Legislature(2011 - 2012)

02/28/2011 03:28 PM House L&C


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              HB 155-PUBLIC CONSTRUCTION CONTRACTS                                                                          
                                                                                                                                
4:22:11 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced  that the final order of  business would be                                                               
HOUSE  BILL NO.  155,  "An Act  relating  to public  construction                                                               
contracts."                                                                                                                     
                                                                                                                                
4:24:05 PM                                                                                                                    
                                                                                                                                
COREY BAXTER, District  Representative, Operating Engineers Local                                                               
302, stated he  is a fourth generation Alaskan.   He related that                                                               
he  takes great  pride  in  supporting his  state  and family  by                                                               
working  in Alaska.   He  asked to  testify against  HB 155.   He                                                               
said, "You don't  have to look hard to constantly  be reminded at                                                               
how much harder it  is for people to make ends meet."   At a time                                                               
when  families are  struggling to  pay for  basic living,  to put                                                               
Alaskans first  by buying  and working  locally, this  bill would                                                               
take more money  out of employees' pockets any  time they perform                                                               
state  construction   projects  under   $75,000.    He   did  not                                                               
understand the logic,  especially given the state's  surplus.  He                                                               
stated that this  bill sends a message  that quality workmanship,                                                               
quality  of life,  and potential  public safety  does not  have a                                                               
priority.  He said, "This law should not be changed."                                                                           
                                                                                                                                
4:25:28 PM                                                                                                                    
                                                                                                                                
JONATHAN SMITH, Member,  Carpenters Local 227, stated  that he is                                                               
a lifelong  Alaskan.  He  spoke in opposition  to this bill.   He                                                               
offered  his  belief that  this  bill  lowers wages  for  working                                                               
people, but  particularly for  Alaskans.  He  stated that  when a                                                               
contractor  bids  on  projects,  Alaskans have  a  level  playing                                                               
field.   Under  this  bill,  employees would  work  for half  the                                                               
wages.  He  offered his belief that  nonresidents would "lowball"                                                               
the wages without  Alaska hire provisions.   In Southeast Alaska,                                                               
workers  rely on  small  projects  to keep  busy.   He  supported                                                               
higher  wages for  Alaskans, especially  given the  high cost  of                                                               
fuel  prices and  heating  oil.   Initially,  some  money may  be                                                               
saved, but in the long run, people will be unemployed.                                                                          
                                                                                                                                
REPRESENTATIVE  MILLER said  he seems  to be  opposing this  bill                                                               
since outside contractors would have  a leg up over local Alaskan                                                               
hire.                                                                                                                           
                                                                                                                                
MR. SMITH  offered his belief  the prevailing  wage is $55  for a                                                               
carpenter and under the bill the Alaskan worker would lose out.                                                                 
                                                                                                                                
4:28:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMPSON  commented in rural areas  some employers                                                               
cannot  comply with  reporting under  the Little  Davis-Bacon Act                                                               
(LDBA).  That  affects many rural contractors, who  cannot bid on                                                               
projects.  The  contracts are awarded to  larger contractors, who                                                               
must fly in, and it adds a whole  lot of money on a small project                                                               
such as repairs to a school.   He related that certain aspects of                                                               
the bill could help in rural areas with respect to rural areas.                                                                 
                                                                                                                                
MR. SMITH related  that in his experience in  Dillingham that the                                                               
LDBA leveled  the playing field.   He knew  he would be  paid the                                                               
same wage  as those  coming in  from Anchorage.   He  offered his                                                               
belief  that without  the  provision in  law,  that the  employer                                                               
could pay any wage.  He supported the LDBA wages.                                                                               
                                                                                                                                
4:29:54 PM                                                                                                                    
                                                                                                                                
PAUL GROSSI,  Lobbyist, Alaska  State Pipe  Trades UA  Local 375,                                                               
stated that his organization is  concerned with the bill for many                                                               
of  the same  reasons  that  other testifiers  have  raised.   He                                                               
offered  his belief  that the  $75,000 minimum  threshold is  too                                                               
high.   He related  it would put  a lot of  jobs outside  of LDBA                                                               
work.   Additionally,  he expressed  concern about  the exemption                                                               
from the  LDBA for  school districts, and  the new  definition of                                                               
maintenance.                                                                                                                    
                                                                                                                                
CHAIR OLSON  explained the  school district  would have  the same                                                               
cap,  that he  anticipated the  language  being cleared  up.   He                                                               
offered  his belief  that the  national average  is $108,000  for                                                               
LDBA.   He  explained  that the  minimum will  not  be above  the                                                               
national  average and  school district  will be  included in  the                                                               
final  number.   He  related  that  schools  would not  be  built                                                               
outside of the  LDBA.  He pointed out that  the language would be                                                               
cleaned up.  In further response  to Mr. Grossi, he clarified the                                                               
definition for maintenance would also  be reconsidered as part of                                                               
the work on the bill.                                                                                                           
                                                                                                                                
MR. GROSSI  pointed out that  LDBA comes with resident  hire law.                                                               
He expressed concern  that exempting any portion of  title 36 may                                                               
also exempt the requirement for  local hire.  Currently, the LDBA                                                               
requires   90   percent   resident   hire.     In   response   to                                                               
Representative  Chenault, he  clarified  that Little  Davis-Bacon                                                               
requires 90 percent local hire.                                                                                                 
                                                                                                                                
MR. GROSSI related that an argument  could be made that this bill                                                               
won't affect  local hire, but  currently the department  does not                                                               
have any way to  track the jobs.  In response  to Chair Olson, he                                                               
advised  the   department  tracks   resident  hire   through  the                                                               
certified payroll.  Thus, whatever  portion is exempted would not                                                               
filing certified payroll  so by law or by de  facto resident hire                                                               
would not be covered.                                                                                                           
                                                                                                                                
4:34:42 PM                                                                                                                    
                                                                                                                                
MR. GROSSI said  he is speaking for the pipe  trades, but pointed                                                               
out that  all construction workers  and contractors could  lose a                                                               
significant amount  of work, not  just because of a  reduction in                                                               
pay  but due  to the  resident hire  provision.   He offered  his                                                               
belief that hiring  local people, also helps the  state and local                                                               
economy.   He pointed  out that when  hiring outside  Alaska, the                                                               
people will do  their job and leave.  They  spend little money in                                                               
Alaska.  If  you hire a resident plumber, that  person will spend                                                               
his/her money  locally.  He  also said he realizes  the provision                                                               
probably created  an unintended consequence  but it is  a serious                                                               
one.                                                                                                                            
                                                                                                                                
4:35:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  asked  if  $75,000  is  too  high  of  a                                                               
threshold whether the current threshold of $2,000 is too low.                                                                   
                                                                                                                                
MR. GROSSI  said he'd like to  keep it at $2,000  but that choice                                                               
is the  prerogative of the  committee.  He asserted  that $75,000                                                               
is too  high.  He  said he realizes  that the threshold  has been                                                               
set at  $2,000 for some  time but he did  "not have a  number for                                                               
you."                                                                                                                           
                                                                                                                                
4:36:57 PM                                                                                                                    
                                                                                                                                
ROCKY  DIPPLE, Member,  International  Brotherhood of  Electrical                                                               
Workers (IBEW), expressed concern  about raising the threshold to                                                               
$75,000.  He  stated that rural Alaska is expensive.   He said he                                                               
does not  want to take  wage cut at a  time when all  other costs                                                               
are increasing.   He thought the bill would  allow contractors to                                                               
"low ball"  bids and "fly  by night" not established  shops would                                                               
bid on projects.  He offered  his belief that new companies would                                                               
come in, do  the jobs cheaply, but ultimately the  new shop would                                                               
end up  going broke.  He  expressed concern about who  would pick                                                               
up the costs.  He said, "Creating  a race for the bottom is never                                                               
a good idea because in the end  if you 'pay peanuts all you catch                                                               
is squirrels.'"                                                                                                                 
                                                                                                                                
4:39:01 PM                                                                                                                    
                                                                                                                                
DALE MILLER, Member, Teamsters Local  959, stated this bill would                                                               
harm families,  benefit employers,  but will not  guarantee lower                                                               
bids.  The  state is not experiencing  financial difficulties yet                                                               
this will cause  problems for working men and women.   He did not                                                               
think lowering  wages would spur  economic growth.   He suggested                                                               
if the  process is a cumbersome  filing process to try  to change                                                               
the  filing  process and  not  raise  the  threshold limit.    He                                                               
acknowledged the bill was a bill  in progress.  Still, he said he                                                               
does not  believe maintenance  definition is a  good idea,  as it                                                               
would  make  the  LDBA  even  more  confusing.  The  LDBA  covers                                                               
construction projects,  which is  already defined.   He  also did                                                               
not  think  it  was  a  good idea  to  exempt  school  districts.                                                               
Construction projects  on these buildings are  not less important                                                               
than those of other buildings.   He urged member to not pass this                                                               
bill  in its  current form.   He  recalled that  even the  Alaska                                                               
Municipal  League resolution  did not  recommend this  high of  a                                                               
threshold limit.                                                                                                                
                                                                                                                                
4:41:58 PM                                                                                                                    
                                                                                                                                
SERGIO ACUNA  stated that he is  a laborer.  He  asked to testify                                                               
in opposition to  the bill.  He said it  difficult to provide for                                                               
his family.   He is a  construction worker and he  works seasonal                                                               
work. He  suggested Alaska  does not need  anti-worker bill.   He                                                               
thought the  bill would  protect the  big and  the powerful.   He                                                               
said  he speaks  not only  for himself  but also  for his  fellow                                                               
workers who  were not able  to testify  today.  He  said, "Please                                                               
leave the bill alone.  Thank you."                                                                                              
                                                                                                                                
4:43:10 PM                                                                                                                    
                                                                                                                                
BERNIE  LOOMIS, Member,  Alaska Regional  Council of  Carpenters,                                                               
stated that the  previous bill on NDs also plays  into this bill.                                                               
There  are pluses  and  minuses to  the bill.    He related  that                                                               
everyone is  affected when the  standards are removed  and people                                                               
cannot  make  a  decent  living in  rural  communities  or  major                                                               
communities.  Everyone is impacted,  especially seniors, when the                                                               
value of the working force is  diminished.  He said it seems that                                                               
people  do  not  mind  paying  $80  or $90  to  fix  a  car  that                                                               
depreciates daily, yet  some people want to pay  the lowest wages                                                               
instead of paying workers a decent  wage to work on projects with                                                               
a huge equity growth in gain  and value.  He predicted that could                                                               
ruin  the  economy.     He  suggested  the  value   of  hiring  a                                                               
professional instead of an amateur  could result in cost savings.                                                               
He  asked members  to  consider taking  away  the negatives  that                                                               
impact the working class.                                                                                                       
                                                                                                                                
4:44:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  asked  whether  he  could  identify  the                                                               
pluses of HB 155.                                                                                                               
                                                                                                                                
MR. LOOMIS  acknowledged that  the $2,000  threshold has  been in                                                               
place for  some time  and it  probably needs  to change  a little                                                               
bit.   One problem  he has experienced  is the  antiquated system                                                               
the  state  uses on  Little  Davis-Bacon  projects that  make  it                                                               
difficult  for contractors.    He said  he  deals with  certified                                                               
payroll issues every  day.  He offered his belief  that the state                                                               
is experiencing  a huge influx  of out  of state workers  and the                                                               
money  they earn  does  not  stay in  Alaska.    This drains  the                                                               
Alaskan  economy.   "The more  you open  the door,  the more  you                                                               
allow it to negate  the economy for the rest of  us who live here                                                               
and have grown up here," he said.                                                                                               
                                                                                                                                
4:46:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT asked whether  the underhanded dealing he                                                               
has noticed happens on both sides of the aisle.                                                                                 
                                                                                                                                
MR. LOOMIS  answered that  he did  not think  it happens  as much                                                               
with  Alaskan  residents.    He  stated that  the  lions  of  the                                                               
industry have  proven themselves  and have  track records.   Some                                                               
issues arise but  not to the same degree.   He offered his belief                                                               
that smaller companies  would come in for a smaller  piece of the                                                               
pie.  He  said they don't care, but would  just "take their money                                                               
and run."                                                                                                                       
                                                                                                                                
4:47:38 PM                                                                                                                    
                                                                                                                                
VINCE  BELTRAMI, President,  Alaska AFL-CIO,  asked to  clarify a                                                               
few points.   He referred  to the sponsor statement,  which lists                                                               
the average  threshold nationwide  at $108,000.   He  pointed out                                                               
after reviewing  32 other  states that  he thought  the threshold                                                               
seemed to  be $40,000 less  than that  figure.  Some  states skew                                                               
the  average since  their  threshold is  extremely  high, in  the                                                               
$400,000 -  $500,000 range.   He recalled earlier  testimony that                                                               
raising  the  threshold  by  $50,000   would  simply  adjust  the                                                               
threshold  for  inflation.   He  offered  his belief  that  would                                                               
increase  inflation  by  about two-thirds.    He  suggested  that                                                               
proposed Section 8, of HB 155  should be removed.  He stated that                                                               
the changing the terminology and  definitions may have unintended                                                               
implications and are a bad idea.   He also thought that modifying                                                               
the threshold invites "low ball"  low-quality construction on the                                                               
state's  public infrastructure,  which  could compromise  safety,                                                               
particularly in public buildings such as schools.                                                                               
                                                                                                                                
MR.  BELTRAMI recalled  earlier  testimony on  the language  that                                                               
would eliminate  the local hire  provision.   Approximately 1,400                                                               
projects  fell   under  $75,000   last  year,  not   taking  into                                                               
consideration   the   schools.     He   recalled   Representative                                                               
Chenault's  has   a  construction  background.     Adjusting  the                                                               
threshold  won't  necessarily  translate to  reduced  bid  costs.                                                               
Instead,  it  would invite  contractors  to  lower the  bid,  and                                                               
pocket  more of  the money  and pay  workers less.   The  federal                                                               
Davis-Bacon Act  sets a standard of  living.  He pointed  out the                                                               
state may potentially have a $12  billion surplus this year so he                                                               
did not  understand the economic  driver that makes  it necessary                                                               
to lower  the standard  of living for  construction workers.   He                                                               
referred to the  fiscal note of $400,000 per year  which means it                                                               
will cost  our state general  fund monies.   He reported  that of                                                               
the  25 or  30 people  at the  Fairbanks Legislative  Information                                                               
Office (LIO),  a strong majority are  in their 20s.   These folks                                                               
want to  work in  construction industry and  earn a  decent wage.                                                               
Under this  bill contractors  could slice  their pay  by whatever                                                               
amount they deemed  as appropriate.  The bottom line  is that the                                                               
state has a  $12 billion surplus and a law  has worked well since                                                               
statehood.  He  did not see "pushing this" bill.   He said, "Good                                                               
paying jobs serve  to improve a stagnant economy.   It just seems                                                               
like an  unnecessary bill that helps  employers, small employers,                                                               
at the  expense of the  workers they'd be  hiring."  He  spoke in                                                               
opposition to HB 155.                                                                                                           
                                                                                                                                
4:53:08 PM                                                                                                                    
                                                                                                                                
KIRK JACKSON,  Member, United Association Plumbers  & Pipefitters                                                               
Local  375,   also  serves   on  the   Supplemental  Unemployment                                                               
Committee for  the UA Plumbers  and Pipefitters.  He  stated that                                                               
he is  speaking on behalf  of its member  today.  He  stated that                                                               
raising the threshold  to $75,000 is too high.   He did not think                                                               
cutting  hourly wages  is  the  answer to  save  money on  public                                                               
construction  projects.     Contractors  can  best   serve  their                                                               
communities by paying  workers a decent wage so  they can support                                                               
their  families.   The cost  of living  in Alaska,  especially in                                                               
rural communities is  high.  Fuel costs  are significantly higher                                                               
and  cutting  a  "working  man's wages"  is  not  appropriate  in                                                               
today's economy.  He spoke in opposition to HB 155, as written.                                                                 
                                                                                                                                
4:54:17 PM                                                                                                                    
                                                                                                                                
JAY  QUACKENBUSH,   Assistant  Business   Manager,  International                                                               
Brotherhood  of Electrical  Workers (IBEW);  President, Fairbanks                                                               
Building Trades, stressed  his opposition to HB 155.   He related                                                               
his  understanding  that  change  takes  place  in  the  process.                                                               
However, this  is not the  time to make  a change to  LDBA, which                                                               
protects the prevailing wage.  He  said, "It doesn't matter to me                                                               
or the people I represent, or  the people who put their blood and                                                               
sweat into  the jobs.  It  doesn't matter what your  skill is, if                                                               
you are  a construction worker  you have a  skill and there  is a                                                               
prevailed wage  for that skill."   The  wages may vary  for sheet                                                               
metal worker, operating engineers,  or bricklayers.  However, the                                                               
skills  are valuable  and wages  are  based on  the economy,  the                                                               
skill, and the training.   He expressed concern that the proposed                                                               
changes would  bring in workers  from the  Lower 48.   He pointed                                                               
out that  the out of state  workers have a lower  cost of living,                                                               
but  will come  to Alaska  and  undercut the  market and  Alaskan                                                               
workers'  ability to  make a  good living.   He  hoped this  bill                                                               
would not go any farther in the process.                                                                                        
                                                                                                                                
4:56:17 PM                                                                                                                    
                                                                                                                                
DENNIS TRAILER,  Member, International Brotherhood  of Electrical                                                               
Workers  (IBEW),  stated he  is  a  member  of  the IBEW  and  is                                                               
speaking on  behalf of  himself.   This issue is  not a  union or                                                               
non-union  issue.   This is  about Alaskans  who would  lose out.                                                               
The prevailing  wage was  set in place  to prevent  other states'                                                               
workers  from coming  in and  undercutting Alaska's  contractors.                                                               
He said, "This is  going to be a Pandora's Box.   If we open this                                                               
up,  we're going  to get  contractors coming  from the  Lower 48.                                                               
They're going to  bring low paid workers into our  area.  They're                                                               
going to  undercut all of  our contractors.   It's going  to give                                                               
economic  harm to  a  lot of  our workers,  both  union and  non-                                                               
union."    He spoke  in  opposition  to HB  155.    He hoped  the                                                               
committee would see that this bill would damage Alaskans.                                                                       
                                                                                                                                
REPRESENTATIVE CHENAULT  commended the gentlemen who  just spoke.                                                               
He agreed this  is not union or non-union issue.   He said, "It's                                                               
a dollar issue."                                                                                                                
                                                                                                                                
4:58:23 PM                                                                                                                    
                                                                                                                                
JOHN BROWN  stated that he is  retired.  Many of  the issues have                                                               
already been raised so he asked  to provide a brief history.  The                                                               
LDBA  is  based  on  the   federal  Davis-Bacon  Act,  which  was                                                               
initiated in the  1920s and was passed in 1935.   He related that                                                               
the  Davis-Bacon   Act  was  initiated  because   two  Republican                                                               
Congressmen from  Illinois were tired of  Mississippi contractors                                                               
bidding on  Illinois projects,  bringing in  Mississippi workers,                                                               
and  taking their  earnings out  of the  state of  Illinois.   He                                                               
agreed this  issue is not a  union or non-union issue.   Instead,                                                               
the issue  is about our  economy and keeping our  economy strong.                                                               
The only  way that  can happen  is for  contractors to  obtain as                                                               
fair a  chance as possible to  keep the dollars spent  in Alaska.                                                               
He spoke in opposition to HB 155.   He urged members to "leave it                                                               
alone."                                                                                                                         
                                                                                                                                
[HB 155 was held over.]                                                                                                         

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