Contact: Ron Roach (916) 441-0490

Inside Taxes Commentary -- November 1, 1995

Prevailing wage: source of taxpayer anger, but needed reforms are proposed

Even in the best of times, it is wasteful of tax dollars to artificially inflate the pay of those who work on public construction projects.

It is even more ludicrous when the state and many cities and counties face major budget problems.

Overdue is action to end an archaic and unjustifiable system that forces state and local governments in California to pay far more for the construction of a badly needed classroom, a library or a freeway overpass to relieve congestion.

The issue is prevailing wage, and the growing rage over the current system's inherently senseless drag on efforts to make government in California more efficient. It is a blatant example of how the public is left with an empty feeling when learning how tax dollars are spent.

Public works projects in California have bloated pricetags because of a system that requires the most frequently used wage rate -- usually one set by a collective bargaining contract -- even when it is significantly higher than the wages paid to most workers in the same region.

For example, three out of 10 painters make $18 an hour union-scale wages in a locality, while two make $14 and two others get $12, one gets $15 and two make $15.50. Those who paint the walls of a publicly owned facility would make $18 an hour, even though seven of 10 painters in their region earn less.

• The solution: Use the rate paid to a majority of workers. If there is no majority, use a weighted average. The weighted average in the above example would be $15.20.
• The savings to taxpayers: As much as $200 million a year, according to the Department of Industrial Relations (DIR), whose director, Lloyd W. Aubry Jr., proposed such a solution in mid-October on behalf of Governor Pete Wilson.

Aubry announced regulations sought to reform the system as described above, making it similar to the federal government's Davis-Bacon Act. Besides regulations, the administration is pushing AB 138, by Assemblyman Jan Goldsmith, which achieves other reforms by statute and could save taxpayers another $200 million to $250 million, the DIR reports.

The California Taxpayers' Association is part of a coalition that has supported Goldsmith's three-year legislative battle. His AB 138 has stalled in the Assembly Labor and Employment Committee, an organized labor bastion for a quarter-century and a graveyard for prevailing wage reform bills over the years. The Republican assemblyman will seek another vote after the Legislature reconvenes in January. Under the current Assembly partisan makeup, labor's hold on the committee may have slipped away.

Among AB 138's provisions is a $100,000 threshold for projects subject to prevailing wage requirements, similar to a proposal by Vice President Al Gore in his reinventing government-for-efficiency program at the federal level. It also would allow hard-pressed local governments to waive prevailing wage requirements under certain circumstances.

California needs reasonable wage requirements. It needs a process that will stretch our tax dollars so they will pay for the construction of more school classrooms, libraries, roads and other badly needed public works.

It defies logic to maintain the status quo. Reform proposed by the Wilson Administration and Assemblyman Goldsmith will help make California more competitive with the rest of the country.

And taxpayers might not feel so empty -- and angry -- when they see the results of these changes: More bang for the buck.