As a member of the General Assembly from the northeastern part of the state, as well as chairman of the House Labor and Industry Committee, I believe it is my core responsibility to protect the interests of the hard-working taxpayers in Monroe County and statewide. One issue that continually drives outrage by local government organizations and school boards is the Prevailing Wage Act.
The burdensome prevailing wage law has made it particularly difficult for schools and municipal governments to maximize a competitive bidding process to get the best deal for taxpayers. When labor, one of the key components of any construction job, is basically a fixed price set by the government, it’s hard to get much variation in bids.
Under current law, the prevailing wage applies to any public works project estimated to cost more than $25,000. Those projects include any construction, reconstruction, demolition, alteration or repair paid for in whole or in part — out of the funds of a public body where the total estimated cost of the project exceeds $25,000. Unfortunately, that amount has not been altered for more than 50 years, not even for inflation.
Because the current prevailing wage rates are now, effectively, the local union wage rates, in many areas these rates often do not reflect the actual market rate paid on private construction projects, especially in rural areas. During three public hearings on the issue of Prevailing Wage Act reform held last session by the House Labor and Industry Committee, both local government and school districts testified that the higher labor costs associated with the act increased their construction costs anywhere from 5 percent to 20 percent. It is clear from this testimony that the prevailing wage mandate, in some areas, leads to higher property taxes on local taxpayers.
In January of this year, I was appointed by the Speaker of the House to serve as chairman of the House Labor and Industry Committee. In this position, I believe it is my duty to taxpayers to address this prevailing wage issue to allow local municipalities and school districts to stretch their scarce budgetary resources. More specifically, our local municipal road maintenance budgets need to be able to maximize the amount of basic road maintenance that can be done. Our roads are deteriorating.
In order to tackle this politically challenging issue, I chaired the April 16 Labor and Industry Committee meeting as we advanced the two prevailing wage reform bills to the full House.
House Bills 796 and 665, which both passed 15-10 in committee, respectively, aim to raise the prevailing wage threshold and establish a clear definition for “maintenance work.”
House Bill 796, sponsored by state Rep. David Millard (R-Columbia), was recently amended in committee to raise that threshold to $100,000. If the current $25,000 threshold were to be adjusted for inflation, it would equal just under $188,000.
According to the Department of Labor and Industry, in 2012:
• There were a total of 6,506 prevailing wage projects, which cost the Commonwealth approximately $6.3 billion.
• Thirty-nine percent of those projects were estimated to cost less than $100,000.
• Projects less than $100,000 totaled $149 million, which equates to about 2 percent of the total cost of all projects in 2012.
The threshold level of $25,000 was set when the Prevailing Wage Act was last amended in 1963. Costs facing our local governments have risen exponentially since then — yet the threshold has not. It’s a huge rarity for any needed municipal construction project in 2013 to cost less than $25,000. Adjusting the cost threshold to $100,000 is a very reasonable, middle of the road, approach for us to help municipalities keep costs under control.
Another prevailing wage reform bill, House Bill 665, sponsored by state Rep. Ron Marsico (R-Dauphin), would expand the types of road maintenance projects that would be exempt from Prevailing Wage Act requirements. This would enable municipalities to stretch their road repair budgets and allow them to maintain more roads.
I am concerned that the road repairs listed under current law includes potentially very costly consequences for local governments across the Commonwealth. That’s why this bill would establish a clear statutory definition for what is to be considered “maintenance work” with respect to road repairs. Under current law, maintenance work is defined as “the repair of existing facilities when the size, type, or extent of such facilities is not changed or increased.”
In 2008, the Pennsylvania Supreme Court affirmed a decision of the Pennsylvania Commonwealth Court issued on Jan. 22, 2007, in the case of Borough of Youngwood v. Pennsylvania Prevailing Wage Appeals Board.
The rulings set forth a much broader interpretation of the definition of road “repair work,” including many activities and practices that have long been considered “maintenance work.” As a result, municipalities have since been required to pay prevailing wages for these projects.
This bill would further define “maintenance work” to specifically enumerate those activities that have traditionally been recognized as such, including road milling, resurfacing and curb and sidewalk repairs.
Both bills have garnered the support of the Commonwealth Foundation, Pennsylvania State Association of Township Supervisors, Pennsylvania State Association of Boroughs, County Commissioners Association of Pennsylvania, Pennsylvania Chamber of Business and Industry, Pennsylvania School Boards Administration, and the Associated Builders and Contractors Inc.
Quite frankly, I am confident that both bills propose reasonable reforms which leave the greater part of Prevailing Wage Act requirements intact. Tougher reforms to this law, which I have always supported, have traditionally met political dead-ends. Now is the time to get something done on this issue. These bills will help our school districts and municipalities to stretch their budgets and prevent even greater local property tax increases.
State Rep. Mario M. Scavello is a Republican who represents the 176th House District (Monroe County) in the Pennsylvania House of Representatives. He is alsochairman of the House Labor and Industry Committee. For more information, visit www.MarioScavello.com.