Legislature(2015 - 2016)BARNES 124
03/16/2016 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB188 | |
| HB337 | |
| HB313 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 188 | TELECONFERENCED | |
| += | HB 337 | TELECONFERENCED | |
| += | HB 313 | TELECONFERENCED | |
| += | HB 263 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 313-PUBLIC CONSTRUCTION CONTRACTS WAGE RATES
3:56:18 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 313, "An Act relating to the public construction
contracts, including the application of prevailing wage rates."
3:56:56 PM
KONRAD JACKSON, Staff to Representative Olson, Alaska State
Legislature, Chair of the House Labor and Commerce Standing
Committee, sponsor, informed the committee HB 313 makes a minor
change to the Little Davis-Bacon Act threshold that public works
contracts must meet before they quality for prevailing wages.
The bill raises the threshold from $25,000 to $75,000. Mr.
Jackson provided a brief history of the law, noting that during
the Great Depression Congress enacted the federal Davis-Bacon
Act of 1931 that decreed prevailing wages are to be paid to
construction workers on federal public works contracts;
thereafter, most states enacted a similar law, known as the
Little Davis-Bacon Act, for the same purpose. Alaska's Little
Davis-Bacon Act (LDBA), found in AS 36.05, was set at $2,000 in
1935, and was raised to $25,000 in 2011. The reason for a
threshold is that some LDBA projects are too small to justify
the administrative work needed to meet LDBA compliance.
Currently, a project under $25,000 can be completed without LDBA
requirements of a certified payroll, reporting to the Department
of Labor & Workforce Development (DLWD), and filing with DLWD.
In Alaska, a limited road system and difficulties with access
add to the cost of construction, bringing many jobs over the
$25,000 limit. He said the federal limit is based on easy
mobilization; in fact, some other states have no threshold, and
of 19 states with thresholds higher than $25,000, the average
threshold is $140,000.
4:01:45 PM
CHAIR OLSON urged for a brief discussion of a forthcoming
amendment to the bill.
MR. JACKSON said a forthcoming amendment would reduce the
proposed limit from $75,000 to $50,000. The proposed amendment
also changes an account in the general fund, created under AS
44.31.025, from the building safety account to the building
safety and wage protection account. Further, the amendment
changes the percentage of the workers' compensation insurance
premiums that are paid to the Division of Insurance, Department
of Commerce, Community & Economic Development, but are deposited
with DLWD, from 1.82 percent to 2.7 percent.
REPRESENTATIVE HUGHES asked for the inflation equivalent to the
$25,000 limit.
CHAIR OLSON offered that in 2011, the 1938 number - after adding
a factor for inflation - was roughly equivalent to over
$100,000. The average of all of the participating states was
$150,000, with the highest at $300,000 in 2010 or 2011. He said
the sponsor's intent was to find a limit to "fit Alaska."
REPRESENTATIVE LEDOUX asked for the present equivalent of
$25,000 in 2011 dollars.
CHAIR OLSON was unsure.
REPRESENTATIVE JOSEPHSON referred to the burdens of filing,
reporting, and the certification of payroll. He asked, "Is that
the, the true target of the bill, or is it about paying workers
less to save school districts and other entities more?"
4:05:13 PM
MR. JACKSON responded that the ultimate effect of raising the
threshold "is more bang for the public construction dollar," by
eliminating the burdens. He gave an example from his personal
experience that his wages at a construction company were $18 per
hour, which went up to over $30 with benefits when working on a
public construction project.
REPRESENTATIVE JOSEPHSON related that the state has dramatically
reduced the capital budget; he surmised that the bill is partly
an outfall of the budget crisis, and questioned whether the bill
is "sort of a de facto tax on the worker."
MR. JACKSON said he did not consider the bill a tax.
REPRESENTATIVE LEDOUX asked whether the bill is supported by the
Alaska Municipal League (AML).
MR. JACKSON responded that AML will not take a position on the
bill; however, the sponsor has heard that municipalities are
saving on construction projects since the previous increase to
$25,000, and has received letters of support from school
districts, municipalities, and a hospital.
CHAIR OLSON added that the bill is not on AML's priority list at
this time.
4:09:38 PM
REPRESENTATIVE COLVER asked for information on the fee that is
charged to public construction projects for the administration
of certified payrolls.
MR. JACKSON directed attention to the bill's fiscal note
Identifier: HB313-DOLWD-WHA-02-18-16.
REPRESENTATIVE COLVER clarified that he was referring to a
policy that is in place: when a company is awarded a public
construction contract, it has to pay DLWD - on a certain fee
structure - to administer a certified payroll.
MR. JACKSON pointed out the fiscal note showed a loss to DLWD of
$125,000, based on the current iteration of the bill which has a
$75,000 threshold.
REPRESENTATIVE HUGHES inquired as to why other states have much
higher thresholds.
MR. JACKSON advised that Maryland has the highest threshold at
$500,000, and other states have none.
CHAIR OLSON acknowledged Representative Wilson's contribution to
the forthcoming amendment.
REPRESENTATIVE LEDOUX asked for an estimate on how much the bill
would save the state.
MR. JACKSON restated that the fiscal note reflects a loss to
DLWD of $125,000 [document not provided]; with the adoption of
the forthcoming amendment "that number radically changes in the
other direction." Also, the estimate would depend on the number
of affected construction projects.
CHAIR OLSON added that road service areas are affected,
particularly in the Fairbanks area.
4:13:55 PM
REPRESENTATIVE LEDOUX observed that the bill is supposed to help
cities and boroughs, but the committee has not received letters
of support from cities and boroughs.
CHAIR OLSON said letters of support are forthcoming.
REPRESENTATIVE HUGHES acknowledged the bill may be seen as a tax
on workers; however, the threshold levies a tax on local
entities, cities and boroughs, and school districts. She opined
that states that do not have thresholds can get more done,
therefore, for state projects, that would be a tax on the people
of Alaska.
CHAIR OLSON recalled that four or five years ago, one or two
union contractors testified in favor of "the bill," saying that
they were losing money because of the work involved in a
certified payroll.
MR. JACKSON pointed out 18 states do not have prevailing wage
laws.
CHAIR OLSON opened public testimony on HB 313.
4:17:34 PM
CHRIS DIMOND stated he is a 15-year member of Carpenter's Local
1281 and was speaking on his own behalf in opposition to HB 313.
The bill would only benefit unscrupulous contractors who would
not pay highly-skilled workers a fair wage. Raising the limit
of the Little Davis-Bacon Act simply provides more income to
contractors and removes skilled labor from projects. Without a
prevailing wage law, contractors hire those who are unskilled,
desperate, and willing to work for less. This is a disservice
to the state: 1.) unskilled and untrained workers raise the
cost of projects because of shoddy work, there is an increase in
accidents and deaths because of the lack of training, and there
are exaggerated maintenance costs as a result of the initial
work performed by unskilled workers; 2.) highly-trained men and
women are put out of work by removing honest contractors from
biddable projects. Mr. Dimond said increasing the Little Davis-
Bacon Act to $50,000 will reduce 17 percent of the jobs he
performs, which is a huge cut to his family and to contractors
who bid on smaller projects. His training and certifications
enable him to earn a fair and livable wage, and thus contribute
to the state and the community through paying taxes and
spending; cutting wages does not save money, and he asked that
the committee not pass the proposed legislation.
4:20:17 PM
MAX MIELKE, Business Manager, Plumbers and Pipefitters Local
262, informed the committee his local represents 100 members
throughout Southeast Alaska. He said HB 313 is not a worker-
friendly bill even with a threshold of $50,000. Mr. Mielke said
he represents many small contractors and recalled that during
times of recession, the small jobs "kept us going." Presently,
approximately 30 percent of jobs are less than $50,000, and the
budget deficit looms. Over the last 12 years, 30 apprentices
have gone through the training center and are working; the
training center program costs $300,000 per year and has students
from all over Southeast, and graduates a highly-skilled
workforce. He stressed that smaller jobs are important to the
towns in Southeast, and acknowledged that he supports aspects of
the bill.
4:23:28 PM
MIKE STURROCK said Island Contractors is a small business and 20
percent of its work is smaller projects that require certified
payroll. He said certified payroll is already part of his job
and is not hard to do on projects from $500,000, down to $1,000.
The certified payroll fee is 1 percent paid to the Department of
Labor & Workforce Development with a cap at $5,000. Mr.
Sturrock expressed his support for moving 1 percent more of the
service fees to the department, but raising the threshold of the
Little Davis-Bacon Act does not help workers or wages.
CHAIR OLSON advised that the fees are being transferred to
enforcement. He stated that there were no complaints when the
limit was increased to $25,000, with the exception of an out-of-
state contractor.
MR. STURROCK restated that his business does certified payroll
on all projects, and he does not support the bill.
4:27:23 PM
PAUL GROSSI said was he was speaking on behalf of the Alaska
State Pipe Trades and the Ironworkers. He said the
organizations he represents oppose the bill because it would
lower the wages of employees in general, which would hurt the
local economy because lower wages mean less spending money.
Also, the bill would eliminate the local hire provisions of the
Little Davis-Bacon Act, thus more contractors would hire workers
from out-of-town and from out-of-state, and local money would
leave the state. He encouraged the legislature to not increase
the problem of money leaving the state, because it is bad for
the economy and for working people.
REPRESENTATIVE HUGHES questioned whether local hire includes
communities, or just instate [Alaska].
MR. GROSSI answered that employers usually hire within the local
community first.
REPRESENTATIVE HUGHES further inquired as to the federal
requirement of instate hire.
MR. GROSSI explained that the Little Davis-Bacon Act is a state
law.
4:29:59 PM
RODNEY HESSON said he was representing the International
Brotherhood of Electrical Workers Local 1547, and is president
of the Juneau Building Trades Council. He stated that the
organizations he represents oppose HB 313.
4:31:15 PM
KIRK PERISICH, Southeast Representative, Carpenters Local 1281,
said he also represents Piledrivers and Millwrights in the
Southeast area. He expressed his opposition to HB 313, and said
the bill has some good aspects, but raising the threshold does
not help workers and does not help contractors, except for those
who are trying to break the rules. In fact, the bill eliminates
certified payrolls and ways to track contractors who may abuse
the system. Alaska has "some of the weakest subcontractor
language," and raising the threshold may encourage an influx of
more contractors who would not pay the prevailing rate. Mr.
Perisich restated his position on the bill.
4:33:50 PM
DAVE REAVES stated his opposition to HB 313. He pointed out
that the previous increase was just five years ago and this is a
100 percent increase. Mr. Reaves has been informed that
construction costs do not decrease, but employee wages are
lowered, some below the poverty line. He supported previous
testimony in opposition to the bill.
CHAIR OLSON commented that he represents everybody in the state
and was asked to revisit this matter. He noted that he has
worked extensively with DLWD on various issues over a long
period of time.
4:36:45 PM
WAYLON KNUDSEN stated he was strongly opposed to the bill. He
recalled that the change in 2011 was originally to be $75,000.
Although the discussion has been directed toward small projects,
$75,000 is a threshold that captures 26 percent of all state
projects - he was unsure of the percentage that fall under
$50,000 - and swings the door open to outside contractors. Mr.
Knudsen urged the committee to vote against the bill.
4:38:37 PM
KEVIN POMEROY, Business Manager, Labor's Local 942, said he also
serves as Road Service Area Commissioner for the Fairbanks North
Star Borough. Mr. Pomeroy spoke against HB 313, which is an
effort to cut construction costs by putting the burden on
Alaskan craftsmen and craftswomen to earn less. He referred to
numerous studies that lowering workers' wages would allow states
and municipalities to build more schools [studies not provided].
He pointed out that labor accounts for about 18 percent to 23
percent of a project's cost, thus claims that not paying
prevailing wages will cut the cost of the project by 20 percent
to 30 percent are inaccurate. Further, another study showed
that the impact of higher wages on cost is compensated by the
positive effects on productivity and quality [study not
provided]. Mr. Pomeroy referred to a bid study that indicated
the differences in mean square foot cost were small, none, or
even cheaper [study not provided]. Prevailing wage laws require
that construction workers on public projects be paid the wages
found by DLWD to prevail for similar work in the locality, along
with provisions to require Alaska-hire and the utilization of
apprentices from a federally registered apprenticeship program;
however, lowering the threshold would eliminate these
provisions. He listed the various aspects of a contract bidding
process, and questioned why workers' wages are always looked at
first to cut costs. Mr. Pomeroy urged the committee to allow
workers to continue to bring efficiencies, productivity, and
quality.
4:43:50 PM
LARRY TALBERT, Business Manager, Local 367, Plumbers and
Steamfitters, expressed his strong opposition to HB 313. He
said he respects legislators who deal with difficult issues. The
Little Davis-Bacon Act guarantees fair competition by
establishing a local wage standard that contractors must pay on
public projects, which provides a level playing field, rather
than rewarding those who slash workers' wages in order to win
bids. The Act also protects the state from fly-by-night
contractors who provide inferior work. Mr. Talbert supported
previous testimony, and stressed that increasing the threshold
would lower the wages of hardworking men and women who are
hampered by legislation such as HB 313.
4:46:14 PM
ROCKY KNUDSEN stated that the bill would put money in the pocket
of the employer that should be paid to employees in wages and
benefits. Small state contracts often come from state grants
without vigorous competitive bidding, and the money is there for
workers' wages. Mr. Knudsen said he worked in construction
until retiring in 1975, and advised that his retirement was paid
for by his wage package; however, others did not make enough
money to save for retirement. He opined the bill is about
"keeping the workers hungry, so the employers can reap the
profits."
4:48:34 PM
BRANDON CALCATERRO informed the committee he has lived in Alaska
for 28 years and graduated from the University of Alaska
Anchorage. He lives with his wife and three daughters and his
family enjoys a high quality of life. Mr. Calcaterro said he is
opposed to HB 313 because when workers are paid the prevailing
wage they are 8 percent more likely to have health insurance,
which is important for a community's morale, and are 4 percent
more likely to have a retirement plan, which allows for a more
positive lifestyle. Financial stress is a leading factor in
failed marriages, domestic violence, and is detrimental to young
children. Construction workers in prevailing wage states earn
17 percent more, and thus have more options for their families.
Mr. Calcaterro stated that everybody suffers when neighbors need
public assistance, and urged the committee to support a high
quality of life in Alaska.
4:50:32 PM
SUZANNE MCCARTHY, Spokesperson, Alaska Laborers Training School,
stated her opposition to HB 313. Ms. McCarthy referred to
previous testimony about the burdens of paperwork and agreed
with the facts that these costs are not directly related to the
cost of the workers' wages. She advised that prevailing wages
do not affect wages for construction managers, supervisors, and
others who are paid a much higher wage; in fact, the burden is
on the young men and women who are working construction. The
Alaska Laborers Training School provides students with skills to
be competitive, and they are highly trained and qualified,
thereby saving project costs. In addition, local hire
strengthens the economy, helps minorities, helps close the
income gap and - during a time of economic stresses - small
projects statewide are important. Although construction work is
transitory, workers are professionals and should be paid as
such.
4:53:54 PM
JULIUS MATHEW advised the committee on the following effects of
raising the threshold on prevailing wage in Alaska: on
construction workers and their families: more construction
workers and their families would depend upon public assistance,
and would lack health care or retirement benefits; more
construction workers would slip below poverty line; the morale
of the workers and their families and how they feel about living
in Alaska; on the economy: considering the $3.8 billion state
budget deficit, taking money out of the hands of residents is a
bad business decision; on construction aspects: labor cost is
a small part of the total cost of a project; reducing the wage
does not increase bidding competition; higher wages attract
highly-skilled workers and higher production and safety. A 2015
study looked at the adverse economic impact of repealing
prevailing wage law in West Virginia [study not provided]. Mr.
Mathew said construction workers in states that have a
prevailing wage law have a higher average income than those in
states that have not, and he listed the different wages in other
states, concluding that reducing the prevailing wage in the
state is not in the best interest of Alaskan construction
workers. He provided statistics from Wisconsin that indicated
construction workers are expected to fall below the poverty
line, rely on food stamps, lose health insurance, and lose
employer-provided pensions. He cautioned that workers without
pension plans end up depending upon the state at the time of
their retirement. Mr. Mathew strongly opposed HB 313.
4:57:43 PM
CHAIR OLSON announced public testimony would remain open.
[HB 313 was held over.]