Budget could depend on prevailing wage bills

 

DOVER — As talks to balance the budget continue, Republican lawmakers are circulating legislation that would temporarily exempt counties, municipalities and school districts from prevailing wage.

The bills, supporters say, would lower costs by 24 percent, freeing up money for more construction projects.

Prevailing wage governs the rates paid to laborers on state-funded projects, and it’s often set much higher than what a worker would earn otherwise. The average hourly wage for an electrician, for instance, is $27.24, according to the U.S. Bureau of Labor Statistics. In Delaware, under prevailing wage, electricians on state-funded construction jobs earn $66.85.

How quickly the budget gets balanced could hinge on prevailing wage reform — specifically, the Republican desire to see major changes and the Democratic wish to keep the program intact.

“The other side is adamant that this antiquated program that we can’t afford any longer stay in place and that’s crowding out other spending decisions,” Senate Minority Whip Greg Lavelle, R-Sharpley, said. “They’re going to come running to (the press) saying we’re going to force these draconian cuts and couldn’t be further from the truth. They’re forcing the cuts by protecting a program that is outdated and expensive.”

Gregory Lavelle

Republicans believe lowering the wage would free up cash to go to the bond bill — “money’s money in state government,” Sen Lavelle said — but House Speaker Pete Schwartzkopf, D-Rehoboth Beach, counters the prevailing wage is not related to the budget.

Supporters also argue the wage helps blue-collar workers and leads to more money being put back in the economy.

Budget debate

The two bills, which would suspend prevailing wage requirements for three years on counties, municipalities and school districts, mark the second attempt in three years to reform prevailing wage.

Lawmakers raised the threshold in 2015 from $100,000 to $500,000 for new construction and from $15,000 to $45,000 for repairs, essentially allowing the state to get more bang for its buck. The increase came about as a result of months-long negotiations between Democrats and Republicans over infrastructure revenue: Democrats agreed to raise prevailing wage if Republicans would back higher Division of Motor Vehicles fees.

This year, legislators are again meeting in hopes of reaching a compromise. But the topic is the budget, which, unlike additional infrastructure money, must be settled.

So far, Republicans have been resistant to tax hikes, while Democrats have fought against some of the cuts members of the minority are seeking.

Both sides want structural reform, but what that means differs between the parties.

According to Rep. Schwartzkopf, prevailing wage is a nonstarter with the House Democrats. Meanwhile, Sen. Lavelle said prevailing wage must be part of any bargain between the parties.

The wage is determined based on salaries paid by construction-related companies that respond to surveys sent by the Department of Labor.

“One of the reasons why they started prevailing wage was to help the small contractor compete against the big contractors,” Rep. Schwartzkopf said. “If your labor costs were all primarily the same and it only differentiated in a bid because of how many people they would use versus how many people you would use, then you’re down to time and labor, which gives the little person, the small-business man, the better chance of getting contracts from the state.”

But Republicans say the practice does not make the best use of taxpayer dollars, and they are determined to change it.

Sen. Anthony Delcollo, R-Marshallton, questioned why an “unskilled laborer” is guaranteed a set wage by the state when other positions are not.

“To say that we as a society, just from a basic logic standpoint, are not going to place the same emphasis and importance on a host of other essential functions, whether it’s nurses, teachers with master’s degrees or public defenders who are starting out or new prosecutors or Supreme Court law clerks or whatever the case may be, there are a host of other things that we could put those resources toward that are chronic needs and that are essential functions of government, but we are unable to because we’ve decided, for reasons that are beyond me, … that it’s appropriate to permit $44 an hour to be a standard for unskilled laborers, and then it goes all the way up to the chain to the point where you’re paying an elevator repair person $165,000 … a year,” he said.

The fiscal year ends June 30, and while legislators have typically produced a finished budget a few days before that date, they did not finalize it until the early hours of July 1 in 2015. This year could be similar: Sen. Lavelle said the two sides have reached a stalemate.

“We want to work with them, but we’re not willing to bend over and lay down,” Senate Minority Leader Gary Simpson, R-Milford, said. “Those days are over.”

The General Assembly appears to have an agreement on a bill raising the franchise tax, which would bring in about $116 million. The Joint Finance Committee had also made about $80 million in cuts and, according to Democrats, another $95 million in “soft cuts” — areas that lawmakers did not fund but did not have to vote on.

That still leaves another $100 million to erase the gap between projected revenue and expenses. A spokesman for Gov. John Carney said in an email the governor would not consider changing prevailing wage and hopes lawmakers can balance the budget with an even mix of taxes and cuts to provide long-term stability.

For now, it’s a staring contest. Who will blink first?

“We either raise the revenue or we cut the rest of the budget,” Rep. Schwartzkopf said. “That’s on (the Republican leaders). … I will make it perfectly clear so everybody understands this: I can bring the Democrats to raise the revenue. So if we don’t raise revenue, you finish the sentence.”

Reach staff writer Matt Bittle at mbittle@newszap.com

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