RUSTHOVEN: Legislative session was underrated

May 9, 2015

RusthovenFrom some media coverage of the General Assembly’s 2015 session, one might think nothing happened beyond passage and subsequent clarification of a Religious Freedom Restoration Act, which—contrary to a fortnight’s hysteria, a fair portion of it posturing and manufactured—paralleled the laws of the federal government and 30 other states (19 by statute and 11 by judicial decision).

In fact, this year’s Legislature, with strong support from Gov. Pence, took a number of steps that will significantly benefit Indiana—and yield significant benefits for Hoosier taxpayers—long after echoes of the RFRA brouhaha have rightly faded.

One example is repeal of Indiana’s common construction wage law, which richly deserved its demise. Such “prevailing wage” laws, which date to the Depression era, set a government-mandated floor—typically, union-level wage rates in the area—on the amount contractors on public works projects must pay workers.

The federal version is the Davis-Bacon Act, which applies to federally funded projects of over $2,000—which is to say, essentially all of them. Davis-Bacon inflates labor costs on such projects 20 percent or more over market-based rates. Annual costs to federal taxpayers now exceed $10 billion.

State versions of Davis-Bacon likewise effectively eliminate competition on labor costs in bidding for public projects (such as school construction), benefiting union contractors at the expense of non-union competing bidders. Just as Davis-Bacon does on federally funded projects, common construction wage laws artificially raise construction costs paid by the state or by school corporations and other local government units—added costs paid by state and local taxpayers.

The sums at issue are not trivial. Estimated annual costs of Indiana’s law—and projected annual savings from its repeal—range from $50 million to $100 million. Studies of neighboring states support such projections.

In the mid-1990s, Ohio, for example, repealed its common construction wage law for public school construction. Post-repeal analysis demonstrated that this reduced school project costs nearly 11 percent—saving Buckeye taxpayers half a billion over half a decade.

Then there’s our neighbor to the north. A study of the impact of Michigan’s law showed that repeal would save $224 million annually. That could help quite a bit in a state where the largest school district (Detroit) is in debt to the tune of $483 million, now requiring about $1,100 per pupil for debt service.

Predictably, organized labor characterized repeal of Indiana’s law as harming Hoosier workers. This familiar attack ignores that such laws force all taxpaying workers to subsidize inflated wages for the steadily declining minority who are unionized.

It’s a sign of changing times—and a good one—that this shopworn charge is losing its persuasiveness. The clearest indication came toward the end of the Indiana repeal battle, when the anti-repeal TV ad campaign shifted tactics to start charging that those wanting to eliminate common construction wage were the folks who supported RFRA “discrimination.” Astounding.

Repeal of common construction wage is a further step toward strengthening Indiana’s already enviable fiscal soundness.

Another step this session included adopting a balanced budget that reduces debt and maintains reserves, even while supporting education at record levels.

Yet another was passing a balanced budget amendment, which—if approved in the next session and then by Hoosier voters—will impose such discipline on future legislators.

Pretty good record. It deserves more attention than it’s getting.•


Rusthoven, an Indianapolis attorney and graduate of Harvard College and Harvard Law School, was associate counsel to President Reagan. Send comments on this column to ibjedit@ibj.com.


Recent Articles by Peter J. Rusthoven / Special to IBJ

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