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.]