Pass HB 477-School Construction & Prevailing Wage, Richard Falknor, 3-11-03

Maryland Taxpayers Association, Inc.
"Building an Opportunity Society for Every Marylander"

"PASS HB 477"
URGES THE MARYLAND TAXPAYERS ASSOCIATION:
BUILD MORE CLASSROOM SPACE FOR LESS MONEY,
PUT CHILDREN AHEAD OF UNION FEATHERBEDDING

Testimony submitted for the record by
MTA Vice President Richard Falknor to the
Maryland House of Delegates Economic Matters Committee
March 11, 2003

Chairman Davis, Sponsor McMillan, and members of the committee, I am Richard Falknor, vice president of the Maryland Taxpayers Association http://www.mdtaxes.org/

Any prevailing-wage scheme is a social and economic antique in today's Maryland - - - if indeed it ever had any validity even in the years of the Great Depression. In times of an economic downturn, prevailing-wage schemes further restrict scarce jobs.

But now when we urgently must streamline Maryland state and local government, increase public-sector productivity, and slice pork from state and local budgets, Maryland prevailing-wage laws are an absurdity.

No one has said it better than one seasoned state-wide office holder in a letter of February 17, 2000. This letter, sent to the chairman of the Maryland Senate Finance Committee, opposed a proposal to curtail the then-school-construction exemption from prevailing-wage requirements:

In this letter, Comptroller William Donald Schaefer first described prevailing-wage generally:

"[U]nder the administration of Maryland's existing "prevailing wage law, "public works (other than school facilities)
usually are built at the wage-and-employee-benefits scale of the AFL-CIO Building and Construction Trades' collective
bargaining agreements negotiated with unionized general contractors and subcontractors that contain rigid labor costs and restrictive work rules and practices." (Emphasis added.)

Comptroller Schaefer then went on to defend the school-construction exemption, which the General Assembly nonetheless subsequently curtailed:

"[T]he long-established exemption under Maryland's prevailing wage law which awards the construction and renovation of public school facilities on the basis of merit to lowest qualified bidders. This exemption is the identical basis upon which over 80% of all private sector commercial, industrial and institutional construction is performed in Maryland and throughout the United States today. The exemption is fair and beneficial to Maryland's school children, to our educational system, and to our taxpayers who foot the bills (because free and competitive bidding usually results in a reduction in "featherbedded" labor costs and an increase in construction productivity and quality."
(Emphasis added.)

The Comptroller then recited the costs to Maryland of curtailing this exemption:

"[A] Maryland State Department of Legislative Services study done in 1995 shows that the
Maryland state prevailing wage law's administrative application of the union wage-and-benefits scale to state construction projects (other than school facilities) adds between 5% and 15% to the cost of these projects. There also is information reflecting that prevailing wage laws may add as much as 20% to 30%. Because the amount of tax dollars to be spent on school construction in any given year is defined by budget allocations, if the cost of school construction is arbitrarily increased by 15% or more, the only result can be a reduction in the number of classrooms to be built or rehabilitation work to be performed by that same percentage." (Emphasis added.)

Finally, the Comptroller predicted the consequences:

"This reduction automatically continues the overcrowding of facilities and a poorer education for our children."

Mr. Chairman, passage of HB 477 modifying "the criteria pertaining to the applicability of prevailing wage rates for State funded school construction projects" will not solve all of Maryland's school-construction problems, but it is an important first step and sends a signal that the era of uncritical subsidizing of the best-politically-organized interest groups is drawing to a close.

MTA urges prompt enactment of HB 477, and also suggests to the members of this panel and the General Assembly that they consider authorizing public-private partnerships to get the best buy in school construction from taxpayer money.

As the Heritage Foundation has explained:

A little-known provision in the major tax bill
that President Bush signed into law on June 7,
2001, will give towns and cities throughout the
country the opportunity to build public school
facilities faster, better, and at lower cost by forming
public-private partnerships with qualified real
estate investors and developers. Under this
approach-pioneered in England, Scotland, and
Nova Scotia, as well as in the states of Florida and
Texas-public school systems can now form partnerships
with private-sector investors who fund
the construction of public school buildings and
lease the facilities to public school systems at
annual costs that are below the costs that communities
would incur if they built the schools on their
own.

Mr. Chairman, the Maryland Taxpayers Association, Inc., a volunteer non-partisan state-wide taxpayer organization, stands ready to assist your committee with its work in improving Maryland school, and infrastructure construction generally.

Thank You.