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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
I am a teacher in the same county who is presently trying to quit the union. Like Caldwell, I strongly disagree with the MEA.

This article was timely.

Rob Olson
Pittsford Area Schools

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I agree this is a change worth making. I describe some of the uneven effects of the idea on my blog at http://rickolson.blogspot.com/2009/08/statewide-health-insurance-plan-for.html which you may also wish to read.

The devil will be in the details, so this is one we will need to monitor closely.

Rick Olson from Saline, former school Business Manager >>

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I AGREE >>
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We have a problem in Detroit Public School, their system had cash flow problem for years now. And honestly it getting worst in terms in progression with more children leaving to charter their schools almost every year. The state decided to give the Detroit school districts cash advance of $70 million so they would meet the schools expenses, as well as payment for teachers. Robert Bobb, the newly appointed emergency financial manager, requested the funds early in order for him to get the house in order before he had to start panicking. President Obama has been giving out large sums of money for troubled school districts, perhaps that’s where a generous portion of the aid came from. Getting Detroit Public Schools in working order is a worthy cause.

LINK TO READ FOR MORE INFO:
http://personalmoneystore.com/moneyblog/2009/03/10/state-advance-detroit-public-schools-70m/


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I am all for school choice and think its great that charters are finally moving forward. However, I'm wondering if the research accounts for a playing field that is not level. I can't take my school buildings and move them anywhere I want, nor can I simply slap up a pole building and make it a school. If anything, public schools need less state regulation and oversight so we can play by the same minimal rules charters do. If you want public schools to compete to improve, remove the barriers to doing so. I will gladly except less funding per pupil if the playing field is level.
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The purpose is to encourage non excercising children to excercise but my daughter's highschool gave her an improper body fat percentage and made my healthy daughter who trains 20 hours a week in tap jazz and ballet believe she was overweaghit instead of a person with muscles.
I believe the public schools do not have the right to make the diagnoses with these kids because they are using one measurement and recording it from their arms that they have a certain percetnage of body fat with one arm caliper test.
Does any one have feed back?
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Specifically, 81 percent of students in religiously affiliated schools and 82 percent of students in other private schools have parents who report being "very satisfied" with their schools, compared to 55 percent of students in assigned public schools and 63 percent of students in chosen public schools.

High levels of satisfaction among private school parents also extend to opinions about their children's teachers, academic standards of the school, order and discipline at the school, the amount of homework assigned, and interactions with school personnel.

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