Senate Republicans again are trying to exempt school and university construction from Kentucky’s prevailing wage law, which generally sets higher wage rates for public works projects.
In past legislative sessions, the Democratic-led House, backed by labor unions, has thwarted Republican efforts to weaken the prevailing wage. But this time, the GOP has a new governor — Matt Bevin — and it hopes to wrest control of the House from Democrats by year’s end, if not sooner.
The Senate budget committee voted 10-to-1 on Tuesday to approve Senate Bill 9 and send it to the full Senate, where it could receive a floor vote by Friday.
The bill’s sponsor, Sen. Wil Schroder, R-Wilder, told the committee that the prevailing wage is a bad deal for school districts because it needlessly drives up their construction expenses. In a fiscal note attached to the bill, legislative researchers estimated a 7.9 percent cost savings for K-12 school projects if the bill becomes law.
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“Schools are paying more for construction with absolutely no guarantee for better quality,” Schroder said.
The bill also would cover college campuses, including dormitories and university hospitals, which could have a significant impact on the building trades in Lexington, Richmond and other college towns. Legislative researchers said they could not find a large enough data sampling to estimate the potential savings for universities.
We have seen, over the years, a 20 percent to 30 percent increase in the costs of construction due to the prevailing wage implementation. This of course allows much less to be done. This costs the state and costs our local school districts.
Tom Shelton, executive director of the Kentucky Association of School Superintendents
Testifying for the bill was Tom Shelton, a former Fayette County school superintendent and now executive director of the Kentucky Association of School Superintendents. Shelton called the prevailing wage “just an additional cost on taxpayers.”
“We have seen, over the years, a 20 percent to 30 percent increase in the costs of construction due to the prevailing wage implementation,” Shelton said. “This of course allows much less to be done. This costs the state and costs our local school districts.”
Two labor union leaders spoke against the bill. They challenged the allegation that prevailing wage increases expenses much, if at all, on public works projects, arguing that only about 20 percent of total project costs are workers’ wages. Prevailing wage boosts pay in the construction industry overall and supports a necessary pool of skilled workers and apprentices, they said.
Prevailing wage rates, which are required to be paid on public works projects estimated to cost more than $250,000, either are set by the Kentucky Labor Cabinet or the U.S. Department of Labor, depending on the circumstances. The wage rates vary by region. In Lexington, for example, an electrician is supposed to earn a base rate of $30.01 an hour; a roofer, $22.03 an hour.
The state government should not encourage contractors to “ratchet down” workers’ wages in order to reach the lowest possible bid, Bill Londrigan, president of the Kentucky State AFL-CIO, told the senators.
“The basic issue here is whether we’re going to allow public dollars that are going to be expended on public construction projects to be used in a manner that makes it difficult for workers to want to be in the skilled trades,” Londrigan said.
Kentucky already tried exempting school construction from the prevailing wage, from 1982 to 1996. Londrigan said the legislature reversed itself in 1996 because the school districts gained no cost savings, and in fact, “just three or four” major contractors came to dominate school construction statewide once they could hire cheaper, less-skilled workers.
What happened is that all of these great savings proved illusory, and competition dried up.
Bill Londrigan, president of the Kentucky State AFL-CIO
“What happened is that all of these great savings proved illusory, and competition dried up,” Londrigan said after the committee hearing.
In 2001, the Kentucky Legislative Research Commission issued a report on the prevailing wage, taking note of the 14-year period where it wasn’t in effect for most school construction in the state.
The LRC report said several studies “have concluded that prevailing wage has no statistically significant effect on construction cost,” though it added that “these studies do not adequately account for differences that affect construction costs,” such as the location of the project or the materials used.
Because of how the prevailing wage is calculated, the required wage tends to be higher than a community’s median average pay for any given trade, the LRC said. In Lexington, the prevailing wage for carpenters was 16 percent higher than the local median average, and it was 35 percent higher for electricians. Contractors sometimes offset higher labor costs on public works projects by making greater use of equipment, the LRC said.
More recently, in 2014, University of Utah economist Peter Philips released a prevailing wage study that was commissioned by union leaders at the Kentucky State Building and Construction Trades Council. Philips’ study said the prevailing wage supports a pool of high-skilled workers in Kentucky, reduces work-related injuries and increases worker productivity.
As for project costs, Philips compared the cost of building elementary schools in Kentucky and Ohio during the 1990s, as Kentucky re-instituted prevailing wage to its schools and Ohio repealed it. There was no statistically significant difference in square-foot construction costs between the two states, Philips wrote.
However, in his report, which the union leaders distributed to the Senate committee, Philips made withering personal remarks about Senate budget chairman Chris McDaniel, R-Taylor Mill, because of his opposition to the prevailing wage. In one section, Philips wrote that McDaniel “believes that on public works projects, construction should be considered among the worst jobs a man can aspire to.” There was no footnote or attribution for the comment.
McDaniel told the union leaders those remarks offended him, since he and nearly all of his male relatives have made their living in the concrete business at construction sites.
“What kind of academic study is this?” McDaniel asked, holding up Philips’ report. “I have to question the objectivity of this whole study.”