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Michigan's prevailing wage law forces schools to waste money

Thu., December 13, 2001

In 1996, the northern Michigan school district of Mesick, after five failures, finally passed a new property tax millage to fund a needed expansion of its high school. Shortly thereafter, the project began on budget and on time. But something happened about halfway through the process: Construction bids suddenly ran over budget by $285,000, forcing the district to eliminate new computers and lab facilities for the students and axe one of the proposed new classrooms.

What caused this sudden financial disruption? The untimely return of Michigan's Prevailing Wage Act, a piece of special-interest legislation that unnecessarily jacks up school construction costs and deprives districts of millions of dollars earmarked for education each year.

Michigan is one of 32 states that has a so-called prevailing wage law. Passed in 1965, it requires that any contract on a project that is supported, even minimally, by state funds must pay contractors wages that are "prevailing" in the area in which the project is located. This sounds innocuous enough. If that were all the law said, one would wonder why the law was even necessary. No school or city that wanted to build a building could pay construction workers less than the going wage, or it wouldn't be able to hire anyone.

But the actual effect of the prevailing wage law is to allow unionized construction workers and contractors to determine what must be paid for construction of school buildings and other government projects. The law states that the Department of Consumer and Industry Services (CIS) "shall establish prevailing wages and fringe benefits at the same rate that prevails on projects of a similar character in the locality under collective agreements or understandings between bona fide organizations of construction mechanics and their employers".

So whatever unions and union contractors agree to is the wage that must be paid by any school district when it wants to undertake any construction, no matter how much higher it might be than the real market wage.

From December 1994 to June 1997, Michigan schools enjoyed 30 months when the Prevailing Wage Act was not in effect, thanks to a federal district court judge who ruled that the act was invalid because it was preempted by federal law. Before a higher court unfortunately reinstated the act, Michigan school districts achieved substantial savings.

For example, the Hastings School District in Barry County was able to take advantage of a nonunion bid for a $4.3-million construction project and immediately save 13 percent. Savings like that can make a big difference for the taxpayer or for the classroom, or both. It could have saved those lost lab, computer, and classroom facilities in Mesick.

School construction in Michigan is on the order of $1.5 billion annually, or close to $900 per pupil. Because of the Prevailing Wage Act, these costs are substantially greater than they need to be. In a study for the Mackinac Center for Public Policy, Professor Richard Vedder of Ohio University found that the law increased construction costs by at least 10 percent. The Ohio Legislature, incidentally, had the good sense in 1997 to exempt schools from that state's prevailing wage law-saving schools an average of 10.5 percent in construction costs, according to the nonpartisan Ohio Legislative Budget Office.

If Michigan were to follow Ohio's lead, our schools would save at least $150 million annually — a figure that amounts to $90 for every student in the state. Nonetheless, former Michigan Attorney General Frank Kelly fought in the courts to keep the Prevailing Wage Act on the books, and any effort to save schools money by repealing it will face a challenge from current Attorney General Jennifer Granholm, as well as from organized labor.

This puts certain Michigan legislators, Granholm, and some school officials in an awkward and indefensible position. Unless they are willing to be hypocrites, they cannot continue calling for more money for schools and at the same time support wasting it through costly favors to unions.

Repealing Michigan's Prevailing Wage Act — or at least exempting schools from its rules — would make school construction more affordable, save money for use in the classroom, and allow for other improvements to public education. Michigan should follow Ohio's lead and put children ahead of well-heeled special interests.

Gary Wolfram, Ph.D. is George Munson Professor of Political Economy at Hillsdale College in Hillsdale, Mich. and a former Michigan deputy state treasurer.

Michigan Education Daily
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User Comments
Since 2009, the EFM was allocated $500.5 million in stimulus funds. They tore down a High School and built a multi-million dollar Cass Tech, the structure alone costing $94 million. $45 million was spent for a safety program. $41 million was used to purchase a reading series not needed, $50 million was used to buy all new computers for staff and students. $1.6 million was used for administrative travel and all leadership positions recieved significant raises. The EFM in the first year gave himself a $86,000 raise, including resources from philanthropist contributions, his salalry was somewhere beyond $450,000. This is a leadership who spent more to rent and eventually buy five floors of the Fisher Bldg for office space, paying more than the owner paid for the entire building one year earlier, adorned with rare and expensive artifacts.

Teachers have had pay freezes since 2001, they have had pay cuts, benefit cuts and an additional $500.00 has been deducted from their monothly pay for two years and counting.

Oh the money is in the schools alright, it just doesn't make it to the classroom. >>
except/accept??????? per pupil funding. If you're a teacher, I hope this was a typo. >>
Yes, I am agree with you. Educational equity argument can help, But also cause blowback credits are more popular than vouchers.

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Daniel

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Yes, I am agree with you. Educational equity argument can help, But also cause blowback credits are more popular than vouchers.

Thanks
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Daniel

<a href=“http://www.legalx.net”>Find Attorney</a> >>
Your comment "No one is that poor that they cant provide a boloney sandwich..." was the definition of "out-of-touch". First, I agree whole-heartedly that parents matter. I would love to see parents drive or car pool kids to school. Even provide them with food, too. However, sadly it is unrealistic. The economy is so weak that everything is shrinking. If we eliminate transportation and food for students we may find many families electing not to send the child to school at all...then what?

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This agreement has saved the districts money yet we are chastised for it despite the fact the wording at issue was known to be invalid and unenforceable by either side. I applaud our effort and believe this suit is frivolous. http://www.godfrey-lee.org/education/components/board/default.php?sectiondetailid=3458&threadid=554 >>
education is an all around development for a child
he should be mentally and physically strong


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he should be mentally and physically strong >>
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Public servants like Presidents, Vice-Presidents, Senators, Congressmen, Judges, Secretaries of Various Departments and the like should be first to be compensated for performance.
The idea that the playing field for students is level everywhere is as Quixotic as thinking all politicians are honest and competent.
There are neighborhoods where only Portugese or gang sign language is spoken, where the parents both work two jobs to pay rent, where getting to school and back is more dangerous than Iraq and Afghanastan.
This Secretary of Education has to remove the silver spoon, roll up his sleeves and take his superior intellect attitude into the trenches and show the poor slobs that are taking their teachers jobs for granted how he would do it. Just because his mommy used to help out in Chicago doesn't give him the Congression Medal of Honor. Actually he's a stuffed shirt pretending to know it all.
How much do you want to bet that he wouldn't attempt entering these neighborhoods let alone these schools without security. >>