Prevailing wage reforms could help local PA road projects
Unions say it would cost workers
By Eric Boehm | PA Independent
HARRISBURG — Roads and bridges in Pennsylvania are in desperate need of repair, but local governments could get some help through an estimated $300 million in savings over the next decade if the state exempts routine maintenance work from prevailing wage laws, which require higher costs for construction labor.
Local governments are responsible for maintaining more than 60,000 miles of roads in Pennsylvania, which also has the highest number of deficient bridges of any state, according to the state Department of Transportation.
As a result of a 2008 state Supreme Court decision, municipalities have had to pay higher wages for maintenance work, such as resurfacing and repaving. The state’s prevailing wage law is applied to maintenance work, in addition to new construction.
As a result, some local governments have put off needed repairs.
“Based on testimony that we heard in committee, there are plenty of municipalities that are doing less road work as a result of prevailing wage costs,” said Bruce Hanson, executive director for state Rep. Ron Miller, R-York, chairman of the House Labor and Industry Committee.
The state’s prevailing wage requirements add between 5 percent and 20 percent to the cost of those projects, Hanson said, although the exact amount varies by location.
One such municipality — Cranberry Township in Butler County — saw its costs increase by 25 percent after the state Supreme Court ruled that maintenance projects must be covered by prevailing wage rules, according to testimony at a House hearing last fall.
And Dingman Township in Pike County can no longer afford to keep resurfacing its roads every decade, according to testimony from the same hearing.
Looking for potential savings, local governments are pressing Republicans in the state General Assembly to push through a proposal to eliminate the prevailing wage requirement for those maintenance activities, although it would remain in place for state-level and federally-funded projects.
“There is less money available and no one wants to raise taxes, but you have to stretch your money as far as you can to provide quality services to your residents,” said Holly Fishel, director of research and policy for the Pennsylvania State Association of Township Supervisors, or PSATS, a local government group.
Passage of those bills would hurt Pennsylvania workers because it would take money from middle income pockets, said J.P. Kurish, spokesman for state Sen. Christine Tartaglione, D-Philadelphia, minority chairwoman of the Senate Labor and Industry Committee.
Kurish said the idea of repealing prevailing wage laws was like the “diet pill fad” because proponents promised savings that would never be realized. But unions oppose the legislation because those savings would come out of the pockets of workers in the form of lower wages.
Instead, labor groups say local governments — and the state — should look for ways to increase revenue for transportation projects or try to save money without reducing workers’ pay.
“The state has an obligation to help those communities, and they should not look to do it on the back on the people who pay the taxes in those local communities,” said Rick Bloomingdale, president of the Pennsylvania AFL-CIO. “Obviously, we want people to be smart about their spending, but we don’t want them to take it out of workers' pockets.”
Bloomingdale said the effort to end prevailing wage at the local level would create a spiral effect, as lower wages would depress local incomes and further drain local governments’ tax revenue.
In most places across the state, the prevailing wage is 30 percent to 60 percent higher than the average wage for the same occupation, according to the Pennsylvania State Association of Boroughs, a local government group.
Both figures are calculated at a county level for each occupation, and there is a wide degree of variance.
Because labor costs account for about 20 percent of any construction project, the prevailing wage requirement adds a minimum of 7 percent to the overall cost of paving projects, according to PSATS statistics.
For a 10-mile paving project that might cost about $1 million, savings would exceed $7,000.
When the state’s prevailing wage act was adopted in 1961, road resurfacing and paving was exempted from the mandatory wages because it was viewed as maintenance work rather than new construction.
The 2008 state Supreme Court case changed that.
In Borough of Youngwood (Westmoreland County) v. Pennsylvania Prevailing Wage Appeals Board, the state’s highest court ruled that road maintenance counts as construction and was therefore subject to the prevailing wage law, a move which instantly added about 10 percent to all local paving projects.
Under the law, only projects valued at less than $25,000 would be exempt from the prevailing wage rule.
Since it costs about $100,000 to resurface and pave a mile of road, few projects can claim the exception, Fishel said.
The bill addressing road maintenance projects is one of a series of attempts to reform the state’s prevailing wage laws, which have been unchanged since 1963.
Other bills waiting for a vote in the state House include a proposal to raise the threshold for the law in line with the cost-of-living increases — the $25,000 threshold was established 49 years ago — and a measure that would standardize the state’s construction job descriptions to provide for more uniform pay and project bidding across the state.
Opponents of prevailing wage reforms argue that exempting projects from the mandate results in lower quality work rather than financial savings.
According to research conducted by the liberal-leaning think tank Keystone Research Center, based here, prevailing wage laws do not raise construction costs, but do increase skills, improve health and safety and lower dependence of construction workers on social safety net programs.
Research from the Commonwealth Foundation, a free market think tank here, indicates that taxpayers have been left on the hook for about $1 billion in state and local costs as a result of required higher wages due to prevailing wage laws at all levels of government.