- Associated Press - Tuesday, December 16, 2014

FRANKFORT, Ky. (AP) - A new study says Kentucky’s public school districts pay workers up to 51 percent more for construction projects because of the state’s prevailing wage law, but a divided panel of lawmakers refused to adopt the report during a contentious meeting Tuesday that could set the tone for the upcoming legislative session.

The Legislative Research Commission compared the labor costs of 12 public school projects with comparable projects in the private sector. They found that Kentucky’s prevailing wage law caused the districts to pay construction workers about $11.37 more per hour than they would have gotten for a similar job in the private sector. The study also concluded the state government paid construction workers about $8 per hour more than they would have been paid in the private sector.

Republican Sen. Chris McDaniel, who is president of a concrete company that has worked on prevailing wage projects, praised the report as “good as anything I’ve ever seen.” But Democrats said the report was flawed because of its small sample size and because it only examined labor costs and did not determine if the prevailing wage law increased the total cost of construction projects.

The prevailing wage law means Kentucky state officials decide how much money state and local governments pay construction workers for publicly funded projects. The goal is to pay workers a wage that reflects the prevailing wage of the local community. State officials set the wages for 86 of Kentucky’s 120 counties by collecting wage information from local contractors in each county. The other 36 counties, mostly the urban ones, use the federal prevailing wage.

The reason Kentucky’s prevailing wage is so much higher than the private wage is because it overemphasizes union wages, according to Mike Clark, the Legislative Research Commission’s chief economist. Clark said union contractors are the only ones who submit their wage data because they usually are the only ones who bid on public projects.

“Contractors that do not bid on public construction projects have no incentive to participate,” Clark said.

State Labor Secretary Larry Roberts said the study “really bothers me” because it did not examine the total cost of construction projects. He argued that higher wages results in higher-skilled workers who can work faster and safer, resulting in lower overall construction costs.

“You can’t determine total cost just by comparing wages of workers who worked on a prevailing wage job vs. a non-prevailing wage job,” he said. “There are a lot of other factors that kind of come into play.”

Democrats and Republicans have been fighting over Kentucky wages for years. The Republican-controlled Senate has blocked efforts by the Democratic-controlled House to raise the state’s minimum wage. Likewise, the House has rebuffed the Senate’s efforts to repeal the prevailing wage law.

Both issues will likely emerge during the 2015 governor’s race. Democrats announced Monday that they have requested the Legislative Research Commission to examine the impact of a higher minimum wage in Kentucky next year. And McDaniel, the Senate budget chairman who is running for lieutenant governor with James Comer in 2015, said he wants to repeal the state’s prevailing wage law because “there is no question that it saves taxpayers dollars to do so.”

But Rep. Rick Rand, D-Bedford and the House budget chairman, vowed to protect the prevailing wage, prompting a heated exchange that ended with McDaniel using his gavel to declare Rand was “out of order.”

“Why shouldn’t it be the policy of this state that we put money in the hands of working people?” Rand said. “My business prospers when working people have money to spend, not when the school district has money to spend.”

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