In a major victory for organized labor, Gov. Brown signed into law Sunday night a bill blocking state funds to cities that don’t pay the prevailing wage on public works projects – a measure aimed directly at charter cities, some of which have sought to avoid paying the prevailing wage in order to save money.
The bill, arguably the most important bill to emerge this year from the Legislature, also limits state funds to cities that have allowed a public works project without the prevailing wage being paid in the last two years.
The prevailing wage, a pay level derived from a complex formula set by the state, essentially reflects union-level wages, which often are higher than non-union pay. Critics, led by the charter cities and opponents of organized labor, said the prevailing wage restriction was unconstitutional and forced up the cost of public projects.
“When you see the prevailing wage, you see the apprenticeship, you see the health care component, and you see a pension contribution as well” — Cesar Diaz
But supporters said the prevailing wage represented a public commitment to the middle class and a respect for workers.
“When you see the prevailing wage, you see the apprenticeship, you see the health care component, and you see a pension contribution as well,” said Cesar Diaz, legislative and political director at the State Building and Construction Trades Council, a major proponent of the bill, which represents some 390,000 workers in more than 160 affiliated unions. He noted that wage requirements already apply in federal projects.
The bill, SB 7, was authored by Senate Leader Darrell Steinberg, D-Sacramento.
Charter cities, created by local voters, are able to govern themselves with regard to “municipal affairs” and their authority on some issues traditionally has surpassed that of the state, experts say. Some 121 of California’s 478 cities are considered charter cities, including Sacramento, Los Angeles, San Francisco and San Jose.
As of last year, there were 70 charter cities with no exemption of prevailing wages (including the previously named cities), 13 charter cities with partial exemption, and 37 with full exemption from prevailing wages. As of June 2013, 51 charter cities have provisions which allow them to avoid paying the prevailing wage when using their own funds — but not when using state funds — for public works projects.
The bill sparked major controversy.
Critics said the measure strips cities of authority and makes certain projects hard to finish without state funding. They said the measure seeks to punish charter cities and micromanage them.
The Associated Builders and Contractors, whose members include non-union builders, opposed this bill.
“Our members perform both prevailing wage and non-prevailing wage work. SB7 will greatly restrict the ability of cities to spend their tax dollars in the most efficient matter for local construction needs. Since our members perform work under both scenarios, we know the savings that can be realized when cities are given options to stretch their dollars further.” said Jodi Nagel, ABC of California Chairwoman in an email.
Critics also said the methodology used to calculate the prevailing wage was flawed because it doesn’t take into account vast differences between individual cities and counties, including their economies.
“It [the prevailing wage exemption] also benefits our members by enabling a greater amount of construction projects that might not have been possible without the flexibility for cities to choose a wage rate that better represents their local market conditions.” Nagel said.
But backers of SB 7 said the prevailing wage, calculated by the state Department of Industrial Relations, was intended to provide a living wage for workers and accurately reflects economic conditions, county by county.
“Essentially, what it comes down to is a living wage for that particular area. Even if you have an impoverished area, you want people to make a decent wage, you want them to be able to go out and purchase things so that the local businesses are able to benefit from that. You also want them to be able to stay in their homes, and purchase more homes, because that jumpstarts the economy,” Diaz said.