In a victory for ABC, New Hampshire Gov. Chris Sununu vetoed legislation that would have imposed prevailing wage requirements on state projects for the first time since the law was repealed in 1985 on July 19.
The state legislature, both chambers of which were taken over by Democrats in the 2018 midterm elections, passed the legislation during its now-adjourned 2019 session. The ABC New Hampshire/Vermont Chapter testified in opposition to SB 271 at public hearings throughout the legislative process and advocated for an executive veto after the legislation received final passage from the Senate in May.
In a press release lauding the move by Gov. Sununu, ABC New Hampshire/Vermont Chapter President Josh Reap said, “Taxpayers deserve the best possible product at the best possible price, and that’s exactly what Gov. Sununu has ensured by vetoing this bill.”
Gov. Sununu’s veto means that New Hampshire remains the only state in New England that doesn’t require prevailing wage on state projects, and one of 24 states nationally without a statewide prevailing wage law.
“In the midst of a booming economy with record low unemployment, the last thing we should do is reduce competition in our construction markets,” wrote Gov. Sununu in his veto message on SB 271.
As the New York state legislature adjourned in Albany, ABC’s Empire State Chapter members celebrated the successful blockage of an extremely onerous effort to expand prevailing wage in the state well beyond its typical applicability on public works projects.
The effort, widely supported by Democrats in the legislature and Gov. Andrew Cuomo, sought to expand the definition of “public works” to a bevy of private projects receiving more than 30 percent of the project budget from public sources beyond direct public investment. This would have included things like tax-free bonds on affordable housing, various tax incentives on environmental cleanup work and energy-related tax credits, among other sources of public assistance.
Unlike many prevailing wage states, as long as a union claims to represent 30% of the workforce, the state automatically adopts their wage and benefits for prevailing wage work. This expansion, on top of widening the pool of work for which it would be harder for merit shop contractors to compete, could have raised construction costs by as much as 30%. This would have severely harmed New York taxpayers, many of whom benefit from the projects with bottom lines that would have been negatively impacted by the proposed expansion.
Throughout the legislative session, the legislature and the governor’s office worked together to advance the measure through a variety of approaches, including a discussion about narrowing the scope of certain affordable housing projects to which the expansion would apply and even an effort to exclude New York City from the expansion altogether. However, in the face of widespread vocal opposition from ABC Empire Chapter and its members, as well as associated coalition groups, the bill was ultimately defeated.
“There is no doubt that if passed, this bill would have crippled the construction industry,” said ABC Empire State Chapter President Brian Sampson. “Though this is a big victory for the chapter, the battle over expanding prevailing wage is not over, with Gov. Cuomo announcing that this is one of his top three priorities for 2020. We will continue to fight and advocate for even stronger protections against policies that damage the merit shop construction industry in the coming months and years.”
A new report released by the Empire Center for Public Policy on April 24 found that prevailing wage requirements inflate the cost of publicly funded construction projects in New York by between 13 percent and 25 percent. The varying percentages are based on the area or region of the state. Taxpayers can expect to pay billions in extra costs, given the tens of billions the state plans to spend on public projects over the next five to 10 years.
Last year, the New York Independent Budget Office (IBO) released a report on the impact prevailing wage requirements would have on affordable housing projects built with the 421a property tax break. IBO estimated wage requirements would cost the city an additional $4.2 billion, increasing affordable housing construction costs by 23 percent or $80,000 per unit.
The report, entitled “Prevailing Waste: New York’s Costly Public Works Pay Mandate,” also notes that the New York prevailing wage rates include fringe benefits, the entirety of which do not go directly to workers but instead are being used to bolster underfunded and struggling union pension plans.
ABC opposes wasteful prevailing wage laws because they contain outdated job restrictions that do not match the needs of today’s competitive construction business environment. Prevailing wage requirements discourage many qualified small and minority-owned contractors from bidding on public projects. State governments’ complex and inefficient wage rate determinations and work restrictions make it difficult for them to compete with better-capitalized corporations.
On April 7, Arkansas Gov.Asa Hutchinson signed a bill repealing the state’s prevailing wage law. The legislation, SB 601 (Act 1068), was approved by the Arkansas House of Representatives on March 30 by a vote of 70-24; the Arkansas Senate passed the bill on March 21 by a bipartisan vote of 28-5. Arkansas is now the 22nd state without a prevailing wage and the second state to take significant action on the issue this year. Kentucky signed a prevailing wage repeal bill into law in January. In 2015, Nevada made significant reforms to its prevailing wage law, while Indiana and West Virginia joined the list of states without a prevailing wage.
“Arkansas lawmakers have made it a priority to create value for taxpayers and opportunities for qualified local contractors deterred by the state's outdated prevailing wage regulations,” said ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “The number of states choosing to do away with costly and archaic prevailing wage requirements continues to grow and ABC looks forward to supporting efforts to repeal or reform inefficient prevailing wage laws in Ohio, nearby Missouri and other states across the country this year.”
ABC released its latest Merit Shop Scorecard rankings in November 2016. The meritshopscorecard.org website reviews and grades state-specific policies and information significant to the success of the commercial and industrial construction industry. The scorecard grades states on their policies on prevailing wage and project labor agreement (PLA) mandates and Right to Work status, as well as their construction job growth rate, commitment to developing a well-trained workforce, career and technical education (CTE) opportunities and results, and use of public-private partnerships (P3s). Plagued in part by its prevailing wage, Arkansas’ business environment ranked 20th in the country.
ABC opposes wasteful prevailing wage laws because they contain outdated job restrictions that do not match the needs of today’s competitive construction business environment. Prevailing wage requirements discourage many qualified small and minority-owned contractors from bidding on public projects. State governments’ complex and inefficient wage rate determinations and work restrictions make it difficult for them to compete with better capitalized corporations. Studies have shown that state prevailing wage laws can needlessly inflate construction costs by as much as 38 percent.
Kentucky became the 27th Right to Work state and 21st state without a prevailing wage after Gov. Matt Bevin signed ABC-supported legislation. The free enterprise-based laws are historic victories for the merit shop platform and provide tremendous momentum at the state level to begin the 2017 legislative season.
The Kentucky Senate passed HB 3, which repealed the state’s costly and inefficient prevailing law by a vote of 25-12 after the Kentucky House of Representatives passed the bill by a vote of 60-35 on Jan. 5. The Senate also passed Right to Work legislation, HB 1, by a vote of 25-12, which prevents workers from being required to join a labor union in order to accept or maintain a job. The Kentucky House of Representatives passed HB 1 by a vote of 61-34 on Jan. 5. Both bills were signed into law by Governor Bevin (R-Ky.).
“Associated Builders and Contractors applauds the Kentucky Legislature’s decisive actions to promote free enterprise and fair and open competition and looks forward to other states following suit in embracing these merit shop principles,” said ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “By creating new opportunities for all Kentucky contractors shut out by the archaic and costly prevailing wage law, and allowing workers to freely decide whether to join a labor union, the Kentucky legislature has enacted needed improvements to the state’s business climate, ranked 32nd in the country by ABC’s latest Merit Shop Scorecard.”
"Associated Builders and Contractors of Indiana/Kentucky commends the leadership of Governor Bevin, Speaker Hoover, Chairman DeCesare, Representative Koenig, Chairman McDaniel, Senate President Stivers and Leader Thayer for their support of fair and efficient government policies that will benefit all Kentuckians," said ABC of Indiana/Kentucky President J.R. Gaylor. "These leaders articulated the need for a better business environment in Kentucky leading up to last November’s election, were given free enterprise-supporting majorities in both chambers of the legislature by the voters of the commonwealth and have delivered these crucial policies that will help grow Kentucky’s economy.”
ABC released its latest Merit Shop Scorecard rankings in November 2016. The meritshopscorecard.org website reviews and grades state-specific policies and information significant to the success of the commercial and industrial construction industry. The scorecard grades states on their policies on prevailing wage and project labor agreement (PLA) mandates and Right to Work status, as well as their construction job growth rate, commitment to developing a well-trained workforce, career and technical education (CTE) opportunities and results, and use of public-private partnerships (P3s). Plagued in part by its prevailing wage and failure to adopt a Right to Work law to date, Kentucky’s business environment ranks 32nd in the country.
ABC opposes wasteful prevailing wage laws because they contain outdated job restrictions that do not match the needs of today’s competitive construction business environment. Prevailing wage requirements discourage many qualified small and minority-owned contractors from bidding on public projects. State governments’ complex and inefficient wage rate determinations and work restrictions make it difficult for them to compete with better capitalized corporations. Studies have shown that state prevailing wage laws can needlessly inflate construction costs by as much as 38 percent.
ABC supports Right to Work laws because they guarantee workers can seek employment without fearing they will be required to join (or pay) a union if they are hired. These laws simply allow workers who do not want to participate in collective bargaining to opt out of joining the union or paying dues or fees. If all or most of the members of a bargaining unit believe union representation will advance their interests, then nothing in a Right to Work law prohibits them from exercising their federally protected right to organize a union and collectively bargain with their employer. U.S. Bureau of Labor Statistics reports that private sector employment grew 5.2 percent faster in Right to Work states than non-Right to Work states from 2003-2013. Additionally, U.S. Department of Commerce data show that per capita disposable income, adjusted for cost of living, was higher in Right to Work states than the national average in 2013.
Neighboring West Virginia also repealed its prevailing wage law and adopted Right to Work legislation in 2016. Despite rhetoric that both actions would have dire economic consequences, the state’s monthly construction unemployment rate has consistently improved compared to its 2015 rate, and the state now ranks second in the country in year-over-year construction unemployment rate progress according to the latest report.
In a victory for taxpayers and merit shop contractors, the Illinois House of Representatives failed to reach the three-fifths majority required to override Gov. Bruce Rauner’s (R-Ill.) veto of S.B. 2964. The bill would have tied prevailing wage rates for public projects to local union rates.
Under current Illinois law, collective bargaining agreements are typically among the factors used to determine the local prevailing wage.
“By tying prevailing wage rates exclusively to collective bargaining agreements, as long as the agreements covered at least 30 percent of workers performing similar work in the area, S.B. 2964 would have essentially given labor organizations the authority to set prevailing wage rates,” said ABC Illinois Chapter President Alicia Martin. “This is despite the fact that more than 60 percent of the private construction workforce in Illinois chooses not to belong to a union or be covered by collective bargaining agreements. Additionally, the bill would have removed the authority to set wages from local governments that are accountable to taxpayers and given it to labor organizations, whose members would be bidding on the very projects they were setting wages for.”
ABC’s Illinois chapter conducted an extensive grassroots operation to engage its members to oppose the bill, which would have put merit shop contractors at a disadvantage in bidding on public work and driven up the cost of public construction projects.
Illinois ranked as the least friendly place for merit shop contractors to do business according to 2016 rankings from ABC’s Merit Shop Scorecard, in part because of its prevailing wage requirements on all public projects.
ABC opposes prevailing laws because they tilt the playing field towards unionized contractors by requiring contractors to pay local union wages and often require contractors to use outdated and rigid union job restrictions.
Eliminating prevailing wage laws lowers state and local government’s cost of doing business creating opportunities for more schools, roads, bridges, low-income housing, hospitals and prisons. A study commissioned in 2014 by the nonpartisan Anderson Economic Group found that from 2002 through 2011, the state of Illinois and local governments could have saved an estimated $1.6 billion on school construction costs with the exemption of prevailing wage.
On July 22, Illinois Gov. Bruce Rauner vetoed a bill that would have significantly changed the prevailing wage calculation process by tying wage rates to union collective bargaining agreements. In vetoing the bill, Gov. Rauner said Senate Bill 2964 would effectively discount the wage rates of those who have chosen not to join a union and who make up a majority of the construction workforce.
“To limit the prevailing wage to the wage specified in a collective bargaining agreement would mean disregarding all those workers whose wages are not set by that agreement,” said Gov. Rauner in his veto message. “Senate Bill 2964 would fix prevailing wage to the wage applicable to as few as 30 percent of the workers in a given trade, meaning that the wage applicable to the remaining 70 percent of workers would be disregarded.” He also noted that the bill would raise the cost of taxpayer-funded projects and take too much power from local governments in determining their own prevailing wage rates.
ABC of Illinois President Alicia Martin expressed support for Gov. Rauner’s veto and referenced a 2014 study released by the Anderson Economic Group that showed prevailing wage rates increased school construction costs by about $1 billion over a decade-long period. “Each year, $2.9 billion in school construction expenditures are subject to Illinois’ prevailing wage laws. From 2002 to 2011, this amounted to over $29 billion. In absence of prevailing wage, the study estimated Illinois taxpayers could have saved $158 million each of the past 10 years,” she said.
In addition to his veto, Gov. Rauner also outlined a number of technical changes to the bill, including some that would preserve the authority of local governments in calculating and setting prevailing wage rates. The legislature may try to override the governor’s veto later this year.
On Feb. 12, the West Virginia Legislature voted to override Gov. Earl Ray Tomblin’s vetoes of a prevailing wage repeal bill and the West Virginia Workplace Freedom Act, making West Virginia the 26th Right to Work state in the country and the fourth state to pass Right to Work since 2012.
Both bills will take effect on July 1, 2016. The actions come nearly a year after West Virginia passed ABC’s government neutrality in contracting legislation, which prohibits government-mandated PLAs and PLA preferences on state and state assisted projects. In signing the Establishing Fair and Open Competition in Governmental Construction Act, Gov. Tomblin became the first Democratic governor to sign legislation outlawing PLA mandates on public construction projects. A total of 22 states have adopted measures ensuring fair and open competition on taxpayer funded construction contracts.
Last week, the New Hampshire House rejected a bill (House Bill 1641) that would have required prevailing wage be paid on all state construction projects. Citing a union-backed study, proponents of the bill argued the legislation would create jobs, spur economic activity, and raise workers’ wages without increasing the cost of projects. Opponents rejected those assertions and insisted the state would pay more for construction projects under the provisions of the bill.
Rep. Jack Flanagan (R-Brookline) claimed the bill would increase construction costs and a fiscal note estimated it would cost the state at least $2.6 million per year to administer the law. In opposing the bill Rep. Flanagan argued that the bill would not “solve the problems it wants to solve” and that New Hampshire “can’t afford to spend more money on these construction projects when we are barely fixing the roads and bridges we have now.” The bill was rejected by a vote of 181-138. New Hampshire repealed its prevailing wage law in 1985.
The New York Independent Budget Office (IBO) has released a revised report on the impact prevailing wage requirements would have on affordable housing projects built with the 421a property tax break.
The 421a tax credit had been the subject of extensive negotiations in the past months. In Jan. 2016, the parties involved announced they could not reach a compromise, killing the tax credit and jeopardizing Mayor de Blasio’s plans for 80,000 affordable housing units for New York City residents. The agency had initially estimated that prevailing wage requirements would add $2.8 billion to the initiative’s total, but the agency says that figure was low as a result of data errors. After receiving additional information from the Department of Housing Preservation and Development, IBO now estimates prevailing wage requirements would cost the city an additional $4.2 billion, increasing affordable housing construction costs by 23 percent or $80,000 per unit.
The announcement came a day after Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, stated in an email, “After careful consideration, we believe it is very clear that absent a prevailing wage requirement, the 421a tax abatement program should not be renewed under any circumstances.” LaBarbera was hand-picked by Gov. Cuomo to be the primary labor representative during the tax break renewal negotiations. Other organizations have criticized LaBarbera for his stance on the issue, with the New York State Association for Affordable Housing stating, “Construction union leaders need to understand that low- and middle-income New Yorkers need new affordable housing, not political posturing.”
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