage" projects from $25,000 (the unchanged 1960s level) to $185,000 (adjusted for inflation). Pennsylvania's 1961 prevailing wage law mandates that a community's "prevailing wage" be paid on publicly funded projects of $25,000 and higher. In practice, the "prevailing wage" is the union-inflated rate found in collective bargaining agreements. On average, it is 51 percent higher than what we pay in the private sector for identical construction of equal quality.

You wouldn't know it to hear the picketers outside Rep. Saylor's office. "Cutting the wages of hard working taxpayers is not fair" their flyer proclaimed, singling out Rep. Saylor's $80,000 salary as further evidence of unfairness. But Rep. Saylor is right: It isn't fair for taxpayers to pay extra in prevailing wage for no added benefit. While one carpenter claimed his salary was still only "two-thirds of the big-city pay," carpenters on prevailing wage projects in York County still get paid 19 percent more than those working on private projects. And York's prevailing wage for other workers—plumbers, electricians, roofers, and others—ends up 50 percent higher than the regular occupational wage.

Prevailing wage reform—and the other efforts Rep. Saylor supports—will ensure taxpayer dollars are not wasted. We're already facing a four-alarm fire with our budget. Unions won't tolerate even the slightest spending reforms: Evidence, yet again, that Pennsylvania's taxpayers are in their grip.

Yesterday, we noted how Pennsylvania's prevailing wage law is a "rent" for labor unions.  Here's an example of how it plays out in real life—when our schools are hit with higher construction costs because of the mandate. So, pop quiz: Would you pay $84 or $126 for the exact same product? 

When it comes to Pennsylvania's "prevailing wage" law, we force the taxpayers to pay $126. That's precisely what happened to taxpayers in the South Western School District in York County. But instead of it being $126 and $84, it was $126,825 instead of $84,504.

You see, when the South Western School District needed some roof repairs, the initial proposal from the contractor came in at $84,504. However, prior to obtaining Board approval, business officials inquired as to whether the proposal had used prevailing wage rates since the total cost of the project exceeded $25,000. The contractor indicated that the initial proposal did not include the artificially increased wage rates. He had used the wages being paid on a similar project in the private sector, like the roof of a large office building.

The contractor resubmitted the proposal for the exact same scope of work and included the payment of prevailing wages. Guess what: The total cost of the project increased from $84,504 to $126,825! That's an increase of $42,321, or 50 percent, for exactly the same product with the same skilled workers. The only difference is that the taxpayers in South Western School District got a 50 percent higher tax bill for the same work.

Thank goodness we taxpayers don't have to pay so-called "prevailing wages" on all the labor that government purchases from contractors. For example, when the state contracts with technology companies, law firms, food service companies or office supply vendors, we don’t mandate certain wage levels for computer techs, lawyers, food servers or Staples employees. So why do we do it only for public construction jobs?

The short answer is this is what happens when the Union Party controls Pennsylvania state government rather than the Taxpayer Party. Of course, we should end such unnecessary mandates such as prevailing wage entirely, but until the Taxpayers have a majority in the Pennsylvania General Assembly, we should at least increase the prevailing wage threshold from $25,000 to $185,000.

"Rent" isn't just a depressing musical about New Yorkers facing AIDS. It's also a term economists use to describe the benefits special interests win for themselves in the political arena, such as regulation that limits competition.

Pennsylvania's 1961 prevailing wage law is a rent. The outdated law mandates that the "prevailing wage" in a community be paid to construction workers on publicly funded projects costing greater than $25,000 (when the law was passed, the average home cost about half that figure).

There's a huge problem with the prevailing wage law: The "prevailing wage" is not the market rate for a carpenter, plumber or electrician—it's the artificially inflated wage that labor unions get in their collective bargaining agreements. On average, the prevailing wage is 51 percent higher than regular wages Pennsylvania construction workers receive for building quality homes, hospitals and offices. That's the rent— the extra taxpayers are forced to pay labor unions for no extra benefit.

In 2010, Pennsylvania taxpayers spent $12.7 billion on construction that was subject to the prevailing wage law. Using county wage data, typical labor costs on construction projects, and the experience of other states that suspended or eliminated their wage mandates, that translates to about 10 to 20 percent in extra costs. Overall, that's an additional $1.3 billion to $2.5 billion that taxpayers pay. That's a needless $400 to $800 more in taxes for the average family of four— money they could use for childcare, groceries, increasingly expensive gas and other essentials.

Two weeks ago, Pennsylvania's lawmakers had a chance to enact a first-step, basic reform to the prevailing wage law: By increasing the "threshold" for prevailing wage projects from the 1960s-era $25,000 to $185,000, which is what the figure would be after adjusting for inflation. But the reform didn't even make it to a vote, and the earliest it will be considered is March 12, when the House returns to session. Labor unions lobby hard to keep their rent. For Pennsylvania's stretched taxpayers, however, prevailing wage is a tired, tuneless score.

On Tuesday, everyone in the Capitol anticipated a final vote in the Pennsylvania House of Representatives on a bill to increase the "prevailing wage" threshold for public construction projects from $25,000 to $185,000.

This bill would save state and local taxpayers an estimated $30-$60 million annually.  These saving would be minor in the context of the $4 billion in government construction spending, as costs for most new buildings or roads far exceed $185,000, but not insignificant. In contrast to the important reforms we've seen in other states, this is a minor tweak to a costly mandate, yet it has become a heavy lift in the House.  They are throwing around nickels like they are manhole covers.

True, this would be the first time in 50 years that Pennsylvania touched this union legislative carve-out that unnecessarily drives up costs for taxpayers at every level of government (school districts, counties, townships, boroughs and the state). But it's not even close to a full repeal of a law that only benefits unions at the expense of the taxpayers.  Yet the final vote got postponed last night.

Once more we were reminded that it is the Union Party that wields the majority in Pennsylvania, despite wide GOP majorities in both the House and Senate. The Taxpayer Party continues to be the oppressed minority with enough Union-Republicans joining the solidly Union-Democrats to stop every piece of legislation that would take the unions' boots off the taxpayers necks and out of our pockets.

Last month, GOP-controlled Indiana sent an "Open for Business" message across the nation when it became the 23rd state to end compulsory unionism.  Yet GOP-controlled Pennsylvania can't even get an inflationary adjustment to a law that should be repealed altogether.

To be sure, the Union Party has been losing its majority grip on Pennsylvania for a number of election cycles.  Some of its biggest apologists and defenders have been removed from office, are in prison or are on their way.  But as the threshold debate has revealed, the Taxpayer Party is still in the minority in Pennsylvania.

The good news, however, is that a vote will likely be taken and we will finally see which Party - Union or Taxpayer - every member of the House identifies with.  Then, finally, we the taxpayers can work towards becoming the majority party in our state rather than being the servants of the unions.

Will the Union Party win again?  You can help beat them by taking action NOW!

The Pennsylvania House of Representatives may vote today on a bill to reform the 1961 prevailing wage mandate.  The prevailing wage requires government to pay higher wages and benefits for construction projects than the private sector for the same work, costing taxpayers upwards of $2 billion each year. 

The state prevailing wage law is based on the federal Davis-Bacon act, which was passed with the expressed intent of limiting competition.

The legislation being considered today—HB 1329—would not repeal this costly, unnecessary law, but simply increase the threshold above which projects are subject to the prevailing wage mandate.  The current level, $25,000, has not been increased in 50 years.  When the prevailing wage law was created, $25,000 was double the cost of the average family home.

Even this modest reform would save taxpayers and help local governments complete important and routine projects.  Here are some examples, from the County Commissioners Association of Pennsylvania:

• A $42,000 bridge repair project in Carbon County.
• A $46,500 roof replacement in Adams County.
• Spending $44,000 to replace exterior lights and posts at the Westmoreland County Courthouse.

Cumberland County's director of facilities estimated that 90% of the county's contracts would fall under the threshold if it were raised to $185,000.  For more information, see this policy points on the history and impact of Pennsylvania's Prevailing Wage.

Click here to take action.

We have documented the racist origins of Pennsylvania's prevailing wage law, how it artificially raises the costs of taxpayer-funded construction projects by 20 percent (or approximately $1 billion per year), and how real reform is possible in the form of six bills the Pennsylvania House will consider.

County-by-county data from the Pennsylvania State Association of Boroughs illustrate how prevailing wage mandates raise labor costs between 30 percent and 76 percent across the commonwealth. If lawmakers and school districts are looking for savings without cutting educational and arts programs or laying off teachers, getting rid of prevailing wage is the most effective reform they can enact.

Prevailing Wage by County